Polyethylene Retail Carrier Bag Committee v. United States , 232 F. App'x 965 ( 2007 )

Note: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2006-1601
POLYETHYLENE RETAIL CARRIER BAG COMMITTEE, HILEX POLY CO., LLC,
and SUPERBAG CORPORATION,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee,
and
HANG LUNG PLASTIC MANUFACTORY, LTD.,
Defendant-Appellee,
and
NANTONG HUASHENG PLASTIC PRODUCTS CO.,
Defendant-Appellee.
Stephen A. Jones, King & Spalding LLP, of Washington, DC, argued for plaintiffs-
appellants. With him on the brief was Joseph W. Dorn. Of counsel was Daniel L.
Schneiderman.
Sameer Yerawadekar, Trial Attorney, Commercial Litigation Branch, Civil
Division, United States Department of Justice, of Washington, DC, argued for
defendant-appellee, United States. With him on the brief were Peter D. Keisler,
Assistant Attorney General, David M. Cohen, Director, and Patricia M. McCarthy,
Assistant Director. Of counsel on the brief were John D. McInerney, Chief Counsel,
Michele D. Lynch, Senior Counsel, and Jennifer I. Johnson, Attorney, United States
Department of Commerce, of Washington, DC. Of counsel was Marisa Beth Goldstein.
Ronald M. Wisla, Garvey Schubert Barer, LLP, of Washington, DC, for
defendant-appellee, Hang Lung Plastic Manufactory, Ltd. With him on the brief was
William E. Perry, of Seattle, Washington.
Adams C. Lee, White & Case LLP, of Washington, DC, for defendant appellee,
Nantong Huasheng Plastic Products Co. With him on the brief was Jay C. Campbell.
Of counsel was Joanna Ritcey-Donohue.
Appealed from: United States Court of International Trade
Judge Judith M. Barzilay
NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2006-1601
POLYETHYLENE RETAIL CARRIER BAG COMMITTEE, HILEX POLY CO., LLC,
and SUPERBAG CORPORATION,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee,
and
HANG LUNG PLASTIC MANUFACTORY, LTD.,
Defendant-Appellee,
and
NANTONG HUASHENG PLASTIC PRODUCTS CO.,
Defendant-Appellee.
___________________________
DECIDED: May 4, 2007
___________________________
Before BRYSON, Circuit Judge, CLEVENGER, Senior Circuit Judge, and LINN, Circuit
Judge.
BRYSON, Circuit Judge.
This appeal concerns an antidumping investigation of polyethylene retail carrier
bags (“PRCBs”) from China. The appellants, the Polyethylene Retail Carrier Bag
Committee and two of its members (collectively “the PRCB Committee”), sought judicial
review by the Court of International Trade of certain determinations made by the
Department of Commerce in connection with the investigation. Those determinations
resulted in respondents Hang Lung Plastic Manufactory, Ltd., (”Hang Lung”) and
Nantong Huasheng Plastic Products Co. (“Nantong”) not being subject to antidumping
duties on imported PRCBs. The Court of International Trade upheld Commerce’s
determinations. No. 04-00319. We hold that those determinations were supported by
substantial evidence, and we therefore affirm the trial court’s decision.
In 2003, Commerce began an investigation into whether PRCBs were being sold
at less than fair value in the United States. Hang Lung and Nantong were among the
companies investigated. After completing the investigation, Commerce determined that
PRCBs were being sold at less than fair value and subsequently issued an antidumping
order. Because Hang Lung and Nantong received de minimis margins as a result of the
investigation, they were excluded from the order. See 19 C.F.R. § 351.204(e).
The PRCB Committee brought this action to challenge the exclusion of Hang
Lung and Nantong from the antidumping order. The Court of International Trade initially
affirmed all but one of the challenged determinations by Commerce. With respect to the
remaining issue, the court remanded for Commerce to provide a further explanation of
the method it used to value Hang Lung’s consumption of electricity in the production
process. After Commerce issued a response on remand, the Court of International
2006-1601 2
Trade affirmed the agency’s determination as to Hang Lung’s electricity usage. The
PRCB Committee then took this appeal.
I
The PRCB Committee first challenges Commerce’s method of calculating the
value of the electricity consumed by Hang Lung in producing plastic bags exported to
the United States. Because Hang Lung did not report the actual amount of electricity
used in the production of those bags, Commerce acted pursuant to 19 U.S.C. § 1677e
by applying “facts otherwise available” and drawing an inference adverse to Hang Lung
with respect to those facts. In particular, Commerce calculated Hang Lung’s electricity
consumption by allocating the value of the electricity Hang Lung used in the production
of all of its exported bags to the production of those bags exported to the United States.
The PRCB Committee now argues that Commerce’s verification of Hang Lung’s
data representing the total amount of electricity it used in producing bags was
unsupported by substantial evidence. The methodology employed in this case,
however, appears to be well within the discretion generally afforded to Commerce in
such matters. See, e.g., Micron Tech., Inc. v. United States, 117 F.3d 1386, 1394-96
(Fed. Cir. 1997); Lasko Metal Prods., Inc. v. United States, 43 F.3d 1442, 1446 (Fed.
Cir. 1994). Hang Lung presented Commerce with worksheets demonstrating how it
attributed electricity usage based on meters in each of its departments. Commerce
verified that the data on the worksheets matched the meter records that Hang Lung kept
in the ordinary course of business. Although Commerce could not verify electricity
usage on a per-unit basis, it was able to use the collected data to calculate total
electricity usage. The PRCB Committee does not provide any affirmative evidence
2006-1601 3
suggesting that the total usage data should be discredited, but instead argues that
Commerce has failed to meet its burden of showing that substantial evidence supports
its determination. In the absence of any reason to question the reliability of the data on
which Commerce relied, we conclude that the calculation of total electricity consumption
is supported by substantial evidence.
In the alternative, the PRCB Committee argues that Commerce’s constructed
value for Hang Lung’s electricity costs was not adverse to Hang Lung and therefore was
inconsistent with 19 U.S.C. § 1677e. That argument is without merit. As discussed
above, Commerce attributed the total cost of electricity for producing all of Hang Lung’s
exported bags to the production of those bags exported to the United States. Because
the attributed electricity cost was greater than the actual cost of electricity used in the
production of those bags, the attributed cost was clearly “adverse” to Hang Lung. The
PRCB Committee argues that Commerce instead should have adopted the highest
electricity usage rate reported by any respondent in the antidumping investigation, but
that was not required. Commerce has broad discretion in choosing which facts to rely
on in applying an adverse inference. See, e.g., F. Lii De Cecco Di Filippo Fara S.
Martino S.p.A. v. United States, 216 F.3d 1027, 1032 (Fed. Cir. 2000). Moreover, the
application of adverse inferences is not intended to be punitive; rather, Congress
“intended for an adverse facts available rate to be a reasonably accurate estimate of the
respondent’s actual rate, albeit with some built-in increase intended as a deterrent to
non-compliance.” Id. Commerce complied with that standard, and for that reason we
find that Commerce’s calculation of the cost of Hang Lung’s electricity usage is
“adverse” within the meaning of 19 U.S.C. § 1677e.
2006-1601 4
II
The PRCB Committee next argues that Commerce improperly accepted
Nantong’s reported purchase price for polyethylene resin, which is one of the primary
raw materials used to make PRCBs. To value factors of production in non-market
economies, Commerce generally relies on the actual prices paid for materials if the
materials are purchased from a market economy supplier and paid for in a market
economy currency. See 19 C.F.R. § 351.408(c)(1). However, Commerce does not use
actual prices if it finds that those prices are distorted or otherwise not market-
determined. See Antidumping Duties; Countervailing Duties; Final Rule, 62 Fed. Reg.
27296, 27366 (May 19, 1997); see also Shakeproof Assembly Components v. United
States, 268 F.3d 1376, 1382 (Fed. Cir. 2001). In this case, Commerce accepted
Nantong’s reported purchase price for resin. There is no dispute that Nantong
purchased its resin from a market economy supplier and paid for the resin in a market
economy currency. The PRCB Committee argues, however, that the resin prices
reported by Nantong were not actually market-determined prices.
Among the respondents in the antidumping investigation, Nantong reported
paying the lowest price per kilogram for both high-density and low-density resin. That
difference could not fairly be attributed to bulk purchasing, as Nantong paid less per
kilogram than even those companies that purchased greater amounts of resin. The
prices reported by Nantong were also lower than those reported on commodity
exchanges. Furthermore, Nantong’s resin supplier was also a downstream customer,
and Nantong gave that supplier preferential pricing on its purchases of Nantong’s
products. Based on those facts, the PRCB Committee argues that the prices paid by
2006-1601 5
Nantong were not arms-length, market-determined prices, and therefore should not
have been used by Commerce to calculate dumping margins.
Commerce investigated whether Nantong’s reported prices for resin were market
determined. In response to Commerce’s inquiry, Nantong stated that it was able to
secure low resin prices due to its longstanding relationship with its supplier and because
the contracts were subject to certain minimum purchase requirements. Nantong also
explained that it negotiated the prices in those contracts based on market prices from a
particular market research website. Commerce reviewed the contracts, invoices, and
website data for the period of investigation, as well as earlier and later periods, and
found no discrepancies. Commerce also found that during the period of investigation,
Nantong was phasing out its discounted sales to its supplier and was replacing them
with full-price sales directly to the supplier’s third-party customer (effectively competing
with the supplier for the third-party customer’s business). Based on its investigation,
Commerce concluded that Nantong and its supplier were not affiliated or in collusion,
and that the prices paid by Nantong for resin were market-determined prices. Even
assuming the same evidence might have permitted Commerce to reach the opposite
conclusion, “the possibility of drawing two inconsistent conclusions from the same
evidence does not prevent an administrative agency’s finding from being supported by
substantial evidence.” Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933
(Fed. Cir. 1984) (quoting Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 619-20 (1966)).
In light of the thoroughness of Commerce’s investigation and the reasonableness of its
methodology, we conclude that Commerce’s determination is supported by substantial
evidence.
2006-1601 6
III
The PRCB Committee next challenges Commerce’s decision to accept
Nantong’s method of reporting its factors of production. During the period of
investigation, Nantong produced two types of polyethylene bags. Both were made with
a mixture of high-density and low-density resin, but one type of bag had a higher
percentage of high-density resin, while the other had a higher percentage of low-density
resin. Nantong did not report its factors of production on a product-specific basis but
instead used a more generalized methodology: It reported the total consumption of raw
materials and the total production of finished goods for the period of investigation, and it
allocated its resin use for each product based on average ratios. Commerce accepted
that methodology and calculated Nantong’s dumping margins accordingly. The PRCB
Committee argues that by relying on those generalized figures, Commerce did not use
the “best available information,” contrary to 19 U.S.C. § 1677b(c)(1).
Commerce generally prefers to calculate factors of production on a product-
specific basis, and it preliminarily determined not to rely on Nantong’s reported data.
However, Nantong demonstrated to Commerce that the records it kept in the normal
course of its business reflected the total monthly consumption of raw materials and the
average ratio of resin in the finished products. Commerce concluded that Nantong’s
allocation methodology was reasonable and that it did not prevent Commerce from
calculating an accurate dumping margin.
The PRCB Committee points out that Nantong had production order slips that
reflected, for individual product lines, specific recipes of polyethylene resin (i.e.,
percentages of high-density and low-density resin). It argues that Commerce should
2006-1601 7
have relied on those slips in calculating the quantities of raw materials used in the
production process. However, Nantong advised Commerce that those recipes were
inaccurate and distortive because they did not reflect the presence of recycled scrap in
the finished product. Commerce observed the mixing process, reviewed Nantong’s
records, and verified from production managers that recycled scrap generally
constituted 10 to 20 percent of the finished product and at times constituted as much as
50 percent. Commerce also verified that the average ratios reported by Nantong were
the same ratios that Nantong reported to Chinese customs officials. Although the
PRCB Committee contends that the use of those average ratios was improper, it is in
effect asking this court to reweigh Commerce’s determination that the production slips
were less accurate than the generalized calculations. In light of the broad discretion
Commerce enjoys in valuing factors of production, see Nation Ford Chem. Co. v. United
States, 166 F.3d 1373, 1377 (Fed. Cir. 1999), we decline that invitation and hold that
Commerce permissibly accepted Nantong’s valuation methodology.
The PRCB Committee also criticizes Commerce’s determination on the ground
that Nantong reported using only five raw materials while other respondents reported
using between 15 and 29 raw materials. Nantong explained that discrepancy by noting
that it produced only two types of bags, both lower-end bags, whereas the other
respondents produced a wider range of bags, including higher-end bags that generally
required a greater number of raw inputs than lower-end items. Commerce verified
Nantong’s factors of production by touring the company’s warehouse and storage room,
viewing the mixing of raw materials and the processing of bags, interviewing various
employees, and auditing the company’s production orders, worksheets, and financial
2006-1601 8
statements. The PRCB Committee points to nothing in the record to suggest Nantong
used any material inputs other than the five reported raw materials. We conclude that
Commerce’s determination is supported by substantial evidence.
IV
Next, the PRCB Committee challenges Commerce’s acceptance of Nantong’s
methodology for allocating its consumption of ink. As in the case of the resin and other
raw materials, Nantong reported that it did not record its ink consumption on a product-
specific basis, but instead allocated it by dividing its total ink consumption during the
period of investigation by its total production of bags during that period. Commerce
verified the accuracy of the total consumption figure by inspecting the inventory slips,
inventory ledgers, warehouse ledgers, and general ledgers for three randomly selected
months, and found no discrepancies. The ledgers also confirmed that Nantong did not
record its ink consumption on a product-specific basis.
The PRCB Committee argues that Nantong’s allocation methodology was
distortive because it valued ink consumption uniformly across all of Nantong’s bags,
even though different lines of bags varied with regard to image size and number of
colors of ink. Commerce, however, stated that it “reviewed numerous different types of
t-shirt bags during verification and found that the size of the bag and the number of
colors are not necessarily an accurate indicator of ink consumption.” Although that
result may be counter-intuitive, we cannot say, on that basis alone, that Commerce’s
finding is unsupported by substantial evidence. Moreover, just as in the case of
Nantong’s other factors of production, Commerce’s determination appears to reflect a
reasonable approximation in light of Nantong’s actual record-keeping.
2006-1601 9
V
Finally, the PRCB Committee challenges Commerce’s valuation of cardboard
used by various respondents, including Hang Lung, as inserts in the PRCBs.
Commerce valued that cardboard by looking to Indian import data with respect to similar
products.
The respondents reported that they used two types of cardboard, treated and
untreated, and that the treated inserts are “higher quality cardboard that can be used for
graphic purposes.” That cardboard, according to the respondents, is classified under
subheading 4810.29.00 of the Harmonized Tariff Schedule. The PRCB Committee
argued that the treated inserts should have been classified as inserts “not suitable for
printing” and that HTS subheading 4810.39.09 should have been used as the basis for
calculating a surrogate value for the treated cardboard inserts. Commerce concluded
that there was no evidence to support the PRCB Committee’s contention that the
respondents’ representation as to the type of treated cardboard inserts they used was
“illogical,” and it selected the products in HTS subheading 4810.29.00 as the class of
goods to use in calculating the surrogate value for the treated cardboard inserts.
The PRCB Committee argues that the respondents initially reported using low-
grade cardboard inserts and then later changed their position, without substantiation, to
claim that the inserts were actually of the “suitable for printing” grade. The record does
not support that assertion. The initial report cited by the PRCB Committee was
submitted by a single respondent, Rally. While that report stated that Rally used low-
grade cardboard as inserts, it did not address the type of cardboard inserts used by
other respondents. The second report cited by the PRCB Committee was submitted by
2006-1601 10
several respondents (including Rally), and it stated that some of those respondents
used the higher-grade treated cardboard as inserts while others used the low-grade
untreated cardboard as inserts. Contrary to the PRCB Committee’s suggestion, the
second report does not contradict the first report by indicating that all of the respondents
used the higher-quality treated cardboard as inserts, nor does it reveal any error in
Commerce’s classification of the treated inserts.
The PRCB Committee also argues that the inserts are used solely for support
and that they serve that purpose regardless of whether they are suitable for printing.
For that reason, the PRCB Committee contends that it can be inferred that the
respondents are wrong in claiming that they used cardboard inserts that are suitable for
printing. The PRCB Committee offers no affirmative proof of misrepresentation, but it
argues that the inference it draws is logical and that the respondents must have simply
“cherry picked” an HTS classification with a lower surrogate value.
Commerce was not required to accept the Committee’s proposed inference in the
face of the respondents’ representation as to the nature of the materials they used for
their cardboard inserts. As the trial court explained, “Commerce chose one among
several HTS categories to value treated cardboard inserts, and the respondents’
submission supported that choice.” In light of the respondents’ representations as to
the nature of their treated inserts and the absence of any evidence to the contrary, we
hold that Commerce’s determination was supported by substantial evidence.
Because we reject each of the PRCB Committee’s challenges to Commerce’s
underlying determinations, we affirm the decision of the Court of International Trade.
2006-1601 11