Wuhan Bee Healthy Co. v. United States , 31 Ct. Int'l Trade 1182 ( 2007 )

Slip Op. 07-113
UNITED STATES COURT OF INTERNATIONAL TRADE
______________________________
:
WUHAN BEE HEALTHY CO., LTD. :
and PRESSTEK INC., :
:
Plaintiffs, :
:
v. : Before: Richard K. Eaton, Judge
:
UNITED STATES, : Court No. 05-00438
:
Defendant, :
:
and :
:
THE AMERICAN HONEY PRODUCERS :
ASSOCIATION OF AMERICA and :
THE SIOUX HONEY ASSOCIATION, :
:
Deft.-Ints. :
______________________________:
OPINION AND ORDER
[United States Department of Commerce’s Final Results sustained
in part and remanded.]
Dated: July 20, 2007
Kalik Lewin (Martin J. Lewin and Brenna Steinert Lenchak), for
plaintiffs.
Peter D. Keisler, Assistant Attorney General; Jeanne E. Davidson,
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice (David S. Silverbrand); Office of
the Chief Counsel of Import Administration, United States
Department of Commerce (Douglas S. Ierley), of counsel, for
defendant.
Kelley Drye Collier Shannon (Michael J. Coursey and R. Alan
Luberda), for defendant-intervenors.
Court No. 05-00438 Page 2
Eaton, Judge: Before the court is the Rule 56.2 motion for
judgment upon the agency record of plaintiffs Wuhan Bee Healthy
Co., Ltd. (“Wuhan Bee”) and Presstek Inc. (“Presstek”)
(collectively, “plaintiffs”). See Pls.’ Br. Supp. Mot. J. Agency
R. (“Pls.’s Mem.”). Defendant United States and defendant-
intervenors The American Honey Producers Association and The
Sioux Honey Association oppose the motion. See Def.’s Mem. Opp’n
Pls.’ Mot. J. Agency R. (“Def.’s Opp’n”); Def.-Ints.’ Br. Opp’n
Pls.’ Mot. J. Agency R. (“Def.-Ints.’ Opp’n”). By their motion,
plaintiffs challenge certain aspects of the final results of the
United States Department of Commerce’s (“Commerce” or the
“Department”) second administrative review of the antidumping
duty order on honey from the People’s Republic of China (“PRC”)
for the period of review, December 1, 2002, through November 30,
2003 (“POR”). See Honey from the PRC, 70 Fed. Reg. 38,873 (Dep’t
of Commerce July 6, 2005) (final results) and the accompanying
Issues and Decision Memorandum (June 27, 2005), Pub. Doc. 341
(“Issues & Dec. Mem.”) (collectively, “Final Results”).
Jurisdiction is had pursuant to 28 U.S.C. § 1581(c) (2000) and 19
U.S.C. § 1516a(a)(2)(B)(iii) (2000). For the reasons that
follow, the court sustains the Final Results in part and remands
this case to Commerce for further action consistent with this
opinion.
Court No. 05-00438 Page 3
BACKGROUND
Plaintiffs Wuhan Bee and Presstek are, respectively, a
producer and exporter of honey from the PRC, and a honey importer
and distributor in the United States. During the POR, Wuhan Bee
exported honey from the PRC (the “subject merchandise”) to its
affiliate Presstek, which in turn sold the honey to Pure Sweet
Honey (“PSH”), an affiliated honey blender.1 PSH then blended
plaintiffs’ merchandise with honey from other countries and
resold it to unaffiliated customers in the United States.
On December 2, 2003, Commerce published a notice of
opportunity to request an administrative review of the
antidumping duty order on honey from the PRC. See Antidumping or
Countervailing Duty Order, Finding, or Suspended Investigation,
68 Fed. Reg. 67,401 (Dep’t of Commerce Dec. 2, 2003) (notice).
Pursuant to the notice, Wuhan Bee asked for a review of its
entries during the POR. See Honey From the PRC, 69 Fed. Reg.
77,184 (Dep’t of Commerce Dec. 27, 2004) (prelim.). Commerce
initiated the second administrative review on January 22, 2003.
See Initiation of Antidumping and Countervailing Duty Admin.
Revs. and Req. for Revocation in Part, 68 Fed. Reg. 3009 (Dep’t
1
Commerce found Wuhan Bee was affiliated with Presstek
for a part of the POR, i.e., from July 20, 2003, forward.
Presstek and PSH were affiliated during the entire POR. See
Issues & Dec. Mem. at 68.
Court No. 05-00438 Page 4
of Commerce Jan. 22, 2003) (notice).
During the course of its review, Commerce issued
questionnaires to Wuhan Bee asking for information concerning,
among other things, its sales to the United States (Section C);
factors of production (Section D); and costs associated with
further manufacturing in the United States (Section E). Commerce
also issued supplemental questionnaires to Wuhan Bee, which
focused on its calculation of “blend ratios.”2 That is, by these
supplemental questionnaires, Commerce sought to determine the
percentage of Wuhan Bee’s honey contained in each sale of blended
honey made by PSH to unaffiliated U.S. customers. As Commerce
noted in the Final Results, blend ratios are “essential to the
reported U.S. sales and further manufacturing databases because
the ratios determine whether a particular honey sale is of
subject or non-subject merchandise and the quantity of the sale
of subject merchandise.” Issues & Dec. Mem. at 80.
Commerce notified Wuhan Bee that it would verify its
questionnaire responses pertaining to U.S. sales made through
2
Wuhan Bee first identified “blend ratios” in its
Section C response as “the percentage of subject honey contained
within the honey resold by Wuhan Bee’s U.S. affiliate . . . .”
Wuhan Bee’s Sec. C Ques. Resp., Conf. Doc. 13 at 25 (adding field
30.1 “BLENDRATU (%)” to the fields Commerce requested Wuhan to
include in its U.S. sales database).
Court No. 05-00438 Page 5
Presstek and PSH between July 20, 2003 and the end of the POR,
in the United States offices of PSH.3 Verification was scheduled
for April 27, 2005, to April 29, 2005.
Prior to verification, Commerce forwarded to Wuhan Bee an
outline indicating the areas to be covered, e.g., “Sales Process
and Sales Traces” and “Further Manufacturing,” and the type of
documentation that it would require in order to verify the
information in Wuhan Bee’s questionnaire responses. See CEP
Verification Outline (Apr. 20, 2005), Conf. Doc. 101 at 7, 9. In
particular, Commerce asked Wuhan Bee to be prepared to provide
“[d]ocumentation supporting the ‘blend ratio,’” so that the
verifiers could trace data from documents to the responses. CEP
Verification Outline, Conf. Doc. 101 at 8. It also instructed
Wuhan Bee to “[p]lease be prepared to demonstrate the blend ratio
for all sales . . . and provide support documentation for all
costs associated with further manufacturing . . . as reported in
your questionnaire responses.” CEP Verification Outline, Conf.
Doc. 101 at 9.
At verification, Commerce selected fifty-one U.S. sales
invoices for review from Wuhan Bee’s U.S. sales databases.
3
Presstek and PSH shared a physical address in Verona,
Wisconsin. See Verification of U.S. Sales and Further
Manufacturing Expenses for Wuhan Bee, Conf. Doc. 106 at 1 n.2.
Court No. 05-00438 Page 6
Twenty-six of the invoices were selected from a database
providing information about sales of subject and non-subject
merchandise during the POR. For five of the twenty-six invoices,
company officials failed to provide supporting documentation. As
for the other twenty-one invoices, Commerce found discrepancies
in blend ratios in three of them. The remaining twenty-five
invoices were selected from a database that quantified the
differences between the amount of subject merchandise sold by
Wuhan Bee to its affiliates and the amount of subject merchandise
in the blended honey sold to unaffiliated U.S. customers. For
nine of the twenty-five invoices, company officials were unable
to provide supporting documentation, and for the remaining
sixteen, Commerce found discrepancies with respect to the
reported blend ratios/blend content for thirteen of the invoices.
See Verification Rep., Conf. Doc. 106 at 3.
On May 19, 2005, plaintiffs filed a brief with Commerce
(“Case Brief”) in an attempt to correct deficiencies in blend
ratios discovered at verification. Commerce rejected an
attachment to the Case Brief and the narrative references to the
attachment, claiming they were “new information” that was
untimely filed and thus could not be verified. Plaintiffs were
given an opportunity to submit a redacted version of the Case
Brief, i.e., one with the claimed untimely new information
Court No. 05-00438 Page 7
omitted, which they did on May 24, 2005. See Letter from
Commerce to Bruce M. Mitchell of 5/23/05, Conf. Doc. 113; see
also Letter from Bruce M. Mitchell to Commerce of 5/24/05, Conf.
Doc. 116.
On July 6, 2005, Commerce published notice of the Final
Results. See Honey from the PRC, 70 Fed. Reg. at 38,873. In the
Final Results, Commerce applied adverse facts available (“AFA”)
to sales made by Wuhan Bee through affiliated parties in the
United States, i.e., Presstek and PSH, after July 20, 2003, and
assigned an antidumping duty rate of 183.80% to those sales.
Issues & Dec. Mem. at 82.
By their motion, plaintiffs challenge Commerce’s decision to
use AFA. They also challenge Commerce’s valuation of the factors
of production of the subject merchandise (in particular, raw
honey and labor) and Commerce’s calculation of surrogate
financial ratios, i.e., the cost of factory overhead; selling,
general and administrative expenses; and profit. Finally, they
challenge Commerce’s decision to change the methodology it used
to calculate the assessment rate and cash deposit rate from an ad
valorem basis to a per kilogram basis.
Court No. 05-00438 Page 8
STANDARD OF REVIEW
The court reviews the Final Results under the substantial
evidence and in accordance with law standard, set forth in
19 U.S.C. § 1516a(b)(1)(B)(i) (“The court shall hold unlawful any
determination, finding, or conclusion found . . . to be
unsupported by substantial evidence on the record, or otherwise
not in accordance with law . . . .”). “Substantial evidence is
‘such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.’” Huaiyin Foreign Trade Corp.
(30) v. United States, 322 F.3d 1369, 1374 (Fed. Cir. 2003)
(quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)).
“Substantial evidence requires more than a mere scintilla, but is
satisfied by something less than the weight of the evidence.”
Altx, Inc. v. United States, 370 F.3d 1108, 1116 (Fed. Cir. 2004)
(internal citations & quotation marks omitted).
The existence of substantial evidence is determined “by
considering the record as a whole, including evidence that
supports as well as evidence that ‘fairly detracts from the
substantiality of the evidence.’” Huaiyin, 322 F.3d at 1374(quoting Atl. Sugar, Ltd. v. United States, 744 F.2d 1556, 1562
(Fed. Cir. 1984)). The court “must affirm [Commerce’s]
determination if it is reasonable and supported by the record as
a whole, even if some evidence detracts from [Commerce’s]
Court No. 05-00438 Page 9
conclusion.” Nippon Steel Corp. v. United States, 458 F.3d 1345,
1352 (Fed. Cir. 2006) (internal quotation marks & citation
omitted). In addition, “[a]s long as the agency’s methodology
and procedures are reasonable means of effectuating the statutory
purpose, and there is substantial evidence in the record
supporting the agency’s conclusions, the court will not impose
its own views as to the sufficiency of the agency’s investigation
or question the agency’s methodology.” Ceramica Regiomontana,
S.A. v. United States, 10 CIT 399, 404–05, 636 F. Supp. 961, 966
(1986), aff’d, 810 F.2d 1137, 1139 (Fed. Cir. 1987) (citing
Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S.
837, 843 (1984)).
DISCUSSION
I. Commerce’s Use of Facts Available/Adverse Facts Available
with respect to Wuhan Bee’s U.S. Sales
In determining whether the subject merchandise is being, or
is likely to be, sold at less than fair value, 19 U.S.C.
§ 1677b(a) requires Commerce to make “a fair comparison . . .
between the export price or constructed export price and normal
value.” Because a portion of Wuhan Bee’s U.S. sales during the
POR were made through its U.S. affiliates, Presstek and PSH,
Commerce compared the “constructed export price” of the subject
Court No. 05-00438 Page 10
merchandise to normal value.4 “Constructed export price” is
“the price at which the subject merchandise is first sold . . .
in the United States . . . by or for the account of the producer
or exporter of such merchandise or by a seller affiliated with
the producer or exporter, to a purchaser not affiliated with the
producer or exporter,” as adjusted. 19 U.S.C. § 1677a(b).
In this case, the first sale of Wuhan Bee’s honey to an
unaffiliated U.S. purchaser was made through PSH after it had
blended Wuhan Bee’s honey with honey from other sources. The
“blend ratios” for the sales Wuhan Bee made through PSH, i.e.,
the percentage of subject merchandise in each sale, were an
important element in the calculation of constructed export price.
In the Final Results, Commerce found that many of Wuhan Bee’s
reported blend ratios could not be verified as accurate. Issues
& Dec. Mem. at 79 (“Of the invoices that we reviewed at
verification, 43 percent failed to be verified as accurate.
Thus, the Department determines that Wuhan Bee’s reported blend
ratios cannot be verified.”).
Where a respondent in an administrative review provides
information that Commerce cannot verify, the Department is
4
Commerce’s construction of normal value is discussed
infra in Part II.
Court No. 05-00438 Page 11
permitted to “fill[] gaps in the record” using facts otherwise
available. Statement of Administrative Action, H.R. Doc. No.
103-316, at 869 (1994), reprinted in 1994 U.S.C.C.A.N. 4040,
4198–99 (“SAA”). The relevant section of the antidumping duty
statute, 19 U.S.C. § 1677e, requires Commerce to determine (1)
whether to use facts otherwise available; and, if reliance on
such facts is warranted, (2) whether to use an adverse inference
in selecting from among the facts otherwise available. First,
under subsection 1677e(a):
If——
(1) necessary information is not
available on the record, or
(2) an interested party or any
other person——
(A) withholds information
that has been requested
by [Commerce] . . .
under this subtitle,
(B) fails to provide such
information by the
deadlines for submission
of the information or in
the form and manner
requested . . .,
(C) significantly impedes
a proceeding under this
subtitle, or
(D) provides such
information but the
information cannot be
verified as provided in
section 1677m(i) of this
Court No. 05-00438 Page 12
title,5
[Commerce] . . . shall, subject to section
1677m(d) of this title, use the facts
otherwise available in reaching the
applicable determination under this subtitle.
19 U.S.C. § 1677e(a). As the Court of Appeals for the Federal
Circuit has held:
The focus of subsection (a) is respondent’s
failure to provide information. The reason
for the failure is of no moment. The mere
failure of a respondent to furnish requested
information—for any reason—requires Commerce
to resort to other sources of information to
complete the factual record on which it makes
its determination.
Nippon Steel Corp. v. United States, 337 F.3d 1373, 1381 (Fed.
Cir. 2003) (emphasis in original). Thus, subsection (a) mandates
the use of facts otherwise available when a respondent provides
Commerce with information that “cannot be verified.” 19 U.S.C.
§ 1677e(a)(2)(D).
Once it determines that the use of facts otherwise available
is required, Commerce, in some circumstances, may use an
inference that is adverse to the interests of the respondent in
selecting from the facts on the record. Pursuant to subsection
5
Subsection 1677m(i) requires Commerce to verify all
information relied upon in reaching its final results under 19
U.S.C. § 1675(a), if (1) verification is timely requested by an
interested party; and (2) no verification was made during the two
immediately preceding reviews of the same order. See 19 U.S.C.
§ 1677m(i)(3)(A)-(B).
Court No. 05-00438 Page 13
1677e(b):
If [Commerce] . . . finds that an interested
party has failed to cooperate by not acting
to the best of its ability to comply with a
request for information from
[Commerce] . . ., [Commerce] . . ., in
reaching the applicable determination under
this subtitle, may use an inference that is
adverse to the interests of that party in
selecting from among the facts otherwise
available.
19 U.S.C. § 1677e(b). The Nippon Steel Court stated that, as
distinguished from subsection (a),
subsection (b) permits Commerce to “use an
inference that is adverse to the interests of
[a respondent] in selecting from among the
facts otherwise available,” only if Commerce
makes the separate determination that the
respondent “has failed to cooperate by not
acting to the best of its ability to comply.”
The focus of subsection (b) is respondent’s
failure to cooperate to the best of its
ability, not its failure to provide requested
information.
Nippon Steel, 337 F.3d at 1381 (quoting 19 U.S.C. § 1677e(b))
(emphasis and alteration in original). “[T]he statutory mandate
that a respondent act to ‘the best of its ability’ requires the
respondent to do the maximum it is able to do.” Id. at 1382.
Determining whether a respondent did the maximum it was able
to do to comply with Commerce’s requests involves both objective
and subjective inquiries. First, Commerce must make “an
objective showing that a reasonable and responsible importer
would have known that the requested information was required to
Court No. 05-00438 Page 14
be kept and maintained under the applicable statutes, rules, and
regulations.” Nippon Steel, 337 F.3d at 1382 (citation omitted).
Second, Commerce must make a subjective showing that the
respondent not only has failed promptly to produce the requested
information, “but further that the failure to fully respond is
the result of the respondent’s lack of cooperation in either: (a)
failing to keep and maintain all required records, or (b) failing
to put forth its maximum efforts to investigate and obtain the
requested information from its records.” Id. at 1382-83.
Finally, for the court to sustain the application of AFA,
Commerce must “articulate why it concluded that a party failed to
act to the best of its ability, and explain why the absence of
this information [was] of significance to the progress of its
investigation.” Mannesmannrohren-Werke AG v. United States, 23
CIT 826, 839, 77 F. Supp. 2d 1302, 1313-14 (1999).
In the Final Results, Commerce concluded that the use of
facts available was required for Wuhan Bee’s U.S. sales to its
affiliates because its reported blend ratios could not be
verified as accurate. Issues & Dec. Mem. at 79. Further,
Commerce found that resort to facts available was appropriate
“[b]ecause Wuhan Bee did not inform the Department that its blend
ratios were not accurate until the Department discovered the fact
Court No. 05-00438 Page 15
at verification . . . .” Id. at 80; see SAA at 869, 1994
U.S.C.C.A.N. at 4198 (“[Subsection 1677e(a)] requires
Commerce . . . to make determinations on the basis of the facts
available where requested information is missing from the record
or cannot be used because, for example, it has not been provided,
it was provided late, or Commerce could not verify the
information.”). In addition, because this discovery was made at
verification, Commerce found that it “did not have the
opportunity to allow Wuhan Bee to correct its deficient data,”
pursuant to 19 U.S.C. § 1677m(d). Id.
Next, Commerce used an adverse inference in selecting from
among the facts available because it concluded that Wuhan Bee had
failed to act to the “best of its ability,” i.e., failed to do
the maximum it was able to do, to produce documents related to
reported blend ratios:
Wuhan Bee had sufficient opportunity to
inform the Department that its blend ratios
were not accurate, yet as late into the
proceeding as March 15, 2005, respondent
asserted on the record just the opposite —
that its blend ratios were accurate and could
be easily verified. . . . [R]espondent’s own
letters to the Department in December 2004
and March 2005, addressing various issues
regarding the blend ratios and further
manufacturing cost, make it clear that
respondent knew how important and central
these ratios were to the Department’s
ultimate margin calculations. Nevertheless,
the Department gave respondent appropriate
notice in its verification outline that it
Court No. 05-00438 Page 16
would be verifying respondent’s blend ratios
and that respondent should “be prepared to
demonstrate the blend ratio for all
sales . . . and provide supporting
documentation for all costs associated with
further manufacturing.” . . .
At verification, the Department discovered
that the blend ratios were not accurate, at
least not with the documentation that
respondent was prepared to show the
Department. Only at this time did respondent
claim that the ratios could not be verified.
Wuhan Bee hindered the calculation of
accurate dumping margins in this review
because it was not more forthcoming about the
problems and issues surrounding the reporting
of the blend ratios, even though the issue
was discussed numerous times throughout this
proceeding.
Issues & Dec. Mem. at 81. In other words, Commerce concluded
that Wuhan Bee failed to put forth its maximum effort by failing
to inform Commerce of problems surrounding its ability to
accurately report blend ratios and by representing that the blend
ratios were accurate and could easily be verified.
Plaintiffs do not challenge the propriety of Commerce’s
decision to resort to facts available under 19 U.S.C. § 1677e(a).
See Pls.’ Mem. 32 (acknowledging “errors in the calculation of
blended ratios and the inability of PSH to fully comply with
Commerce’s . . . document and reconciliation requests”).
Plaintiffs do, however, challenge Commerce’s decision to take an
adverse inference against Wuhan Bee in selecting from among the
facts available.
Court No. 05-00438 Page 17
First, plaintiffs object to Commerce’s decision to use AFA
based on the finding that Wuhan Bee and its affiliates did not
act to the best of their abilities. They argue that Commerce
failed to articulate why it concluded that a party failed to act
to the best of its ability through a reasoned inquiry into the
facts.” Pls.’ Mem. 32. Plaintiffs insist that the record does
not support a finding “that Wuhan and its affiliates failed to
cooperate fully with Commerce, or that the errors in blend
ratio[s] were intended, or in fact, would have enabled Wuhan to
obtain a more favorable result.” Pls.’s Mem. 32.
Plaintiffs argue that Commerce decided to apply AFA based on
a presumption “that Wuhan was aware, or should have been aware,
that some of the blend ratios it calculated were in error.”
Pls.’ Mem. 21. They claim this presumption is unreasonable and
unfounded given the “commercial realities” of PSH’s honey
blending. Pls.’ Mem. 24. In particular, plaintiffs contend that
the record evidence shows that: (1) blending honey is an “art
form,” which is done according to customer preferences with
respect to moisture content and color; (2) “honey is blended
according to a plan recorded on . . . daily processing
report[s],” which “do not specify the quantity or source of the
honey barrels that enter into production”; and (3) “for
commercial purposes, the amount of either subject or non-subject
Court No. 05-00438 Page 18
merchandise is considered immaterial.” Pls.’ Mem. 23-24. As a
result, for this review, Wuhan Bee manually reviewed documents to
calculate blend ratios, since “PSH did not maintain blend ratios
in the normal course of its record keeping,” then reported the
blend ratios in its section C and supplemental questionnaire
responses. Pls.’ Mem. 28.
For its part, defendant argues that “Commerce properly
determined that [Wuhan Bee] and PSH failed promptly to produce or
put forth the maximum effort to investigate and obtain the
requested information” about blended honey sales. Def.’s Opp’n
12. Defendant insists that: (1) a reasonable importer would have
known that the requested information was required to be kept and
maintained, Def.’s Opp’n 15; and (2) Wuhan Bee failed to
cooperate fully because it knew that blend ratios were a
significant issue in Commerce’s investigation and had notice that
Commerce would examine those ratios at verification, yet failed
to put forth the maximum effort to investigate and obtain the
requested information. Def.’s Opp’n 18-22.
The court finds that Commerce’s application of AFA is
justified. Although not explicitly identified as such, the first
required finding under Nippon Steel, i.e., an objective inquiry,
has been satisfied. The key to this inquiry is whether
Court No. 05-00438 Page 19
plaintiffs’ behavior has been reasonable and responsible. As
expressed in the Final Results, Commerce apparently found that
plaintiffs were neither reasonable nor responsible in their
record keeping and in representing that their questionnaire
responses were accurate and could easily be verified. Commerce
further apparently found that a reasonable and responsible
respondent would have brought any problems surrounding its
supporting documentation to Commerce’s attention before the
verification. These assumptions are consistent with the Nippon
Steel Court’s injunction that a reasonable importer “have
familiarity with all of the records it maintains in its
possession, custody, or control; and . . . conduct prompt,
careful, and comprehensive investigations of all relevant records
that refer or relate to the imports in question . . . .” Nippon
Steel, 337 F.3d at 1382.
The second required finding, that Wuhan Bee failed to act to
the best of its ability, has also been satisfied. Based on
correspondence between Wuhan Bee and Commerce, it is clear that
Wuhan Bee recognized that blended honey sales and further
manufacturing expenses were significant issues in this review and
that the databases submitted in response to Commerce’s
questionnaires on these issues would be the subject of
verification. See, e.g., Letter from Jeffrey S. Grimson to
Court No. 05-00438 Page 20
Commerce of 12/3/04, Pub. Doc. 222 at 1, 2 (acknowledging that
Wuhan Bee was “unique among all honey respondents in that Chinese
honey sold by Wuhan Bee through its US affiliate is blended with
non-subject merchandise prior to sale to the first unaffiliated
U.S. customer”; “[Data submitted on further manufacturing]
represents the total cost of blending, including the non-subject
honey.”). Indeed, it represented that its questionnaire
responses could be verified:
Wuhan Bee’s responses to the Department’s
questionnaires have been sufficiently
complete and accurate for the Department to
be able to complete its verification of PSH’s
resale prices and U.S. expenses, including
further manufacturing expenses, when
verification takes place . . . .
Letter from Bruce M. Mitchell to Commerce of 3/15/05, Conf. Doc.
96 at 13. Along with this representation, Wuhan Bee indicated
that it was reviewing its questionnaire responses. Letter from
Bruce M. Mitchell to Commerce of 3/15/05, Conf. Doc. 96 at 13 n.6
(stating that plaintiffs had found certain clerical errors in
their responses, but that “none . . . undermine[d] the overall
veracity of the submission”). It did not, however, bring to
Commerce’s attention any problems affecting its ability to
accurately report blend ratios, nor did plaintiffs ask Commerce
for help in this regard.6 On the contrary, it assured Commerce
6
The argument that plaintiffs may not have kept records
of blend ratios in the normal course of business does not stand
(continued...)
Court No. 05-00438 Page 21
that “PSH’s record keeping system . . . used to compile the blend
ratios reported in Sections C and E, conform to stringent
industry standards and are sufficiently precise to allow PSH to
trace the source of honey in its blends . . . .” Letter from
Bruce M. Mitchell to Commerce of 3/15/05, Conf. Doc. 96 at 11.
Nonetheless, at verification, PSH’s officials failed to produce
supporting documentation for twenty-eight percent of the invoices
Commerce selected for review. Verification Rep., Conf. Doc. 106
at 3. With respect to those invoices for which PSH supplied
supporting documentation, Commerce discovered inaccuracies forty-
6
(...continued)
in the way of Commerce’s application of an adverse inference
because the “best of its ability” standard, particularly with
respect to a successive review,
assumes that importers are familiar with the
rules and regulations that apply to the
import activities undertaken and requires
that importers, to avoid a risk of an adverse
inference determination in responding to
Commerce’s inquiries: (a) take reasonable
steps to keep and maintain full and complete
records documenting the information that a
reasonable importer should anticipate being
called upon to produce; (b) have familiarity
with all of the records it maintains in its
possession, custody, or control; and (c)
conduct prompt, careful, and comprehensive
investigations of all relevant records that
refer or relate to the imports in question to
the full extent of the importers’ ability to
do so.
Nippon Steel, 337 F.3d at 1382. While the “best of its ability”
standard recognizes that mistakes sometimes occur, it “does not
condone inattentiveness, carelessness, or inadequate record
keeping.” Id.Court No. 05-00438 Page 22
three percent of the time. See Issues & Dec. Mem. at 79;
Verification Rep., Conf. Doc. 106 at 3. That the errors in blend
ratios may not have been intended is not relevant to Commerce’s
decision to take an adverse inference. Nippon Steel, 337 F.3d at
1383 (“While intentional conduct, such as deliberate concealment
or inaccurate reporting, surely evinces a failure to cooperate,
the statute does not contain an intent element. ‘Inadequate
inquiries’ may suffice. The statutory trigger for Commerce's
consideration of an adverse inference is simply a failure to
cooperate to the best of respondent's ability, regardless of
motivation or intent.”). Commerce’s subjective inquiry, then,
focuses on plaintiffs’ “fail[ure] to put forth [their] maximum
efforts to investigate and obtain the requested information from
[their] records.” Id. at 1382-83.
Finally, plaintiffs make the argument that the Case Brief as
originally submitted, i.e., with the attachment, confirmed that
the errors in blend ratios that Commerce discovered at
verification did not result in any advantage to Wuhan Bee. That
is, Wuhan Bee insists that it “[did] not obtain a more favorable
result by failing to cooperate than if it had cooperated fully.”
Pls.’ Mem. 31 (internal quotation marks & citation omitted).
Commerce may take an adverse inference to induce compliance with
its requests, and, indeed, to ensure that uncooperative
Court No. 05-00438 Page 23
respondents do not receive a benefit as a result. See Timken Co.
v. United States, 354 F.3d 1334, 1345 (Fed. Cir. 2004).
Commerce’s decision whether or not to take an adverse inference,
however, does not turn on whether Wuhan Bee’s failure to comply
with Commerce’s requests resulted in any advantage to it. That
Wuhan Bee did not comply to the best of its ability is enough to
trigger the use of an adverse inference. Nippon Steel, 337 F.3d
at 1381. Moreover, to the extent plaintiffs argue that Wuhan Bee
did not “intend” the errors in blend ratios, this argument is
immaterial because intent is not relevant to Commerce’s decision
to use AFA. Id. at 1383 (“The statutory trigger for Commerce's
consideration of an adverse inference is simply a failure to
cooperate to the best of respondent’s ability, regardless of
motivation or intent.”). It may be true, as plaintiffs contend,
that the Case Brief and the attachment did not contain new
information, but rather a resorting of information that had been
verified. See Pls.’ Mem. 30-32. Nonetheless, because the sole
purpose of the attachment to the Case Brief was to show that “any
differences between ‘precise’ quantities sold and ‘actual’
quantities reported would not have [had] an advantageous impact
on Wuhan Bee’s margins,” Case Brief, Conf. Doc. 113, Attach. 1 at
20, Commerce’s rejection of the attachment and narrative
references thereto, if in error, was harmless error.
Court No. 05-00438 Page 24
In light of the foregoing, Commerce justifiably found that a
reasonable importer would have known that blend ratios were an
important issue in this investigation and that the questionnaire
responses, and the documents to support the responses, with
respect to such ratios would be subject to verification.
Commerce also reasonably concluded that Wuhan Bee was aware that
the mix of subject and nonsubject merchandise in U.S. sales would
be the subject of inquiry by Commerce at verification.
Furthermore, Wuhan Bee’s failure to maintain adequate records of
blended honey sales and to bring any of the documentary problems
to Commerce’s attention prior to verification justified
Commerce’s finding that Wuhan Bee failed to do the maximum it was
able to do. The court thus sustains Commerce’s use of AFA.
II. Commerce’s Construction of Normal Value
Next, the court turns to plaintiffs’ challenges to
Commerce’s construction of normal value under 19 U.S.C.
§ 1677b(c)(1). When merchandise that is the subject of an
antidumping investigation is exported from a nonmarket economy
(“NME”)7 country, such as the PRC, Commerce generally determines
7
A “nonmarket economy” country is “any foreign country
that [Commerce] determines does not operate on market principles
of cost or pricing structures, so that sales of merchandise in
such country do not reflect the fair value of the merchandise.”
19 U.S.C. § 1677(18)(A). “Because it deems China to be a
nonmarket economy country, Commerce generally considers
(continued...)
Court No. 05-00438 Page 25
its normal value by valuing the factors of production used in
producing the merchandise to which it adds “an amount for general
expenses and profit plus the cost of containers, coverings, and
other expenses.” 19 U.S.C. § 1677b(c)(1). Factors of production
include the quantities of raw materials consumed and the hours of
labor needed to produce the subject merchandise. See 19 U.S.C.
§ 1677b(c)(3).
Commerce is directed to use “the best available information
regarding the values of such factors in a market economy country
or countries considered to be appropriate by the administering
authority.” 19 U.S.C. § 1677b(c)(1). What constitutes best
available information is not defined by statute or regulation,
but Commerce normally considers the quality, specificity and
contemporaneity of the data and prefers to use public, country-
wide data, where it is available. See Goldlink Indus. Co. v.
United States, 30 CIT __, __, 431 F. Supp. 2d 1323, 1337 (2006);
Freshwater Crawfish Tail Meat from the PRC, 66 Fed. Reg. 20,634(Dep’t of Commerce Apr. 24, 2001) (notice), Issues and Decision
7
(...continued)
information on sales in China and financial information obtained
from Chinese producers to be unreliable for determining, under 19
U.S.C. § 1677b(a), the normal value of the subject merchandise.”
Shanghai Foreign Trade Enters. Co. v. United States, 28 CIT __,
__, 318 F. Supp. 2d 1339, 1341 (2004). Therefore, since the
subject merchandise came from the PRC, Commerce constructed
normal value by valuing the factors of production using surrogate
data from India. See 19 U.S.C. § 1677b(c)(4).
Court No. 05-00438 Page 26
Mem., cmt. 2.
A. Valuation of the Factors of Production
Plaintiffs dispute Commerce’s decision as to what
constitutes the “best available information” to value: (1) raw
honey; and (2) labor costs.
1. Raw Honey
In the Final Results, Commerce valued raw honey using data
submitted by plaintiffs from a Web site maintained by EDA Rural
Systems Pvt. Ltd., an organization that provides business
development services to the honey and beekeeping sector in India
(“EDA Data”). See Factors of Production Valuation Mem. for the
Final Results, Pub. Doc. 340, Attach. I. Based on this
information, Commerce derived an average price for raw honey of
74.90 Rupees per kilogram during the POR. See Factors of
Production Valuation Mem. for the Final Results, Pub. Doc. 340 at
2.
Commerce decided to use EDA Data exclusively in valuing raw
honey. In doing so, it rejected three articles also submitted by
plaintiffs, which contained different values of honey, from: (1)
Court No. 05-00438 Page 27
Hindu Business Line;8 (2) Indiainfoline;9 and (3) Indian
Express.10 Plaintiffs argue that the values contained in the
three articles should be averaged with the value of honey found
in the EDA Data.
In the Final Results, Commerce explained its decision to
value raw honey using just the EDA Data: “[T]he EDA Data . . .
constitute[s] a[n] . . . appropriate surrogate value source for
this POR. [It is] . . . the best information currently available
because it is publicly available, quality data, specific to the
raw honey beekeeping industry in India, and contemporaneous with
the POR.” Issues & Dec. Mem. at 10. With respect to quality,
Commerce found that “the EDA Data source is highly documented,
including numerous specific price points over a six year period
for multiple types of honey from many suppliers, and includes
detailed information on production, inputs, and beekeepers.” Id.
at 11. With respect to specificity, Commerce noted that “the
prices quoted in the EDA Data are specific to the raw honey
beekeeping industry in the state of Bihar in India.” Id. With
8
“Girijan co-op targets Rs 135-cr turnover” (dated Apr.
17, 2003).
9
“Prospects of Bee Keeping in Rubber Plantations of
Kerala” (dated Sept. 2, 2003).
10
“In Jharkhand, it’s all about honey, honey” (dated Feb.
17, 2003).
Court No. 05-00438 Page 28
respect to contemporaneity, Commerce found that the “EDA Data is
contemporaneous to this administrative review, . . . and it
includes monthly data points over a majority of the POR.” Id.
(footnote omitted).
In addition, Commerce addressed the reliability and
persuasiveness of the three other data sources proposed by
plaintiffs and rejected each one:
[1] [T]he [Hindu Business Line article] . . .
is not reliable because . . . the information
is based on data provided by . . . an Indian
cooperative, and represents the experience of
only one producer; and . . . the Department
has rejected this data in previous segments
of this proceeding because it was not
obtained from publicly available sources and
may not be representative of country-wide
prices in India. . . .
[2] [T]he [Indiainfoline article] appears to
be nothing more than a school paper written
by a first-year business student and posted
on the Business School section of the website
with no additional information on the
author’s qualifications or the sources of his
information. . . .
[3] [T]he [Indian Express article] . . .
states that the prices quoted are limited to
a single beekeeper that only produces 1.5 MT
per year, and . . . was rejected as
unreliable [in a previous segment of the
proceeding] . . . . [T]he exceptionally
limited nature of [this] data renders [it]
unpersuasive of Indian prices as a whole in
comparison with the broader EDA Data.
Issues & Dec. Mem. at 13.
Court No. 05-00438 Page 29
Plaintiffs do not quarrel with Commerce’s use of the EDA
Data. Rather, they argue that Commerce’s rejection of the other
sources plaintiffs proposed was unreasonable. According to
plaintiffs, the three articles “covered different regions of
India but showed a relatively narrow range of prices for raw
honey . . . .” Pls.’ Reply Br. to Def.’s & Def.-Ints.’ Resp.
Brs. (“Pls.’ Reply”) 10. Plaintiffs further maintain that the
prices contained in the EDA Data are not representative of the
price of honey found in India generally. Pls.’ Mem. 34; Pls.’
Reply 9. Thus, plaintiffs contend that “[a]s all information on
the record is region-specific, the most reasonable method to
arrive at a country-wide surrogate value is to calculate an
average price derived from all this data . . . .” Pls.’ Mem. 37.
Plaintiffs therefore insist that “Commerce’s reasons for
rejecting [the Hindu Business Line, Indiainfoline and Indian
Express articles] were arbitrary and capricious.” Pls.’ Reply 9.
Commerce rejected the [Hindu Business Line
article] because the information related to a
cooperative, while using the data from
another cooperative, [Mahabaleshwar Honey
Production Cooperative Society Ltd.], to
determine financial ratios. Commerce
rejected the [Indiainfoline article] as it
had concerns over the origins of the article
written by a business student, but used the
EDA Data, found on a random website.
Further, Commerce relied upon articles
published in . . . Indiainfoline . . . in
other proceedings. Finally, Commerce
rejected [the Indian Express article] as it
Court No. 05-00438 Page 30
was limited to the results of a single
beekeeper and had previously rejected this
information before. Yet, there is nothing to
suggest that the price information in the
article was unreliable.
Pls.’ Reply 9. Plaintiffs thus seek a remand with instructions
to value raw honey based on an average of the honey values found
in the Hindu Business Line, the Indiainfoline and the Indian
Express articles as well as the EDA Data.
In response, defendant contends that Commerce’s explanations
for rejecting plaintiffs’ proposed data are reasonable, and that
the record supports Commerce’s decision not to average the honey
values:
[T]he [Hindu Business Line, Indiainfoline and
Indian Express] articles either quote prices
from single producers, or contain data from
unknown origins, which Commerce determined
not to be comparable with the EDA data.
Further Commerce “continue[d] to find that
the [three articles] are unreliable sources
for valuing honey.” . . .
In this case, the sources for the surrogate
value of raw honey contained upon the record
were all regionally limited. EDA data are
based upon the raw honey beekeeping industry
in the second largest honey producing state
in India, offering more representative prices
than the article from Indiainfoline, the
prices for which are from the Kerala region,
which accounts for only nine percent of
India’s honey production. In addition,
Commerce rejected the articles from
[Indiainfoline] and Hindu Business Line
because they either quote prices from single
producers, making them less representative
than EDA data, or contain data from unknown
Court No. 05-00438 Page 31
origins rather than from public sources,
unlike the EDA data.
Def.’s Opp’n 29 & 31. Thus, defendant insists that, since the
alternative data sources proposed by plaintiffs were not
reliable, Commerce’s decision not to average them with the EDA
Data is justified.
Commerce enjoys some latitude in selecting among the
available information in valuing the factors of production. See
Nation Ford Chem. Co. v. United States, 166 F.3d 1373, 1377 (Fed.
Cir. 1999). In choosing from among the available data, Commerce
“must act in a manner consistent with the underlying objective of
19 U.S.C. § 1677b(c) – to obtain the most accurate dumping
margins possible.” Shandong Huarong Gen. Corp. v. United States,
25 CIT 834, 838, 159 F. Supp. 2d 714, 719 (2001) (citation
omitted); Shakeproof Assembly Components, Div. of Ill. Tool
Works, Inc. v. United States, 268 F.3d 1376, 1382 (Fed. Cir.
2001)). To determine whether Commerce’s selection of surrogate
values furthers this statutory purpose, the court must determine
whether “Commerce’s choice of what constitutes the best available
information evidences a rational and reasonable relationship to
the factor of production it represents.” Shandong Huarong, 25
CIT at 838, 159 F. Supp. 2d at 719 (citations omitted).
Here, the court finds reasonable Commerce’s use of the EDA
Court No. 05-00438 Page 32
Data and the exclusion of the other three sources proposed by
plaintiffs. First, plaintiffs do not dispute the reliability of
the EDA Data. Indeed, although now declaring the data as being
from a “random website,” at the administrative level they argued
in favor of Commerce using it as a part of an average. See
Issues & Dec. Mem. at 10. Moreover, Commerce’s decision not to
average the EDA Data with the three articles proposed by
plaintiffs was reasonable in light of the deficiencies Commerce
found in those sources.
First, Commerce was justified in rejecting the Hindu
Business Line article. In a single sentence the article states a
range of prices received by a single producer, the Girijan Co-
operative Corporation Ltd. See Hindu Business Line Article at 2.
The EDA Data, on the other hand, contains information on numerous
producers and therefore represents a wider range of prices. In
addition, there is no indication that the sources of the data
contained in the Hindu Business Line article are publicly
available. See Issues & Dec. Mem. at 12.
Second, the court finds no error in Commerce’s conclusion
that the Indiainfoline article was unreliable. Commerce found
that unlike the EDA Data, the sources of which were well-
documented and made available by a business entity, the
Court No. 05-00438 Page 33
Indiainfoline article contained nothing to indicate it was
reliable. In particular, there was “no additional information on
the author’s qualifications or the sources of his information”
other than his status as a first-year business student. Id. 12-
13.
Third, the Indian Express article was found not to be as
representative as the EDA Data because it pertained to the
experience of only a single beekeeper.
In light of the proposed sources’ deficiencies, the court
finds reasonable Commerce’s decision not to average this data
with the EDA Data, which Commerce found was (1) publicly
available; (2) well-documented, with numerous price points for
multiple types of honey from many suppliers; (3) detailed
information on production, inputs and beekeepers; (4) based on
India’s second largest honey-producing region (Bihar); and (5)
contemporaneous with the POR. Thus, Commerce’s conclusion that
the EDA Data was the “best available information” on the record
on which to base its valuation of raw honey is supported by
substantial evidence and in accordance with law.
2. Labor Costs
The cost of labor is another factor of production used to
Court No. 05-00438 Page 34
construct normal value. As this Court has observed, “Commerce
treats the wage rate differently from all other factors of
production[.] [F]or labor, Commerce employs regression-based wage
rates reflective of the observed relationship between wages and
national income in market economy countries.”11 Dorbest Ltd. v.
United States, 30 CIT __, __, 462 F. Supp. 2d 1262, 1291 (2006).
“Using this regression analysis, Commerce determines the
relationship between countries’ per capita Gross National Product
[(“GNI”)] and their wage rates; Commerce approximates the wage
rate of the PRC by using the PRC’s GNI as the variable in the
equation that was the result of the regression.” Id. at __, 462
F. Supp. 2d at 1291.
Here, Commerce based its regression analysis upon the
average wages from a basket of fifty-six market economy
11
In full text, Commerce’s regulation with respect to how
labor is to be valued in the nonmarket economy context provides:
For labor, the Secretary will use regression-
based wage rates reflective of the observed
relationship between wages and the national
income in market economy countries. The
Secretary will calculate the wage rate to be
applied in nonmarket economy proceedings each
year. The calculation will be based on
current data, and will be made available to
the public.
19 C.F.R. § 351.408(c)(3) (2005).
Court No. 05-00438 Page 35
countries.12 Factors of Production Valuation Mem. for the
Prelim. Results, Pub. Doc. 231, Attach. 14. Therefore, after
making its calculation, it “use[d] the 2004-revised expected wage
rate of $0.93/hour as a surrogate for Chinese labor costs, in
accordance with its regulations and long-standing practice.”
Issues & Dec. Mem. at 28.
Plaintiffs challenge Commerce’s methodology for calculating
the surrogate wage rate, arguing that in determining which
countries make up the basket of fifty-six countries, Commerce
“selectively excluded many low wage countries and selectively
included non-comparable source countries.” Pls.’ Mem. 41. For
example, plaintiffs point out that Commerce included “source
countries, such as Switzerland, the U.K., Norway, and Germany,”
Pls.’ Mem. 18, and excluded available data, which plaintiffs
placed on the record, for twenty-two additional countries, e.g.,
Albania, Bangladesh, Cambodia and the Czech Republic. Pls.’ Mem.
41; see also Letter from Bruce M. Mitchell to Commerce of
1/18/05, Ex. 5, Attach. 1, Pub. Doc. 257 (placing on the record
data for twenty-two countries); Case Brief dated May 10, 2005,
12
The basket of countries includes high-wage countries,
such as Switzerland ($18.24/hour); the United Kingdom
($15.11/hour); and the United States ($14.83/hour); and low-wage
countries, such as India ($0.15/hour); Pakistan ($0.26/hour); and
Sri Lanka ($0.30/hour). Factors of Production Valuation Mem. for
the Prelim. Results, Pub. Doc. 231, Attach. 14.
Court No. 05-00438 Page 36
Pub. Doc. 301 at 44 & n.16. Commerce’s exclusion of available
data, plaintiffs argue, was arbitrary and contrary to Commerce’s
own position that “more data is better than less data.” Pls.’
Mem. 41.
Plaintiffs also contend that in performing its regression
analysis, Commerce improperly combined data from 2001 (regarding
the wage rates and per capita GNI of the fifty-six market economy
countries) with data from 2002 (regarding Chinese GNI), when 2002
data was available with respect to the wage rates and per capita
GNI of the market economy countries. Pls.’ Mem. 17 (citing
arguments raised below in plaintiffs’ Case Brief dated May 10,
2005, Pub. Doc. 301 at 38-39). Plaintiffs charge that by mixing
Chinese GNI data from 2002 with wage rate and per capita GNI data
from 2001, Commerce violated its regulations which require use of
“current data.” Pls.’ Mem. 41 (quoting 19 C.F.R.
§ 351.408(c)(3)). Thus, plaintiffs argue, Commerce’s methodology
“critically undermines any assertion that the regression based
wage calculation significantly enhances the accuracy and fairness
in the NME case.” Pls.’ Mem. 41.
Defendant responds that because “Commerce has consistently
based its regression analysis upon average wages from a basket of
56 countries since it updated its regression analysis in 2000,”
Court No. 05-00438 Page 37
the twin aims of predictability and fairness are served by using
this method of calculating wage rate. Def.’s Opp’n 43. In
addition, Commerce insists that changing the methodology as
plaintiffs propose, i.e., to add twenty-two countries to the
basket currently compiled, is a significant change that would
require comment from the general public, which would be
impracticable in this review. Def.’s Opp’n 43-44.
As to its wage rate finding, however, Commerce requests
remand because it acknowledges that it “mistakenly relied upon
income data from two different years [i.e., 2001 and 2002,] in
its calculation of the surrogate wage rate.” Def.’s Opp’n 41.
Thus, defendant asks the court to sustain its wage rate
calculation methodology and to remand for the limited purpose of
recalculating the labor wage rate using “the correct GNI data.”
Def.’s Opp’n 45.
The court cannot sustain Commerce’s labor calculation. When
valuing factors of production, Commerce is required to use “the
best available information regarding the values of such factors
in a market economy country or countries considered to be
appropriate.” 19 U.S.C. § 1677b(c)(1). In the Final Results,
Commerce rejected plaintiffs’ request to recalculate the
surrogate wage:
Court No. 05-00438 Page 38
The Department is reviewing its regression-
based wage rate calculation . . .; however,
comprehensively re-examining each country in
the existing dataset and recalculating the
wage rate regression using GNI requires more
time than is currently available. To revise
the data here would be impracticable given
the time constraints of this review. The
Department is fully satisfied that the
current figures are reasonable and correct,
and will use them unless and until they are
changed as a result of a thorough review.
Recalculating the regression analysis using a
significantly different basket of countries
would amount to a significant change in the
Department’s methodology; such a change
should be subject to notice and comment from
the general public. Thus, it would be
inappropriate to restrict this public-comment
process to the context of the instant review.
Consequently, the Department will invite
comments from the general public on this
matter in a proceeding separate from the
current review of this order.
Issues & Dec. Mem. at 28. In other words, Commerce declined to
revise the data set it relied upon in the Final Results because:
(1) it was impracticable under the statutory deadlines for
completing its investigation; and (2) recalculating the
regression analysis using a significantly different basket of
countries would likely result in a significant change in
methodology that would require comment from the public. This
Court has rejected both of these arguments.
In Dorbest Ltd., the Court found wanting the argument that
statutory deadlines for completing investigations prevented
Commerce from considering available information in updating its
Court No. 05-00438 Page 39
regression model:
Congress was certainly sensitive to this
concern [of completing investigations within
statutory deadlines] by limiting Commerce’s
choice of data to that “available” during the
investigation. But in recognizing this
concern, Congress nonetheless required that
if information was available, i.e., placed on
the record, Commerce was compelled to
consider it. Therefore, Commerce’s defense
runs directly against its statutory duty.
Consequently, Commerce’s . . . defense
must . . . be rejected.
Id. at __, 462 F. Supp. 2d at 1296. As to Commerce’s past
practice of relying on data from fifty-six countries in making
PRC wage rate calculations and the need for public comment prior
to any change in that practice, the Dorbest Ltd. Court observed:
Commerce’s . . . argument . . . that the data
set in question must be developed through
notice-and-comment rulemaking[] appears to be
inconsistent with Commerce’s past practice.
Commerce has in the past updated and expanded
the number of countries within the data set
without resorting to notice and comment
rulemaking. In fact, during the
investigation here, Commerce used a basket of
fifty-six countries, but during the voluntary
remand, used a basket of only fifty-four. No
notice-and-comment rulemaking was used to
effect the change. Commerce has also, over
time, expanded its data set of countries from
forty-five countries to fifty-six countries
without vetting its choices through notice-
and-comment rulemaking.
Id. at __, 462 F. Supp. 2d at 1295. The court agrees with the
Dorbest Ltd. Court’s observations and likewise rejects Commerce’s
Court No. 05-00438 Page 40
arguments.13
In light of the foregoing, this matter is remanded so that
Commerce may consider the information plaintiffs have placed on
the record with respect to the twenty-two additional countries.
Further, Commerce must explain its decisions: (1) to exclude the
twenty-two low-wage countries with respect to which plaintiffs
placed information on the record; and (2) to include data from
high-wage countries, such as Switzerland, the United Kingdom and
the United States. In the event that on remand Commerce rejects
the data from the twenty-two additional countries, it must
explain its decision with reference to specific evidence and
without reference to time constraints. In addition, Commerce
must explain its decision to rely on a methodology that results
in the disparity observed between the hourly wage rate in, e.g.,
India ($0.15/hour), a market economy country found to be
economically comparable to the PRC, and the hourly wage rate
13
The court also notes that Commerce announced a revised
methodology in a notice published on October 19, 2006. See
Antidumping Methodologies: Market Economy Inputs, Expected Non-
Market Economy Wages, Duty Drawbacks; and Request for Comments,
71 Fed. Reg. 61,716, 61,721-23 (Dep’t of Commerce Oct. 19, 2006).
Under the revised methodology, the basket of countries “will
include data from all market economy countries that meet the
criteria described [in the notice] and that have been reported
within 1 year prior to the Base Year,” which is the most recent
reporting year of the data required for the regression
methodology. Id. at 61,722.
Court No. 05-00438 Page 41
calculated for the PRC ($0.93/hour).14 Dorbest Ltd., 30 CIT at
__, 462 F. Supp. 2d at 1269 (“For the court to conclude that a
reasonable mind would support Commerce’s selection of the best
available information, Commerce needs to justify its selection of
data with a reasoned explanation.”).
Finally, with respect to its request for voluntary remand to
revise its wage rate finding, Commerce is instructed to
recalculate the wage rate using the correct, most current GNI
data. See Allied Pac. Food (Dalian) Co. v. United States, 30 CIT
__, __, 435 F. Supp. 2d 1295, 1309 (2006) (granting voluntary
remand instructing that “Commerce must support its findings of
fact concerning the surrogate value for the labor wage rate by
citing to specific evidence on the record and also must include
an explanation for the choices it makes from among the various
alternatives it considers”).
B. Surrogate Financial Ratios
In accordance with the requirement under 19 U.S.C.
§ 1677b(c)(1)(B) that normal value include amounts for “general
expenses and profit,” Commerce “usually calculates separate
14
As plaintiffs point out, “the calculated wage rate of
$0.93/hour is more than 600% higher than India’s published,
country-wide labor rate of $0.15/hour.” Issues & Dec. Mem. at
25.
Court No. 05-00438 Page 42
values for selling, general and administrative [(“SG&A”)]
expenses, manufacturing overhead and profit, using ratios15
derived from financial statements of one or more companies that
produce identical or comparable merchandise in the surrogate
country.” Shanghai Foreign Trade, 28 CIT at __, 318 F. Supp. 2d
at 1341.
Here, Commerce determined that data from Mahabaleshwar Honey
Production Cooperative Society Ltd.’s (“MHPC”) 2003-2004
financial statement was the “best available information” from
which to derive surrogate financial ratios.16 In choosing to
15
As this Court explained in Shanghai Foreign Trade,
[t]o calculate the SG & A ratio, the Commerce
practice is to divide a surrogate company’s
SG & A costs by its total cost of
manufacturing. For the manufacturing
overhead ratio, Commerce typically divides
total manufacturing overhead expenses by
total direct manufacturing expenses.
Finally, to determine a surrogate ratio for
profit, Commerce divides before-tax profit by
the sum of direct expenses, manufacturing
overhead and SG & A expenses. These ratios
are converted to percentages (“rates”) and
multiplied by the surrogate values assigned
by Commerce for the direct expenses,
manufacturing overhead and SG & A expenses.
Id. at __, 318 F. Supp. 2d at 1341 (citing Manganese Metal From
the PRC, 64 Fed. Reg. 49,447, 49,448 (Dep’t of Commerce Sept. 13,
1999) (final results)).
16
MHPC, a cooperative, “is in the business of buying raw
honey from its members and selling processed honey to its
(continued...)
Court No. 05-00438 Page 43
rely on the MHPC financial statement, it rejected the financial
statement of Apis (India) Natural Products (“Apis”), a honey
supplier:
With respect to quality, we find that MHPC is
a better source of data than Apis because the
MHPC materials include a complete annual
report, an auditors report, and complete
profit and loss business statements that
segregate MHPC’s honey and fruit canning
businesses. With respect to specificity, we
note that MHPC is a honey processor in India,
and the financial statements include details
on MHPC’s costs and revenues related to its
honey processing business. The MHPC
statement is also contemporaneous to the
POR . . . . In contrast, we find that the
Apis statement does not include any auditor
notes, nor does it appear to include complete
schedules or details on Apis’ operations.
Therefore, we are not using the Apis data
because we determine that it is not as
reliable or detailed as that of MHPC, and
because we have other publicly available
information which meets the Department’s
criteria for data on which to base the
surrogate financial ratios.
Issues & Dec. Mem. at 17. Thus, Commerce concluded the MHPC
financial statement was more reliable than the Apis financial
statement and used the data in the MHPC financial statement to
derive the financial ratios.
When calculating the ratio for manufacturing overhead, it
was necessary to include the cost of raw honey used in making
16
(...continued)
customers . . . .” Issues & Dec. Mem. at 18.
Court No. 05-00438 Page 44
processed or finished honey. The MHPC financial statement,
however, did not include a raw material cost for honey.
Accordingly, Commerce extrapolated the raw material cost, using
the following methodology:
[The] raw material cost was derived by
dividing the total cost of honey by the
quantity [MHPC] purchased [from its members]
and then multiplying this figure by the sum
of the quantities [MHPC] sold [to its
customers] and lost during production.
Issued & Dec. Mem. at 18. Commerce included the cost of raw
materials as a component of direct manufacturing costs. See
Factors of Production Valuation Mem. for the Final Results, Pub.
Doc. 340, Attach. II (Surrogate Financial Ratios).
Plaintiffs argue that: (1) Commerce’s use of the MHPC
financial statement was unreasonable because it did not include a
figure representing the raw material cost for honey; and (2) the
methodology Commerce used to extrapolate the raw material cost
for honey is flawed because it is based on unsupported
assumptions. Pls.’ Mem. 37-38.
First, plaintiffs claim that without “separate opening and
closing raw materials inventories or [an] indicat[ion] [of] the
amount of honey processed during the reported accounting period,”
the MHPC financial statement is incomplete on its face. Pls.’
Mem. 37. Plaintiffs contend that the absence of this information
Court No. 05-00438 Page 45
makes Commerce’s decision to use the MHPC financial statement
unreasonable.
Second, the methodology Commerce used to extrapolate the raw
material cost for honey, plaintiffs claim, is based on
unsupported assumptions. According to plaintiffs:
In the absence of . . . data [on either the
opening and closing raw materials inventories
or the amount of honey processed during the
reported accounting period], Commerce assumed
[1] any raw honey processed from opening
period inventory was valued at the price of
raw honey purchased during the [reported
accounting period]. Commerce further assumed
[2] all honey sold during the [reported
accounting period] was processed during the
[reported accounting period].
Commerce’s calculation of financial ratios is
predicated on these assumptions. However,
there is nothing in the MHPC Financials to
support these assumptions, as opposed to
alternative assumptions that honey consumed
from inventory to process finished honey was
priced higher or lower than purchased raw
honey or that MHPC processed more honey than
it sold during the [reported accounting
period] or less than it sold – any of which
would radically change the surrogate
financial ratios. As such it was impossible
for Commerce to calculate accurate, actual
surrogate financial ratios from the MHPC
Financials.
Pls.’ Mem. 37-38. In other words, plaintiffs charge that the
MHPC financial statement does not support the assumptions that
(1) the cost of raw honey (if any) taken from MHPC’s inventory
was the same as later purchased raw honey; and that (2) all of
Court No. 05-00438 Page 46
the honey MHPC sold during the reported accounting period was
processed during that period. Commerce would not have had to
make these assumptions, plaintiffs argue, had it used the Apis
financial statement.
Plaintiffs also argue that the MHPC financial statement
lacks a report indicating it is in accordance with Indian
Generally Accepted Accounting Principles (“GAAP”). Pls.’ Mem.
38-39. Plaintiffs argue that as a cooperative, MHPC is not
required to report its financial statements in accordance with
the Indian GAAP. Pls.’ Mem. 39. They further contend that Apis
is so required, and “therefore its auditor’s report illustrates
that the statements are reliable as in accordance with the
financial/accounting standards of India.” Pls.’ Reply 13 n.18.
Plaintiffs thus seek a remand to Commerce with instructions to
use the Apis financial statement to calculate the surrogate
values for factory overhead, SG&A expenses and profit.
For its part, defendant contends Commerce’s use of the 2003-
2004 MHPC financial statement to derive surrogate financial
ratios was reasonable because the statement was contemporaneous
with the POR and included complete and detailed information
regarding MHPC’s financial and business operations. Def.’s Opp’n
35-36.
Court No. 05-00438 Page 47
Next, defendant argues that the methodology Commerce used to
extrapolate the cost of raw materials consumed is reasonable.
First, defendant contends that the methodology “is consistent
with [the antidumping statute,]17 which permits Commerce to
allocate costs and make adjustments where the reported costs do
not reasonably reflect the costs associated with the subject
merchandise.” Def.’s Opp’n 37; see also Issues & Dec. Mem. at
18. Second, defendant states: “[R]espondents have cited no
specific evidence that the derived MHPC raw material cost of
honey is distortive.” Def.’s Opp’n 37 (quoting Issues & Dec.
Mem. at 18). Finally, with respect to plaintiffs’ argument that
the MHPC financial statement is not GAAP compliant, defendant
contends that plaintiffs’ argument is barred because it was not
previously raised before Commerce. Def.’s Opp’n 32; see also
Def.-Ints.’ Opp’n 30.
The court finds that Commerce was justified in determining
that the 2003-2004 MHPC financial statement was the best
available information to value factory overhead, SG&A expenses
and profit. It is apparent from the Final Results that Commerce
examined both the MHPC and Apis financial statements and compared
17
In its opposition brief, defendant incorrectly cites 19
U.S.C. § 1677a(c), which pertains to adjustments for export price
and constructed export price. The court presumes that defendant
intended to cite 19 U.S.C. § 1677b(f).
Court No. 05-00438 Page 48
their quality, specificity and contemporaneity. It then
concluded based on this examination that “the Apis financial
statement . . . is not a reliable source for calculating the
surrogate financial ratios because it is neither complete, nor
sufficiently detailed to provide a reliable source for surrogate
values.” Issues & Dec. Mem. at 17. As Commerce observed, “the
Apis statement does not include any auditor notes, nor does it
appear to include complete schedules or details on Apis’
operations.” Id. The MHPC’s statement, on the other hand,
“include[s] a complete annual report, an auditors report, and
complete profit and loss and business statements that segregate
MHPC’s honey and fruit canning businesses.” Issues & Dec. Mem.
at 17; Factors of Production Valuation Mem. for the Final
Results, Pub. Doc. 340, Attach. II. Unlike Apis’s statement,
MHPC’s statement details its honey operations with both narrative
text and schedules indicating, for example, the number of
kilograms of honey produced by particular MHPC members and the
price per kilogram. See Rebuttal to Pet’r Surrogate Data, Pub.
Doc. 265, Attach. 1. The court thus finds that Commerce’s
determination that the MHPC financial statement was the best
available information to value financial ratios was reasonable.
While Commerce reasonably found the MHPC’s financial
statement to be more reliable than Apis’s, as has been noted, the
Court No. 05-00438 Page 49
MHPC financial statement lacks a figure representing the raw
material cost for honey. In the absence of this data, Commerce
extrapolated the data using a methodology, which it expressed
mathematically as follows: total cost of honey purchased during
MHPC’s reporting year, i.e., April 1, 2003, to March 31, 2004
(2,598,344 Rs.)/quantity purchased during that year (29,433.80
kg.) X the sum of the quantities sold and lost during production
during that year (40,540.20 Rs.) = 3,578,789.88 Rs. See Factors
of Production Valuation Mem. for the Final Results, Pub. Doc.
340, Attach. II. The court will sustain Commerce’s chosen
methodology “[a]s long as the agency’s methodology and procedures
are reasonable means of effectuating the statutory purpose, and
there is substantial evidence on the record supporting the
agency’s conclusions . . . .” Ceramica Regiomontana, S.A., 10
CIT at 404-05, 636 F. Supp. at 966; Shakeproof Assembly
Components, 268 F.3d at 1382 (“[T]he critical question is whether
the methodology used by Commerce is based upon the best available
information and establishes antidumping margins as accurately as
possible.”).
The court finds reasonable Commerce’s methodology for
determining the raw material cost of honey. First, while
plaintiffs complain that the methodology was unsupported by the
record, they do not propose an alternative methodology. Second,
Court No. 05-00438 Page 50
Commerce’s use of the methodology was not unreasonable because it
resulted in Commerce’s use of prices that are closest in time to
the POR. Issues & Dec. Mem. at 17 (“[I]t is the Department’s
established practice to select the most contemporaneous surrogate
values to value the factors-of-production and financial
ratios.”).
With respect to plaintiffs’ GAAP argument, the court finds
it is barred because it was not raised before the agency. Title
28 U.S.C. § 2637(d) provides that “the Court of International
Trade shall, where appropriate, require the exhaustion of
administrative remedies.” Id. The doctrine of exhaustion is not
an absolute requirement in Commerce cases; it is left to this
Court to determine when exhaustion is appropriate. Koyo Seiko
Co. v. United States, 26 CIT 170, 175, 186 F. Supp. 2d 1332, 1338
(2002); Carpenter Tech. Corp. v. United States, 30 CIT __, __,
452 F. Supp. 2d 1344, 1346 (“[E]xhaustion is generally
appropriate in the antidumping context because it allows the
agency to apply its expertise, rectify administrative mistakes,
and compile a record adequate for judicial review – advancing the
twin purposes of protecting administrative agency authority and
promoting judicial efficiency.”) (citation omitted). “Failure to
allow an agency to consider the matter and make its ruling
deprives the agency of its function and results in the court
Court No. 05-00438 Page 51
usurping the agency’s power as contemplated by the statutory
scheme.” China First Pencil Co. v. United States, 30 CIT __, __,
427 F. Supp. 2d 1236, 1244 (2006) (citations omitted).
Plaintiffs make no argument that an exception to this rule
applies, e.g., where administrative consideration would be
futile, or the issue raised is a pure question of law. See,
e.g., id.; Consol. Bearings Co. v. United States, 348 F.3d 997,
1003 (Fed. Cir. 2003) (where “[s]tatutory construction alone
[was] not sufficient to resolve this case,” the case “[did] not
qualify for the ‘pure question of law’ exception to the
exhaustion doctrine’”).
Plaintiffs raise for the first time the issue of GAAP
compliance in support of its argument that the MHPC financial
statement is not as reliable as the Apis financial statement.
While plaintiffs presented their other arguments with respect to
the reliability of the MHPC financial statement at the
administrative proceeding, they failed to raise this argument.
Thus, because this issue was not raised before Commerce it is
barred by the exhaustion of remedies doctrine. See Carpenter
Tech. Corp., 30 CIT at __, 452 F. Supp. 2d at 1346 (finding
plaintiff failed to exhaust administrative remedies on issue of
collapsing where plaintiff failed to raise the issue before
Commerce). Therefore, the court shall not consider plaintiffs’
Court No. 05-00438 Page 52
GAAP argument.
III. Commerce’s Calculation of Plaintiffs’ Assessment Rate and
Cash Deposit Rate
The court next turns to plaintiffs’ challenge to Commerce’s
method of calculating cash deposit and assessment rates. In the
Final Results, Commerce “determined that, with respect to the
antidumping duty order on honey from the PRC, per-kilogram
antidumping duty cash deposit and assessment rates are
appropriate.” Issues & Dec. Mem. at 30 (emphasis added).
Plaintiffs contend that “[t]hroughout the prior annual
reviews and new shipper reviews on honey, Commerce’s practice was
to base its assessment rate and cash deposit rate upon an ad
valorem basis.” Pls.’ Reply 14. Yet, “after all case briefs and
rebuttal briefs had been filed, and the record closed . . .
Commerce requested comments regarding a possible revision to
Commerce’s standard methodology for calculating assessments and
cash deposits, from an ad valorem basis to a per kilogram basis,”
and allowed “less than two days for commenting on the issue,
denying Wuhan an opportunity to fully review and comment on [the]
issue.” Pls.’ Mem. 42. Plaintiffs argue that “‘principles of
fairness prevent Commerce from changing its methodology at this
late stage {and} Commerce is required to administer the
antidumping laws fairly.’” Pls.’ Reply 14 (quoting Shikoku Chem.
Court No. 05-00438 Page 53
Corp. v. United States, 16 CIT 382, 388, 795 F. Supp. 417, 421
(1992)).
Defendant responds that while Commerce’s regulations
“provide for the agency to ‘normally’18 calculate the assessment
rate upon an ad valorem basis,” the “regulation does not require
Commerce to calculate the assessment rate on an ad valorem
basis.” Def.’s Opp’n 38, 39 (emphasis in original). With
respect to the amount of time given to the parties to comment on
the proposed use of a per kilogram methodology, defendant asserts
that “Wuhan could have requested an extension of time, but did
not.” Def.’s Opp’n 40. Thus, defendant urges the court to
sustain Commerce’s decision to apply an assessment rate and the
18
Title 19 C.F.R. § 351.212 states that “normally” the
assessment rate will be based on the entered value of
merchandise. Entered value is not, however, the sole means by
which Commerce may calculate assessment rate:
If the Secretary has conducted a review of an
antidumping order under § 351.213
(administrative review), . . . the Secretary
normally will calculate an assessment rate
for each importer of subject merchandise
covered by the review. The Secretary
normally will calculate the assessment rate
by dividing the dumping margin found on the
subject merchandise examined by the entered
value of such merchandise for normal customs
duty purposes. The Secretary then will
instruct the Customs Service to assess
antidumping duties by applying the assessment
rate to the entered value of the merchandise.
19 C.F.R. § 351.212(b)(1).
Court No. 05-00438 Page 54
cash deposit rate on a per kilogram basis.
Here, because (1) Commerce used the ad valorem methodology
to calculate such rates in the first annual review and new
shipper reviews on honey,19 and (2) Commerce asked for comments
on a possible change from an ad valorem to a per kilogram basis
late in the course of this review, i.e., after the record was
closed, the court finds that Commerce unreasonably restricted the
time in which the parties could comment to two days.20 While the
regulations do not require Commerce to use the ad valorem method
in all situations, as evidenced by the word “normally,”
considerations of fairness favor allowing plaintiffs more time to
respond to Commerce’s proposed change in methodology after having
used the ad valorem methodology in this and prior reviews. As
19
See, e.g., Honey from the PRC, 68 Fed. Reg. 69,988,
69,994 (Dep’t of Commerce Dec. 16, 2003) (prelim. results of
first antidumping duty admin. rev.) (“[T]he Department will issue
appraisement instructions directly to CBP to assess antidumping
duties on appropriate entries by applying the assessment rate to
the entered value of the merchandise.”); Honey from the PRC, 69
Fed. Reg. 69,350, 69,356 (Dep’t of Commerce Nov. 29, 2004)
(notice of prelim. results of new shipper revs.) (“[W]e will
calculate importer-specific ad valorem duty assessment rates
based on the ratio of the total amount of the dumping margins
calculated for the examined sales to the total entered value of
those same sales.”).
20
By letter dated May 24, 2005, Commerce requested
comments from the interested parties regarding its proposed
revision to the assessment and cash deposit methodology by the
close of business on May 26, 2005. Letter from Commerce to All
Interested Parties of 5/24/05, Pub. Doc. 317 at 1.
Court No. 05-00438 Page 55
noted in the Final Results, Commerce’s decision to use a per
kilogram methodology here was based on its finding that “there
can be a substantial difference between the U.S. sales price for
honey and the average entered value reported to U.S. Customs and
Border Protection.” Issues & Dec. Mem. at 30. This finding led
Commerce to conclude that it “[was] unable to calculate ad
valorem cash deposit rates that [would] ensure the collection of
total antidumping duties due.” Id. Commerce reached its
decision, however, without adequate time being allotted for
either the giving of comments or for consideration of comments.
As a result, plaintiffs were prejudiced by the Department’s
actions. See Sea-Land Serv., Inc. v. United States, 14 CIT 253,
257, 735 F. Supp. 1059, 1063 (1990) (requiring a showing that
procedural errors by the agency “‘were prejudicial to the party
seeking to have the action declared invalid’”) (citations
omitted), aff’d and adopted, 923 F.2d 838 (Fed. Cir. 1991). The
court thus finds that on remand plaintiffs shall have the
opportunity to submit further comments on whether Commerce should
calculate assessment and cash deposit rates on an ad valorem
basis or a per kilogram basis, in light of Commerce’s concern
that it would be unable to “ensure the collection of total
antidumping duties due.” Id. Furthermore, plaintiff shall be
allowed to place evidence on the record, should it find it
necessary to do so, specifically with respect to how an ad
Court No. 05-00438 Page 56
valorem methodology furthers, or does not further, the collection
of total duties owed. Finally, Commerce must fully explain its
decision to use a per kilogram or ad valorem methodology by
reference to evidence placed on the record.
CONCLUSION
For the forgoing reasons, the court sustains the Final
Results in part and remands for further action consistent with
this opinion. Remand results are due October 20, 2007. Comments
to the remand results are due November 20, 2007. Replies to such
comments are due December 4, 2007.
/s/ Richard K. Eaton
Richard K. Eaton
Dated: July 20, 2007
New York, New York
ERRATA
Wuhan Bee Healthy Co. v. United States, Court No. 05-00438, Slip
Op. 07-113, dated July 20, 2007.
Page 3: In line 18, replace “January 22, 2003" with “January
22, 2004"
In line 20, replace “68 Fed. Reg. 3009" with “69 Fed.
Reg. 3117"
Page 4: In line 1, replace “Jan. 22, 2003" with “Jan. 22, 2004"
July 20, 2007