CP Kelco Oy v. United States , 978 F. Supp. 2d 1315 ( 2014 )


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  •                                             Slip Op. 14-42
    UNITED STATES COURT OF INTERNATIONAL TRADE
    CP KELCO OY and CP KELCO US, INC.,
    Plaintiffs,            Before: Richard W. Goldberg, Senior Judge
    Court No. 13-00079
    v.
    PUBLIC VERSION
    UNITED STATES,
    Defendant,
    and
    ASHLAND SPECIALTY INGREDIENTS,
    G.P.,
    Defendant-Intervenor.
    OPINION AND ORDER
    Nancy A. Noonan, Arent Fox LLP, of Washington, DC, argued for plaintiff. With her on
    the brief were Matthew J. Clark and Matthew L. Kanna.
    Stephen C. Tosini, Commercial Litigation Branch, Civil Division, U.S. Department of
    Justice, of Washington, DC, argued for defendant. On the brief were Stuart F. Delery, Assistant
    Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director,
    and L. Misha Preheim, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
    Department of Justice. Of counsel on the brief was Joanna V. Theiss, Attorney, Office of the
    Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, DC.
    Edward M. Lebow, Haynes and Boone, LLP, of Washington, DC, argued for defendant-
    intervenor Ashland Specialty Ingredients, G.P. With him on the brief was Nora L. Whitehead.
    Goldberg, Senior Judge: This is a trade case brought under Section 201 of the Customs
    Courts Act of 1980, 
    28 U.S.C. § 1581
    (c) (2006). Plaintiffs CP Kelco Oy and CP Kelco US, Inc.
    (collectively “Kelco”) challenge the dumping margin the U.S. Department of Commerce
    (“Commerce” or “the agency”) assigned their goods during the 2010 2011 administrative review
    Case No. 13-00079                                                                                              Page 2
    of an antidumping order on carboxymethylcellulose. Specifically, Kelco claims that the targeted
    dumping inquiry Commerce conducted before calculating the margin was neither in accordance
    with law nor based in substantial evidence.
    The court holds that Commerce was permitted by law to conduct a targeted dumping
    inquiry during the contested review. The court also finds that Commerce’s method for
    discovering targeted dumping and the application of that methodology to Kelco generally
    accorded with law and the evidence. Nevertheless, the court concludes that an element of the
    agency’s targeted dumping analysis—the de minimis test—was neither grounded in substantial
    evidence nor in accordance with law. The court remands to Commerce to conduct the targeted
    dumping inquiry afresh and to recalculate Kelco’s dumping margins consistent with that inquiry.
    PROCEDURAL BACKGROUND
    In August 2011, Commerce initiated an administrative review of an antidumping order on
    carboxymethylcellulose from Finland. Initiation of Antidumping and Countervailing Duty
    Administrative Reviews, 
    76 Fed. Reg. 53,404
    , 53,405 (Dep’t Commerce Aug. 26, 2011).1 The
    next year, the Aqualon Company, a petitioner, alleged Kelco had sold its goods for less-than-fair
    value at prices that differed “significantly among purchasers, regions, and periods of time.”
    Letter from Haynes & Boone LLC to Hon. John Bryson, PD 56 at bar-code 3077453-01 (May
    25, 2012), ECF No. 30 (July 2, 2013) (“Pet’r’s Allegation”). This practice is known as “targeted
    dumping.” In view of its allegation, Aqualon asked Commerce to compute Kelco’s margins
    using a methodology that accounts for targeted dumping among an exporter’s sales. 
    Id.
     at 1 2.2
    1
    Carboxymethylcellulose is “an acid ether derivative of cellulose that in the form of its sodium salt is used
    as a thickening, emulsifying, and stabilizing agent and as a bulk laxative in medicine.” Merriam-Webster’s
    Collegiate Dictionary 172 (10th ed. 1993).
    2
    Defendant-Intervenor Ashland Specialty Ingredients, G.P. (“Ashland”) was previously known as Aqualon
    Company. See Order Granting Consent Mot. to Amend Caption, ECF No. 36 (Sept. 10, 2013).
    Case No. 13-00079                                                                          Page 3
    Commerce initially declined to conduct a targeted dumping inquiry when calculating
    Kelco’s margins. Instead, the agency followed standard procedure and assigned Kelco a 5.86%
    dumping margin in the preliminary results. See Purified Carboxymethylcellulose from Finland,
    
    77 Fed. Reg. 47,036
    , 47,038, 47,042 (Dep’t Commerce Aug. 7, 2012) (“Preliminary Results”).
    Later, however, Commerce inquired whether Kelco had engaged in targeted dumping and
    discovered targeted dumping by time period. Commerce then reassessed Kelco’s margins using
    an alternative methodology and assigned an 11.62% rate. Post-Prelim. Targeted Dumping
    Analysis Mem. at 3 4, PD 68 at bar-code 3112119-01 (Dec. 21, 2012), ECF No. 30 (July 2,
    2013) (“Post-Preliminary Analysis”). The agency confirmed its findings from the targeted
    dumping inquiry in the final results, settling on a 12.06% dumping margin. Purified
    Carboxymethylcellulose from Finland, 
    78 Fed. Reg. 11,817
    , 11,817 (Dep’t Commerce Feb. 20,
    2013) (“Final Results”).
    Kelco filed a summons with this court to challenge the margin. Summons, ECF No. 1.
    In the accompanying complaint, Kelco alleges Commerce’s targeted dumping inquiry was
    neither in accordance with the law nor grounded in substantial evidence. Compl. ¶¶ 19–27, ECF
    No. 4. Kelco implies that Commerce should use its normal methodology to calculate the
    dumping margin on remand. See 
    id. at 7
     (prayer for relief).
    LEGAL BACKGROUND
    To understand how Commerce’s targeted dumping inquiry shaped Kelco’s margins, some
    legal table-setting is needed. In general, Commerce calculates dumping margins by comparing a
    good’s “export price” to its “normal value.” See 
    19 U.S.C. § 1677
    (35). Commerce makes this
    comparison using one of three methods: the average-to-average methodology (“A-A”), the
    transaction-to-transaction methodology (“T-T”), or the average-to-transactional methodology
    Case No. 13-00079                                                                                  Page 4
    (“A-T”). Commerce’s preferred method in both investigations and administrative reviews is A-
    A. 
    19 C.F.R. § 351.414
    (b)–(c) (2013). Under this approach, the agency adopts the good’s
    weighted-average U.S. price as the export price. 
    Id.
     § 351.414(d). It then subtracts the export
    price from the good’s weighted-average price in the exporter’s home market (i.e., the normal
    value), yielding a dumping margin. Id. Commerce used the A-A methodology to calculate
    Kelco’s margins in the Preliminary Results. Preliminary Results, 77 Fed. Reg. at 47,042 n.39.3
    Commerce may also use the A-T methodology to set margins, but in limited
    circumstances. In investigations, Commerce may apply A-T only if it finds a “pattern of export
    prices . . . for comparable merchandise that differ significantly among purchasers, regions, or
    periods of time,” and alternative methodologies inadequately explain the pattern. 19 U.S.C.
    § 1677f-1(d)(1)(B)(i)–(ii). If an exporter’s sales meet these criteria, that exporter engaged in
    targeted dumping. Commerce may then use A-T to compute the exporter’s dumping margins,
    comparing weighted-average normal values to export prices from individual sales. See 
    19 C.F.R. § 351.414
    (b)(3). Commerce does not offset non-dumped sales against dumped sales when using
    the A-T method. See Issues & Decisions Mem. at Issue 1, PD 80 at bar-code 3118300-01 (Feb.
    5, 2013), ECF No. 30 (July 2, 2013) (“I&D Mem.”). As a consequence, margins calculated
    under A-T can be significantly higher than those computed under A-A.
    Hence Commerce’s method for discovering targeted dumping bears critically on an
    exporter’s margins. The method, widely known as the “Nails test,” proceeds as follows. In the
    first step, called the “standard deviation test,” Commerce determines “the volume of the
    allegedly targeted group’s (i.e., purchaser, region, or time period) sales of subject merchandise
    3
    Commerce rarely uses T-T to compute dumping margins. See Calculation of Weighted Average Dumping
    Margin and Assessment Rate, 
    77 Fed. Reg. 8101
    , 8102 (Dep’t Commerce Feb. 14, 2012) (final modification)
    (discussing investigations).
    Case No. 13-00079                                                                                        Page 5
    that are at prices more than one standard deviation below the weighted-average price of all sales
    under review, targeted and non-targeted.” 
    Id.
     at Issue 2. Standard deviations are calculated on a
    product-specific basis by control number (“CONNUM”). If more than thirty-three percent of
    allegedly targeted sales are at least one standard deviation below the average price of all
    reviewed sales in a given CONNUM, Commerce moves to step two. 
    Id.
    In step two, the “gap test,” the agency considers by CONNUM the sales that passed the
    standard deviation test. Commerce first calculates the difference between the weighted-average
    price of allegedly targeted sales and the next higher weighted-average price of sales to a non-
    targeted group (the “target gap”). Next, Commerce calculates the average difference, weighted
    by sales volume, between prices to non-targeted groups (the “non-target gap”). Finally, the
    agency compares the target gap to the non-target gap.4 If the target gap exceeds the non-target
    gap for more than five percent of the exporter’s sales to the alleged target by volume, Commerce
    finds that targeted dumping occurred. The agency may then use A-T to calculate the exporter’s
    margins, but only if Commerce cannot account for observed price differences using A-A. Id.5
    Commerce takes a similar approach when it applies the A-T methodology in reviews. 
    Id.
    Unlike the law governing investigations, however, the law governing reviews does not specify
    which comparative methodology Commerce must use to calculate margins. Instead, the statute
    explains only how to compute normal values when using the A-T method in reviews. 19 U.S.C.
    § 1677f-1(d)(2). To fill this apparent gap in the statute, federal regulations require Commerce to
    4
    Commerce does not use the terms “target gap” and “non-target gap” in its analysis. These terms were
    coined as shorthand for ease of explanation.
    5
    There is rulemaking underway concerning whether Commerce may apply A-T to all sales, both targeted
    and untargeted, when Commerce finds targeted sales in an investigation. See Gold East Paper (Jiangsu) Co. v.
    United States, 37 CIT __, __, 
    918 F. Supp. 2d 1317
    , 1325 28 (2013); Non-Application of Previously Withdrawn
    Regulatory Provisions Governing Targeted Dumping in Antidumping Duty Investigations, 
    78 Fed. Reg. 60,240
    (Dep’t Commerce Oct. 1, 2013). The court is unaware of any similar rulemaking for reviews.
    Case No. 13-00079                                                                                      Page 6
    apply A-A in reviews unless another method is deemed more appropriate. 
    19 C.F.R. § 351.414
    (c)(1); see also Calculation of Weighted Average Dumping Margin and Assessment
    Rate, 
    77 Fed. Reg. 8101
    , 8102 04 (Dep’t Commerce Feb. 14, 2012) (“Final Modification”).
    Commerce has used A-T instead of A-A in reviews if the Nails test reveals that an exporter
    engaged in targeted dumping.6
    In this case, Commerce applied the Nails test to Kelco’s sales during an administrative
    review. The agency concluded that some of Kelco’s sales constituted targeted dumping.
    Commerce also found—though obliquely—that Kelco’s targeted sales comprised more than a de
    minimis share of its total U.S. sales. I&D Mem. at Issue 2. After determining that the A-T
    methodology yielded higher margins than the A-A approach, Commerce recalculated Kelco’s
    margins using A-T. Commerce assigned Kelco a 12.06% margin in the Final Results, up from
    5.86% in the Preliminary Results. See Public Mem. of Law in Supp. of Pls.’ 56.2 Mot. J. on
    Agency R. 4 5, ECF No. 28 (“Pls.’ Br.”).
    STANDARD OF REVIEW
    The court must review Commerce’s determinations to ensure they are supported “by
    substantial evidence on the record” and “in accordance with law.” 19 U.S.C.
    § 1516a(b)(1)(B)(i). An agency decision is based in substantial evidence if bolstered by “such
    relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”
    Consol. Edison Co. v. NLRB, 
    305 U.S. 197
    , 229 (1938); Nippon Steel Corp. v. United States, 
    337 F.3d 1373
    , 1379 (Fed. Cir. 2003).
    6
    Before publishing the Final Modification in February 2012, Commerce used A-T without offsets as its
    default comparative methodology in reviews. 77 Fed. Reg. at 8101. For a history of Commerce’s evolving method
    for calculating margins in administrative reviews, see Timken Co. v. United States, Slip Op. 14-24, 
    2014 WL 763124
    , at *1 2 (CIT Feb. 27, 2014).
    Case No. 13-00079                                                                               Page 7
    The agency’s interpretation of relevant statutes is “in accordance with law” if it passes
    the two-step test announced in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.,
    
    467 U.S. 837
     (1984). Under Chevron, the court first determines whether a statute “directly
    [speaks] to the precise question at issue.” 
    Id. at 842
    . The court employs “the traditional tools of
    statutory construction” in this analysis, relying primarily on the statute’s plain meaning and
    secondarily on the “statute’s structure, canons of statutory construction, and legislative history.”
    Timex V.I., Inc. v. United States, 
    157 F.3d 879
    , 882 (Fed. Cir. 1998) (internal quotation marks
    omitted). Then, if the court finds the statute’s meaning unclear, it scrutinizes the agency’s
    interpretation of the statute to determine whether it is permissible. The court defers to the
    agency if the interpretation is reasonable. See Chevron, 
    467 U.S. at
    843–44.
    An agency action also fails to accord with law if it is arbitrary. See U.S. Steel Corp. v.
    United States, 37 CIT __, __, 
    953 F. Supp. 2d 1332
    , 1336 (2013); Thai Plastic Bags Indus. Co. v.
    United States, 37 CIT __, __, 
    949 F. Supp. 2d 1298
    , 1302 (2013). Under Motor Vehicle
    Manufacturers Ass’n v. State Farm Mutual Automobile Insurance Co., 
    463 U.S. 29
    , 43 (1983),
    an agency rule is arbitrary if “the agency . . . relied on factors which Congress has not intended it
    to consider, entirely failed to consider an important aspect of the problem, . . . or is so
    implausible that it could not be ascribed to . . . the product of agency expertise.” See also
    Burlington Truck Lines, Inc. v. United States, 
    371 U.S. 156
    , 167 68 (1962) (invalidating
    exercise of agency discretion where agency failed to explain basis of its action).
    DISCUSSION
    The court evaluates Kelco’s claims in light of these standards. First, the court considers
    whether Commerce was authorized by statute to conduct a targeted dumping inquiry during the
    administrative review. See Pls.’ Br. 1 2. The law shows that Commerce was so authorized.
    Case No. 13-00079                                                                            Page 8
    Second, the court assesses whether the method Commerce used to discover targeted
    dumping was based in substantial evidence and in accordance with law. See 
    id.
     The court holds
    that Commerce’s targeted dumping inquiry was valid in all respects but one: Commerce’s de
    minimis test—which functioned either as an additional step of the Nails inquiry or as a guidepost
    in the agency’s discretionary analysis—was arbitrary and contrary to law.
    I.      Commerce Acted in Accordance with Law When It Conducted a Targeted
    Dumping Inquiry During the Review
    Kelco first argues that Commerce was not permitted to conduct a targeted dumping
    inquiry during the administrative review. Though not so phrased in its brief, Kelco relies almost
    exclusively on the interpretive maxim expressio unius est exclusio alterius to support its claim.
    See Pls.’ Br. 7 12; Pls.’ Reply Br. 1 9, ECF No. 45 (“Reply Br.”). Translated from Latin, the
    maxim means “to express or include one thing implies the exclusion of the other,” suggesting
    that if Congress grants a right or privilege in one situation, then Congress intentionally withholds
    that right or privilege in other situations. Black’s Law Dictionary 620 (8th ed. 2004). In this
    vein, Kelco asserts that while the statute expressly permits Commerce to conduct targeted
    dumping inquiries in investigations, the law does not authorize such inquiries in administrative
    reviews. Consequently, Congress must have intended to prohibit targeted dumping inquiries in
    reviews, and Commerce acted contrary to law by applying its targeted dumping analysis to
    Kelco. Pls.’ Br. 9 12; see also 19 U.S.C. § 1677f-1(d).
    A. The Targeted Dumping Statute Is Ambiguous
    The court cannot agree. Under Chevron, the court must invalidate agency actions that
    contradict a statute’s unambiguous instructions. See 
    467 U.S. at
    842 43. But the statute at issue
    here does not clearly prohibit targeted dumping inquiries in reviews. The court notes first that 
    19 U.S.C. § 1675
    —the section that orders Commerce set dumping margins in reviews—says
    Case No. 13-00079                                                                           Page 9
    nothing about how those margins should be calculated. Instead, the section only requires
    Commerce to determine “the normal value and export price . . . of each entry of the subject
    merchandise, and . . . the dumping margin for each such entry.” 
    19 U.S.C. § 1675
    (a)(2)(A). The
    provision governing Commerce’s margin calculation methodology in reviews also offers little
    direction: 19 U.S.C. § 1677f-1(d)(2) tells Commerce how to average normal values when using
    the A-T methodology in reviews, but nothing more. In sum, the statute lacks language to inform
    the agency’s choice between the A-A, T-T, and A-T methodologies in reviews. Given this spare
    guidance, Commerce was free to use the targeted dumping inquiry to help it choose between A-
    A and A-T to calculate Kelco’s dumping margin. See Def.’s Opp. to Pls.’ M. for J. on Agency
    R. 8–11, ECF No. 39 (“Resp. Br.”); U.S. Steel Grp. v. United States, 
    96 F.3d 1352
    , 1362 (Fed.
    Cir. 1996) (“So long as the [agency’s] analysis does not violate any statute and is not otherwise
    arbitrary and capricious, the [agency] may perform its duties in the way it believes most
    suitable.”); Mid Continent Nail Corp. v. United States, 34 CIT __, __, 
    712 F. Supp. 2d 1370
    ,
    1376 77 (2010).
    Even so, Kelco contends the interpretive maxim expressio unius precludes using the
    targeted dumping inquiry in reviews. 19 U.S.C. § 1677f-1(d)(1) explicitly permits the targeted
    dumping inquiry in investigations. Section 1677f-1(d)(2), by contrast, does not mention the
    inquiry in the context of reviews. Kelco points to this disparity as proof that “Congress
    expressly withheld from [Commerce] the authority to use the targeted dumping exception in
    administrative reviews. . . . When statutory language contains no ambiguity, [Commerce] cannot
    create authority that has not been explicitly or implicitly granted.” Pls.’ Br. 9.
    The court does not see it that way. As the Supreme Court explained, expressio unius
    arguments “ha[ve] force only when the items expressed are members of an associated group or
    Case No. 13-00079                                                                                          Page 10
    series, justifying the inference that items not mentioned were excluded by deliberate choice, not
    inadvertence.” Barnhart v. Peabody Coal Co., 
    537 U.S. 149
    , 168 (2003) (internal quotation
    marks omitted). Admittedly, the provisions here appear in a series. Section 1677f-1(d)(1)(B)
    permits targeted dumping inquiries in investigations, but § 1677f-1(d)(2) provides no such
    authority for reviews. Nevertheless, § 1677f-1(d)(2) mandates how Commerce must average
    normal values when using the A-T method to calculate margins in reviews. This implies that the
    legislature intended to allow A-T to be used in reviews. It thus makes little sense that Congress
    would prohibit targeted dumping inquiries in reviews, because the inquiry’s sole purpose is to
    help Commerce decide whether to apply the A-T methodology in a given case. The inference to
    be drawn, if any, is that Congress would allow the targeted dumping inquiry in reviews, not the
    opposite. See Barnhart, 
    537 U.S. at 168
    .
    FAG Italia S.p.A. v. United States, 
    291 F.3d 806
     (Fed. Cir. 2002), does not mandate a
    different result. See Pls.’ Br. 10 12. There, the statute in question authorized Commerce to
    conduct duty absorption inquiries in administrative reviews, but only during the second and
    fourth years after an antidumping order first issued.7 Commerce, however, attempted to conduct
    duty absorption inquiries in the second and fourth years following a transition order. FAG Italia,
    
    291 F.3d at 811
    .8 On appeal, the government argued the statute was silent regarding whether
    Commerce could conduct absorption analyses in reviews following a transition order. This
    silence, the government explained, served as tacit permission to carry out absorption inquiries
    7
    “Duty absorption” occurs when an exporter pays the cost of antidumping duties without passing those
    costs to U.S. consumers. FAG Italia, 
    291 F.3d at 809
    . If Commerce finds an exporter has absorbed duties, it may
    pass those findings to the International Trade Commission for use in assessing material injury. 
    19 U.S.C. § 1675
    (a)(4).
    8
    A transition order is an “antidumping duty order . . . which is in effect on the date the WTO Agreement
    enters into force with respect to the United States.” FAG Italia, 
    291 F.3d at 811
    . Transition orders were deemed
    issued on January 1, 1995, for the purposes of subsequent sunset reviews. Id.; 
    19 U.S.C. § 1675
    (c)(6)(D).
    Case No. 13-00079                                                                           Page 11
    following transition orders. 
    Id.
     at 815 16. The Federal Circuit disagreed and held that the
    statutory silence did not authorize Commerce to conduct the inquiries following transition
    orders. “The fact that Commerce is empowered to take action in certain limited situations does
    not mean that Commerce enjoys such power in other instances.” 
    Id. at 817
    .
    In this vein, Kelco argues Commerce misinterpreted statutory silence in § 1677(d)(2) to
    permit targeted dumping inquiries in reviews. The comparison to FAG Italia, however, is inapt.
    In FAG Italia, the same provision that authorized duty absorption inquiries also limited those
    inquiries to the second and fourth years following an order. See 
    19 U.S.C. § 1675
    (a)(4).
    Congress endowed Commerce with an investigative power and cabined it in the same penstroke.
    Here, by contrast, the provisions authorizing Commerce to calculate dumping margins in
    investigations and reviews are separate from provisions describing how to perform those
    calculations. 
    19 U.S.C. § 1673
     empowers Commerce to calculate margins in investigations, and
    § 1677f-1(d)(1) channels Commerce’s exercise of that power. 
    19 U.S.C. § 1675
    (a) charges
    Commerce to compute margins in reviews, and § 1677f-1(d)(2) provides limited mathematical
    guidance regarding those computations. Paragraphs 1677f-1(d)(1) and (2), in short, were
    designed to be read in light of their parent provisions and not as a unit. Given this statutory
    scheme, one cannot easily infer that language authorizing targeted dumping inquiries in
    investigations bars the agency from conducting similar inquiries in reviews. See NTN Bearing
    Corp. v. United States, 
    368 F.3d 1369
    , 1373 (Fed. Cir. 2004) (holding expressio unius does not
    apply when “its application would thwart the legislative intent made apparent by the entire act”)
    (internal quotation marks omitted).
    Kelco’s case is more akin to NTN Bearing than to FAG Italia. In NTN Bearing,
    Commerce used cost data from the respondents’ affiliates to calculate respondents’ inventory
    Case No. 13-00079                                                                           Page 12
    carrying costs and difference in merchandise (“difmer”) adjustment. 
    Id.
     at 1371 72. The
    statute, however, expressly authorized Commerce to use affiliate data for other purposes,
    including to calculate a respondent’s production costs and constructed normal value. 19 U.S.C.
    § 1677b(f). The Federal Circuit nevertheless approved Commerce’s use of the affiliate data.
    The court found that statutory language governing carrying costs and difmer adjustments did not
    prohibit Commerce from using affiliate data to compute those values. 
    368 F.3d at 1373
    . And
    although the statute expressly referenced affiliate data only in the context of production costs and
    constructed normal value, the law did not preclude using affiliate data in other contexts. 
    Id.
    Likewise, 19 U.S.C. § 1677f-1(d)(1)(B)—the provision authorizing targeted dumping inquiries
    in investigations—does not bar Commerce from using targeted dumping inquiries in reviews.
    Indeed, the statute did not preclude, whether expressly or implicitly, the targeted dumping
    analysis in the review below.
    B. Commerce’s Decision to Conduct a Targeted Dumping Inquiry in the Review
    Was Reasonable
    Nor was the agency’s decision to conduct a targeted dumping inquiry an unreasonable
    interpretation of the statute. See Chevron, 
    467 U.S. at
    843–44. As discussed above, the statute
    permits Commerce to use A-T in reviews. See 19 U.S.C. § 1677f-1(d)(2). The regulations
    regarding reviews also allow Commerce, when appropriate, to apply A-T instead of A-A. See 
    19 C.F.R. § 351.414
    (c)(1). Because neither the statute nor the regulations dictate when using A-T
    would be “appropriate” in reviews, it was reasonable for Commerce to use the targeted dumping
    inquiry as a principled way of choosing between A-A and A-T to calculate Kelco’s margins.
    Kelco nevertheless argues that the agency’s interpretation was invalid because
    antidumping investigations and reviews serve different purposes. See Reply Br. 7–8 (citing
    Union Steel v. United States, 
    713 F.3d 1101
    , 1109 (Fed. Cir. 2013)). In investigations,
    Case No. 13-00079                                                                           Page 13
    Commerce examines overall pricing patterns to decide whether to impose antidumping duties.
    Reviews, by contrast, exist to determine the amount of those duties. Because the targeted
    dumping inquiry focuses on “overall pricing patterns,” Kelco argues the inquiries are appropriate
    only in investigations. 
    Id. at 8
    .
    Kelco’s own citation refutes this argument. In Union Steel—a case Kelco offers to
    illustrate the difference between investigations and reviews—the Federal Circuit upheld
    Commerce’s decision to use the A-A methodology in investigations and the A-T methodology
    without offsets in reviews. 713 F.3d at 1108–09. But as discussed previously, the targeted
    dumping inquiry is simply a threshold analysis Commerce conducts before applying A-T to
    calculate dumping margins. It does not follow that Congress would prohibit targeted dumping
    inquiries in reviews when the inquiry’s purpose is to help Commerce decide whether to apply A-
    T in a given case. The policy differences between investigations and reviews do not render the
    agency’s interpretation of the statute unreasonable.
    Because Commerce’s interpretation passes both steps of Chevron, the court holds that the
    decision to conduct a targeted dumping inquiry during the review accorded with law.
    II.      Commerce’s Method for Discovering Targeted Dumping Was Not in
    Accordance with Law
    Kelco next claims that Commerce’s method for discovering targeted dumping was
    neither grounded in substantial evidence nor in accordance with law. This argument breaks into
    three subparts. First, Kelco argues the Nails test is itself arbitrary and unsupported by substantial
    evidence. Second, Kelco alleges Commerce did not base in substantial evidence its decision to
    apply the Nails test to Kelco. Third, Kelco claims Commerce acted arbitrarily by refusing to
    excuse Kelco’s targeted sales from A-T treatment under the de minimis test. Of these arguments,
    only the last persuades.
    Case No. 13-00079                                                                             Page 14
    A. The Nails Test Itself Is Neither Arbitrary Nor Unsupported in Evidence
    Kelco argues the Nails test as applied in administrative reviews is arbitrary and
    unsubstantiated in evidence. In particular, Kelco alleges Commerce failed to explain how the
    Nails test’s standard deviation metric and thirty-three and five percent thresholds unmask
    targeted dumping. Pls.’ Br. 13 14.
    These arguments do not advance Kelco’s case. Under State Farm, 
    463 U.S. at 43
    , an
    agency rule is arbitrary if “the agency . . . relied on factors which Congress has not intended it to
    consider, entirely failed to consider an important aspect of the problem, . . . or is so implausible
    that it could not be ascribed to . . . the product of agency expertise.” The Nails test avoids these
    pitfalls because it identifies targeted dumping as described by statute. Under § 1677f-
    1(d)(1)(B)(i), targeted dumping exists if “there is a pattern of export prices . . . for comparable
    merchandise that differ significantly among purchasers, regions, or periods of time.” As
    explained in Mid Continent Nail in the context of investigations, the Nails test’s standard
    deviation analysis pinpoints “pattern[s] of export prices” by measuring “the dispersion of values
    in an exporter’s price data, to aid in identifying which of the exporter’s sales were relatively low
    compared to others.” 34 CIT at __, 
    712 F. Supp. 2d at 1377
    . The court has upheld Commerce’s
    standard deviation test as a statistically valid means of determining price dispersion. See 
    id.
     at
    __, 
    712 F. Supp. 2d at
    1377 78. Kelco’s arguments give no occasion to abandon this holding in
    the context of reviews.
    Commerce’s thirty-three and five percent thresholds are also valid. If thirty-three percent
    of allegedly targeted prices fall one standard deviation below average prices by CONNUM, then
    the agency concludes that a “pattern of export prices” existed. See I&D Mem. at Issue 2; Mid
    Continent Nail, 34 CIT at __, 
    712 F. Supp. 2d at 1378
    . Next, Commerce takes the sales that pass
    Case No. 13-00079                                                                                            Page 15
    the standard deviation test and determines whether they pass the gap test. I&D Mem. at Issue 2.
    If sales that pass the gap test comprise five percent of the exporter’s sales to the alleged target,
    Commerce concludes that prices “differ[ed] significantly” among purchasers, regions, or periods
    of time. Mid Continent Nail, 34 CIT at __, 
    712 F. Supp. 2d at
    1378 79. The court has held that
    these thirty-three and five percent thresholds together identify targeted dumping as defined in 19
    U.S.C. § 1677f-1(d)(1)(B)(i). Id. Kelco furnished no arguments or record evidence
    demonstrating the contrary.9 The court thus holds that the Nails test as applied in reviews is
    based in substantial evidence and not arbitrary.
    B. Commerce’s Application of the Nails Test to Kelco Was Neither Unsupported in
    Evidence nor Contrary to Law
    Next, Kelco argues that Commerce’s choice to deploy the Nails test in the review below
    was contrary to law and unsupported in evidence. It notes that Commerce returned to “case-by-
    case adjudication” to find targeted dumping after the agency withdrew a targeted dumping
    regulation in 2008. Pls.’ Br. 14; see Withdrawal of Regulatory Provisions Governing Targeted
    Dumping in Antidumping Duty Investigations, 
    73 Fed. Reg. 74,930
    , 74,931 (Dep’t Commerce
    Dec. 10, 2008) (interim final rule) (the “Withdrawal”).10 Consequently, Commerce needed to
    conduct “a specific analysis as to the facts of the present case in order to determine whether the
    9
    At oral argument, Kelco called the Nails test arbitrary in reviews because Commerce applies A-A using
    month-to-month comparisons in reviews and twelve-month comparisons in investigations. Oral Argument at 16:18,
    38:35. This distinction does not render the Nails test arbitrary in reviews, though. First, Kelco never made this
    argument in its brief. See Pls.’ Br. 13 14. Second, even if month-to-month A-A comparisons reveal targeted
    dumping better than annual A-A comparisons, this does not bar Commerce from using the targeted dumping inquiry
    and the A-T methodology in reviews. See 
    19 C.F.R. § 351.414
    (c). As recognized in Union Steel, 713 F.3d at 1109,
    Commerce does not average export prices at all under A-T, yielding transaction-specific margins that are likely
    more accurate even than month-to-month A-A comparisons. Third, and most important of all, A-T is explicitly
    permitted in reviews under the statute. See 19 U.S.C. § 1677f-1(d)(2).
    10
    The court invalidated the Withdrawal on procedural grounds in Gold East, 37 CIT at __, 918 F. Supp. 2d
    at 1325.
    Case No. 13-00079                                                                                       Page 16
    Nails test was the most appropriate way to unmask any alleged . . . targeted dumping.” Pls.’ Br.
    14. Kelco says Commerce never undertook this “specific analysis.”
    These arguments fail to persuade. Under the substantial evidence standard, the court
    must uphold Commerce’s choice if it was based on “relevant evidence [that] a reasonable mind
    might accept as adequate to support a conclusion.” Consol. Edison, 
    305 U.S. at 229
    .
    Commerce’s decision to apply the Nails test to Kelco clears this hurdle. In the Preliminary
    Results, Commerce noted that petitioner Aqualon based its allegation of targeted dumping on
    record evidence. See Preliminary Results, 77 Fed. Reg. at 47,037 38; Pet’r’s Allegation 3 7.11
    Even so, Commerce initially refused to administer the targeted dumping test to afford the
    “parties an opportunity to meaningfully comment on the Department’s implementation of this
    recently adopted methodology in the context of this administrative review.” Preliminary Results,
    77 Fed. Reg. at 47,038.
    After receiving comments, Commerce decided to run the targeted dumping analysis as
    Aqualon had petitioned. In the Post-Preliminary Analysis, the agency acknowledged its
    authority to use A-T under 
    19 C.F.R. § 351.414
    (c)(1) and explained how it applied the Nails test
    to Kelco’s sales. Post-Preliminary Analysis at 2–3. The Post-Preliminary Analysis further
    concluded that Kelco engaged in targeted sales by time period. See 
    id.
    11
    At oral argument, Kelco claimed Aqualon’s targeted dumping allegation was inadequate to trigger
    Commerce’s Nails inquiry. Oral Argument at 16:58. The court disagrees. As an initial matter, Kelco never made
    this argument in its brief. See Pls.’ Br. 14 15. Furthermore, neither the statute nor the regulations specify when
    Commerce must investigate for targeted dumping or what form a petitioner’s targeted dumping allegations must
    take. See 19 U.S.C. § 1677f-1(d)(1)(B); 
    19 C.F.R. § 351.414
    (c)(1). In this case, Aqualon based its targeted
    dumping allegation on its preliminary application of the Nails test to Kelco’s sales. See Pet’r’s Allegation 3 7;
    Comments of Pet’r Aqualon Company on Post-Prelim. Targeted Dumping Analysis Mem. at 1 2, PD 71 at bar-code
    3112811-01 (Jan. 2, 2013), ECF No. 30 (July 2, 2013). Though it seems circular that Aqualon based its claim on the
    results of the very test Commerce deploys to find targeted dumping, it was not unreasonable for Commerce to
    launch its own, independent Nails inquiry in response to the allegation, however derived.
    Case No. 13-00079                                                                          Page 17
    Commerce again explained how it applied the Nails test in the I&D Memo, adding that
    the Court of International Trade had upheld the Nails test as reasonable. I&D Mem. at Issue 2.
    The agency also noted that it used the Nails test in reviews of other antidumping orders. Id.; see
    also Ball Bearings and Parts Thereof from France, Germany, and Italy, 
    77 Fed. Reg. 73,415
    (Dep’t Commerce Dec. 10, 2012) and accompanying I&D Mem. at cmt. 1 (“Ball Bearings”);
    Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People’s
    Republic of China, 
    78 Fed. Reg. 3396
     (Dep’t Commerce Jan. 16, 2013) and accompanying I&D
    Mem. at cmt. 1. The court finds that this evidence—garnered from the review below and other
    reviews where the Nails test was used—sufficed to support Commerce’s decision to apply the
    Nails test to Kelco.
    Kelco, by contrast, does not identify any specific conclusions Commerce made that were
    unsupported by evidence or logic. In its brief, Kelco faults Commerce for failing “to state what
    facts it looked at and how those facts supported” the agency’s choice to employ the Nails test
    during the review. Pls.’ Br. 15. Yet Kelco does not suggest what more Commerce could have
    done to shore up its decision. It does not, for example, offer any factors independent of the Nails
    inquiry that would corroborate whether Kelco had perpetrated targeted dumping. Nor did Kelco
    propose anything better at oral argument, where it made a vague pitch for Commerce to issue
    supplemental questionnaires before undertaking a Nails inquiry. Oral Argument at 17:43.
    Having considered these arguments and the record, the court finds Commerce’s decision to use
    the Nails test below was based in substantial evidence and in accordance with law.
    C. Commerce’s Use of the De Minimis Test Was Arbitrary
    Finally, Kelco argues Commerce acted arbitrarily by applying an ill-defined de minimis
    test to Kelco’s targeted sales. In reviews of other antidumping orders, Commerce declined to
    Case No. 13-00079                                                                                            Page 18
    apply the A-T methodology where targeted sales constituted a small fraction—or a de minimis
    portion—of an exporter’s total U.S. sales. See Pls.’ Br. 15 16. Here, Commerce held Kelco’s
    targeted sales were more than de minimis but did not explain what “de minimis sales” means.
    The agency consequently applied the A-T methodology to compute Kelco’s margins. Kelco says
    Commerce should have offered some definition of de minimis sales before finding that its sales
    exceeded the de minimis threshold. See 
    id.
     at 17 18.
    The court agrees with Kelco.12 As discussed above, agency decisions are arbitrary if they
    cannot “be ascribed to . . . the product of agency expertise.” State Farm, 
    463 U.S. at 43
    .
    Administrative decisions are similarly invalid if they fail to state “the basis on which the
    [agency] exercised its expert discretion.” Burlington Truck Lines, Inc. v. United States, 
    371 U.S. 156
    , 167 (1962); see also Nat’l Org. of Veterans’ Advocates, Inc. v. Sec’y of Veterans Affairs,
    
    314 F.3d 1373
    , 1380 81 (Fed. Cir. 2003) (remanding where agency did not articulate rationale
    for statutory interpretation). Commerce’s de minimis test founders under either of these
    standards.
    First, Commerce never explained what purpose the de minimis test serves in the statutory
    scheme. Under 19 U.S.C. § 1677f-1(d)(1)(B)(i), Commerce may apply A-T in investigations if
    an exporter’s sales constitute “a pattern of export prices” differing significantly among
    purchasers, regions, or time periods. In this vein, the de minimis test could serve as part of the
    Nails inquiry in investigations and reviews, signaling whether targeted sales are voluminous
    12
    In its brief, Defendant-Intervenor Ashland appeared to challenge whether Commerce is permitted to
    conduct de minimis inquiries in reviews at all. The de minimis test, Ashland alleged, “would undermine
    Commerce’s targeted dumping analysis by eliminating its ability to take action at the very first sign of the targeted
    dumping behavior.” Def.-Intervenor’s Resp. Br. 14, ECF No. 37. Thus “a de minimis principle should not and
    cannot be applied to targeted dumping.” Id. At oral argument, however, Ashland stated that it did not contest
    Commerce’s decision to conduct a de minimis analysis during the review. Oral Argument at 24:12. The court thus
    declines to consider whether the statute permitted the agency to conduct a de minimis inquiry.
    Case No. 13-00079                                                                                    Page 19
    enough to form a “pattern” of significantly differing prices as described in statute. Post-
    Preliminary Analysis at 3 (suggesting pattern existed “based on the percentage of U.S. sales
    found to have been targeted”); Oral Argument at 25:41 (arguing for Kelco that de minimis test is
    third prong of Nails analysis). Alternatively, the de minimis test could guide the agency’s
    discretion when deciding whether to apply A-T to an exporter’s targeted sales. The statute does
    not compel Commerce to apply A-T to exporters who made targeted sales. Instead, it states that
    Commerce “may determine” to use A-T when deciding whether such exporters made sales at
    less-than-fair value. 19 U.S.C. § 1677f-1(d)(1)(B); see also Oral Argument at 27:27 (arguing for
    government that de minimis test guides agency’s discretion to apply A-A or A-T). The agency
    could use the de minimis test to serve this discretionary function, to identify a pattern of prices,
    or both. Yet nothing in the record establishes which role the test played in the review below.
    Second, Commerce never explained the quantum of an exporter’s sales that must be
    targeted to fall above or below the de minimis threshold. In the I&D Memo, Commerce said
    only that “the percentage of sales by quantity which was found to be targeted in this case is far
    too high to be considered de minimis, and so CP Kelco’s argument [regarding the de minimis
    threshold] is not relevant in the context of this case.” I&D Mem. at Issue 2.13 Commerce’s Post-
    Preliminary Analysis also mentioned that Commerce considered applying the A-T methodology
    only after finding “sufficient sales . . . passed the Nails test.” Post-Preliminary Analysis at 3.
    But the Analysis furnished neither a qualitative nor a quantitative explanation of what a
    “sufficient” number of sales is.
    13
    With respect to alleged targeted dumping by customer, Commerce found [[ ]]% of sales by quantity
    and [[ ]]% of sales by value were targeted. Respecting targeted dumping by time period, (footnote continued)
    Commerce found [[ ]]% of sales by quantity and [[ ]]% of sales by value were targeted. Confidential Mem. of
    Law in Supp. of Pls.’ 56.2 Mot. J. on Agency R. 17, ECF No. 27 (“Pls.’ Confid. Br.”).
    Case No. 13-00079                                                                          Page 20
    Nor do administrative reviews under other antidumping orders define de minimis sales.
    See Pls.’ Br. 16. Commerce applied the de minimis analysis in a number of proceedings other
    than the review contested here. See Certain Frozen Warmwater Shrimp From India, 
    78 Fed. Reg. 42,492
     (Dep’t Commerce July 16, 2013) and accompanying I&D Mem. at cmt. 1 (applying
    A-T to exporter with “sufficient volume of targeted sales” but A-A to exporter with “insufficient
    volume of targeted sales”); Ball Bearings, 
    77 Fed. Reg. 73,415
     (Dep’t Commerce Dec. 10, 2012)
    (final admin. reviews) and accompanying I&D Mem. at cmt. 1; Circular Welded Carbon Steel
    Pipes and Tubes from Turkey, 
    77 Fed. Reg. 72,818
     (Dep’t Commerce Dec. 6, 2012) and
    accompanying I&D Mem. at cmt. 1. None of these proceedings, however, furnished a useful
    definition of de minimis sales.
    In an effort to reduce this ambiguity, the government tries to sketch the contours of the de
    minimis threshold on appeal. In its brief, the government cites a de minimis provision from a
    dumping margin regulation to show that Kelco’s sales were more than de minimis. Resp. Br.
    18 19; see also 
    19 C.F.R. § 351.106
    (c) (treating dumping margins under 0.5% as de minimis).
    As a general rule, however, agencies cannot rely on post hoc rationalizations to justify actions
    taken during administrative proceedings: “[A]n administrative order cannot be upheld unless the
    grounds upon which the agency acted in exercising its powers were those upon which its action
    can be sustained.” SEC v. Chenery Corp., 
    318 U.S. 80
    , 95 (1943). Here, although the
    government cites a potentially relevant de minimis provision in its brief, Commerce did not do so
    anywhere in the record. The court is thus left without a basis to evaluate the de minimis test’s
    substance and place in the statutory scheme. See Burlington, 
    371 U.S. at
    167 68.
    And so the court must return the undercooked de minimis dish to the administrative
    kitchen. On remand, Commerce must define the de minimis test’s function (i.e., does the test
    Case No. 13-00079                                                                                          Page 21
    identify a “pattern” of differing prices, does it guide the agency’s discretion to apply A-T, or
    both?). Commerce must then outline the quantitative data, qualitative variables, or other
    information it considers when determining whether an exporter’s targeted sales fall above or
    below the de minimis threshold. Finally, Commerce must use this definition to find whether
    Kelco’s targeted sales pass or fail the de minimis test. Conclusory explanations of the variety
    found in the I&D Memo below will not be accepted.14
    CONCLUSION AND ORDER
    The law allowed Commerce to scrutinize Kelco’s sales for targeted dumping during the
    review. The law also supported the agency’s choice to use the Nails test to discover targeted
    sales. But Commerce could not deny Kelco a de minimis exception to its A-T margin calculation
    methodology without saying what de minimis means. The agency must correct this error on
    remand.
    14
    The court’s decision does not conflict with another recent targeted dumping case, Timken Co. v. United
    States, 
    2014 WL 763124
    . There, Commerce found that respondents’ targeted sales were de minimis and hence
    insufficient to justify using the A-T methodology to calculate dumping margins. Petitioner Timken alleged
    Commerce erred by failing to define what de minimis targeted sales were. 
    Id. at *8
    .
    Rejecting Timken’s claim, Judge Restani gave three reasons why Commerce did not need to define de
    minimis sales: (1) Commerce was never presented with and did not consider petitions to specify and justify a de
    minimis threshold; (2) Timken never argued that the targeted sales found were more than de minimis; and (3)
    respondents’ targeted sales were small. 
    Id. at *9
    . Judge Restani also noted the government’s argument that
    “Commerce is not obligated to justify relying on” the default A-A methodology to calculate margins in reviews. 
    Id. at *8
    .
    Yet unlike the petitioner in Timken, Kelco clearly asked Commerce to find its sales were “minimal and
    insufficient to meet the [de minimis] standard.” I&D Mem. at Issue 2. To make this finding, the agency needed to
    have some principled definition of what de minimis sales are. See Pls.’ Br. 18. The record, however, sported no
    such explanation. Furthermore, although Kelco’s targeted sales by time period were appreciable, they were not
    obviously more than de minimis. See Pls.’ Confid. Br. 17. Finally, Commerce applied A-T to calculate Kelco’s
    margins, departing from the methodology (A-A) the agency normally applies in reviews. See 
    19 C.F.R. § 351.414
    (c)(1) (mandating A-A in reviews unless “another method is appropriate in a particular case”).
    In short, because Commerce used an exceptional methodology to generate Kelco’s margins, because
    Kelco’s sales were not clearly more or less than de minimis, and because Kelco specifically asked the agency to find
    its targeted sales were de minimis, Kelco’s case differs from Timken’s. Commerce must provide a principled
    definition of de minimis targeted sales on remand.
    Case No. 13-00079                                                                        Page 22
    Upon consideration of all papers and proceedings herein, it is hereby:
    ORDERED that the final determination of the International Trade Administration,
    United States Department of Commerce (“Commerce”), published as Purified
    Carboxymethylcellulose from Finland, 
    78 Fed. Reg. 11,817
     (Dep’t Commerce Feb. 20, 2013)
    (final results), be, and hereby is, REMANDED to Commerce for redetermination; it is further
    ORDERED that Plaintiff’s Rule 56.2 Motion for Judgment on the Agency Record be,
    and hereby is, GRANTED as provided in this Opinion and Order; it is further
    ORDERED that Commerce must issue a redetermination (“Remand Redetermination”)
    in accordance with this Opinion and Order that is in all respects supported by substantial
    evidence, in accordance with law, and supported by adequate reasoning; it is further
    ORDERED that Commerce must fully explain the purpose of the de minimis test and
    provide a reasoned definition of the quantum of total sales of subject merchandise that must be
    targeted for Kelco to fall above or below the de minimis threshold discussed in this Opinion and
    Order; it is further
    ORDERED that Commerce must apply the de minimis test as defined in the Remand
    Redetermination to Kelco’s targeted sales and recalculate Kelco’s dumping margins in
    accordance with the results of that test; it is further
    ORDERED that Commerce shall have ninety (90) days from the date of this Opinion and
    Order in which to file its Remand Redetermination, which shall comply with all directives in this
    Opinion and Order; that the Plaintiff and Defendant-Intervenor shall have thirty (30) days from
    the filing of the Remand Redetermination in which to file comments thereon; and that the
    Defendant shall have thirty (30) days from the filing of Plaintiff and Defendant-Intervenor’s
    comments to file comments.
    /s/ Richard W. Goldberg
    Richard W. Goldberg
    Senior Judge
    Dated: April 15, 2014
    New York, New York