Shanghai Eswell Enter. Co. v. United States , 32 Ct. Int'l Trade 1233 ( 2008 )

Slip Op. 08-124
UNITED STATES COURT OF INTERNATIONAL TRADE
SHANGHAI ESWELL ENTER. CO., :
LTD.; JINFU TRADING CO., LTD.; :
and ZHEJIANG NATIVE PRODUCE :
AND ANIMAL BY-PRODUCTS IMPORT :
& EXPORT GROUP CORP., : Before: Richard K. Eaton, Judge
:
Plaintiffs, : Court No. 05-00439
:
v. :
:
UNITED STATES, :
:
Defendant, :
:
and :
:
THE AMERICAN HONEY PRODUCERS :
ASSOCIATION OF AMERICA AND :
THE SIOUX HONEY ASSOCIATION, :
:
Def.-Ints. :
:
OPINION
[United States Department of Commerce’s Remand Results are
sustained.]
Dated: November 18, 2008
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP (Bruce M.
Mitchell, Ned H. Marshak, and Paul G. Figueroa), for plaintiffs.
Gregory G. Katsas, Assistant Attorney General; Jeanne E.
Davidson, Director, Reginald T. Blades, Assistant Director,
Commercial Litigation Branch, Civil Division, United States
Department of Justice (Jane C. Dempsey); Office of the Chief
Counsel for Import Administration, United States Department of
Commerce (Sapna Sharma), for defendant.
Kelley Drye & Warren LLP (Michael J. Coursey and R. Alan
Luberda), for defendant-intervenors.
Court No. 05-00439 Page 2
Eaton, Judge: In Shanghai Eswell Enterprise Co., Ltd. v.
United States, 31 CIT __, Slip Op. 07-138 (Sept. 13, 2007) (not
reported in the Federal Supplement)(“Shanghai Eswell I”), this
court sustained, in part, and remanded the final results of the
United States Department of Commerce’s (“Commerce” or the
“Department”) second administrative review of the antidumping
duty order on imports of honey from the People’s Republic of
China (“PRC”) for the period December 1, 2002, to November 30,
2003 (“POR”). See Honey from the PRC, 70 Fed. Reg. 38,873,
38,874 (Dep’t of Commerce July 6, 2005) (“notice”) and the
accompanying Issues and Decision Memorandum (June 27, 2005), Pub.
Doc. 341 (“Issues & Dec. Mem.”) (collectively, “Final Results”).
Commerce has now issued the Final Results of Redetermination
Pursuant to Court Remand (Dep’t of Commerce Feb. 11, 2008)
(“Remand Results”). Plaintiffs Shanghai Eswell Enterprise Co.,
Ltd. (“Shanghai Eswell”), Jinfu Trading Co., Ltd. (“Jinfu PRC”),
and Zhejiang Native Produce and Animal By-Products Import &
Export Group Corp. (“Zhejiang”) (collectively, “plaintiffs”) have
filed their comments to the Remand Results. See Pls.’ Comments
to Remand Results (“Pls.’ Comments”). In addition, Commerce has
filed its response to those comments, and defendant-intervenors
The American Honey Producers Association of America, Inc. and The
Sioux Honey Association (collectively, “defendant-intervenors”)
have filed their responses, as well. See Def.’s Resp. to Pls.’
Court No. 05-00439 Page 3
Comments (“Def.’s Resp.”); Def.-Ints.’ Resp. to Pls.’ Comments
(“Def.-Ints.’ Resp.”). 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 set forth below, the Remand Results are sustained.
STANDARD OF REVIEW
The court reviews Commerce’s Remand Results under the
substantial evidence standard: “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. . . .” 19 U.S.C. § 1516a(b)(1)(B)(i).
DISCUSSION
I. Normal Value
In antidumping investigations, Commerce must determine
whether merchandise is sold, or is likely to be sold, at less
than fair value by making “a fair comparison . . . between the
export price,1 or constructed export price2 and normal value.”
1
The “export price” is “the price at which the subject
merchandise is first sold . . . by the producer or exporter of
the subject merchandise outside of the United States to an
unaffiliated purchaser in the United States or to an unaffiliated
purchaser for exportation to the United States,” as adjusted. 19
U.S.C. § 1677a(a).
2
“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
Court No. 05-00439 Page 4
19 U.S.C. § 1677b(a). In cases where the subject merchandise
originates from a non-market economy (“NME”)3 country, such as
the PRC, Commerce usually determines normal value by employing
surrogate data to value the factors of production used to produce
the merchandise. See 19 U.S.C. § 1677b(c)(1). The Department
then adds “an amount for general expenses and profit plus the
cost of containers, coverings and other expenses.” Id.
A. Valuation of Factors of Production: Raw Honey
In its Final Results, Commerce relied on Indian data from
the website maintained by EDA Rural Systems Pvt. Ltd. (“EDA”) to
calculate the value of raw honey.4 In response, plaintiffs
exporter, to a purchaser not affiliated with the producer or
exporter,” as adjusted. 19 U.S.C. § 1677a(b).
3
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
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 480,
481, 318 F. Supp. 2d 1339, 1341 (2004). Therefore, because the
subject merchandise comes 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).
4
Commerce explained: “In selecting the EDA Data, the
Department determines that the raw honey pricing data in this
article is the best information currently available because it is
publicly available, quality data, specific to the raw honey
(continued...)
Court No. 05-00439 Page 5
contended that Commerce had not adequately considered evidence of
a decline in honey prices during the second half of the POR and
cited data from the World Trade Atlas (“WTA”) as evidence of this
decline. Shanghai Eswell I, 31 CIT at __, Slip Op. 07-138 at 8;
see Pls.’ Comments at 2-5.
In Shanghai Eswell I, the court found merit in plaintiffs’
arguments. Shanghai Eswell I, 31 CIT at __, Slip Op. 07-138 at
9-10. Thus, the court directed Commerce to
either (1) address the evidence cited by
plaintiffs and explain whether and how the
observed decline in prices during the second
half of the POR is reflected in its
calculation of the value of raw honey; or (2)
recalculate the value to reflect a reasonable
interpretation of the record evidence
concerning the decline.
Id. at __, Slip Op. 07-138 at 11.
On remand, Commerce addressed the evidence of a price
decline offered by plaintiffs: 1) the WTA data; and 2) three
additional sources, specifically, two news articles and the
statements of a journalist.
1. World Trade Atlas Data
On remand, Commerce claims that it did not use the WTA data
offered by plaintiffs for two reasons: (1) because “the WTA
4
(...continued)
beekeeping industry in India, and contemporaneous with the POR.”
Issues & Dec. Mem. at 10.
Court No. 05-00439 Page 6
export data represent export prices from India to other
countries,” and that this data does not necessarily “accurately
reflect the market value of the goods within the country of
exportation”; and (2) because the Harmonized Tariff heading
(“HTS”)5 on which the WTA data is based is a “basket category”
that may include merchandise other than raw honey. Remand
Results at 5-6.
As to the use of export data, Commerce insists that the WTA
data, and export data generally, are not “a reliable source for
valuing inputs or serving as an indicator of internal pricing
trends because [Commerce] could not ascertain whether export
prices reflected or mirrored the domestic prices of honey in the
marketplace.” Def.’s Comments 3 (citations omitted). Thus, the
Department would have “no way of knowing if export prices mimic
5
The heading upon which the WTA data is based, HTS
0409.00.00 is described as “natural honey” in the Harmonized
Tariff Schedule of the United States (“HTSUS”). See HTSUS, USITC
Pub. 3477, sec. 1, ch. 4, at 35 (2002). HTSUS is a listing of
classifications of all goods imported into the United States and
the accompanying duties on those imports.
The Explanatory Notes to this heading describe it as covering
“honey produced by bees (Apis mellifera) or by other insects,
centrifuged, or in the comb or containing comb chunks, provided
that neither sugar nor any other substance has been added. Such
honey may be designated by floral source, origin or color.”
Harmonized System Explanatory Notes 04.09 (2d ed. 1996). The
court notes that, while the explanatory notes are not legally
binding, they are persuasive and considered “generally indicative
of the proper interpretation of a tariff provision.” Drygel,
Inc. v. United States, 541 F. 3d 1129, 1134 (Fed. Cir.
2008)(citations and quotation omitted).
Court No. 05-00439 Page 7
or even reflect domestic prices in the marketplace.” Remand
Results at 5. In other words, Commerce does not find the WTA
data to be the best available information6 because, unlike the
EDA data, there is no evidence on the record demonstrating that
the WTA data reflect domestic prices.
In their comments, plaintiffs do not directly address
Commerce’s claim that record evidence does not support the
conclusion that export prices necessarily reflect domestic
prices. Rather, plaintiffs insist that Commerce’s argument that
export prices are not reliable as a source for valuing domestic
inputs is “reversible legal error” because it “summarily rejects
declining export prices as evidence that Indian raw honey prices
declined during the [POR].” Pls.’ Comments 4.7
6
In choosing surrogate values, Commerce is directed to
value the factors of production based on “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).
7
In addition, plaintiffs contend that the Department’s
claim that export prices do not necessarily reflect domestic
prices has been “effectively overruled” by Fuyao Glass Indus.
Group Co. v. United States, 27 Int’l Trade Rep. (BNA) 1328 (Ct.
Int’l Trade 2005) (“Fuyao”) which rejected the Department’s
position that export prices were unreliable based solely upon
speculation that subsidies may have affected these prices. Pls.’
Comments 3.
Contrary to plaintiff’s argument, however, Fuyao is
inapplicable in this case because Commerce did not decline to use
the WTA export data based on a suspicion of export subsidies.
Rather, Commerce explicitly stated that the WTA export data “may
not accurately reflect the market value of the goods within the
(continued...)
Court No. 05-00439 Page 8
With respect to the HTS heading upon which the WTA data is
based, Commerce finds that even if it were to
accept export data in this instance for
purposes of evaluating domestic pricing
trends, we do not find the WTA export data to
constitute an acceptable source for such
because the category of merchandise covered
by the data is much broader than the
merchandise covered by the scope of the
order.
Remand Results at 6. To support this position, Commerce claims
that the WTA export data is based upon an HTS heading that
“includes exports of both raw honey and processed honey, and may
include specialty forms of honey in jars, bottles, etc.” Remand
Results at 6. That this category of merchandise includes
processed honey is not contested, and plaintiffs specifically
note in their comments that the record contained “data for over
70 percent of Subheading8 [0409.00.00] merchandise . . . which
revealed that these exports consisted of processed and filtered
honey packaged in drums.” Pls.’ Comments 4 (footnote omitted).
As Commerce notes, because a basket category may not reflect
prices solely of subject merchandise “[w]hen valuing respondents’
factors of production (“FOPs”) the Department prefers product
specific tariff classifications rather than basket tariff
provisions, unless there is no other available information.”
7
(...continued)
country of exportation.” Remand Results at 5.
8
Plaintiffs refer to heading 0409.00.00 as a subheading.
Court No. 05-00439 Page 9
Remand Results at 6 (citations omitted). As a result, Commerce
does not find the WTA data to be the best available information
to value raw honey, particularly because the record contains the
EDA data which reflects the price solely of raw honey, the
subject of the review. Accordingly, on remand the Department
does not consider the evidence derived from the WTA export data
as probative of a decline in raw honey prices during the latter
half of the POR.
Plaintiffs sole argument in response is that “[t]he
Department’s belief that the HTS category [used in the WTA data]
is ‘broad and expansive’ is simply wrong. Subheading
[0409.00.00] is not a ‘basket’ HTS subheading encompassing
multiple products. It is limited to honey – the precise product
subject to this investigation.” Pls.’ Comments 4 (citation
omitted).
The court sustains Commerce’s findings and holds that
Commerce supports with substantial evidence its reasons for
excluding the WTA data. First, Commerce fully explains the basis
for its decision not to rely on the WTA data as evidence of a
decline in honey prices. Specifically, the Department explains
that the WTA data represents export data, and that being the
case, Commerce has no way of determining if this export data
reflects domestic prices. Put another way, there is no evidence
on the record showing that the WTA data reflects domestic prices,
Court No. 05-00439 Page 10
in contrast to the EDA data which does reflect domestic pricing.
The court therefore finds that the Department’s decision to
exclude the WTA data in favor of the EDA data was reasonable and
supported by substantial evidence. See Shakeproof Assembly
Components Div. of Ill. Tool Works, Inc. v. United States, 23 CIT
479, 481, 59 F. Supp. 2d 1354, 1357 (1999) (“The statute requires
Commerce to use the best available information, but does not
define that term . . . . If Congress had desired to restrict the
material on which Commerce could rely, it would have defined the
best available information.”) (footnote and citation omitted).
Second, Commerce explains that, in addition, it did not use
the WTA data because they are for a broad category of honey
products, not just raw honey, and thus may not accurately
represent prices for raw honey. Plaintiffs do not address how
the price for this HTS heading, which includes both processed and
raw honey, is calculated. More to the point, plaintiffs fail to
explain if and how the data for export prices under HTS
0409.00.00 were affected (i.e., skewed upward) by the inclusion
of processed honey in this category. Accordingly, this
information cited by plaintiffs does not constitute substantial
evidence of a price decline during the second half of the POR.
Court No. 05-00439 Page 11
2. Other Evidence Regarding Price Decline
On remand, in reaching its determination on surrogate value,
Commerce chose not to use evidence from three additional sources
that plaintiffs put on the record in the administrative review to
support their argument that the WTA data reflected a price
decline during the second half of the POR. These three sources
are: (1) “Honey Sweet Despite Price Fall,” published by the
Tribune of India on December 15, 2003, giving a range of honey
prices for 2003 as between 105 and 65 rupees (“Tribune article”);
(2) statements by the author of the Tribune article who advised
Commerce that in September 2003, honey prices were between 45 and
75 rupees (“prices from the journalist”); and (3) “Prospects of
Bee Keeping in Rubber Plantations of Kerala,” from Indiainfoline,
giving the range of honey prices in September 2003 as between 40
and 42 rupees (“Indiainfoline article”).9 Def.’s Comments 6 n.
1; see also Pls.’ Comments 5.
As stated, on remand Commerce was instructed to explain how
plaintiffs’ proffered evidence of a price decline was taken into
account in the Final Results. Commerce explains in the Remand
Results that, because the WTA export data primarily relied upon
by plaintiffs did not demonstrate the alleged decline in raw
9
Indiainfoline is a financial services company focused
on industry in India. Among other things, it provides research
and content for brokerage, commodities, mutual fund and portfolio
management services businesses. See Indiainfoline,
http://www.indiainfoline.com (last visited Nov. 18, 2008).
Court No. 05-00439 Page 12
honey prices within India, it had not “specifically addressed”
three other sources offered by plaintiff as further evidence of a
price decline in the Final Results. See Def.’s Comments 6;
Remand Results at 23. On remand, Commerce has addressed
arguments made by defendant-intervenors on remand regarding the
additional sources, outlining its reasons for rejecting the
evidence from these three sources. Plaintiffs claim that,
nonetheless, the Department has still “failed to explain the
basis of its decision” to exclude this material. Pls.’ Comment
6.
Despite plaintiffs’ claim, the court finds that the
Department has now given a sufficient explanation for rejecting
the additional sources. In reaching its determination on remand,
Commerce states, “the evidence contained in these two articles
and the prices from the journalist fail to demonstrate that raw
honey prices fell during the second half of the POR, or that our
calculation methodology resulted in an inappropriate surrogate
value for raw honey.” Remand Results at 23.
First, Commerce states that the surrogate value for raw
honey (74.9 rupees) “fell within the range of prices reported in
the Tribune article [from 105 rupees to 65 rupees] and provided
by the journalist [from 75 rupees to 45 rupees],” such that these
sources “did not undermine Commerce’s decision not to take into
account WTA export data or rejecting the use of the information
Court No. 05-00439 Page 13
in adjusting or determining the surrogate data.” Def.’s Comments
6 (citing Remand Results at 22). An examination of these sources
reveals that Commerce is correct in making these statements, and
thus these two sources do not provide substantial evidence for
plaintiffs’ claim of a price decline.
In addition, Commerce correctly notes that this court has
previously determined that the Indiainfoline article “was an
unreliable source for surrogate value data.” Def.’s Comments 7
(citing Remand Results at 22; Shanghai Eswell I, 31 CIT at __,
Slip Op. 07-138 at 7-8 (finding “the 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.”) (quoting Wuhan Bee
Healthy Co. v. United States, 31 CIT __, __, Slip Op. 07-113 at
32-33 (July 20, 2007) (not reported in the Federal Supplement)
(“Wuhan I”)). Consequently, the Department maintains that “this
evidence fails to substantiate plaintiffs’ argument that the
surrogate honey price chosen by the Department was incorrect.”
Remand Results at 23 (citation omitted). The court finds no
reason to depart from this Court’s previous holding that the
Indiainfoline article is unreliable.
Thus, plaintiffs’ argument that Commerce on remand
“summarily rejected” the additional sources is unfounded. See
Court No. 05-00439 Page 14
Wuhan Bee Healthy Co. v. United States, 32 CIT __, __, Slip Op.
08-61 at 8 (May 29, 2008) (not reported in the Federal
Supplement) (“Wuhan II”) (citing United Steel, Paper and
Forestry, Rubber, Manufac., Energy, Allied Industr. and Service
Workers Int'l Union v. United States Sec'y of Labor, 32 CIT __,
__, Slip Op. 08-45 at 7 (Apr. 30, 2008) (“A fundamental
requirement of administrative law is that an agency set forth its
reasons for decision.”) (quotation and citation omitted)). Based
on the foregoing analysis, the court holds that Commerce's
surrogate value determination for the factor of production raw
honey is sustained.
B. Calculation of Surrogate Financial Ratios
Title 19 U.S.C. § 1677b (c)(1)(B) requires that the
calculation of normal value include amounts for “general expenses
and profit.” Accordingly, Commerce “usually calculates” separate
values for: (1) selling, general and administrative (“SG&A”)
expenses; (2) manufacturing overhead; and (3) profit, using
ratios derived from financial statements of companies that
produce identical or comparable merchandise in the surrogate
country. Wuhan I, 31 CIT at __, Slip Op. 07-113 at 41-42
(citation and quotation omitted).
In Shanghai Eswell I, the court affirmed the Department’s
reliance on data from Mahabaleshwar Honey Producers Cooperative
Court No. 05-00439 Page 15
Society, Ltd.’s (“MHPC”) financial statement as the “best
available information” for calculating surrogate financial
ratios. Shanghai Eswell I, 31 CIT at __, Slip Op. 07-138 at 12.
The court, however, remanded for further explanation (1)
Commerce’s decision to include honey sales commissions in its
calculation of selling, general and administrative expenses
(“SG&A”),10 rather than using them to make an adjustment to
constructed value, and (2) Commerce’s failure to treat MHPC’s
expenses for jars, corks and honey machine purchases as direct
materials. Id. at __, Slip Op. 07-138 at 20, 26.
(1) Honey Sales Commissions
In its Final Results, Commerce determined that the honey
sales commissions found on the MHPC financial statements should
10
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.
Shanghai Foreign Trade Enters. Co. v. United States, 28 CT 480,
482, 318 F. Supp. 2d 1339, 1341 (2004) (citations omitted).
Court No. 05-00439 Page 16
be included in the calculation of the surrogate SG&A ratio as
standard selling expenses.11
The court in Shanghai Eswell I held that Commerce had not
addressed plaintiffs’ argument that in this case sufficient
record evidence existed of an “exact correlation” between
Shanghai Eswell’s, Zhejiang’s, and the surrogate producer’s
expenses to enable Commerce to make a circumstances-of–sale
(“COS”) adjustment, and that remand was thus appropriate.
Shanghai Eswell I, 31 CIT at __, Slip Op. 07-138 at 21. The
court remanded this issue to Commerce to explain in more detail
its determination that the record evidence was insufficient to
permit a COS adjustment in this case. Id. On remand, Commerce
continues to find that “honey sales commissions should be
included in the surrogate SG&A calculation,” primarily because
11
Under Commerce’s regulations, “direct selling
expenses” include “commissions . . . that result from, and bear a
direct relationship to, the particular sale in question.” 19
C.F.R. § 351.410(c)(2008). In a market economy proceeding,
Commerce is required to make a “circumstances-of-sale” adjustment
to (A) either export price or constructed export price; and (B)
normal value to account for differences in direct selling
expenses incurred in the United States and foreign markets. See
19 U.S.C. § 1677a(d)(1)(A) (providing for the reduction in the
price used to establish constructed export price by the amount of
any commissions for selling the subject merchandise in the United
States); 19 U.S.C. § 1677b(a)(6)(C)(iii) (providing for
adjustment to normal value for differences in circumstances of
sale). The purpose of the adjustment is to ensure that export
price and normal value are being compared on an “equivalent
basis” when Commerce makes its dumping determination. See Imp.
Admin. Antidumping Manual, Ch. 8 at 16 (Jan. 22, 1998) (available
at http://www.ia.ita.doc.gov).
Court No. 05-00439 Page 17
there is not sufficient evidence of an “exact correlation”
between Shanghai Eswell’s, Zhejiang’s, and the surrogate
producer’s expenses. Remand Results at 9.
For their part, plaintiffs claim that “the commission
expenses incurred by Shanghai Eswell and Zhejiang parallel the
expenses incurred by MHPC [the surrogate producer].” Pls.’
Comments 7. Plaintiffs argue that “MHPC incurs selling
commissions in its home market sales, which mirror exactly the
honey sale commission expense incurred by plaintiffs in their
sales in the U.S. market.” Id.
Commerce, however, disagrees. It states:
record evidence cited by plaintiffs reveals
that neither Shanghai Eswell, nor Zhejiang,
paid commissions on sales in the United
States as the exporter. Rather, the
commissions paid on U.S. sales were paid in
the United States by Shanghai Eswell’s and
Zhejiang’s U.S. affiliates.
Remand Results at 10 (citations omitted). By way of contrast,
“MHPC’s financial statement does not contain activity for
overseas affiliates; therefore, it is reasonable to conclude that
the commissions reflected on MHPC’s financial statement were
incurred and paid by MHPC itself within India.” Id.
Accordingly, Commerce finds that “an exact correlation did not
exist with respect to commissions between Shanghai Eswell,
Zhejiang, and the surrogate producer.” Def.’s Comments 8.
The court finds that Commerce has provided a sufficient
Court No. 05-00439 Page 18
explanation, supported by substantial evidence, for its decision
not to make a COS adjustment for commissions indicated on MHPC’s
financial statement. The record evidence does not demonstrate
that an exact correlation existed between the commissions paid by
Shanghai Eswell, Zhejiang, and the surrogate producer. This is
because the surrogate producer’s financial statement does not
contain entries relating to activity for overseas activity.
Thus, it is fair to assume that any commissions paid were for
home market sales. The commissions cited by Shanghai Eswell and
Zhejiang on the other hand, were paid in the United States by
their affiliates. Therefore, the record does not support with
substantial evidence a finding of an “exact correlation” between
the MHPC financials and plaintiffs’ actual experience. Beyond
claiming that an exact correlation exists, plaintiffs have not
pointed to any evidence to substantiate their claim. Thus, the
Department’s findings as to its inclusion of honey sales
commissions are sustained.
(2) Jars, Corks and Honey Machine Purchases
In its Final Results, Commerce did not include MHPC’s
expenses for (1) jars and corks and (2) honey machines in its
financial ratio calculation. See Issues & Dec. Mem. at 23;
Shanghai Eswell I, 31 CIT at __, Slip Op. 07-138 at 22. Commerce
explained that its decision not to include these expenses was
Court No. 05-00439 Page 19
justified because these expenses “appear separately in both the
‘Sales’ and ‘Purchase’ columns, independent of the ‘Honey
Collection’ and ‘Honey Sale’ line items . . . .” Issues & Dec.
Mem. at 23.
In Shanghai Eswell I, the court noted that the chart of
these expenses in the MHPC financial statement, upon which
Commerce relied, “specifically pertains to honey sale and
collection” and that there was no evidence to support a
conclusion that the jars were used for anything other than
containers for honey. 31 CIT at __, Slip Op. 07-138 at 24-25.
As for the honey machines, the court found Commerce’s conclusion
that honey machines are a “productive asset” to be inadequately
explained. Shanghai Eswell I, 31 CIT at __, Slip Op. 07-138 at
25. The court therefore remanded these issues and instructed
Commerce to further explain its decision not to include expenses
for jars, corks and honey machines in its financial ratio
calculation as direct expenses for producing finished honey. Id.
at __, Slip Op. 07-138 at 26.
As to jars and corks, on remand Commerce reconsiders its
treatment of expenses for jars and corks and revises its
financial ratios to include these expenses as direct material
costs. Remand Results at 15. With respect to honey machines,
Commerce continues to find that they are a productive asset and
therefore do not constitute a direct expense to be included in
Court No. 05-00439 Page 20
its financial ratio calculation. Id. at 16.
As to the honey machines, the Department explains that, in
accordance with generally accepted accounting principles
(“GAAP”), “[p]roductive assets are defined as tangible property
to be used in a productive capacity that will benefit the
enterprise for greater than one year” and that the purchase of
productive assets do not result in a direct expense. Id. In
addition, Commerce notes, honey machines are independently
itemized on MHPC’s financial statement. Id. at 16. Accordingly,
the Department finds that they are properly treated as a
productive asset to be depreciated, rather than as a direct input
to be expensed. Id.
It is worth noting that plaintiffs have not commented on the
Department’s Remand Results with respect to jars, corks or honey
machines. Accordingly, Commerce “may well be entitled to assume
that the silent party has decided, on reflection, that it concurs
in the agency’s [remand results], and the court will uphold the
parties’ concurrence.” Wuhan II, 32 CIT at __, Slip Op. 08-61 at
12 (quotation and citation omitted).
The court sustains the Department’s findings regarding the
treatment of jars, corks, and honey machines, as there is
substantial evidence on the record supporting its conclusions.
See Ceramica Regiomontana, S.A. v. United States, 10 CIT 399,
404-05, 636 F. Supp. 961, 966 (1986). The decision to include
Court No. 05-00439 Page 21
expenses for jars and corks in the financial ratios is supported
by a) the MHPC statement which “specifically pertains to honey
sale and collection,” and b) the lack of evidence to support a
conclusion that the jars were used for anything other than as
containers for finished honey. See Shanghai Eswell I, 31 CIT at
__, Slip Op. 07-138 at 24-25.
The court also finds that the Department’s explanation for
choosing to treat the honey machines as productive assets rather
than direct expenses is reasonable and supported by substantial
evidence. Specifically, honey machines fit the GAAP designation
of productive assets and are separately itemized on MHPC’s
financial statement. As a result, Commerce was correct to treat
them as a capital asset subject to depreciation rather than an
input to be expensed. The Remand Results are sustained with
respect to the treatment of these expenses.
II. Commerce’s Decision to Use Export Price for Jinfu PRC’s
United States Sales
In the Final Results, Commerce found that, prior to October
25, 2003, the date of the transfer document (“Certificate of
Transfer of Shares”), Jinfu PRC and Jinfu Trading (U.S.A.) Co.,
Ltd. (“Jinfu USA”)12 were not under common ownership or otherwise
12
As explained in Shanghai Eswell I, Jinfu USA is the
(continued...)
Court No. 05-00439 Page 22
“affiliated,” within the meaning of 19 U.S.C. § 1677(33)(F).13
See Issues & Dec. Mem. at 45. Because of this finding, Commerce
“treated any sales made between Jinfu PRC and Jinfu USA prior to
October 25, 2003, on an [export price] basis, while all sales
made after this date have been treated as [constructed export
price] sales.” Issues & Dec. Mem. at 45 (citations omitted).
In Shanghai Eswell I, the court sustained the Department’s
determination that CEO B,14 the chairman and CEO of Jinfu PRC, did
12
(...continued)
successor company to Yousheng Trading (U.S.A.) Co., Ltd.
(“Yousheng USA”), a company to which Jinfu PRC sold its honey
during the POR. On November 8, 2002, Yousheng USA filed an
amendment to its articles of incorporation changing its name to
Jinfu Trading (U.S.A) Co., Ltd. 31 CIT at ___, Slip Op. 07-138 at
27 n. 12.
13
In pertinent part, the statute provides:
The following persons shall be considered “affiliated”
or “affiliated persons”:
(F) Two or more persons directly or
indirectly controlling, controlled by,
or under common control with, any person
. . . .
For purposes of this paragraph, a person shall be
considered to control another person if the person
is legally or operationally in a position to
exercise restraint or direction over the other
person.
19 U.S.C. § 1677(33)(F).
14
As in Shanghai Eswell I, the court will apply the same
shorthand that it used most recently in Jinfu Trading Co. v.
United States, 32 CIT __, Slip Op. 08-38 (Apr. 4, 2008) (not
reported in the Federal Supplement). 31 CIT at __, Slip Op. 07-
(continued...)
Court No. 05-00439 Page 23
not own Jinfu USA prior to October 25, 2003.15 Shanghai Eswell I,
31 CIT at __, Slip Op. 07-138 at 29-30. The court, however, also
found that Commerce had failed to provide a sufficient
explanation for its determination on affiliation (which does not
necessarily entail ownership) and remanded this matter to
Commerce. Shanghai Eswell I, 31 CIT at __, Slip Op. 07-138 at
34.
In accordance with the court’s remand instructions, Commerce
reexamined the record evidence. On remand, it continues to find
14
(...continued)
138 at 27 n. 13. Specifically, Jinfu USA’s sole employee is
referred to as “Mr. A”; the chairman and CEO of Jinfu PRC is
referred to as “CEO B”; and the original owner of Yousheng USA is
referred to as “Mr. D”. Id.15
The Shanghai Eswell I court based its determination on
the Certificate of Transfer of Shares executed between CEO B and
Mr. D. The document provides, by its terms, that “This
certificate transfer is effective upon execution by the
undersigned,” and accordingly, that the document was not to gain
legal effect unless and until the parties signed it. Shanghai
Eswell I, 31 CIT __, Slip Op. 07-138 at 29 (citation omitted).
Moreover, despite the document being dated October 25, 2003, it
was apparently signed in December of 2003, and the parties
involved backdated the document to October 25, 2003. Id. at __,
Slip Op. 07-138 at 29 n. 15. Thus, the court found:
[t]he earliest possible effective date of the
ownership transfer agreement would be October
25, 2003. As a result, the court finds, as
it did in Jinfu I, that it cannot find as
unsupported by substantial evidence
Commerce’s determination that CEO B did not
have sole ownership of either Yousheng USA or
Jinfu USA prior to October 25, 2003.
Shanghai Eswell I, 31 CIT at __, Slip Op. 07-138 at 29-30
(footnote, quotation and citations omitted).
Court No. 05-00439 Page 24
that the companies were not affiliated prior to October 25, 2003.
Remand Results at 18. Plaintiffs argue that this remand
determination is unsupported by substantial evidence. In
addition, plaintiffs contend that, in light of a recent United
States Court of Appeals for the Federal Circuit decision, the
court should revisit Commerce’s determination that the Chairman
and CEO of Jinfu PRC did not own Jinfu USA prior to October 25,
2003.
A. Commerce’s Determination That Jinfu PRC and Jinfu USA
Were Not Affiliated Until October 25, 2003
Plaintiffs claim that they have demonstrated that Jinfu PRC
and Jinfu USA were affiliated “during POR 2 [December 1, 2002
through November 30, 2003]”. Pls.’ Comments 11, 17. This Court
has held that Commerce is required to find affiliation where the
party alleging affiliation has demonstrated that “[t]wo or more
entities . . . share various control relationships whereby one
entity is legally or operationally in a position to exercise
restraint or direction over the other and that such relationship
provides one entity the significant potential for the
manipulation of price or production of the other.” Hontex
Enters., Inc. v. United States, 29 CIT 1096, 1101, 387 F. Supp.
2d 1353, 1358 (2005) (quotation and citation omitted); see also
19 U.S.C. § 1677(33) (“[A] person shall be considered to control
another person if the person is legally or operationally in a
Court No. 05-00439 Page 25
position to exercise restraint or direction over the other
person.”); 19 C.F.R. § 351.102(b)(3) (finding of control requires
that “the relationship has the potential to impact decisions
concerning the production, pricing, or cost of the subject
merchandise or foreign like product”).
The facts surrounding the affiliation of the two companies
have been the subject of earlier litigation in this Court. In
Jinfu Trading Co. v. United States, 32 CIT __, Slip Op. 08-38
(Apr. 4, 2008) (not reported in the Federal Supplement) (“Jinfu
III”), the Court sustained Commerce’s finding that Jinfu PRC was
not affiliated with Jinfu USA on or before November 2, 2002.
Having reviewed Jinfu III and having considered the parties
arguments, the court adopts the holding in Jinfu III and finds
that Jinfu PRC and Jinfu USA were not affiliated prior to
November 2, 2002.
Plaintiffs contend that, regardless of the Court’s ruling in
Jinfu III finding no affiliation during the new shipper review at
issue in that case, Commerce’s affiliation findings in this case
are not supported by substantial evidence. Specifically,
plaintiffs argue that record evidence exists to support a finding
that CEO B controlled Jinfu USA prior to the October 25, 2003
Certificate of Transfer of Shares. See Pls.’ Comments 12-14.
Plaintiffs argue that evidence of events occurring after November
2, 2002 demonstrates that the two companies were affiliated after
Court No. 05-00439 Page 26
that date but prior to October 25, 2003. First, plaintiffs
insist that “Mr. A expressly named CEO B as Jinfu USA’s President
in [an annual report] he filed with the State of Washington on
March 12, 2003.” Pls.’ Comments 13 (citations omitted). Second,
plaintiffs state that “CEO B was also named as Jinfu USA’s
President and owner in documents filed with the Internal Revenue
Service and Customs Service.” Pls.’ Comments 13. Finally,
plaintiffs contend that certain sale-specific documents were
signed by CEO B on behalf of Jinfu USA “in his capacity as
President of that company.” Pls.’ Comments 13 (citing Jinfu
Supplemental Section D Response (May 17, 2004), Administrative
Record (“AR”) Doc. 4[7] at Ex. 2 (Human Consumption Certificate
dated Aug. 19, 2003; Certificate of Non-Reimbursement of
Antidumping Duties dated Aug. 19, 2003)).
In response, Commerce states that the documents submitted by
Jinfu PRC, taken as a whole, do not constitute substantial
evidence that the two companies were affiliated prior to October
25, 2003. In addition, Commerce cites one post-November 2, 2002
document to support its case:
Jinfu USA’s Master License Application, filed
with King County, Washington on November 18,
2002, was signed by Jinfu USA’s sole
employee. We note that under the “Purpose of
Application” section, which instructs the
applicant to “Please check all boxes that
apply,” the only checked box is “Open/Reopen
Business.” The next box, “Change Ownership,”
is left blank. In addition, under “List all
owners: Sole proprietor, partners, officers,
Court No. 05-00439 Page 27
and LLC members,” Jinfu USA’s sole employee
only lists himself as the secretary. There
is no mention of any owner of Jinfu USA,
other than this employee asserting that he is
the owner.
Remand Results at 29 (citing Final Results at Comment 8). As to
the Master License Application, the court finds, and plaintiffs
do not dispute, that this document is substantial evidence that
no change with respect to affiliation occurred after November 2,
2002 and before November 18, 2002.
With respect to the documents cited by plaintiffs as
evidence that CEO B controlled Jinfu USA during the POR, the
court first turns to the March 12, 2003 submission to the state
of Washington. This one page annual report does indeed name CEO
B as president of Jinfu USA and was signed by Mr. A.
Nonetheless, this document, by itself, does not demonstrate
ownership of Jinfu USA by CEO B. As the court has previously
held, the earliest that the transfer of ownership could be found
is October 25, 2003, the date of the Certificate of Transfer of
Shares. See Shanghai Eswell I, 31 CIT at __, Slip Op. 07-138 at
29-30 (The document provides, by its terms, that “‘This
certificate transfer is effective upon execution by the
undersigned.’ It is clear, therefore, that the Certificate of
Transfer of Shares was not to gain legal effect unless and until
the parties signed it.” Shanghai Eswell I, 31 CIT at __, Slip
Op. 07-138 at 29 (citation omitted)).
Court No. 05-00439 Page 28
Moreover, the March 12, 2003 document is scant evidence that
CEO B was in a position to exercise actual or potential control
over Jinfu USA. That is, because the overwhelming evidence up to
this point has been that Mr. A operated Jinfu USA independent of
CEO B’s control (see Jinfu III, 32 CIT at __, Slip Op. 08-38 at
15), Commerce is acting within its discretion in finding the bare
representation in the March 12 document that CEO B was president
of Jinfu USA is not by itself dispositive. In other words,
because the evidence to this point has been that Mr. A had sole
operational control of Jinfu USA, the March 12 document cannot be
said to be substantial evidence that the state of affairs had
changed. This is because there is nothing in the document
demonstrating that CEO B was in a position to impact Jinfu USA’s
“price or cost” decisions. See U.S. Steel Group v. United
States, 96 F.3d 1352, 1357 (Fed. Cir. 1996) (“It is the
[Department’s] task to evaluate the evidence it collects during
its investigation.”).
Next, plaintiffs point to documents allegedly prepared for
the Internal Revenue Service in which CEO B was named as Jinfu
USA’s President and owner. With regard to these documents, this
Court has previously found, in Jinfu Trading Co. v. United
States, 30 CIT __, Slip Op. 06-137 (Sept. 7, 2006) (not reported
in the Federal Supplement) (“Jinfu I”), that the 2002 tax return
“was unsigned, and [it] was unclear whether it was ever filed.”
Court No. 05-00439 Page 29
Def.’s Comments 13; see Jinfu I, 30 CIT at __, Slip Op. 06-137 at
24. Thus, these papers are of little probative value. See Jinfu
I, 30 CIT at __, Slip Op. 06-137 at 24.
Regarding the sale-specific documents signed by CEO B on
behalf of Jinfu USA, these documents designate Jinfu PRC and
Jinfu USA as “related” companies “on entry summaries filed with
Customs for each shipment,” and two of these documents (the Human
Consumption Certificate dated Aug. 19, 2003 and the Certificate
of Non-Reimbursement of Antidumping Duties dated Aug. 19, 2003),
were signed by CEO B on behalf of Jinfu USA “in his capacity as
President of that company.” Pls.’ Comments 13 (citation
omitted). These documents, filed with Customs and regarding a
sale, also do not overcome the evidence of the Certificate of
Transfer of Shares, nor do they indicate the level of control
necessary to show affiliation. In particular, neither of these
documents evidence any control, on CEO B’s part, over costs or
pricing of the products Jinfu USA handles.
Here, Commerce specifically discussed and addressed
plaintiffs’ proffered evidence and found it unpersuasive.
Commerce must assess the weight to be assigned to specific
evidence. Nippon Steel Corp. v. United States, 458 F.3d 1345,
1350 (Fed. Cir. 2006). Having reviewed Commerce’s explanation,
the court finds that Commerce’s determination that Jinfu PRC was
not affiliated with Jinfu USA prior to October 25, 2003 is
Court No. 05-00439 Page 30
supported by substantial evidence.
B. Commerce’s Determination That CEO B Did Not Have
Ownership of Jinfu USA Prior to October 25, 2003
Plaintiffs argue that this court’s prior decision that CEO B
did not have ownership of Jinfu USA before October 25, 2003 must
be revisited and reversed. As discussed above, in Shanghai
Eswell I, the court affirmed the Department’s determination that
CEO B did not have ownership of Jinfu USA prior to October 25,
2003 based on the execution of the Certificate of Transfer of
Shares. Shanghai Eswell I, 31 CIT at __, Slip Op. 07-138 at 29-
30. Plaintiffs now claim that the recent Federal Circuit
decision in Crawfish Processors Alliance v. United States, 477 F.
3d 1375 (2007) (“Crawfish Processors”), requires the court to
reverse its previous decision because the Federal Circuit has
rejected certain evidence upon which the court relied as not
required to prove affiliation. See Pls.’ Comments 18.
In Crawfish Processors, the company claiming ownership
purchased stock in the other entity using a promissory note
committing the purchaser to pay the purchase price, in
merchandise, over a period of time. See Crawfish Processors, 477
F.3d at 1378. Commerce rejected the purchaser’s affiliation
claim, asserting that 19 U.S.C. § 1677(33) requires that a
“transfer of cash or merchandise” be fully effectuated within the
period of review in order to demonstrate ownership, and that
Court No. 05-00439 Page 31
because payment in full was not made during the period of review
the transfer did not occur. See id. at 1380-81. The Federal
Circuit rejected Commerce’s requirement that payment be made
within the period of review, stating that “[t]he statute imposes
no time requirement on financial transactions showing
affiliation.” Id. at 1381. In other words, because the
documents transferring title were executed, and a promissory note
was delivered, during the period of review, these alone were
sufficient to put ownership of both companies in one place.
Plaintiffs argue that because the court’s previous ruling on
the question of ownership was based, in part, on CEO B’s failure
to pay for his interest in Jinfu USA until more than one year
after the new shipper sale, Crawfish Processors requires the
Court to “revisit its decision, and based on the legal analysis
set forth above, find that CEO B, in fact, had acquired ownership
of Jinfu USA in October 2002, when all of the parties to the
transaction intended that the transfer of ownership take place.”
See Pls.’ Comments 21. The court finds that plaintiffs overstate
the application of Crawfish Processors to the present matter.
The plaintiffs in Jinfu III made this same argument in
support of their contention that the Court should revisit its
holding that CEO B did not own Jinfu USA on the date of the
purported new shipper sale (November 2, 2002). The Jinfu III
Court found that, unlike Jinfu PRC’s situation, the petitioners
Court No. 05-00439 Page 32
in Crawfish Processors “demonstrated that the transfer of
ownership itself took place [during the period of review]
notwithstanding the method of payment. . . .” Jinfu III, 32 CIT
at __, Slip Op. 08-38 at 16-17. In contrast, here, as in Jinfu
III, the record evidence demonstrates that because the
Certificate of Transfer of Shares was dated October 25, 2003,
ownership did not pass until that date. See Id. at __, Slip Op.
08-38 at 17.16 Consequently, the Jinfu III Court found, even if
it were to “‘discount[] the importance of the time when final
payment was made,’ as urged by plaintiff, it still could not
16
The Jinfu III Court noted:
The court has previously detailed six
independent reasons in support of this
conclusion. They are that: (1) Yousheng USA
was not renamed Jinfu USA until at least
November 8, 2002; (2) either Mr. A or Mr. D
owned Yousheng USA from its date of
incorporation at least until its name was
changed to Jinfu USA; (3) the Certificate of
Transfer of Shares explicitly stated that it
is to be “EFFECTIVE UPON EXECUTION BY THE
UNDERSIGNED” and that the execution took
place on December 30, 2003; (4) CEO B did not
pay Mr. D the consideration for the shares
until more than a year after November 2,
2002; (5) the portion of the November 18,
2002 Master Application for Jinfu USA’s
business license that asked if Yousheng USA
was owned, controlled or affiliated with
another entity was left blank; and (6) the
tax return stating that Jinfu USA was wholly
owned by CEO B was dated June 13, 2003,
unsigned, and may never have been filed.
Jinfu III, 32 CIT at __, Slip Op. 08-38 at 17 (citations
omitted).
Court No. 05-00439 Page 33
conclude that CEO B acquired [Jinfu USA] prior to November 2,
2002 because there is no documentary evidence that the
acquisition took place.” Jinfu III, 32 CIT at __, Slip Op. 08-38
at 17-18.
As noted, the record in this case demonstrates that Jinfu
PRC had no ownership interest in Jinfu USA until, at the
earliest, the date of October 25, 2003 found on the Certificate
of Transfer of Shares: “[t]he earliest possible effective date of
the ownership transfer agreement would be October 25, 2003. . . .
The [Certificate of Transfer of Shares] is dated October 25, 2003
. . . .” Shanghai Eswell I, 31 CIT at __, Slip Op. 07-138 at 29;
29 n. 15; Remand Results at 28. This is the very date used by
Commerce in this case in finding that ownership of Jinfu USA
transferred. Accordingly, the court finds that the decision in
Crawfish Processors does not require it to revisit its ownership
analysis, because, regardless of when payment was made, ownership
did not transfer prior to October 25, 2003.
For the reasons above, the court finds that the Department
has complied with the court’s remand instructions and sustains
the Department’s finding that Jinfu PRC was not affiliated with
Jinfu USA prior to October 25, 2003.
Court No. 05-00439 Page 34
CONCLUSION
For the foregoing reasons, the court sustains the
Department’s Remand Results. Judgment shall be entered
accordingly.
/s/Richard K. Eaton
Richard K. Eaton
Dated: November 18, 2008
New York, New York