Yama Ribbons & Bows Co., Ltd. v. United States , 865 F. Supp. 2d 1294 ( 2012 )

SLIP OP 12 - 117
UNITED STATES COURT OF INTERNATIONAL TRADE
YAMA RIBBONS AND BOWS CO., LTD,
Plaintiff,
v.
Before: Donald C. Pogue,
UNITED STATES, Chief Judge
Defendant, Court No. 10-00291
and
BERWICK OFFRAY LLC,
Defendant-Intervenor.
OPINION
[Commerce’s final determination is affirmed.]
Dated: September 14, 2012
John J. Kenkel, Gregory S. Menegaz, and J. Kevin Horgan,
DeKieffer & Horgan, of Washington, DC, for the Plaintiffs,
Renee A. Gerber, Trial Attorney, Commercial Litigation
Branch, Civil Division, United States Department of Justice, of
Washington, DC, for the Defendant. With her on the briefs were
Stuart F. Delery, Acting Assistant Attorney General; Jeanne E.
Davidson, Director; and Reginald T. Blades, Jr., Assistant
Director. Of counsel on the briefs were, Daniel J. Calhoun,
Office of Chief Counsel for Import Administration, United States
Department of Commerce, and
Gregory C. Dorris, Pepper Hamilton LLP, of Washington, DC,
for the Defendant-Intervenor.
Pogue, Chief Judge: In this action, Plaintiff, Yama
Ribbons and Bows Co., Ltd. (“Yama”), a producer of ribbons,
Court No. 10-00291 Page 2
challenges the final countervailing duty (“CVD”) rate determined
by the United States Department of Commerce (“Commerce” or “the
Department”) in an investigation of certain narrow woven ribbons
with woven selvedge1 from the People’s Republic of China
(“China”). Specifically, Yama asserts that Commerce erred in
calculating a CVD subsidy rate for Yama’s products by incorrectly
using the value of Yama’s unconsolidated Chinese sales, rather
than Yama’s consolidated Hong Kong sales, as the denominator in
the CVD subsidy calculation. Yama claims that because the
unconsolidated sales were not the first sales at arm’s length,
they are not the actual “sales value” required by Commerce’s
regulations for determining a subsidy rate.
The court has jurisdiction pursuant to 28 U.S.C.
§ 1581(c) (2006). For the reasons explained below, Commerce’s
decision to use Yama’s unconsolidated Chinese sales to value the
denominator for the subsidy calculation is affirmed.
BACKGROUND
This case arises from Commerce’s CVD investigation,
initiated on August 16, 2009, to determine whether
1
Selvedge is the edge of ribbon on either side, woven such
that it will not fray or unravel. Webster’s Third New
International Dictionary 2062 (2002).
Court No. 10-00291 Page 3
countervailable subsidies2 had been granted to certain Chinese
manufacturers of narrow woven ribbons with woven selvedge.3 Yama
was a respondent in this investigation. When calculating CVD
subsidy rates for a respondent, Commerce divides the value of
subsidy benefits by the sales value of the merchandise which
received the subsidies.4 In other words, the denominator in
Commerce’s calculation is the sales value of the importer or
producer’s subject merchandise.
To calculate Yama’s CVD rate, Commerce preliminarily
included sales from Yama’s affiliated Hong Kong company, Yama
HK,5 as part of the calculation’s denominator. Inclusion of the
2
A countervailing duty is imposed on an import when the
United States International Trade Commission has found “material
injury” to a domestic industry and Commerce determines that “the
government of a country or any public entity within the territory
of a country is providing, directly or indirectly, a
countervailable subsidy . . . .” 19 U.S.C. § 1671. To be
countervailable, a subsidy must provide a financial contribution
to a specific industry, and the respondent must benefit. See 19
U.S.C. § 1677(5)–(5A); Essar Steel Ltd. v. United States, 34 CIT
__, 721 F. Supp. 2d 1285, 1292 (2010).
3
The period of investigation is January 1, 2008 to December
31, 2008.
4
See 19 C.F.R. § 351.525(a) (“The Secretary will calculate
an ad valorem subsidy rate by dividing the amount of the benefit
allocated to the period of investigation or review by the sales
value during the same period of the product or products to which
the Secretary attributes the subsidy under paragraph (b) of this
section.”).
5
The name of Yama’s Hong Kong affiliate is confidential.
This opinion will refer to it as “Yama HK”.
Court No. 10-00291 Page 4
Hong Kong sales resulted in a preliminary de minimis subsidy rate
for Yama. See Narrow Woven Ribbons with Woven Selvedge from the
People’s Republic of China, 74 Fed. Reg. 66,090, 66,096 (Dep’t
Commerce Dec. 14, 2009) (preliminary affirmative countervailing
duty determination and alignment of final countervailing duty
determination with final antidumping duty determination)
(“Preliminary Determination”). Because the subsidy determination
was de minimis, Yama’s imports would not have been subject to
countervailing duties. See id.After considering comments from interested parties,
Commerce revised its calculations in its final determination to
exclude Yama HK’s sales. See Narrow Woven Ribbons with Woven
Selvedge from the People’s Republic of China, 75 Fed. Reg. 41,801(Dep’t Commerce July 19, 2010) (final affirmative countervailing
duty determination) (“Final Determination”) and accompanying
Issues and Decision Memorandum, (July 12, 2010), available at
http://ia.ita.doc.gov/frn/summary/PRC/2010-17541-1.pdf (last
visited Sept. 12, 2012)(“I&D Memo”). Rather, Commerce used the
sale price of the merchandise from Yama to Yama HK as the
denominator. I&D Memo at 20. This exclusion resulted in a
subsidy rate greater than de minimis, and thus in the imposition
of countervailing duties.6 See id. at 20, 22. Plaintiff now
6
The final rate was calculated pursuant to 19 C.F.R.
§ 351.525(b)(6)(i), which states that, for companies with cross-
Court No. 10-00291 Page 5
challenges the final CVD rate.
STANDARD OF REVIEW
The court will sustain Commerce’s determination if it
is supported by “substantial evidence on the record,” and
“otherwise . . . in accordance with law.” Section
516A(b)(1)(B)(i) of the Tariff Act of 1930, 19 U.S.C.
§ 1516a(b)(1)(B)(i).7 To be in accordance with law, the agency’s
decision must be authorized by the statute, and consistent with
the agency’s regulations. See, e.g., Hontex Enter., Inc. v.
United States, 27 CIT 272, 292–93, 248 F. Supp. 2d 1323, 1340–41
ownership, “the Secretary normally will attribute a subsidy to
the products produced by the corporation that received the
subsidy.”
In calculating the CVD subsidy rate, Commerce found that
Xiamen Yama Import and Export Co., Ltd. (“Yama Trading”), a
Chinese affiliate, supplied inputs to Yama. It therefore
consolidated the sales of these two Chinese companies and
attributed the Chinese subsidies granted to both those Chinese
companies to their consolidated Chinese sales.
While there are exceptions, listed in 19 C.F.R.
§ 351.525(b)(6)(ii)–(v), which create alternate CVD subsidy rate
calculation methods, Commerce determined that the CVD record did
not show contain sufficient evidence to support the application
of these exceptions. I&D Memo at 20. It therefore excluded
sales figures from the Hong Kong affiliate in its final
calculation of the denominator pursuant to 19 C.F.R.
§ 351.525(b)(6)(i). See id.In supplemental briefing requested by the court, Plaintiff
made clear that it is not claiming any of the statutory
exceptions listed in 19 C.F.R. § 351.525(b)(6)(ii)–(v).
7
Further citations to the Tariff Act of 1930 are to Title
19 of the United States Code, 2006 edition.
Court No. 10 - 00291 Page 6
(2003).
DISCUSSION
Yama claims that the use of an intra-company transfer
price, instead of the sales price to a U.S. consumer, as the
denominator for its subsidy rate calculation, was improper. It
also claims that Commerce used an appropriate methodology in an
analogous determination, Coated Free Sheet Papers from the
People’s Republic of China, 72 Fed. Reg. 60,645 (Dep’t Commerce
Oct. 25, 2007) (final affirmative countervailing duty
determination) (“CFS Paper”), yet unreasonably refuses to follow
its own prior practice. These arguments are unavailing.
It is Commerce’s practice to attribute subsidies to the
company that received them. 19 C.F.R. § 351.525(b)(6)(i). While
there are exceptions that allow Commerce to attribute the
subsidies to foreign cross-owned subsidiaries and affiliates,8
Commerce must base its decisions on the record before it in each
individual investigation. With respect to data within their
8
In antidumping (“AD”) and CVD investigations, Commerce
treats Hong Kong and the People’s Republic of China as two
separate countries. See Application of U.S. Antidumping and
Countervailing Duty Laws to Hong Kong, 62 Fed. Reg. 42,965 (Dep’t
Commerce Aug. 11, 1997); 22 U.S.C. § 5713(3) (“The United States
should continue to treat Hong Kong as a territory which is fully
autonomous from the United Kingdom and, after June 30, 1997,
should treat Hong Kong as a territory which is fully autonomous
from the People’s Republic of China with respect to economic and
trade matters.”).
Court No. 10 - 00291 Page 7
control, the burden rests on the interested parties “to create an
accurate record during Commerce’s investigation.” Essar Steel
Ltd. v. United States, 678 F.3d 1268, 1277 (Fed. Cir. 2012).
I. Denominator
As stated above, Commerce based the denominator of the
CVD calculation on the sales price from Yama to Yama HK. Yama
argues that this calculation is improper because the transfer of
goods from Yama to Yama HK was not a sale at arm’s length, but
rather an “artificial internal transfer price.” Pl.’s Rule 56.2
Mot. for J. upon the Agency R., ECF No. 22 at 32 (“Pl.’s Br.”).
Yama notes that Commerce’s verification report identifies the
figures Commerce used as “internal transfer values,” Pl.’s Br.
at 33 (citing Commerce Verification Report: Yama Ribbons and Bows
Co., Ltd., (Mar. 17, 2010) Admin. R. Con. Doc. 148 at 5), and
contends that when Commerce acknowledged these were internal
transfers, it should have turned to the first arms-length sales,
namely, the sales from its Hong Kong affiliate.
Commerce correctly responds that only Chinese companies
(Yama and Yama Trading) received Chinese subsidies and therefore,
pursuant to 19 C.F.R. § 351.525(b)(6)(i), using sales figures
from Yama HK, a Hong Kong company, would be inappropriate. Yama
HK did not directly receive any Chinese subsidies. By excluding
Yama HK’s sales from the denominator, Commerce complied with its
own regulation, which calls for it to attribute subsidies to the
Court No. 10 - 00291 Page 8
sales of the companies which receive them. See 19 C.F.R.
§ 351.525(b)(6)(i). Furthermore, Commerce notes that it does not
have any information regarding Hong Kong subsidies that may have
been received by Yama HK, and therefore including the
consolidated Hong Kong sales in the denominator without properly
attributing any corresponding Hong Kong subsidies would be
inappropriate and contrary to the statute. See 19 C.F.R.
§ 351.525(a).
While Yama appears to have identified its cross-
ownership relationship with Yama HK early in the administrative
process in one of its questionnaire responses, the evidence
supporting its assertion of cross-ownership between the two
companies is not on the CVD administrative record, but rather,
appears to be proprietary data on the record for the accompanying
AD investigation. See Pl.’s Br. at 38. Yama contends that
Commerce should have requested the necessary information, but it
is well established that in AD and CVD investigations, the burden
falls on the interested party to place relevant information
within its possession on the record. Statement of Administrative
Action Accompanying the Uruguay Round Agreements Act, H.R. Doc.
No. 103-316, vol. 1 (1994) at 829, reprinted in 1994 U.S.C.C.A.N.
4040; 19 C.F.R. § 351.401(b)(1) (“The interested party that is in
possession of the relevant information has the burden of
establishing to the satisfaction of [Commerce] the amount and
Court No. 10 - 00291 Page 9
nature of a particular adjustment.”). Therefore, while a cross-
ownership relationship between Yama and Yama HK might exist,
which potentially could place Yama in one of the exceptions
listed under 19 C.F.R. § 351.525(b), Commerce was correct in not
considering any of these exceptions because the record before it
in the investigation did not contain any evidence to support the
existence of such a relationship. I&D Memo at 20.
II. Coated Free Sheet Paper methodology
Yama next argues that Commerce should have applied the
methodology from CFS Paper, a case Yama claims is analogous to
its own situation. See Pl.’s Brief at 30 (citing CFS Paper).
Yama notes a number of similarities between its situation and CFS
Paper, namely that: (1) the price on which the alleged subsidy is
based differs from the United States invoice price; (2) the
exporter and the party who invoices the customer are affiliated;
(3) the United States invoice establishes the customs value to
which countervailing duties are applied; (4) there is a one-to-
one correlation between the invoice that reflects the price on
which subsidies are received and the invoice with the mark-up
that accompanies the shipment; (5) the merchandise is shipped
directly to the United States; and (6) the invoices can be
tracked as back-to-back invoices that are identical except for
price. Id.In response, Commerce makes two arguments: First, Yama
Court No. 10 - 00291 Page 10
mischaracterized Commerce’s calculations in CFS Paper. Second,
even if the methodology used in CFS Paper would alter the outcome
here, Yama had the burden of providing verifiable documentation
sufficient for Commerce to make Yama’s requested adjustment, and
Yama did not provide this data. See Def.’s Opp’n to Pl.’s Rule
56.2 Mot. For J. upon the Agency R., ECF No. 31 at 38 (“Def.’s
Br.”).
Commerce clarified that in CFS Paper it did not, as
Plaintiff claims, simply use the consolidated sales figures
reflected in the affiliated reseller’s prices as the denominator.
Rather, it adjusted the subsidies calculated by the ratio of the
sales value of exports from the investigated country and the
sales value in the United States. See id. Regardless, Commerce
continued, it would be unable to apply the CFS Paper calculation
methodology to a determination of the CVD margin for Yama,
because Yama failed to provide the necessary documentation,
which, as discussed supra, it bore the burden of producing.9
Commerce states that Yama has cited “no record evidence to
substantiate as a factual matter its eligibility for a rate
adjustment,” Def.’s July 3 Letter, ECF No. 44, at 4 (emphasis in
original), and therefore it was reasonable to use the ad valorem
9
Commerce clarified that the particular missing
information is any verifiable data regarding the above-mentioned
six criteria that Yama claims link its situation to that in CFS
Paper. See Def.’s July 3 Letter, ECF No. 44 at 3.
Court No. 10 - 00291 Page 11
subsidy rate calculation – without applying any of the exceptions
– specified in Commerce’s applicable regulation.
Yama argues that it submitted evidence of its
eligibility for a rate adjustment in the companion antidumping
investigation, and that Commerce should have pulled relevant data
from the AD record and placed it on the record in the CVD
proceeding. Yama contends that the CVD proceeding “should be
seen as one combined proceeding with the simultaneous antidumping
investigation,” especially because “the petition that initiated
the countervailing duty investigation was the same petition that
included the request for an antidumping investigation.” See
Pl.’s July 26 Letter, ECF No. 53 at 7-9. However, antidumping
duty and countervailing duty investigations operate pursuant to
different statutory provisions, are separate administrative
proceedings, and as such, each investigation has its own unique
and separate administrative record. See 19 C.F.R § 351.306.
Importantly, the relevant data appears to be proprietary and
therefore it would have been inappropriate for Commerce simply to
move it from one administrative record to another. See 19 C.F.R
§ 351.306 (authorizing sanctions against any Commerce employee
who discloses business proprietary information). While Commerce
has discretion to transfer certain non-proprietary information
from one proceeding to another, see, e.g., Melamine Chemicals,
Inc. v. United States, 2 CIT 113, 115–16 (1981), it may not
Court No. 10 - 00291 Page 12
unilaterally transfer proprietary information across
administrative proceedings. See 19 U.S.C. § 1677f(b)-(c); 19
C.F.R § 351.306.
Even assuming, arguendo, that Plaintiff may be correct
in its assertions that Yama’s merchandise was merely transferred
from one company to another and therefore qualifies for the
exception used in CFS Paper, the result does not change. Absent
any evidence on the administrative record supporting these
claims, which Plaintiff has the burden of providing, Commerce’s
decision to use the unconsolidated sales figures as the
denominator in its CVD rate calculation is supported by
substantial evidence.
CONCLUSION
For the reasons discussed above, Commerce’s calculation of
the countervailing duty rate for Plaintiff is AFFIRMED. Judgment
will be issued accordingly.
/s/ Donald C. Pogue
Donald C. Pogue, Chief Judge
Dated: September 14, 2012
New York, New York