La Molisana S.p.A. v. United States , 2017 CIT 111 ( 2017 )

Slip Op. 17 - 111
UNITED STATES COURT OF INTERNATIONAL TRADE
:
LA MOLISANA S.p.A, :
:
Plaintiff, :
:
v. : Before: R. Kenton Musgrave, Senior Judge
: Court No. 16-00047
:
UNITED STATES, :
:
Defendant, :
:
and :
:
NEW WORLD PASTA CO. and :
DAKATA GROWERS PASTA CO., :
Defendant-Intervenors. :
:
OPINION AND ORDER
[Remanding eighteenth administrative review of certain pasta from Italy.]
Dated: August 23, 2017
David J. Craven and Saichang Xu, Sandler, Travis & Rosenberg, of Chicago, IL, for the
plaintiff.
Elizabeth Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, for the defendant. On the brief were Chad A. Readler,
Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr.,
Assistant Director. Of Counsel was Mykhalo Gryzlov, Senior Counsel, Office of the Chief Counsel
for Trade Enforcement and Compliance, U.S. Department of Commerce.
Paul C. Rosenthal and David C. Smith, Kelley Drye & Warren LLP, of Washington, DC, for
the defendant-intervenors.
Court No. 16-00047 Page 2
Musgrave, Senior Judge: The plaintiff, La Molisana S.p.A., challenges two
determinations from the eighteenth (2013-2014) antidumping duty administrative review of certain
dry pasta from Italy1: (1) whether the U.S. Department of Commerce, International Trade
Administration (“Commerce” or “Department”) erred in requiring La Molisana’s pasta sales product
shapes to be reported without variance from the proceeding’s pasta shape classification list; and
whether Commerce failed to provide meaningful opportunity for addressing the agency’s differential
pricing analysis. This being a timely-filed matter described by 19 U.S.C. §1516a(a)(2), subsections
(A)(i)(I) and (B)(iii), jurisdiction is proper under 28 U.S.C. §1581(c). The standard of review is
substantial evidence on the record. 19 U.S.C. §1516a(b)(1)(B)(i). The case will be remanded per
the following.
Discussion
I
A. Background
The pasta shape classification list provides for eight different types of shape
categories: (1) long cuts (e.g., linguine, spaghetti), (2) specialty long cuts (e.g., capellini, fioccini),
(3) nested/folded/coiled, (4) lasagna, (5) short cuts (e.g., fagiolini, medium shells), (6) specialty short
cuts (e.g., mezzanelli, pasta mista), (7) soupettes (e.g., ditali, corallini), and (8) combination of
shapes. E.g., Initial Questionnaire (“IQ”) (Oct. 3, 2014), PDoc 24, at B-8, C-7. Appendix III of the
1
Certain Pasta From Italy: Final Results of Antidumping Administrative Review;
2013-2014, 81 Fed. Reg. 8043 (Feb. 17, 2016) (“Final Results”); Certain Pasta From Italy:
Amended Final Results of Antidumping Duty Administrative Review; 2013-2104, 8l Fed. Reg. 12690
(Mar. 10, 2016) (“Amended Final Results”) and the accompanying issues and decision memorandum
(“IDM”), PDoc 228. Citations to other specific administrative reviews are herein abbreviated “AR”
followed by its numeric sequence.
Court No. 16-00047 Page 3
IQ sent to all respondents lists some 256 different shapes and their corresponding control number
category (i.e., CONNUMs) and provided therein in relevant part is as follows:
SHAPE CLASSIFICATION
You are required to classify the pasta types reported in field 3.9 into one of the shape
categories specified in field 3.1 in accordance with the questionnaire examples and
the attached “Classification of Pasta Shapes.” If you sold pasta in shapes that do not
appear on the attached list, please use the most similar pasta type on this list as a
guide for determining the appropriate shape classification. Support any such
classification with a description and picture of the pasta type, the production line on
which it is produced, the standard production capacity of that line (e.g., pounds per
hour), and the line speed (e.g., pounds per hour) for the pasta type in question. Please
note that any revisions in shape classification must also be reflected in control
numbers and variable manufacturing cost information.
IQ at 151 (or Appx. III at 4; italics added).
Long (and linear) cuts are made on long cut pasta machines and short cuts are made
on short cut pasta machines. Once the determination of long or short is made, the question is then
whether a cut is a “standard” or “special” cut, which for purposes of this matter is a critical
distinction: the “dividing line” is not due to any physical differences in pasta cuts within the long or
short shape categories but due to the higher production costs that would be associated with the
slower line speeds of the latter. See, e.g., Certain Pasta From Italy, 78 Fed. Reg. 9364 (Feb. 8,
2013) (AR15 final) and accompanying issues and decision memorandum (all such memoranda
hereinafter “I&D Memo”) at cmt 1; Certain Pasta From Italy, 64 Fed. Reg. 6615 (Feb. 10, 1999)
(inter alia AR1 final) and accompanying I&D Memo at cmt 7.
Commerce attempts to frame La Molisana’s dispute as a disagreement with
methodology, but the parties rather appear in agreement that the methodology is proper and long
standing. Onward since the 1996 investigation, Commerce’s practice has been to use a 75 percent
line-speed benchmark to distinguish “speciality” cuts from “regular” cuts produced on the same long
Court No. 16-00047 Page 4
or short production line. See, e.g., id. La Molisana’s initial Section B and C questionnaire responses
included detailed exhibits in which the production speeds of the various shapes which La Molisana
believed were improperly categorized in Commerce’s shape list and which La Molisana believed
should be re-classified. La Molisana also included as part of this exhibit a list of those shapes which
it believed did not appear on Commerce list and, using the same methodology, placed these shapes
into what it believed to be appropriate categories. See LM Response to Sections B and C of the IQ
(Dec. 2, 2014), CDocs 38-54, at Exs B-1 and C-1. La Molisana had submitted pictures of these
shapes as part of its Section A response. See LM Response to Section A of the IQ (Nov. 5, 2015),
PDocs 34-39, at Ex A-13(a).
About a month later, Commerce issued a supplemental questionnaire (“SQ”) to La
Molisana stating:
1. In your [Section B Questionnaire Response,] page 2, and at Ex B-2, you state that
you classified shapes “by taking the production speed for the cut on one of the lines
as compared to the production speed for a shape classified by the Department in a
particular category.” However, the Department does not classify products by
production characteristics, rather through sales characteristics. Please assign shape
codes to each of your observations in the home market and U.S. market databases
according to the shape classifications included in Appendix III of the initial
questionnaire. If you believe a change in the model match is warranted, you must
submit a formal request to the Department for a change to the model match
methodology.
SQ (Jan. 6, 2015), PDoc 86, at 2. (bracketing and italics added; footnote omitted).
La Molisana requested clarification of this instruction on January 13, 2015, noting
Commerce’s extant practice. Commerce’s reply three days later to this request was as follows:
A. Please report your shapes, and the appropriate shape code, according to the
existing list of classifications as presented in Appendix III of the Initial
Questionnaire.
Court No. 16-00047 Page 5
B. For shapes not listed in Appendix III, please report the characteristics based on
the most similar shape listed in Appendix III.
Dep’t Resp. to Request for Clarification (Jan. 16, 2015), PDoc 92, at 2 (italics added).
Believing it had already placed on the record the correct classifications, La Molisana
explains, in order to avoid confusion resulting from multiple competing databases it sent in a
database of the shapes as Commerce apparently wanted them (re)classified, but it did so under
protest, noting at the time that it intended to raise this issue in its administrative case brief. In that
brief, La Molisana argued Commerce had failed to follow the established methodology for shape
classification in this order and further argued against the methodology imposed by Commerce in this
review, i.e., Appendix III governs a shape’s classification regardless of any information on the record
as to production line speed for that shape. See LM Case Brief (Oct. 6, 2015), CDoc 240, at 2-4.
In the IDM, Commerce refused to allow the reclassification of the shapes but did not
directly address whether the methodology had shape-shifted to sales-based from production-based;
rather, Commerce indicated that the shape methodology was essentially immutable, that the list had
been “refined”, and that Commerce need not consider certain proffered facts. Commerce stated:
Although a 75 percent throughput rate has been used to distinguish pasta shape for
specialty long and short pasta cuts, we have never allowed respondents to reclassify
pasta shape classifications based on its own reported line speeds without providing
the requisite evidence to support such a reclassification. Furthermore, we have not
allowed respondents to reclassify pasta shapes that are already included in the pasta
shape classification table.
IDM at 6.
B. Argument
La Molisana argues generally that the above statement in the IDM is factually
inaccurate, both with respect to the review in question and also with respect to categorical statements
Court No. 16-00047 Page 6
about what has and has not been allowed in prior reviews of this order. First, it notes that the
statement is directly contradicted by Commerce’s instructions in Appendix III, in which is stated in
relevant part: “Please note that any revisions in shape classification” et cetera. See IQ at 151, supra.
Thus, La Molisana argues that the questionnaire instructions themselves clearly contemplated
revisions to the existing list of shapes, and that if Commerce’s subsequent statement that the list of
shapes is essentially immutable and that respondents are not allowed to reclassify shapes were true,
then any provision providing for the “revision” of shapes would be rendered a nullity.
Second, La Molisana notes that Commerce has, in fact, allowed respondents to
reclassify shapes that were included in the pasta shape classification table. In the I&D Memo for the
fourth (1999-2000) administrative review,2 for example, Commerce stated: “For those cuts which
PAM believed were specialty cuts yet the Department considered a regular cut (or vice versa), it
provided the line speed data. We reviewed this information and accepted the revised shape
classification as provided by PAM.” AR4 I&D Memo at issue 19. Thus, Commerce has expressly
allowed parties in other segments to re-classify shapes on the shape list. Further, La Molisana
criticizes the defendant’s attempt to dismiss Commerce’s own decision in AR15 through claiming
that such decision stood for the proposition that Commerce did not reclassify shapes, but La
Molisana points out that stance is undercut by the language of AR15 itself:
In the investigation the Department used a 75 percent throughput rate to distinguish
pasta shape for specialty long and short pasta cuts. We do not use the throughput
rates to further differentiate between specialty short and super-specialty short or
specialty long and super-specialty long. Based on the throughput rates of the pasta
at issue, we can classify them as specialty short and specialty long because the line
2
See I&D Memo accompanying Certain Pasta From Italy, 67 Fed. Reg. 300 (Jan. 3, 2002)
(inter alia, AR4 final).
Court No. 16-00047 Page 7
speed or the throughput rates are 75 percent or less than the corresponding line speed
or throughput rates of the short and long pasta.
AR15 I&D Memo at cmt 1. As this language makes clear, and as previously noted, Commerce since
the investigation has used speed as the dividing point between special and regular cuts, and it is
production speed, not sales characteristics, which apparently controls that distinction. And in
considering the record of AR5, Certain Pasta From Italy, 68 Fed. Reg. 6882 (Feb. 11, 2003), the
court previously acknowledged “other evidence on the record that appears to show that line speed
is a shorthand for shape.” New World Pasta Co. v. United States, 28 CIT 290, 309 n.22, 316 F.
Supp. 2d 1338, 1355 n.22 (2004). La Molisana contends that if Commerce’s standard is that the
production speed drives whether or not a cut is standard or special but for the administrative review
at bar refused to consider any evidence showing the relative production speeds of certain cuts, then
Commerce has not actually abided by its own standard but made an arbitrary decision not based on
an actual review of production data, which is not in accordance with Motor Vehicle Mfrs. Ass’n of
U.S., Inc. v. State Farm Insurance Co., 463 U.S. 29, 43 (1983) (an agency’s determination is
arbitrary and capricious if the agency “entirely failed to consider an important aspect of the problem,
offered an explanation for its decision that runs counter to the evidence before the agency”, etc.).
Third, La Molisana argues that Commerce “did not even try” (LM Br. at 13) to
explain the departure from its prior practices and rather appears to have misconstrued both prior
practice from other reviews and the positions that it had taken in this review. Commerce claimed
that it never allowed “reclassifications” of products on Commerce’s shape list and that a “formal
request” (whatever that means) to modify the shape methodology was not made and that insufficient
information was placed on the record. Yet, as discussed above, Commerce not only has considered
Court No. 16-00047 Page 8
the reclassification of shapes, it has expressly allowed this and expressly contemplated this in the
questionnaire.
Fourth, La Molisana contends it was not asking that Commerce “modify” its shape
methodology but rather was simply asking that Commerce apply the existing methodology to the
facts of record including the information provided by La Molisana, and La Molisana submits that
the information placed on the record in this review would appear to be similar to that placed on the
record in AR4 (the 4th review of the antidumping duty order on pasta from Italy); and that if the
record were not sufficient without supplementation then Commerce should have asked for more
information. In AR4, Commerce did not believe the information to be sufficient to sustain the claim
and issued a supplemental questionnaire requesting more information. AR4 I&D Memo at issue 17.
La Molisana thus argues that to the extent that Commerce believed the information La Molisana
submitted was insufficient, then Commerce should have followed extant precedent and asked for
further detail from La Molisana; but rather than requesting this information, Commerce essentially
enumerated a “new standard” based on sales (i.e., an “immutable” list of shapes) and not on
production; and when confronted with the fact that this was a different standard it wound up further
mischaracterizing its own practice.
C. Analysis
The court cannot agree that Commerce enumerated a “new” standard. Rather, for this
proceeding Commerce appears to have ossified in its approach to “considering” the facts before it.
The court, thus, can agree with La Molisana that Commerce’s practice, as established by both
administrative and judicial precedent, is quite clear, and that Commerce must follow its prior
decisions unless it is able to provide a reasoned explanation for the departure from such decisions.
Court No. 16-00047 Page 9
See Citrosuco Paulista, S.A. v. United States, 12 CIT 1196, 1209, 704 F. Supp. 1075, 1088 ( 1988)
(“it is . . . a general rule that an agency must either conform itself to its prior decisions or explain the
reasons for its departure”); Cinsa S.A. de C.V. v. United States, 21 CIT 341, 349, 966 F. Supp. 1230,
1238 (1997) (“Commerce . . . cannot arbitrarily abandon a relied[-]upon methodology”, it “can reach
different determinations in separate administrative reviews but it must employ the same methodology
or give reasons for changing its practice”); RHP Bearings Ltd. v. United States, 24 CIT 1218, 1226,
120 F. Supp. 2d 1116, 1124 (2000) (application of a “special rule” in only two prior reviews does
not form a “long-established practice” but Commerce is still obliged “to explain the apparent
inconsistency of its approach in this review and the two preceding reviews”). See also American
Silicon Technologies v. United States, 22 CIT 776, 777, 19 F. Supp. 2d 1121, 1123 (1998).
La Molisana is correct that an immutable list cannot take into account any changes
in technology in the production of a cut nor the specific “shape” of the cut produced by each
producer nor the speeds of each producer’s machines. However, La Molisana undercuts its own
argument to a certain degree in pointing out that each pasta producer uses its own unique dies, and
that a shape produced by one producer will not necessarily be identical to that of another producer.
The defendant thus correctly implies that the shapes list is not company-specific. See, e.g., Def’s
Resp. at 17 (“taken to its logical conclusion, permitting classifications based on company-specific
line speeds would result in a system in which (1) physically identical pasta could have different
classifications, and (2) the pasta would be classified by something other than its physical
characteristics”) (internal quotes omitted; referencing 19 U.S.C. §1677(16)(A)) On the other hand,
the defendant goes too far in attempting to characterize La Molisana’s arguments as an “attempt to
replace the well-established shape classification in the model match methodology with a system
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based on company-specific line speeds.” Id. at 9. The court does not interpret La Molisana’s
arguments to that extent.
Further, the defendant argues “La Molisana has not demonstrated that the
well-established shape classification list, which was proposed by Italian pasta respondents in the
original investigation,[ ]
and further refined in subsequent reviews, is unreasonable” Id. at 14(footnote omitted). The argument presumes perfection in Appendix III for this review, i.e., that the
listed shapes and their corresponding CONNUM categories are indeed immutable, and yet, as also
acknowledged, the list has been subject to at least four revisions over the years. While it appears
true, as the defendant also contends, that the list reflects a “shape-based approach [to] match[ ]
foreign pasta to domestic pasta based on the ‘physical characteristics’ of the pasta, which is precisely
what 19 U.S.C. §1677(16)(A) requires”3, it is plain that the list is also divided over those “physical
characteristics” by presumed production line speed at the start of each administrative review
segment, and it is well-established that each such segment is to be considered a separate proceeding
with its own unique facts. E.g., Shandong Huarong Machinery Co. v. United States, 29 CIT 484,
491 (2005). The questionnaire itself contemplates the possibility of revisions and, by implication,
the right of parties to seek them. La Molisana placed on the record specific information about the
line speeds used for the production of its various cuts of pasta and why the cuts that it sought to
re-classify were produced at the same line speeds as exemplar cuts. See CDocs 38-54, supra, at Exs
B-1 and C-1. La Molisana argues that this information demonstrated that some of the cuts which
Commerce had placed on the list as “special” cuts, were in fact produced at the same speed as that
3
Def’s Resp. at 15, referencing New World Pasta Co. v. United States, 28 CIT 290, 306, 316
F. Supp. 2d 1338, 1352 (2004).
Court No. 16-00047 Page 11
of standard cuts. The record being plain that consideration of this claim is what La Molisana sought,
to which the record and argument here reflect no adequate rejoinder, the matter will therefore be
remanded therefor.
II
The second issue concerns Commerce’s differential pricing analysis. In the
preliminary results Commerce determined that the differential pricing analysis did not produce a
meaningful difference between the use of average to average (“A-A”) when compared to average to
transaction (“A-T”). Certain Pasta From Italy, 80 Fed. Reg. 47467 (Aug. 7, 2015) (prelim. results)
and accompanying preliminary decision memorandum, PDoc 183 (Aug. 3, 2015), at 8. Anticipating
that when Commerce corrected any errors it might revisit this issue, La Molisana submitted
arguments in its case brief challenging Commerce’s differential pricing analysis and the potential
use of the A-T methodology. CDoc 240 at 11-12. These included a discussion of the seasonality
of the product and other factors that could explain a difference in price.
In the Final Results, as reflected in the IDM, Commerce did not consider La
Molisana’s arguments because they were mooted by the finding in the preliminary results that the
difference was not meaningful. However, in the amended final results Commerce determined to
apply the differential pricing analysis and to use A-T methodology. Amended Final Calculation
Memorandum, PDoc 237, CDoc 264 (Mar. 7, 2016). Commerce did not address any of the
arguments La Molisana presented but appears to have simply ruled that since the A-T methodology
produced a higher rate than the A-A methodology, it was more accurate and thus should be used. La
Molisana complains Commerce neither stated why a “higher” rate is necessarily more accurate nor
addressed any of the concerns raised in its case brief.
Court No. 16-00047 Page 12
The defendant voluntarily requests remand in order to place its analysis and
determination on the record. The defendant-intervenors oppose remand and argue for sustaining
Commerce’s determination because when La Molisana alleged clerical error in the Final Results, it
must have understood that the consequence of that allegation would result in halving its dumping
margin, which in turn would trigger a re-calculation that would invoke use of the A-T methodology.
But the court has been provided no basis on which to draw such ultimate conclusion, and it is still
a fundamental tenet of these matters that an agency must “articulate a[ ] rational connection between
the facts found and the choice made.” Burlington Truck Lines, Inc. v. United States, 371 U.S. 156,
168 (1962). See also SEC v. Chenery Corp., 332 U.S. 194, 196 (1947) (courts judge the propriety
of agency action solely on the ground invoked by the agency and are powerless to substitute “a more
adequate or proper basis”). Remand to Commerce to address the record is appropriate. See SKF
USA Inc. v. United States, 254 F.3d 1022, 1029 (Fed. Cir. 2001).
Conclusion
The matter is hereby remanded to the Department of Commerce, International Trade
Administration with instruction to reconsider La Molisana’s arguments on the application of the
speed/shape methodology to the facts of record and also to supplement the record with articulated
consideration of La Molisana’s administrative case brief comments regarding the differential pricing
issue. The results of remand shall be due November 30, 2017, and within five days of such filing
the parties shall confer and file with the court either a proposed briefing schedule for commenting
on the remand results or other indication of proceeding to final disposition. So Ordered.
Dated: August 23, 2017 /s/ R. Kenton Musgrave
New York, New York R. Kenton Musgrave, Senior Judge