Citic Trading Co. v. United States , 27 Ct. Int'l Trade 356 ( 2003 )

SLIP-OP 03 - 23
UNITED STATES COURT OF INTERNATIONAL TRADE
__________________________________________
:
CITIC TRADING CO., LTD, ET AL., :
:
Plaintiffs, :
:
v. : PUBLIC
:
UNITED STATES, : Before: WALLACH, Judge
: Court No.: 01-00901
Defendant, :
and :
:
ABC COKE, CITIZENS GAS & COKE :
UTILITY, ERIE COKE CORP., SLOSS :
INDUSTRIES CORP., and TONAWANDA :
COKE CORPORATION, :
:
Defendant-Intervenors. :
__________________________________________:
[Remanded]
Decided: March 4, 2003
Manatt, Phelps & Phillips, LLP (Jeffrey S. Neeley), for Plaintiffs.
Robert D. McCallum, Jr., Assistant Attorney General; David M. Cohen, Director; Lucius B. Lau,
Assistant Director; John N. Maher, Trial Attorney; William J. Kovatch, Jr., Office of Chief
Counsel for Import Administration, U.S. Department of Commerce, of counsel, for Defendant.
Schagrin Associates (Roger B. Schagrin), for Defendant-Intervenors.
1
OPINION
WALLACH, Judge.
I
Introduction
Plaintiffs CITIC Trading Co., Ltd., Minmetals Townlord Technology Co., Ltd., and
Sinochem International Co., Ltd. (collectively “Plaintiffs” or “ Respondents”) move for judgment
upon the agency record pursuant to USCIT Rule 56.2, challenging the decision of the United
States Department of Commerce, International Trade Administration (the “Department,”
“Commerce” or “ITA”) in Final Determination of Sales at Less Than Fair Value: Foundry Coke
Products From The People’s Republic of China, 66 Fed. Reg. 39487 (July 31, 2001) (“Final
Determination”).
Plaintiffs challenge five aspects of the Final Determination: (1) the Department’s choice
of surrogate values for coking coal; (2) the Department’s finding that foreign producers reported
coal usage amounts subsequent to washing; (3) the Department’s use of adverse inferences based
on non-cooperation by producers; (4) the Department’s refusal to use surrogate values from
related coal mines; and (5) the Department’s use of adverse inferences against Sinochem. The
Department’s determination is remanded on all five issues.
2
II
Background
On September 20, 2000, ABC Coke, Citizens Gas & Coke Utility, Erie Coke
Corporation, Sloss Industries Corporation, and Tonawanda Coke Corporation (collectively
“Petitioners” or “Defendant-Intervenors”) filed an antidumping petition alleging that imports of
foundry coke from China were being injuriously dumped in the United States. The Department
initiated an antidumping duty investigation on October 10, 2000. See Initiation of Antidumping
Duty Investigation: Foundry Coke From the People’s Republic of China, 65 Fed. Reg. 61303(Oct. 17, 2000). Commerce determined the scope of the investigation to be “coke larger than 100
mm (4 inches) in maximum diameter and at least 50 percent of which is retained on a 100 mm (4
inch) sieve, of a kind used in foundries.” Id. at 61304. On November 7, 2000, Commerce issued
Section A Questionnaires to the Embassy of the People’s Republic of China (“PRC”), as well as
courtesy copies to Sinochem, CITIC, Minmetals, and Shanxi Grand Coalchem Industrial Co.
(“Shanxi”)1, each a foundry coke exporter. On November 14, 2000, the United States
International Trade Commission (“ITC”) preliminary determined that “there is a reasonable
indication that an industry in the United States is threatened with material injury by reason of
imports from China of foundry coke.” Foundry Coke from China, 65 Fed. Reg. 69573, 69573
(Nov. 17, 2000) (“ITC Preliminary Determination”).
During the preliminary proceedings, Commerce provided the parties a list of countries
operating at a similar level of economic development to the PRC for purposes of surrogate value
1
Shanxi is not a party to this action.
3
determination.2 Accordingly, Respondents submitted information from an Indian producer of
coking coal, Bharat Coking Coal, for the relevant period of investigation running from January 1,
2000, through June 30, 2000. Petitioners similarly determined on January 23, 2001, that India
was the most appropriate surrogate country and submitted publicly-available information
concerning factors of production from India. On February 20, 2001, Commerce selected India as
the primary surrogate country, noting that India was a significant producer of the subject
merchandise, that Petitioners had submitted factors from Indian sources, and that India was at a
level of economic development similar to the PRC.
In addition, Commerce requested that respondents provide information on their supplying
foundries within the PRC. On January 23, 2001, Sinochem, CITIC, and Shanxi submitted
Section D Questionnaires from some, but not all, of their suppliers, explaining that certain
suppliers had failed to respond because they had been involuntarily closed by the PRC
government. Commerce further issued Supplemental Questionnaires on January 26, 2001
requesting documentation on the closures. In response, Sinochem, CITIC, and Shanxi provided
documents from the People’s Government of Qing-Xu County and the People’s Government of
Shanxi Province representing that certain unidentified companies had been shut down due to
their use of outdated equipment.
During the preliminary proceedings, Commerce also issued a Supplemental
Questionnaire to Sinochem requesting additional information on an unreported U.S. sale where a
2
These countries are: India, Pakistan, Sri Lanka, Egypt, Indonesia and the Philippines.
See Notice of Preliminary Determination of Sales at Less Than Fair Value: Foundry Coke From
the People’s Republic of China, 66 Fed. Reg. 13885, 13889 (Mar. 8, 2001) (“Preliminary
Determination”).
4
portion of the merchandise was over 100mm in size. Sinochem responded on January 5, 2001,
claiming that it had reported all sales of coke falling within the scope of the investigation. A
second Supplemental Questionnaire was issued on January 26, 2001, in the response to which
Sinochem confirmed that it did sell foundry coke over 100mm in size during the POI, but said
that since the majority of the coke was under 100mm, the sale was not subject to the
investigation.
In the Preliminary Determination, Commerce determined that foundry coke from the PRC
was being sold at less-than-fair value in the United States. See Preliminary Determination, 66
Fed. Reg. at 13885. In determining surrogate values for coal, Commerce chose not to rely on
Respondents’ Indian coking coal prices but instead utilized Indian Import Statistics for the period
of April 1998 through March 1999. Id. at 13890. Pursuant to 19 U.S.C. §1677e(b), Commerce
applied adverse facts available against Sinochem for failure to report its sale containing coke
over 100mm in size. 66 Fed. Reg. at 13889. Finally, Commerce determined that respondents did
not act to the best of their ability to obtain section D responses from their suppliers and resorted
to adverse facts available for exporters who purchased from those companies.3 Id.
In order to address Department’s use of alternative coking coal prices, on May 1, 2001,
respondents submitted additional coking coal prices from Coal Week International. Arguing that
import prices relied upon by Commerce in the Preliminary Determination were imprecise and
unreliable, respondents requested that Commerce use a basket of coking coal prices from
3
According to Commerce, the non-responsive suppliers failed to adequately establish that
they “were in fact shut down by the government since the government document did not provide
names of the foundry coke producers subject to the governmental decree or any other information
that would suggest that any specific company had been shut down.” Preliminary Determination,
66 Fed. Reg. at 13889.
5
comparable countries such as South Africa, Indonesia, Colombia, Venezuela and Poland.
In addition, Respondents also arranged for Chinese government officials to meet with
Department’s investigators to provide assurances of the credibility of the shutdowns and to
counter Commerce’s use of adverse facts available on the issue. Although Commerce met with
the officials and they offered various documents to support their statements, Commerce did not
accept any of the documents, claiming they would constitute new information on the record.
Commerce published its Final Determination and accompanying Issues and Decisions
Memorandum (“Decision Memorandum”)4 on July 31, 2001. Final Determination, 66 Fed. Reg.
39487. In the Decision Memorandum, Commerce again rejected Respondents’ submission of
surrogate values for coking coal, preferring instead to continue using Indian Import Statistics for
the period of April 1998 to March 1999. Id. As in the Preliminary Determination, Commerce
continued using adverse facts available against those exporters that could not provide evidence
substantiating that some of their suppliers had closed. Commerce explained that the continued
application of adverse facts available was appropriate since respondents failed to submit
information in a timely manner and in the requested form. As for Sinochem’s unreported sale,
Commerce did not apply adverse facts available but rather applied facts available by conducting
a “margin analysis” on the portion of the sale considered in-scope, “using the price of the original
sale and the volume of the sale which exceeds 100mm in size.” Decision Memorandum at
Comment 12.
4
Commerce’s Final Determination was further amended due to ministerial errors in
Notice of Amended Final Determination of Sales at Less Than Fair Value: Foundry Coke From
the People’s Republic of China, 66 Fed. Reg. 45962 (Aug. 31, 2001), and Notice of Amended
Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order: Foundry
Coke Products From The People’s Republic of China, 66 Fed. Reg. 48025 (Sept. 17, 2001).
6
In addition, Commerce also determined that Respondents reported coking coal inputs at
stages subsequent to the washing. This conclusion was based on Respondents’ questionnaires
responses submitted earlier during the proceedings where respondents reported that they washed
the coal themselves but recycled the by-product of the washing process, i.e. coal mud, into the
production of coke. Commerce therefore determined that “the reported usage rates are for
washed coal, and there is no need to adjust the coal factors to account for washing.” Id. at
Comment 2. Finally, Commerce determined that, contrary to respondents’ contentions,5 it
would not determine a surrogate value for coal obtained from related coal mines by using a
factors of production methodology. Commerce did not “consider that coal is a self-produced
input for any of the respondents,” so it “did not value coal using the factors of production for coal
from the coal mines.” Id. at Comment 3.
On September 14, 2001, the ITC determined “that an industry in the United States is
materially injured by reason of imports from China of foundry coke.” Foundry Coke from China,
66 Fed. Reg. 47926, 47926 (Sept. 14, 2001) (“ITC Final Determination”). On October 17, 2001,
Plaintiffs filed the present action to contest the Department’s Final Determination that foundry
coke from the PRC was being sold at less-than-fair value in the United States.
5
Respondents argued that the Department’s practice is to calculate a surrogate value of
the producer’s inputs using surrogate prices for the actual inputs for the mining of the coal. They
further argued that statutory provisions state that Commerce is to determine normal value using
the factors of production of the merchandise. Consequently, respondents argue they acted
according to Department’s practice and statutory provisions in providing inputs of coking coal
for both related and unrelated mines, including the factors of production for coking coal supplied
by related mines.
7
III.
Jurisdiction and Standard of Review
The court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (1994).
In reviewing the Final Determination, 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 USC § 1516a (b)(1)(B) (1994). “Substantial evidence
is something more than a ‘mere scintilla,’ and must be enough reasonably to support a
conclusion.” Primary Steel, Inc. v. United States, 17 CIT 1080, 1085, 834 F.Supp. 1374, 1380
(1993); Ceramica Regiomontana, S.A. v. United States, 10 CIT 399, 405, 636 F. Supp. 961, 966
(1986), aff’d, 810 F.2d 1137 (Fed. Cir. 1987). “As 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., 10 CIT at 404-5.
8
IV.
Discussion
A.
A Remand is Necessary Because The Department’s Final Determination Is Not Supported
by Substantial Evidence
Plaintiffs challenge five aspects of the Final Determination: (1) the Department’s choice
of surrogate values for coking coal; (2) the Department’s finding that foreign producers reported
coal usage amounts subsequent to washing; (3) the Department’s use of adverse inferences based
on non-cooperation by producers; (4) the Department’s refusal to use surrogate values from
related coal mines; and (5) the Department’s use of adverse inferences against Sinochem.
Because the court finds that the Final Determination is unsupported by substantial evidence, the
Court concludes that remand is proper on all five issues. A detailed review of the parties’
contentions follows.
1.
The Department’s Choice of Surrogate Values Is Not Supported by Substantial Evidence
a.
Commerce Agrees That The Surrogate Value Date Upon Which It Relied Contains Errors
Plaintiffs dispute the Department’s choice of surrogate values for coking coal as
9
unsupported by the record, falling outside of the period of investigation, and unreflective of coal
prices produced within PRC. More specifically, Plaintiffs argue that the Department’s reliance
on Indian Import Statistics for the period of April 1998 to March 1999 is unsupported by
substantial evidence because: (1) the prices used by Commerce are uncorroborated by the record
and inconsistent explanations were provided as to what source documentation might show; (2)
Commerce used coal prices outside of the period of investigation without taking into
consideration the commodity’s volatile nature; (3) Commerce failed to use prices from an
authoritative source on the record that is both contemporaneous to the period of investigation and
for coal produced and sold in economies of comparable levels of development to the PRC; and
(4) Commerce used prices that were reflective of coal produced in non-comparable economies.
To support their contention as to the unreliability and inconsistencies in Commerce’s use
of surrogate prices, Plaintiffs cite to the Decision Memorandum as well as various documents
generated by Commerce in reaching its Final Determination.6 In comparing the Decision
Memorandum, the CITIC Analysis Memo and its supporting documents, Plaintiffs point to
inconsistent listings of time periods for valuating coal input, and conflicting uses of value
6
See Analysis for the Final Determination of Foundry Coke from the People’s Republic
of China: CITIC Trading Company, Ltd., A.R. (Non-public) Doc. No. 111 (“CITIC Analysis
Memo”); Analysis for the Final Determination of Foundry Coke from the People’s Republic of
China: Sinochem International, A.R. (Non-Public) Doc. No. 110 (“Sinochem Analysis Memo”);
Analysis for the Final Determination of Foundry Coke from the People’s Republic of China:
Shanxi DaJin, A.R. (Non-public) Doc. No. 113 (“Shanxi Analysis Memo”); Analysis for the
Final Determination of Foundry Coke from the People’s Republic of China: Minmetals
Townlord, A.R. (Non-public) Doc. No. 112 (“Minmetals Analysis Memo”) (collectively
“Analysis Memoranda”); Plaintiffs’ Memo at 15-17.
10
inflators and surrogate prices.7 Plaintiffs also cite to discrepancies in the Sinochem Analysis
Memo where the purportedly inflated values are not reflected in the supporting documents’ listed
values.8 Finally, Plaintiffs point to the Shanxi Analysis memo, where coal inputs are for
inconsistent periods, and the Minmetals Analysis Memo, where coal prices and input periods
conflict between the actual memo and its supporting documents. Plaintiffs argue that all these
figures are unreliable because no source documents were provided for the asserted values.
Plaintiffs also argue that the Department has failed to follow its own preference for using
surrogate data that is contemporaneous with the period of investigation.9 According to Plaintiffs,
it is the accuracy of the determination that is of paramount concern to the Antidumping statute,
and where prices from one source are shown to be distorted, DOC practice is to turn to another
source. Rhodia, Inc. v. United States, 185 F. Supp. 2d 1343, 1352 (CIT 2001). Plaintiffs claim
that the data they submitted is more accurate since it is contemporaneous with the period of
investigation and contains prices for merchandise from comparable surrogate countries. While
7
In the CITIC Analysis memo, Commerce states that it based its determination on “coal
input based on the Indian Import Statistics for the period of April 1998 to May 1999.” Plaintiffs’
Memo at 15-16. Commerce further states that it inflated this value with International Financial
Statistics, resulting in a surrogate value for coal of $59.82. Plaintiffs argue that this statement
directly conflicts with the Issues and Decision Memorandum, where Commerce stated that it
used data from a time contemporaneous to the period of investigation, i.e. January 1, 2000,
through June 30, 2000. Plaintiffs also argue that it conflicts with Attachment I to the CITIC
Analysis Memo which is based on the Monthly Statistics of the Foreign Trade of India for April
2000-September 2000, and has no inflated values as in the main memo.
8
As in the CITIC Analysis Memo, the Sinochem Analysis memo states that coal input is
based on Indian Import Statistics for the period of April 1998 to May 1999, and that the resulting
values are inflated with International Financial Statistics. The supporting documents in
Attachment I, however, list coking coal prices at the non-inflated value of $45.54.
9
The period of investigation ran from January 1, 2000, to June 30, 2000.
11
they admit that their prices are from numerous other developing countries, Plaintiffs argue they
are still appropriate as “[i]t has been longstanding DOC practice to use prices from a basket of
countries in appropriate circumstances.”10 Plaintiffs’ Memo at 19. Accordingly, they conclude
that in refusing to use the data they submitted and providing no source documentation for its
surrogate prices, Commerce has “failed to follow its own preference and the requirement that it
use the most accurate information available.” Id. at 18.
Finally, Plaintiffs argue that Commerce has failed to provide any specifications as to the
nature of the coking coal upon which it based its surrogate value determination. They note that
Commerce had already previously rejected Plaintiffs’ submission of coal prices, which were from
an Indian Producer of coking coal and set contemporaneously to the period of investigation. This
decision was based on the fact that the specifications of that coking coal were of a “significantly
lower quality of coking coal than that which is actually used by foundry coke producers.”
Preliminary Determination, 66 Fed. Reg. at 13890. Plaintiffs therefore conclude that Commerce
has acted inconsistently in its own findings since “[n]othing on the record allows DOC to know
whether the coking coal import prices that it has used were for coal similar to that used in China
or for a far different product.” On this basis, Plaintiffs argue that the court should remand
Commerce’s final determination on surrogate values because the use of Indian Import Statistics
for the period of April 1998 - May 1999 is unsupported by the record and not sufficiently
10
Plaintiffs cite to the Issues and Decision Memorandum accompanying Manganese
Metal from the People’s Republic of China; Final Results of Antidumping Duty Administrative
Review, 66 Fed. Reg. 15076 (Mar. 15, 2001), where Commerce stated that “where the facts on
record indicate that the Department’s usual practice would not permit the accurate valuation of a
factor input, the Department has chosen surrogates from countries not included among the
Department’s list of potential surrogate countries.” Plaintiff’s Memo at 19.
12
contemporaneous to the period of investigation.
Defendant-Intervenors, in turn, argue that Department’s decision to use Indian Import
Statistics rather than Plaintiffs’ price quote from Coal Week International is supported by
substantial evidence “because the source was from [a] primary surrogate [country], India, that is
publicly available, sufficiently contemporaneous, specific to the input in question, and
sufficiently reliable.” Defendant-Intervenors’ Brief in Opposition to Plaintiffs’ Rule 56.2 Motion
for Judgment Upon the Agency Record (“Defendant-Intervenors’ Brief”) at 9 (quoting Decision
Memo at Comment 1). Accordingly, they say, Commerce “had no need to turn to another
surrogate country to obtain a value for coking coal.” Defendant-Intervenors’ Brief at 10. They
further argue that Commerce properly determined the price quotes from Coal Week International
to be improper since the data is not from a publicly available source and, contrary to the Indian
Import Statistics, is only based on “the average of two spot price quotes from unidentified
companies.” Id. at 10 (quoting Decision Memorandum at Comment 1).
Finally, Defendant-Intervenors argue that the alleged inconsistencies regarding the source
of surrogate values are merely reflective of Commerce’s inadvertent mislabeling of supporting
data. Although Department identified two different dates throughout the analysis memoranda,11
an “[e]xamination of the coking coal value derived from the Indian Import Statistics used to
calculate the final margins for each of the four respondents demonstrates . . . that the Department
used a surrogate value derived from the period of April 2000 - September 2000.” Id. at 10.
Defendant-Intervenors also argue that, contrary to Plaintiffs’ assertions, the April 2000 -
September 2000 statistics were made part of the record in the underlying investigation.
11
April 1998 - May 1999 and April 2000 - September 2000.
13
According to Defendant-Intervenors, they were referenced “on the record throughout the final
analysis memoranda for CITIC, Shanxi Dajin, and Minmetals,” and Commerce “stated in the
Final Determination that it had relied on similar data in other investigations, including Certain
Hot-Rolled Carbon Steel Flat Products from the People’s Republic of China, Inv. No. A-570-
865.” Id. at 11-12; see also Decision Memorandum at Comment 1.
On this basis, Defendant-Intervenors conclude that the court should uphold Department’s
use of surrogate value information on coking coal from the Indian Import Statistics from April
2000 - September 2000, as this data was sufficiently contemporaneous to the period of
investigation and from a publicly available source often utilized in PRC investigations.
Defendant admits to numerous inconsistencies in the administrative record. Nonetheless,
Defendant argues that an examination into the mislabeled surrogate values demonstrates that the
source of the data is for the period of April 2000 through September 2000, rather than April 1998
through May 1999. According to Defendant, “the differences in the identification of the source
data in the memoranda and calculation charts is most likely attributable to clerical error.”
Defendant’s Memo at 15. Defendant argues that “the Court should remand this issue so that
Commerce may reopen the administrative record, clarify clerical errors due to administrative
oversight, make the Indian Import Statistics for the period April 2000 through September 2000 a
matter of record, and allow for commentary.” Id. at 16.
14
b.
The Record Evidence Does Not Provide a Reasonable Basis For Commerce’s Selection of
Surrogate Values
The antidumping law provides the standard by which Commerce is to establish normal
value for merchandise exported from non-market economies. Section 773(c)(1) of the Tariff Act
of 1930 directs Commerce to base normal value on the non-market economy producer’s factors
of production. 19 U.S.C. §1677b(c)(4)(1999). These factors are to be valued, to the extent
possible “in one or more market economy countries that are: (A) at a level of development
comparable to that of the nonmarket economy country, and (B) significant producers of the
comparable merchandise.” 19 U.S.C. §1677b(c)(4).
Commerce must also 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). While the
statute does not define “best available information”, it “grants to Commerce broad discretion to
determine the ‘best available information’ in a reasonable manner on a case-by-case basis.”
Timken Co. v. United States, 2001 CIT 96, 166 F. Supp. 2d 608, 616 (2001).12
12
This discretion, however, is constrained by the underlying objective of the statute; to
obtain the most accurate dumping margins possible. See 19 U.S.C. §1677b(c); see also Writing
Instrument Mfrs. Ass’n. v. United States, 21 CIT 1185, 984 F. Supp. 629, 637 (1997). “This
objective is achieved only when Commerce’s choice of what constitutes the best available
information evidences a rational and reasonable relationship to the factor of production it
represents.” See, e.g., Allied Tube and Conduit Corp. v. United States, 132 F. Supp. 2d 1087,
1095 (CIT 2001); Usinas Siderurgicas De Minas Gerais, S.A. v. United States, __CIT__, Slip op.
98-108, 1998 Cr. Int’l Trade LEXIS 107 (July 24, 1998); AK Steel Corp. v. United States, 21
CIT 1265, 988 F. Supp. 594, 605 (1997).
15
While accuracy is of utmost importance, 19 U.S.C. §1677b(c) fails to indicate the time
periods from which surrogate values are supposed to be taken. This court, however, has
repeatedly recognized that Commerce’s practice is to use surrogate prices from a period
contemporaneous with the period of investigation.13 Accordingly, while the standard of review
precludes the court from determining whether Department’s choice of surrogate values was the
best available on an absolute scale, the court may determine the reasonableness of Commerce’s
selection of surrogate prices.
The surrogate value data provided within the administrative record reveals patent
inconsistencies between the various documents listing surrogate prices.14 These discrepancies are
evident in Commerce’s listings of time periods for valuating coal input, its sporadic use of value
inflators to reduce inequalities between comparable markets, and its final listings of surrogate
prices. The parties’ discussion of their source was purely speculative.
13
See Shandong Huarong Gen. Corp. v. United States, 159 F. Supp. 2d 714, 728 (CIT
2001); Coalition for the Pres. of the Am. Brakedrum and Rotor Aftermarket Mfrs. v. United
States, 44 F. Supp. 2d 229, 259 (CIT 1999) (“Commerce’s practice is to use publicly available
values which are ‘representative of a range of prices within the [period of
investigation]’”)(quoting Union Camp Corp. v. United States, 20 CIT 931, 941 F. Supp. 108, 116
(1996). “Under normal conditions and absent evidence to the contrary, the Court presumes that
Commerce acts or seeks to act in a regular manner consistent with its established practices.”
Shandong Huarong Gen. Corp., 159 F. Supp. 2d at 728; see also Hylsa, S.A. v. United States, 22
CIT 44 (1998)(“The case for judicial deference is less compelling with respect to agency
positions that are inconsistent with previously held views.”)(quoting Pauley v. Bethenergy Mine,
Inc., 501 U.S. 600, 610, 115 L. Ed. 2d 604, 111 S. Ct. 2524 (1991)); United States v. Mead
Corporation, 533 U.S. 218, 121 S. Ct. 2164, 150 L. Ed. 2d 292 (2001) (“the fair measure of
deference to an agency administering its own statute has been understood to vary with
circumstances, and courts have looked to the degree of the agency’s care, its consistency,
formality, and relative expertness, and to the persuasiveness of the agency’s position.”).
14
See e.g. A.R. (Non-Public) Doc. No. 110; A.R. (Non-Public) Doc. No. 111; A.R. (Non-
Public) Doc. No. 113; A.R. (Non-Public) Doc. No. 112.
16
The parties seem to be in agreement that some form of clerical error occurred. While
Plaintiffs and Defendant agree to a remand, Defendant-Intervenors recommend that the court
speculate about what Commerce ultimately intended. That is beyond this court’s perview and
remand is necessary on the issue of surrogate values for coking coal produced in the PRC.
Commerce must resolve its internal inconsistencies on this issue and select surrogate values that
are sufficiently contemporaneous to the period of investigation and consistent with the objectives
of 19 U.S.C. §1677b(c).
2.
The Department’s Finding that Foreign Producers Reported Coal Usage Amounts
Subsequent to Washing is Unsupported by the Evidence
a.
Only Defendant-Intervenors Now Contends That Coal Inputs Were For Washed Coal
Plaintiffs challenge Commerce’s determination that the foreign producers reported coal
inputs at a stage subsequent to coal washing. In the Issues and Decisions Memorandum,
Commerce stated that “[i]t is evident from respondents’ questionnaire responses, and we further
confirmed at verification, that respondents reported coking coal input quantities at the stage
subsequent to coal washing.” Decision Memorandum at Comment 2. Plaintiffs contend that
these producers washed the coal themselves and reported all coal inputs prior to the washing
stage. According to Plaintiffs, the washing process creates coal mud, which is a re-cycled input
that is sometimes used in the production of coke. Plaintiffs argue that Commerce improperly
17
determined that this re-cycled product constitutes coal inputs at a stage subsequent to the
washing since there is no evidence on the record for this proposition. On this basis, Plaintiffs
conclude that the court should remand the Final Determination with instructions for Commerce
to make an adjustment for the difference between the washed coal used by the producers and the
unwashed surrogate coal prices.
Defendant-Intervenors, in turn, argue that Department’s finding on coal usage amounts is
supported by substantial evidence. They claim that Plaintiff’s arguments “regarding coal mud
by-product does not undermine the Department’s decision” since other evidence on record
supports the Department’s conclusion. Defendant-Intervenors’ Brief at 13. Defendant-
Intervenors point to the questionnaires submitted by Plaintiffs and argue that because coal inputs
are “based on the number of beehives that are filled with coal,” and “the coal in the beehives has
already undergone washing,” then “the coal input that the producers reported must therefore be
washed coal.” Id. at 15.
In addition, Defendant-Intervenors maintain that a comparison “of the usage amount
reported by a domestic producer of the subject merchandise in the petition to the Chinese
producers’ usage amounts clearly demonstrates that the Chinese producers reported coal input
amounts of washed coal.” Id. According to Defendant-Intervenors, the coal washing process
“results in losses as high as 40 to 50 percent as impurities in the coal are washed away.” Id. at
14. As domestic producers use washed coal and both domestic and Chinese producers reportedly
use similar amounts of coal per net ton of coke produced, Defendant-Intervenors argue that “[t]he
similarity of these input amounts demonstrates that the Chinese producers reported the coal usage
amount subsequent to washing.” Id. at 15-16. On this basis, Defendant-Intervenors conclude
18
that there is substantial evidence on the record for the court to sustain Department’s
determination on coal usage amounts.
Defendant itself maintains that “[u]pon further review of the record, Commerce has
determined that it cannot support its finding” on coal usage amounts. Defendant’s Memo at 17.
Defendant consequently argues that “a remand is appropriate to allow Commerce to determine
whether an adjustment is appropriate for Respondents’ use of unwashed coal.” Id.
b.
There Is No Cognizable Evidence Of Coal Inputs At Stages Subsequent To Coal Washing
As previously discussed, Commerce must base normal value on the non-market economy
producer’s factors of production. 19 U.S.C. §1677b(c). It values these factors of production “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). Purportedly applying that standard, Commerce determined that there was no need
to adjust the coal factors to account for washing because “[i]t is evident from respondents’
questionnaire responses, and we further confirmed at verification, that respondents reported
coking coal input quantities at the stage subsequent to coal washing.” Decision Memorandum at
Comment 2. The court, however, finds no discernable record evidence of coal inputs at stages
subsequent to the washing.15 The questionnaire responses that producers submitted during the
15
The court examined, inter alia, the producers’ Section D Questionnaire Responses. See
Section D Questionnaire Response of Wenshui Beizhang (Jan. 16, 2001) at D-2, A.R. (Non-
public) Doc. No. 32; Section D Questionnaire Response of Wencheng International, PLC (Jan.
19
investigation demonstrate that the producers washed the coal themselves and recycled the by-
product of this process as additional coal input.16 This coal input is therefore neither for washed
or unwashed coal, but rather for recycled inputs directly resulting from washing already reported
unwashed coal.
Defendant-Intervenors also argue that a comparison between the practices of domestic
and Chinese producers would demonstrate that the latter reported coal input amounts for washed
coal. That argument was not the basis for Commerce’s decision not to adjust coal input
quantities. Commerce refused to adjust the inputs because it was “evident from respondents’
questionnaire responses . . . that respondents reported coking coal input quantities at the stage
subsequent to coal washing.” Decision Memorandum at Comment 2. Although Commerce is
afforded considerable deference, this court will not accept Defendant-Intervenors’ post hoc
16, 2001) at D-3, A.R. (Non-public) Doc. No. 31; Section D Questionnaire Response of Luliang
Fu Li (Jan. 19, 2001) at D-2, A.R. (Non-public) Doc. No. 39; Section D Questionnaire Response
of Shanxi Yaxin (Jan. 19, 2001) at D-3, A.R. (Non-public) Doc. No. 38; Section D Questionnaire
Response of Shanxi Zhongyang Shuangfe (Jan. 19, 2001) at D-2, A.R. (Non-public) Doc. No. 36;
Section D Questionnaire Response of Shanxi Ju Fu (Jan. 19, 2001) at D-2, A.R. (Non-public)
Doc. No. 35; Section D Questionnaire Response of Shanxi Panlong (Jan. 19, 2001) at D-2, A.R.
(Non-public) Doc. No. 28; Section D Questionnaire Response of Shanxi Lishi Liangyu (Jan. 16,
2001) at D-2, A.R. (Non-public) Doc. No. 29; Section D Questionnaire Response of Jiaocheng
Youse (Jan. 16, 2001) at D-2, A.R. (Non-public) Doc. No. 33; Section D Questionnaire Response
of Qingxu Huaxin (Jan. 16, 2001) at D-2-3, A.R. (Non-public) Doc. No. 34; Section D
Questionnaire Response of Taiyuan Genyang (Jan. 16, 2001) at D-2, A.R. (Non-public) Doc. No.
30.
16
At oral argument, counsel for Defendant-Intervenors further argued that coal inputs
were for washed coal because such inputs were based on the number of filled beehives, and such
beehives were only filled with washed coal. As counsel for Plaintiffs correctly pointed out,
however, the calculation of coal inputs based on the number of beehives that are filled constitutes
the normal methodology of coal input calculation, which was not relied upon in the present
investigation. See Defendant-Intervenors’ Appendix to their Brief in Opposition to Plaintiffs’
Rule 56.2 Motion for Judgment Upon the Agency Record, App. 1 at D-4.
20
rationale as a basis for upholding a final determination. 19 U.S.C. §1516a(b)(1)(B)(i)(1999).
Accordingly, since respondents’ questionnaire responses do not support Commerce’s final
determination on coal inputs, a remand is necessary so that Commerce may either make an
adjustment reflecting respondents’ use of unwashed coal, or provide a reasonable explanation
and substantial evidence for its finding on washed coal inputs.
3.
The Department’s Use of Adverse Inferences Based on the Non-cooperation of Producers is
Not Supported by Substantial Evidence
a.
Defendant Has Applied Adverse Inferences Despite A Clearly Good Faith Effort on The
Part of Plaintiff
Plaintiffs argue that Commerce improperly applied adverse inferences for their failure to
obtain documentation on the coke producers’ shut-downs. According to Plaintiffs, “DOC cannot
take adverse inferences where it has asked for information, been told that it does not exist, and
there is nothing on the record to contradict that absence of data.” Plaintiff’s Memo at 23.
Plaintiffs maintain there was “no list of closed companies . . . at the time of questionnaire and
supplemental responses.” Plaintiffs’ Reply Brief at 7. While they “made every effort possible to
provide information to DOC,” they could not “force these independent companies to cooperate
with [Commerce]” as “the producers were independent and unrelated to the exporters.” Id.
21
Plaintiffs further point out that during verification, Chinese government officials offered to
provide Commerce with a list of companies that had shut down due to environmentally-
objectionable equipment,17 but that the latter rejected this information as “new information.” Id.
at 8. Plaintiffs claim Commerce improperly rejected this information because one of the
purposes of verification is to “corroborate[], support[], or clarif[y] information already on the
record.” Id. at 9.
On this basis, Plaintiffs argue that Commerce’s imposition of adverse facts available was
unwarranted and that it should instead resort to non-adverse facts available for determining the
normal values of Chinese producers who had informed Commerce of their shutdowns.
Defendant, in turn, argues that Commerce’s decision to apply adverse facts available was
supported by substantial evidence and in accordance with law. According to Defendant,
Commerce needed “usage rate information from the actual PRC producers” in order to
“accurately calculate normal value based upon the factors of production methdology.”
Defendant’s Memo at 20. To achieve this objective, Commerce requested that Plaintiffs “submit
a Section D questionnaire response from each of their suppliers.” Id. While some of the
suppliers “expressed a clear lack of interest in participating in this investigation,” others had
simply been shut down due to environmentally related hazards. Id. at 21.
Defendant claims that adverse inferences were warranted in the case of non-cooperating
suppliers because “Commerce reasonably found that Sinochem, CITIC, and Shanxi did not act to
the best of their ability in urging their suppliers to comply with Commerce’s request for
17
According to Plaintiffs, this list “had been compiled on March 8, 2001, only a few
weeks before verification.” Plaintiff’s Reply Brief at 8.
22
information.” Id. at 21. For the other non-responsive suppliers, Defendant similarly argues that
Plaintiffs did not act to the best of their ability in submitting information that would either list or
identify the specific companies that had been shut down. According to Defendants, Plaintiffs
were never limited to compiling a list of shut down plants, but rather could submit any
documentation that would substantiate the closures. Consequently, Defendant argues that
Plaintiffs had no basis for claiming that a list could not be compiled within time constraints, as
any other evidence would have sufficed. On this basis, Defendant concludes that Commerce’s
determination on adverse facts available was supported by substantial evidence and in
accordance with law.
b.
Plaintiffs Acted to the Best of Their Ability In Providing Commerce With Information on
the Non-responding Producers’ Shutdowns
In arriving at its Final Determination, Commerce is required to use facts otherwise
available if “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, subject to subsections (c)(1) and
(e) of section 1677m of this title,
(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 title . . .
19 USC § 1677e(a)(1999).
23
The use of facts available, however, is limited by 19 U.S.C. §1677m(d), which was
“designed to prevent the unrestrained use of facts available as to a firm which makes its best
effort to cooperate with [Commerce].” Borden, Inc. v. United States, 4 F. Supp. 2d 1221, 1245
(CIT 1998). Section 1677m(d) provides that:
If [Commerce] . . . determines that a response to a request for information under this
subtitle does not comply with the request, [Commerce] . . . shall promptly inform the
person submitting the response of the nature of the deficiency and shall, to the extent
practicable, provide that person with an opportunity to remedy or explain the deficiency
in light of the time limits established for the completion of the investigations or reviews
under this title. If that person submits further information in response to such deficiency
and either -
(1) [Commerce] finds that such response is not satisfactory, or
(2) such response is not submitted within the applicable time limits,
then [Commerce] . . . may, subject to subsection (e) of this section, disregard all or part of
the original and subsequent responses.
19 USC § 1677m(d)(1999).
Subsection (e) of the same section further provides that:
In reaching a determination . . . [Commerce] . . . shall not decline to consider information
that is submitted by an interested party and is necessary to the determination but does not
meet all the applicable requirements established by [Commerce] . . . if -
(1) the information is submitted by the deadline established for its submission,
(2) the information can be verified,
(3) the information is not so incomplete that it cannot serve as a reliable basis for
reaching the applicable determination,
(4) the interested party has demonstrated that it acted to the best of its ability in
providing the information and meeting the requirements established by
[Commerce] . . . with respect to the information, and
(5) the information can be used without undue difficulties.
19 USC § 1677m(e) (1999).
24
19 USC § 1677m(d) requires that Commerce, prior to resorting to facts available, give a
party an opportunity to remedy or explain deficiencies in its submission. Subject to the
conditions in Subsection (e), the remedy or explanation provided by the party may be disregarded
in favor of facts available if the information is found to be “not satisfactory” or untimely. See
Borden, 4 F.Supp.2d at 1245 (“Subsection (e) may require use of the respondent’s information
notwithstanding that a remedy or explanation is unsatisfactory.”).
If Commerce makes an additional finding that “an interested party has failed to cooperate
by not acting to the best of its ability to comply with a request for information,” Commerce may
resort to adverse facts available under 19 USC § 1677e(b)(1999). However, a failure to respond
is only a basis for facts available, as Commerce must make the additional finding that the party
“failed to cooperate by not acting to the best of its ability” in order to draw adverse inferences.
19 USC § 1677e(b); see also Mannesmannrohren-Werke AG v. United States, 23 CIT 826, 77 F.
Supp. 2d 1302, 1315 (1999). A party can therefore “fail to respond because it was not able to
obtain the requested information, did not properly understand the question asked, or simply
overlooked a particular request,” without having adverse inferences drawn against it.
Mannesmannrohren-Werke AG, 77 F. Supp. 2d at 1316.
Moreover, Commerce may not simply provide the conclusory statement that a party “has
failed to cooperate by not acting to the best of its ability,” or repeat its findings with regards to
facts available, in order to draw adverse inferences against it. Mannesmannrohren-Werke AG, 77
F. Supp. 2d at 1313; see also Borden, 4 F. Supp. 2d at 1246 (“Here, the Department did not make
the required additional finding that De Cecco had failed to act to the best of its ability. In
essence, it simply repeated its 19 USC § 1677e(a)(2)(B) finding, using slightly different words. . .
25
”) (citation omitted); Ferro Union, Inc. v. United States, 23 CIT 178, 44 F. Supp. 2d 1310, 1329
(CIT 1999) (“Once Commerce has determined under 19 USC § 1677e(a) that it may resort to
facts available, it must make additional findings prior to applying 19 USC § 1677e(b) and
drawing an adverse inference.”). 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 is of significance
to the progress of its investigation.” Mannesmannrohren-Werke AG, 77 F. Supp. 2d at 1313,
1314; see also Ferro Union, 44 F. Supp. 2d at 1332 (“If overall the failure to identify these
companies was of no significance to the progress of the investigation, then Commerce cannot
apply total adverse facts on the basis of the non-identification of these companies.”).
Applying this standard here, the Court finds that Plaintiffs acted to the best of their ability
in providing Commerce with information on the non-responding producers’ shutdowns. During
the investigation, Plaintiffs submitted notices from the Qingxu County government and from the
Shanxi Province demonstrating that the local governments had ordered the shutdown of factories
not in compliance with the environmental emission standards.18 Plaintiffs also notified
Commerce that they were unable and could not force the producers to provide information
substantiating their shutdowns because the producers were unrelated and independent entities.
Although Plaintiffs never submitted evidence specifically identifying the producers that
were forced to shut down, they did submit information clearly demonstrating that massive
shutdowns had been ordered by the PRC government. These producers were completely
18
See “Notice of the People’s Government of Qing-Xu County Regarding June 5 shut-
Down Action to the enterprise and Equipment which are Unable to Finish Harness Task within
the Limited Time;” Prop. Doc. No. 55; “Notice About the Close Down of the Enterprise which
do not Finish the Regulation within the Time Limitation,” Prop. Doc. No. 56.
26
independent from Plaintiffs and neither Defendant nor Defendant-Intervenors point to evidence
in the record that would demonstrate that Plaintiffs actually were in a position to obtain such
evidence. As Plaintiffs correctly state, “[t]here . . . is no factual challenge to the record evidence
that the producers were independent and unrelated to the exporters and that the exporters in any
way could force these independent companies to cooperate with DOC.” Plaintiff’s Reply Brief at
7.
While Commerce does state in the Final Determination that “there is no evidence on the
record to determine whether the specific suppliers at issue were among those shut down by the
government,” Commerce fails to articulate any reason as to why it concluded Plaintiffs have
failed to act to the best of their ability. Decision Memorandum at Comment 9. In other words,
Commerce did not explain the basis for its conclusion that Plaintiffs’ best abilities included
obtaining the necessary information from the producers. To conclude that Plaintiffs somehow
could have obtained this information amounts to pure speculation. As Commerce provides no
reasoning, this court finds Commerce’s decision to apply adverse inferences against Plaintiffs
unsupported by the evidence.
In regard to Plaintiff’s list submission, Commerce determined it constituted “new
information” which was untimely submitted. Untimeliness alone, however, will not necessarily
bar the admission of new information during verification. Commerce has often accepted new
information when “(1) the need for that information was not evident previously, (2) the
information makes minor corrections to information already on the record, or (3) the information
corroborates, supports, or clarifies information already on the record.” See Notice of Final
Determination of Sales at Less Than Fair Value: Structural Steel Beams From Luxembourg, 67
27
Fed. Reg. 35488, at Comment 1 (May 20, 2002); Notice of Final Determination of Sales at Less
Than Fair Value: Structural Steel Beams from Germany, 67 Fed. Reg. 35497, at Comment 5
(May 20, 2002); Notice of Final Determination of Sales at Less Than Fair Value: Certain Hot-
Rolled Carbon Steel Flat Products From India, 66 Fed. Reg. 50406, at Comment 4 (Oct. 3, 2001).
In fact, Commerce specifically told one of the respondents in the case that new information
corroborating, supporting or clarifying the record would be accepted during verification. The list
offered by Plaintiffs would fulfill that precise purpose for statements on the record regarding
plant shutdowns.19 Consequently, this court finds Commerce’s decision to reject Plaintiffs’ list
submission unsupported by the evidence.
Accordingly, a remand is necessary so that Commerce may include Plaintiffs’ list
submission in the record and use non-adverse facts available for determining the normal values
of non-responding producers.
19
In any case the Court questions whether, based on the record here, Commerce could
conclude the information was new, as opposed to factual verification of information already
submitted, that is, that the plants had been shut down.
28
4.
The Department’s Refusal to Use Surrogate Values From Related Coal Mines is
Unsupported by the Evidence
a.
Defendant-Intervenors and Plaintiffs Dispute Commerce’s Use of Surrogate Values from
Unrelated Companies
Plaintiffs argue that Commerce improperly failed to include values from related coal
mines in its surrogate value calculations. According to Plaintiffs, Commerce’s determination not
to include these values because “[n]one of the mines are members of any of the respondents’
group,” is unsupported by the evidence. Plaintiffs’ Memo at 25. They argue that since the
companies are related, their coal is self-produced and their costs should be calculated based on
their actual inputs. To support this contention, Plaintiffs cite to 19 U.S.C. §1677(33)(E)(1999)
which provides that an affiliated party includes “any person directly or indirectly owning,
controlling or holding with power to vote, 5 percent or more of the outstanding voting stock or
shares of any organization and such organization.” As “DOC verified the related nature of the
sampled coal mine and found that the producer owned [10] percent of the shares of the mine,”
Plaintiffs maintain that Commerce should have used actual inputs rather than surrogate values
from a comparable market economy. Plaintiffs’ Memo at 25.
On this basis, Plaintiffs conclude that a remand is necessary so that Commerce may use
the factors of production information from related coal mines rather than surrogate values from
unrelated companies.
29
Defendant-Intervenors, in turn, argue that Commerce’s use of the same methodology to
determine the surrogate value for coal inputs purchased from both related and unrelated coal
mines is supported by substantial evidence. They argue that, “[i]n determining the normal value
of subject merchandise in a nonmarket economy, the Department uses factors of production
which are based on the best available information regarding the values of those factors in a
market economy surrogate country.” Defendant-Intervenors’ Brief at 20; 19 U.S.C.
§1677b(c)(1). According to Defendant-Intervenors, “the valuation of factors in a surrogate
country should not be based upon circumstances peculiar to the state-controlled economy.”
Defendant-Intervenors’ Brief at 20.
In addressing Plaintiffs’ arguments, Defendant-Intervenors argue that Plaintiffs failed to
“provide a sufficient factual basis to support valuing the coal input any differently from the coal
purchased from unaffiliated mines.” Id. at 21. Defendant-Intervenors maintain that a 10 percent
ownership interest or family interest in the coal mines is not sufficient to demonstrate that the
coal is self-produced. Id. In addition, Defendant-Intervenors claim that Plaintiffs have also
“failed to provide any legal support in their brief providing a basis for having the Department
calculate separately the actual inputs for the production of coal from the related coal mines in a
nonmarket economy.” Id. Accordingly, they maintain that there is no Department practice, nor
any statutory authority, supporting Plaintiffs’ contentions. Id. at 21-23. On this basis,
Defendant-Intervenors conclude that the court “should affirm the Department’s use of Indian
Import Statistics for the surrogate value for coal used in producing the subject merchandise.” Id.
at 23.
Defendant candidly states that, upon review of the record, Commerce can no longer
30
support its finding and consequently, “a remand is appropriate to allow Commerce to fully
consider the issue of whether applying a factors of production methodology to the coal produced
by the purportedly related coal mines is appropriate.” Defendant’s Memo at 17-18.
b.
Commerce Failed to Provide an Adequate Explanation for its Decision to Use Surrogate
Values from Unrelated Companies
As previously discussed, section 773(c)(1) of the Tariff Act of 1930 directs Commerce to
base normal value on the non-market economy producer’s factors of production. 19 U.S.C.
§1677b(c)(4). Commerce must base these surrogate values on the best available information and
they must reflect the cost of producing goods “in one or more market economy countries that
are: (A) at a level of development comparable to that of the nonmarket economy country, and (B)
significant producers of the comparable merchandise.” 19 U.S.C. §1677b(c)(4).
While the statute specifically provides for factors of production, Commerce is not
restricted to the exclusive use of surrogate values in comparable market economies. As this court
previously noted, “nothing in the [statute] or its legislative history mandates that Commerce must
derive foreign market values exclusively from either actual prices paid by the nonmarket
economy, or from surrogate-based values.” Lasko Metal Products, Inc. v. United States, 16 CIT
1079, 1082 (1992) (quoting Tianjin Mach. Import & Export Corp. v. United States, 16 CIT 931,
940 (1992)). Accordingly, “Commerce may use evidence of prices paid by the nonmarket
economy country to market-economy suppliers in combination with surrogate country
31
information when valuing factors of production.” Id. at 1081 (quoting Tianjin Mach. Import &
Export Corp., 16 CIT at 941). The agency has often resorted to this mix and match methodology
in order to achieve greater accuracy in the calculation of dumping margins.20 In addition,
Commerce has similarly relied on self-produced inputs rather than surrogate values where it
could value the materials, energy, and labor employed to manufacture the input. See
Silicomanganese From the People’s Republic of China, 65 Fed. Reg. 31514 (May 18, 2000);
Certain Cut to Length Carbon Steel Plates from PRC, 62 Fed. Reg. 61964 (Nov. 20, 1997).
These methodologies are all reflective of the statute’s overriding requirement for accuracy.
In reaching its Final Determination on the issue of related coal mines, Commerce
provided the following reasoning:
Based on the record facts, we do not consider that coal is a self-
produced input for any of the respondents, Shanxi Dajin International
(Group) Company, Minmetals Townlord Technology Co., Ltd,, and
Sinochem International Company, Ltd.. None of the mines are members of
any of the respondents’ group. Therefore, we did not value coal using the
factors of production for coal from the coal mines.
Decision Memorandum at Comment 3.
Commerce provides no explanation of what constitutes “respondents’ group,” nor does it
explain why membership in such a group signifies that Plaintiffs’ merchandise is self-produced.21
20
See Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the
Republic of Hungary, 56 Fed. Reg. 41,819, 41,820 (Dep’t Comm. 1991) (stating that “[i]t is the
Department’s practice to value factor-of-production inputs at actual acquisition prices if it can be
established that those inputs are purchased from a market economy country in freely convertible
currency”); see also Sparklers from the People’s Republic of China, 56 Fed. Reg. 20,588, 20,588
(May 6, 1991).
21
While Plaintiffs argue that pursuant to 19 U.S.C. §1677(33)(E) the producers and the
coal mines are related, Plaintiffs fail to provide any explanation as to why close affiliation is
32
Accordingly, a remand is necessary so that Commerce may properly determine whether applying
a factors of production methodology to the coal produced by the related coal mines is
appropriate.
5.
The Department’s Use of Adverse Inferences Against Sinochem is Unsupported by
Substantial Evidence and Not in Accordance With Law
a.
The Parties are in Dispute as to the Correct Interpretation of the Scope Language
Plaintiffs argue that Commerce incorrectly interpreted the scope of the investigation, and
accordingly that the agency’s resort to adverse facts available is unsupported by the evidence and
contrary to law. The petition limits the scope of the investigation to “coke larger than 100 mm (4
inches) in maximum diameter and at least 50 percent of which is retained on a 100 mm (4-inch)
sieve, of a kind used in foundries.”22 Plaintiffs’ Memo at 11. Plaintiffs maintain that the correct
interpretation is that a shipment is subject to the order only if 50% or more of the sale contains
coke that is larger than 100 mm in diameter. As the Sinochem shipment under review had only
11.50 percent of coke over 100mm, Plaintiffs argue that it was not subject to the order.
proof that the merchandise is self-produced. Similarly, while Commerce relies on membership to
a “group” as the basis for its decision, it fails to explain whether this membership is equivalent to
an affiliation, and whether it would signify that the merchandise is self-produced.
22
This language is consistently used throughout the administrative proceedings. See, e.g.,
Petition, ITC Preliminary Determination, ITC Final Determination, Preliminary Determination,
Final Determination, Decision Memorandum.
33
Plaintiffs further claim that “adverse inferences against Sinochem [are] unjustified
because the product that Sinochem did not report was not subject merchandise.” Id. at 29.
Plaintiffs point out that in its Preliminary Determination, the ITC determined that industrial coke
fell outside of the scope of this case due to its smaller size. Accordingly, Plaintiffs conclude that
Sinochem’s undersized coke is not within the order since it properly constitutes industrial coke
rather than foundry coke.23 On this basis, Plaintiffs argue that this court should remand the Final
Determination so that Commerce may recalculate the dumping margins of Sinochem after
removing adverse inferences that were drawn against that company.
Defendant, in turn, argues that the correct interpretation of the scope of the investigation
is whether 50% or more of the portion of the shipment sold as being over 100mm is retained on a
100 mm sieve. According to Defendants, “the Harmonized Tariff Schedule of the United States
(“HTSUS”) lends guidance” in interpreting the language of this investigation. Defendant’s
Memo at 25. Under the 2000 version of the HTSUS subheading 2704.00.00.10, foundry coke is
defined as “larger than 100 mm (4 inches) in maximum diameter and at least 50 percent of which
is retained on a 100 mm (4-inch) sieve after drop shatter testing pursuant to ASTM D 3038.” Id.
at 25. Defendants argue that “so long as fifty percent of the coke, sold over 100 mm, passes the
drop shatter testing (i.e. is retained on a 100mm sieve), it is within the scope of the order.” Id. at
25-26. Accordingly, they conclude Commerce “properly determined that the portion of
23
Plaintiffs similarly argue that the scope of the investigation only includes shipments
where the majority of the merchandise includes coke over 100mm in size, i.e. foundry coke.
Although counsel for Plaintiffs conceded at oral argument that Sinochem’s 75-125 mm shipment
was labeled as “foundry coke”, counsel argued that Plaintiffs were relying on the ITC’s initial
definition of industrial coke, i.e. coke under 100mm in size, for excluding the shipment from the
scope of the investigation.
34
[Sinochem’s] sale that was made up of coke over 100 mm was within the scope of the
antidumping investigation.” Id. at 26.
Defendant points out that “[a]lthough Commerce did apply adverse facts available to this
sale in the Preliminary Determination, . . . for the Final Determination, Commerce collected
information on this sale at verification, and actually performed a ‘margin analysis’ on the portion
of the sale that was sold as being over 100mm.” Id. at 24; Decision Memorandum at Comment
12. Consequently, Defendant argues that the issue is not whether Commerce properly resorted to
adverse facts available but whether Commerce correctly interpreted the scope of the investigation
and order. On this basis, they conclude that Commerce’s determination that the portion of
Sinochem’s sale over 100 mm was within the scope of the investigation is supported by
substantial evidence and in accordance with law.
Finally, in addressing Plaintiffs’ argument that Sinochem’s merchandise is industrial coke
rather than foundry coke, Defendant-Intervenors add that “there is no basis for Sinochem to
assume that its labeling of subject merchandise as ‘industrial coke’ necessarily avoids application
of the order: the ITC determination excluded ‘industrial coke’ from its like product finding
because it defined ‘industrial coke’ as coke less than 100 mm in maximum diameter.”
Defendant-Intervenors’ Brief at 28. Defendant-Intervenors therefore conclude that “[t]he ITC’s
like product determination did not in any way limit the applicability of the order to merchandise
within the scope, i.e., coke of 100 mm or greater in maximum outside diameter and fifty percent
of which is retained on a 100-mm sieve.” Id. at 28.
35
b.
Commerce’s Interpretation of the Scope Language Conflicts With its Application
The petition filed by the domestic industry limits the scope of the investigation to “coke
larger than 100 mm (4 inches) in maximum diameter and at least 50 percent of which is retained
on a 100-mm (4-inch) sieve, of a kind used in foundries.” A.R. (Public) Doc. No. 1, Petition at 3.
This language is consistently used throughout the proceedings and forms the basis for
Commerce’s Final Determination. See Final Determination, 66 Fed. Reg. at 39489. It is also
further defined by reference to several headings within the HTSUS, namely subheading
2704.00.00.10 (as of Jan. 1, 2000) and subheading 2704.00.00.11 (as of July 1, 2001). Id. While
these subheadings are cited as a reference, the Final Determination specifically provides that
“[a]lthough the HTSUS subheadings are provided for convenience and Customs purposes, our
written description of the scope of this investigation is dispositive.”24 Id.
In its Decision Memorandum, Commerce determined that Sinochem had misread the
scope language and that its shipment of foundry coke straddling the scope size definition
included merchandise that fell squarely within the proceedings. Commerce also provided an
interpretation of the scope language:
24
Defendant argues that the language of HTSUS 2704.00.00.10 supports its interpretation
of the scope language. While the scope language is followed by a reference to several HTSUS
headings, this reference does not indicate an intent to define the scope of covered merchandise
solely based on the language of HTSUS 2704.00.00.10. See Wirth Limited v. United States, 22
CIT 285, 294 (1998). Petitioners were required by regulation to include these headings. See 19
C.F.R. § 353.12(b)(4)(1996).
36
[T]he first condition of the scope is that the scope applies to coke
“larger than 100mm,” the second being “and at least fifty percent
of which is retained on a 100-mm sieve.” By including the
modifier “of which” immediately after the fifty percent threshold,
and with both statements following the initial condition of 100mm,
the most reasonable understanding is that the test is to determine
whether fifty percent or more of the coke sold as being larger than
100mm is retained on the 100mm sieve. The result of this
conclusion is that the respondents’ application of the fifty percent
threshold to the entire volume of the portion of the sale straddling
the scope is inapposite; the test should only be applied to coke
above 100mm.
Decision Memorandum at Comment 12. Based on this analysis, Commerce concluded that each
sale “is best conceived as being in effect two sales, one for merchandise within the scope and one
outside.” Id. Accordingly, Commerce performed a “margin analysis” on the portion of
Sinochem’s straddling shipment that exceeded the 100mm scope limit. Id.This result, however, is wholly inconsistent with Commerce’s treatment of Sinochem’s
other shipments, as well as the shipments of other respondents involved in the proceedings.
Commerce’s articulation of the scope language in the Final Determination essentially leads to the
conclusion that where a shipment contains a percentage of merchandise below 100mm, the
shipment in its entirety could never be considered as falling within the scope. Similarly, where a
shipment is labeled as containing only merchandise over 100mm, but testing reveals that less
than 100% of the merchandise is over 100mm, Commerce would also be unable to include the
entire shipment as within scope. As plaintiff correctly argues, however, Commerce repeatedly
resorted to a “bright line test” whereby an entire shipment is considered within scope if more
than 50% of the sale is above 100mm, and outside of scope if less than 50% is below 100mm.
37
Plaintiff’s Reply Brief at 10. For instance, Commerce included as within scope one hundred
percent of Sinochem’s 100-300 mm shipment containing 88.13 percent of merchandise over 100
mm.25 Under the standards articulated in the Decision Memorandum, Commerce could only
include up to 88.13 percent of that shipment as within scope since the test would allegedly only
be applicable to merchandise over 100 mm. Under a “bright line” interpretation, however,
Commerce could properly include one hundred percent of the merchandise because over fifty
percent of it was over 100mm. Its decision to perform a “margin analysis” on the portion of
Sinochem’s straddling shipment containing 11.50 percent of coke over 100mm is consequently in
direct contradiction with its prior application of the scope of the investigation, i.e. the “bright line
test.”26
Commerce provides no reasoning for its contradictory interpretation of the scope
language, so a remand is necessary for it to either provide such a reasoning or resort to its
previous interpretation of the language consistent with its prior practice.
25
Commerce similarly included the entire shipment of Shanxi Grand Coalchem, another
respondent, as within scope where 9.90 percent of that sale was below 100mm. Plaintiff’s Reply
Brief at 11. With CITIC, Commerce also included one hundred percent of the merchandise
where only 90.04 percent of the merchandise was above 100mm. Id.26
Commerce’s interpretation of the scope language also presents a tautology. According
to Commerce, only merchandise over 100mm should be subjected to the 100mm sieve. By
definition, however, merchandise over 100mm will always be retained on a 100mm sieve. The
sieve test is therefore meaningless unless the sieve can fulfill its primary purpose, i.e. to sift.
38
V.
Conclusion
For the foregoing reasons, the Court remands this case to Commerce for consideration of
the issues discussed herein.
________________________
Evan J. Wallach, Judge
Dated: March 4, 2003
New York, New York
39