Jinfu Trading Co. v. United States , 30 Ct. Int'l Trade 1465 ( 2006 )

Slip Op. 06–137
UNITED STATES COURT OF INTERNATIONAL TRADE
______________________________
:
JINFU TRADING CO., LTD., :
:
Plaintiff, : Before: Richard K. Eaton, Judge
:
:
v. :
: Court No. 04-00597
: Public Version
UNITED STATES, :
:
Defendant. :
______________________________:
OPINION AND ORDER
[United States Department of Commerce’s final results rescinding
plaintiff’s new shipper review remanded]
Dated: September 7, 2006
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, LLP
(Bruce M. Mitchell and Adam M. Dambrov), for plaintiff.
Peter D. Keisler, Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice; Jeanne E. Davidson, Deputy
Director, International Trade Section, Commercial Litigation
Branch, Civil Division, United States Department of Justice
(David S. Silverbrand), for defendant.
Eaton, Judge: This matter1 is before the court on plaintiff
Jinfu Trading Co., Ltd.’s (“plaintiff” or “Jinfu PRC”) Rule 56.2
motion for judgment upon the agency record challenging the
1
The Sioux Honey Association and the American Honey
Producers Association were granted leave to intervene as of right
in this action. See Order of 1/4/05.
Court No. 04-00597 Page 2
findings in the United States Department of Commerce’s
(“Commerce” or “the Department”) final results and final
rescission of plaintiff’s new shipper review (“NSR”) for entries
of honey from the People’s Republic of China (“PRC” or “China”).
See Honey From the PRC, 69 Fed. Reg. 64,029 (ITA Nov. 3, 2004)
(final results) (“Final Results”). By its motion, plaintiff
contests the Department’s conclusion that neither Yousheng
Trading (U.S.A.) Co., Ltd. (“Yousheng USA”)2 nor its successor
Jinfu Trading (U.S.A.) Co., Ltd. (“Jinfu USA”) were affiliated
with Jinfu PRC within the meaning of 19 U.S.C. § 1677(33)(F) or
(G) (2000) on November 2, 2002, the date of the sale claimed as
the basis for the NSR.3 Commerce insists that because the record
does not support the conclusion that on November 2, 2002,
plaintiff’s CEO owned or controlled either Yousheng USA or Jinfu
USA, Jinfu PRC’s sale of honey to Yousheng USA constituted the
2
While plaintiff’s motion and the Final Results address
the affiliation between Jinfu PRC and Jinfu USA, the record does
not contain any evidence that a company named Jinfu USA existed
as of November 2, 2002, the date of the claimed new shipper sale.
What the record does indicate, however, is that Yousheng USA, the
predecessor to Jinfu USA, did exist on November 2, 2002, and
indeed was the entity involved in the subject sale. Therefore,
the court’s review will refer to the alleged affiliated company,
where appropriate, as Yousheng USA.
3
The statute provides, in pertinent part, that the
following persons are deemed “affiliated”: “(F) Two or more
persons directly or indirectly controlling, controlled by, or
under common control with, any person”; “(G) Any person who
controls any other person and such other person.” 19 U.S.C. §
1677(33).
Court No. 04-00597 Page 3
first sale of the merchandise to an unaffiliated U.S. customer.
As a result, Commerce found that the information contained in
plaintiff’s request for a new shipper review was incomplete. See
Final Results, 69 Fed. Reg. at 64,029–30. Thus, Commerce
maintains that it was justified in rescinding the new shipper
proceedings. Jurisdiction lies with 28 U.S.C. § 1581(c) (2000)
and 19 U.S.C. § 1516a(a)(2)(B)(iii). For the following reasons,
the Department’s Final Results are remanded.
BACKGROUND
Plaintiff is an exporter of honey from the PRC. See Br.
Supp. Pl.’s R. 56.2 Mot. J. Ag. R. (“Pl.’s Br.”) at 7; see also
Def.’s Opp’n Pl.’s Mot. J. Ag. R. (“Def.’s Opp’n”) at 3. Its
alleged affiliate, Yousheng USA (whose name was later changed to
Jinfu Trading (U.S.A.) Co., Ltd.)4 is a domestic corporation,
formed by Mr. A5 in October of 2002 to import baby strollers from
the PRC. See Def.’s Opp’n at 4. Because the standards imposed
4
On November 8, 2002, Yousheng USA filed an amendment
with the State of Washington to change its name to Jinfu Trading
(U.S.A.) Co., Ltd. See Def.’s Opp’n at 4.
5
For purposes of confidentiality, [[ ]],
the resident officer of Jinfu USA, the successor to Yousheng USA,
will be referred to as “Mr. A”. It is unclear who actually owned
Yousheng USA when it was formed, Mr. A or [[ ]],
who will be referred to as “Mr. D”. Mr. A incorporated Yousheng
USA, but Mr. D was listed as the sole shareholder on the
instrument purporting to transfer ownership of the company. See
Pl.’s Conf. App. 10; see also Pl.’s Br. 10.
Court No. 04-00597 Page 4
on entries of baby strollers made their importation difficult,
the plan was abandoned. See Pl.’s Br. at 9. As a result, Mr. A
was left to find another use for the company. Coincidentally,
Jinfu PRC’s chairman and CEO, CEO B,6 was seeking to establish a
U.S. company to import honey from the PRC. See id. at 10.
Having learned of CEO B’s intentions, Mr. A suggested that CEO B
use Yousheng USA to import his merchandise. See id. Thereafter,
certain activities took place with the apparent purpose of: (1)
transferring ownership of Yousheng USA to CEO B; and (2) changing
the corporate name of Yousheng USA to Jinfu Trading (U.S.A.) Co.,
Ltd. (“Jinfu USA”). See Pl.’s Conf. App. 10.
On June 30, 2003, in accordance with 19 U.S.C. §
1675(a)(2)(B),7 plaintiff filed a request with Commerce that it
6
For purposes of confidentiality, [[ ]],
the chairman and CEO of Jinfu PRC, will be referred to as “CEO
B”. Neither party disputes that as chairman and CEO, CEO B
controlled Jinfu PRC.
7
Pursuant to the statute:
If the administering authority receives a
request from an exporter or producer of the
subject merchandise establishing that——
(I) such exporter or producer did
not export the merchandise that was
the subject of an antidumping duty
. . . order to the United States
. . . during the period of
investigation, and
(continued...)
Court No. 04-00597 Page 5
initiate an NSR for the period beginning on December 1, 2002 and
ending May 31, 2003.8 See Pl.’s Br. at 7. As part of the
request, plaintiff made the certifications and supplied the
documentation required by 19 C.F.R. § 351.214(b) (2005).9 See
7
(...continued)
(II) such exporter or producer is
not affiliated (within the meaning
of section 1677(33) of this title)
with any exporter or producer who
exported the merchandise to the
United States . . . during that
period,
the administering authority shall conduct a
review under this subsection to establish an
individual weighted average dumping margin
. . . .
19 U.S.C. § 1675(a)(2)(B).
8
This Court has described a “new shipper review” as a
proceeding where “Commerce is essentially conducting a new
antidumping review that is specific to a particular producer [or
exporter].” Tianjin Tiancheng Pharm. Co., Ltd. v. United States,
29 CIT __, __, 366 F. Supp. 2d 1246, 1249 (2005).
9
The regulation states, in pertinent part, that a
request for a new shipper review must contain the following:
(ii)(A) The certification [that the person requesting
the review did not export subject merchandise
to the United States during the period of
investigation]; and
(B) A certification from the person that
produced or supplied the subject
merchandise to the person requesting the
review that that producer or supplier
did not export the subject merchandise
to the United States . . . during the
period of investigation;
(continued...)
Court No. 04-00597 Page 6
Pl.’s Br. at 7. Among other things, plaintiff certified that on
November 2, 2002, it sold honey to what it stated was its
American affiliate, Jinfu USA.10 Plaintiff further provided
9
(...continued)
(iii)(A) A certification that, since the investigation
was initiated, such exporter or producer has
never been affiliated with any exporter or
producer who exported the subject merchandise
to the United States . . . during the period
of investigation, including those not
individually examined during the
investigation;
(B) In an antidumping proceeding involving
imports from a nonmarket economy
country, a certification that the export
activities of such exporter or producer
are not controlled by the central
government;
(iv) Documentation establishing:
(A) The date on which subject merchandise of
the exporter or producer making the
request was first entered, or withdrawn
from warehouse, for consumption, or, if
the exporter or producer cannot
establish the date of first entry, the
date on which the exporter or producer
first shipped the subject merchandise
for export to the United States;
(B) The volume of that and subsequent
shipments; and
(C) The date of the first sale to an
unaffiliated customer in the United
States . . . .
19 C.F.R. § 351.214(b)(2)(ii)-(iv).
10
Although Yousheng USA did not file the necessary
documents to have its name changed to “Jinfu USA” until November
(continued...)
Court No. 04-00597 Page 7
instruments documenting that on December 17, 2002, its affiliate
resold the honey purchased from Jinfu PRC to an unaffiliated U.S.
customer, Customer C.11 See Pl.’s Conf. App. 1 at Ex. 3. Jinfu
PRC claimed that this sale constituted “[t]he date of the first
sale to an unaffiliated customer in the United States.” 19
C.F.R. § 351.214(b)(iv)(C); see also Pl.’s Conf. App. 1 at 3
(“Exhibit 3 . . . contains a copy of the commercial invoice for
the first sale to an unaffiliated customer in the United States,
which shows the date of this first sale to an unaffiliated
customer.”) (emphasis omitted). Based on plaintiff’s
certifications, the Department granted plaintiff’s request and
initiated the NSR for the period beginning on December 1, 2002
and ending May 31, 2003. See Honey From the PRC, 68 Fed. Reg.
47,537 (ITA Aug. 11, 2003).
Commerce then issued its antidumping questionnaire, to which
plaintiff responded on September 16, 2003. See Pl.’s Br. at 8;
see also Pl.’s Conf. App. 4. In its response, plaintiff stated
that a company called Jinfu USA was its affiliate because CEO B
owned that company. See Pl.’s Br. at 8. Plaintiff’s response
10
(...continued)
8, 2002, “Jinfu USA” was listed on the invoice as the purchaser
of the honey from Jinfu PRC. See Pl.’s Conf. App. 1, Ex. 3.
11
For purposes of confidentiality, [[ ]],
the “unaffiliated U.S. customer,” will be referred to as
“Customer C.”
Court No. 04-00597 Page 8
further included an invoice as evidence that November 2, 2002 was
the date of the first sale between Jinfu PRC and Jinfu USA. See
Def.’s Opp’n at 4. However, the response also contained evidence
indicating that ownership of Yousheng USA, the predecessor of
Jinfu USA, did not pass to CEO B until October 25, 2003, nearly
one year after the date of the claimed affiliated sale. See id.This discrepancy between the date of the claimed affiliated
sale of the honey and the transfer of company ownership caused
the Department to conclude that more information relating to the
issue of affiliation was needed; thus, it issued a supplemental
questionnaire. See Pl.’s Br. at 9; see also Def.’s Opp’n at 4.
In its supplemental response, plaintiff stated that: (1) Jinfu
USA was legally incorporated in the State of Washington on
October 4, 2002; (2) that Yousheng USA’s name was lawfully
changed to Jinfu USA on November 12, 2002; (3) that the October
25, 2003 execution date contained on the certificate purporting
to transfer 10,000 shares of Yousheng USA to CEO B was a clerical
error and the date should have been October 25, 2002; and (4)
that ownership of Yousheng USA passed to CEO B by the transfer of
10,000 shares of Yousheng USA stock. See Def.’s Opp’n at 4.12
12
Plaintiff submitted several corporate documents to
support the affiliation claim articulated in its supplemental
response. First, plaintiff relied on the November 12, 2002
“Certificate of Existence/Authorization” as support for its claim
(continued...)
Court No. 04-00597 Page 9
The Department then carried out verification of Jinfu PRC’s
questionnaire responses at both its China and U.S. facilities.
See Pl.’s Br. at 12. At the China site, Commerce interviewed
Jinfu PRC officials and reviewed corporate documents, while in
the United States, the Department spoke with Mr. A about the
relationship between Yousheng USA and Jinfu PRC. See Pl.’s Br.
at 12–13; see also Def.’s Opp’n at 5.
Upon reviewing the data contained in plaintiff’s
questionnaire responses, Commerce published its preliminary
results rescinding Jinfu PRC’s NSR. See Honey From the PRC, 69
Fed. Reg. 31,348, 31,349 (preliminary results) (ITA June 3, 2004)
(“Preliminary Results”). In the Preliminary Results, Commerce
found that Jinfu USA was not affiliated with Jinfu PRC on
November 2, 2002. As a result, Commerce deemed plaintiff’s
request for an NSR incomplete because it did not properly
describe the first unaffiliated sale of the merchandise. This
12
(...continued)
that Jinfu USA existed as of October 4, 2002. Next, plaintiff
pointed to the “Certificate of Transfer of Shares” that purported
to transfer 10,000 shares of either Yousheng USA or Jinfu USA to
CEO B on October 25, 2002. Then, plaintiff referenced Jinfu
USA’s November 18, 2002 “Master Application” for a business
license, which it claimed demonstrated that the two companies
were affiliated. Plaintiff further contended that the March 24,
2003 “Amended Articles of Incorporation” for Jinfu USA
specifically stated that CEO B was the sole owner of Jinfu USA.
Finally, plaintiff argued that Jinfu USA’s 2002 tax return, dated
June 13, 2003, indicated that Jinfu USA was wholly owned by CEO
B. See generally Pl.’s Conf. App. 10, 11.
Court No. 04-00597 Page 10
conclusion was based primarily on the Department’s finding that
no company named Jinfu USA existed until November 12, 2002,
thereby rendering impossible any claim that plaintiff was
affiliated with that company on November 2, 2002. See Def.’s
Opp’n at 6. In addition, Commerce found that the October 25,
2003 date on the Certificate of Transfer of Shares precluded a
finding that CEO B owned either Yousheng USA or Jinfu USA on
November 2, 2002. See id. The reasons behind Commerce’s
conclusions were expanded upon in a memorandum that was released
to Jinfu PRC approximately one week prior to the publication of
the Preliminary Results. See generally Honey From the PRC:
Analysis of the Relationship and Treatment of Sale between Jinfu
Trading Co., Ltd., and Jinfu Trading (USA), Inc. (ITA May 26,
2004).
Following the publication of the Preliminary Results,
Commerce notified plaintiff that it would accept comments
regarding its findings.13 See Def.’s Opp’n at 7. Jinfu PRC took
advantage of this opportunity by submitting a case brief
claiming: (1) that Jinfu USA was an existing corporate entity in
13
In addition to its substantive challenges, plaintiff
seeks a remand of the Final Results because, in its view,
Commerce failed to afford it an adequate opportunity to explain
the inconsistencies that provided the basis for the Preliminary
Results. See Pl.’s Br. at 31–38. Because of the court’s remand
instructions, it is unnecessary to now decide plaintiff’s
ancillary claim.
Court No. 04-00597 Page 11
the State of Washington on November 2, 2002; and (2) that the
date of the Certificate of Transfer of Shares was a clerical
error and that the actual date ownership of Yousheng USA
transferred to CEO B was October 25, 2002. See Pl.’s Case Brief
in Honey from the PRC: NSR for 12/10/02–5/31/03-(Inv. No. A-570-
863) (July 7, 2004) at 6. Ultimately, Commerce affirmed in the
Final Results its preliminary finding that the two companies were
not affiliated and, thus, rescinded plaintiff’s NSR. See Final
Results, 69 Fed. Reg. at 64,029–30. Plaintiff challenges the
Final Results.
STANDARD OF REVIEW
When reviewing a final new shipper review determination by
Commerce, the court “shall hold unlawful any determination,
finding, or conclusion found . . . to be unsupported by
substantial evidence on the record or otherwise not in accordance
with law.” 19 U.S.C. § 1516a(b)(1)(B)(I); see also Hebei New
Donghua Amino Acid Co., Ltd. v. United States, 29 CIT __, __, 374
F. Supp. 2d 1333, 1337 (2005). “Substantial evidence is ‘such
relevant evidence as a reasonable mind might accept as adequate
to support a conclusion.’” Huaiyin Foreign Trade Corp. (30) v.
United States, 322 F.3d 1369, 1374 (Fed. Cir. 2003) (quoting
Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)). The
existence of substantial evidence is determined “by considering
Court No. 04-00597 Page 12
the record as a whole, including evidence that supports as well
as evidence that ‘fairly detracts from the substantiality of the
evidence.’” Id. (quoting Atl. Sugar, Ltd. v. United States, 744
F.2d 1556, 1562 (Fed. Cir. 1984)). In addition, “‘a reviewing
court is not barred from setting aside a[n] [agency] decision
when it cannot conscientiously find that the evidence supporting
that decision is substantial, when viewed in the light that the
record in its entirety furnishes, including the body of evidence
opposed to the [agency’s] view.’” Nippon Steel Corp. v. United
States, __ F.3d __, __ (Fed. Cir. 2006) (internal quotation marks
and citation omitted); see also id. (“It will be the duty of the
courts to determine in the final analysis and in the exercise of
their independent judgment, whether on the whole record the
evidence in a given instance is sufficiently substantial to
support a finding, conclusion, or other agency action as a matter
of law.”). Finally, the possibility of drawing two opposite, yet
equally justified conclusions from the record will not prevent
the agency’s determination from being supported by substantial
evidence. Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966).
DISCUSSION
I. Affiliation Between Jinfu PRC and Yousheng USA
A. Relevant Law
In its affiliation analysis, Commerce must examine the
Court No. 04-00597 Page 13
subject relationship in accordance with 19 U.S.C. § 1677(33).14
This section contains two subsections that provide general
descriptions of affiliated persons. See 19 U.S.C. §§
1677(33)(F), (G). The first general provision, § 1677(33)(F),
14
According to the statute:
The following persons shall be considered
“affiliated” or “affiliated persons”:
(A) Members of a family, including
brothers and sisters (whether by
the whole or half blood), spouse,
ancestors, and lineal descendants.
(B) Any officer or director of an
organization and such organization.
(C) Partners.
(D) Employer and employee.
(E) 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 such
organization and such organization.
(F) Two or more persons directly or
indirectly controlling, controlled
by, or under common control with,
any person.
(G) Any person who controls any
other person and such other person.
For purposes of this paragraph, a person
shall be considered to control another person
if the person is legally or operationally in
a position to exercise restraint or direction
over the other person.
19 U.S.C. § 1677(33).
Court No. 04-00597 Page 14
states that “[t]wo or more persons directly or indirectly
controlling, controlled by, or under common control with, any
person,” are affiliated. 19 U.S.C. § 1677(33)(F). Similarly, §
1677(33)(G) instructs that affiliation is had between “[a]ny
person who controls any other person and such other person.” 19
U.S.C. § 1677(33)(G). At the conclusion of § 1677(33), Congress
inserted an additional paragraph stating even more particularly
that, “[f]or purposes of [§ 1677(33)], a person shall be
considered to control another person if the person is legally or
operationally in a position to exercise restraint or direction
over the other person.” 19 U.S.C. § 1677(33). Thus, these
provisions of the statute direct Commerce to center its
affiliation analysis on the question of control, i.e., whether
one party is in a position to “exercise restraint or direction”
over another.
Commerce is also guided by the regulations to § 1677(33),
which provide:
In determining whether control over another person
exists, within the meaning of [19 U.S.C. § 1677(33)],
the Secretary will consider the following factors,
among others: corporate or family groupings; franchise
or joint venture agreements; debt financing; and close
supplier relationships. The Secretary will not find
that control exists on the basis of these factors
unless the relationship has the potential to impact
decisions concerning the production, pricing, or cost
of the subject merchandise or foreign like product.
The Secretary will consider the temporal aspect of a
relationship in determining whether control exists;
Court No. 04-00597 Page 15
normally, temporary circumstances will not suffice as
evidence of control.
19 C.F.R. § 351.102(b).
This Court has interpreted the statutory and regulatory
language as requiring Commerce to find affiliation where the
party alleging affiliation has demonstrated that “[t]wo or more
entities . . . share various control relationships whereby one
entity is legally or operationally in a position to exercise
restraint or direction over the other and that such relationship
provides one entity the significant potential for the
manipulation of price or production of the other.” Hontex
Enters., Inc. v. United States, 29 CIT __, __, 387 F. Supp. 2d
1353, 1358 (2005) (internal quotation marks omitted). In
addition, this Court has further held that a finding of control
does not require a showing of actual control, but rather proof
that one party has the potential to exercise control over the
other is sufficient. See China Steel Corp. v. United States, 28
CIT __, __, 306 F. Supp. 2d 1291, 1299 (2004) (“‘The
[affiliation] statute focuses on the capacity to control, rather
than on the actual exercise of control.’”) (quoting Ta Chen
Stainless Steel Pipe, Ltd. v. United States, 23 CIT 804, 813
(1999) (not reported in the Federal Supplement)).
Court No. 04-00597 Page 16
Therefore, the court must determine whether Commerce
reasonably concluded that the evidence failed to demonstrate that
on November 2, 2002, CEO B had, at a minimum, the potential to
exercise control over the pricing decisions of Yousheng USA.
B. Evidence of Affiliation: Ownership Interest
Jinfu PRC initially claims that because CEO B was the owner
of Jinfu USA, the entities were affiliated on November 2, 2002.
Plaintiff raises several arguments to demonstrate that Commerce
failed to consider the “compelling” record evidence supporting
this claim. See Pl.’s Br. at 20. Its arguments relate
principally to the Department’s conclusion that plaintiff’s
proffered evidence failed to support its assertions that Jinfu
USA existed on November 2, 2002, and that CEO B owned or
controlled the company on that date. See id.Plaintiff’s primary contention in response to Commerce’s
determination that Jinfu USA did not exist on November 2, 2002,
is that Commerce erred by not giving due credit to the
Certificate of Existence/Authorization (“Certificate of
Existence”) issued to Jinfu USA by the State of Washington. See
id. at 20–21. As plaintiff states, “on November 12, 2002, the
State of Washington issued a [Certificate of Existence] to a
company named ‘Jinfu Trading (USA) Inc.’ expressly stating that
Court No. 04-00597 Page 17
the original ‘Certificate of Incorporation’ was issued to this
company by the State of Washington on October 4, 2002.” Id.Plaintiff understands this document to indicate that, as of
October 4, 2002, Jinfu USA existed as a corporate entity. See
id. Thus, plaintiff argues that had Commerce accorded an
appropriate level of credit to this document, it would have been
compelled to conclude that Jinfu USA existed at the time of the
first sale.
Plaintiff next contends that the Department erred in finding
that CEO B did not have any ownership interest in either Yousheng
USA or Jinfu USA at the time of the claimed new shipper sale
because the Certificate of Transfer of Shares was dated October
25, 2003, almost one year after the date of the new shipper sale.
See Pl.’s Br. at 23. Plaintiff bases it argument on its
understanding of the law of contracts, which it contends does not
require an agreement to be either reduced to writing or signed in
order to become effective. See id. (“The contract needn’t be in
writing; if it is in writing, it needn’t be signed, provided
there’s other evidence of acceptance, for example . . . by
performance.”) (internal citation and quotation marks omitted).
In addition to relying on general contract principles, plaintiff
analogizes its situation to that presented in Washington State
securities law, which plaintiff states “expressly provides that a
Court No. 04-00597 Page 18
signed, written contract is not required to enforce an agreement
to sell securities.” Id. at 24 (citing Wash. Rev. Code § 62A.8-
113). In other words, plaintiff claims that regardless of the
date on the Certificate of Transfer of Shares, actual ownership
of Yousheng USA transferred to CEO B on October 25, 2002.
As additional support for its claim that CEO B owned Jinfu
USA on November 2, 2002, plaintiff points to several corporate
documents including the November 18, 2002 Master Application for
Jinfu USA’s business license, Jinfu USA’s March 24, 2003 Amended
Articles of Incorporation, and Jinfu USA’s 2002 tax return, dated
June 13, 2003. See generally id. at 20. According to plaintiff,
although these documents are dated after the date of the claimed
new shipper sale, each one indicates that CEO B was the sole
owner of Jinfu USA on November 2, 2002. See, e.g., id. at 21
(“[b]oth the original and amended tax returns expressly stated
that [CEO B] was the 100 percent owner of Jinfu-USA.”).
Next, plaintiff argues that Commerce failed to consider the
data gathered at verification from CEO B and Mr. A. In
plaintiff’s view, the information adduced through Commerce’s
interviews of both CEO B and Mr. A established that the formation
date of Jinfu USA was October 4, 2002, and that CEO B owned that
company on the date of the claimed new shipper sale. Id. Put
Court No. 04-00597 Page 19
another way, plaintiff contends that the data marshaled through
verification were not only credible, but also failed to provide
the Department with “any evidence, let alone substantial
evidence, that Jinfu-USA was owned by any person other than [CEO
B].” Id.
Commerce takes issue with plaintiff’s argument that the
State of Washington documents remove all doubt as to when Jinfu
USA existed as a corporate entity. See Def.’s Opp’n at 17. The
Department further asserts that plaintiff’s proffered documents
fail to establish that CEO B owned either Yousheng USA or Jinfu
USA, and, thus, do not support a finding that Jinfu PRC and the
U.S. company were affiliated as of November 2, 2002. See id.
According to Commerce:
[T]he documents upon which [plaintiff] relies are all
dated after November 2, 2002, the date of the subject
sale and, therefore, do not demonstrate control on
November 2.
Additionally, in the “Master Application” filed with
the state of Washington on November 18, 2002, sixteen
days after the new shipper sale, which lists all
owners, neither Jinfu PRC nor its CEO are purported to
be owners, but rather the only name present is an
employee of Jinfu USA’s predecessor company, Yousheng
USA. Furthermore, although the “Master Application”
requested notification of any change of ownership, no
change was indicated upon the record. Further still,
the portion of the form stating whether Jinfu USA, “is
owned by, controlled by, or affiliated with any other
business entity,” is blank.
Id.
Court No. 04-00597 Page 20
Moreover, the Department states that:
[R]ecord evidence from the State of Washington and the
“Amended Articles of Incorporation” prepared by
Yousheng USA’s/Jinfu USA’s U.S. attorney, contradict
the information submitted and statements by Jinfu PRC
concerning the date on which the transfer of ownership
took place. First, none of the documents filed with
the State of Washington state that the CEO of Jinfu PRC
is the owner of Yousheng USA or Jinfu USA or that
either Yousheng USA or Jinfu USA changed ownership.
. . . [T]he record lacks evidence demonstrating that
Jinfu USA informed the State of Washington of any
alleged change in ownership as late as November 8,
2002. Furthermore, Jinfu USA’s “Amended Articles of
Incorporation” were signed well after January 2003,
further calling into question the alleged date of
transfer of ownership, and it is unclear from the
record whether this document was in fact filed by Jinfu
USA with the State of Washington. Lastly, Jinfu USA’s
application for a “Master Business License,” examined
by the Department at its Jinfu CEP Verification,
contradicts Jinfu PRC’s assertion that its CEO owned
Jinfu USA on October 25, 2002. . . .
Issues and Decision Memorandum for the Final Results and Final
Rescission, In Part, of the New Shipper Review of the Antidumping
Duty Order on Honey from the PRC (ITA Oct. 25, 2004) (“Issues &
Decision Mem.”) at 11. In other words, Commerce maintains that
plaintiff’s evidence that a company named Jinfu USA existed on
November 2, 2002 and that CEO B owned that company, is not
probative of the facts plaintiff wishes to establish.
Commerce further observes that the Certificate of Transfer
of Shares, which memorialized the transfer of ownership of
Yousheng USA to CEO B, did not become legally effective until
signed. See id. at 10. Although bearing the date October 25,
Court No. 04-00597 Page 21
2003, Commerce notes that the document was not signed until
December 30, 2003, more than one year after the date of the
claimed new shipper sale. In an effort to explain this
discrepancy, plaintiff submitted the affidavit of CEO B, in which
he claimed that in December 2003, he recognized that he had not
signed the transfer, and so he signed it and backdated it October
25, 2003. See Def.’s Opp’n at 18. For Commerce, the admission
by CEO B that he backdated the document renders unreliable
plaintiff’s claim that it was not dated October 25, 2002 because
of a clerical error.
Commerce finds additional fault with the Certificate of
Transfer of Shares, which purported to transfer complete
ownership of Yousheng USA to Jinfu PRC through the transfer of
10,000 shares of stock. According to Commerce, the March 24,
2003 Amended Articles of Incorporation for Jinfu USA, however,
state that there were 500,000 shares of the company outstanding
as of that date. See Def.’s Opp’n at 18. Thus, the Department
asserts that a controlling interest in the company could not have
been achieved by the transfer of only 10,000 shares of stock.
See id. at 17; see also Issues & Decision Mem. at 24 (“[T]he
amount of shares allegedly transferred to the CEO of Jinfu PRC on
October 25, 2002 is different from the amount of shares listed in
Jinfu USA’s ‘Amended Articles of Incorporation’ dated March 24,
Court No. 04-00597 Page 22
2003.”).
It is apparent that Commerce was not unreasonable in
concluding that a company named Jinfu USA did not exist on
November 2, 2002, and that CEO B did not own Jinfu USA or its
predecessor Yousheng USA on that date. First, while Mr. A
formally applied to change Yousheng USA’s name to Jinfu Trading
(U.S.A.) Co., Ltd., he did not do so until November 8, 2002.
Second, the November 12, 2002 Certificate of Existence, the
document that recognized Yousheng USA’s name change, indicates
that Mr. A incorporated Yousheng USA, not Jinfu USA, on October
4, 2002. As of that date, the company was owned by either Mr. A
or Mr. D,15 not CEO B. Third, all of the evidence relied upon
by plaintiff to show ownership by CEO B is both equivocal and
dated after November 2, 2002. That is, the Certificate of
Existence indicating that Yousheng USA had been renamed Jinfu USA
is dated November 12, 2002; the Master Application for Jinfu
USA’s business license is dated November 18, 2002; the
Certificate of Transfer of Shares was signed on December 30,
2003, but backdated to October 25, 2003; the Amended Articles of
Incorporation are dated March 24, 2003; and Jinfu USA’s 2002 tax
15
Mr. D, the general manager of
[[ ]], assumed the [[ ]] fee
Mr. A incurred as a result of incorporating Yousheng USA. See
Pl.’s Br. at 9, 13; see also Pl.’s Conf. App. 7, 10.
Court No. 04-00597 Page 23
return is dated June 13, 2003. Thus, the court cannot agree with
plaintiff that these documents, all dated after November 2, 2002,
support its claim that CEO B owned either Yousheng USA or Jinfu
USA on that date.
Further, the court finds unavailing plaintiff’s argument
that the Certificate of Transfer of Shares did not require the
parties’ signatures in order to become effective. By its terms,
the document provides that: “THIS CERTIFICATE TRANSFER IS
EFFECTIVE UPON EXECUTION BY THE UNDERSIGNED.” Pl.’s Conf. App.
7. It is clear, therefore, that the Certificate of Transfer of
Shares was not to gain legal effect unless and until the parties
signed it. Even if this document were found to be effective as
of October 25, 2003, an unlikely conclusion given that it was
actually signed and backdated by CEO B on December 30, 2003, it
would still have been effective eleven months after November 2,
2002. Further undermining plaintiff’s argument that the law of
contracts gives effect to the Certificate of Transfer of Shares
on October 25, 2002 although neither party had signed the
document as of that date, is CEO B’s failure to pay Mr. D the
consideration for the shares until more than one year after the
date of the claimed new shipper sale.16 In other words, because
16
According to the verification report, CEO B paid the
[[ ]] debt incurred by [Mr. A] on [[ ]]
(continued...)
Court No. 04-00597 Page 24
the transfer was not supported by valid consideration until well
after November 2, 2002, plaintiff cannot rely on an unwritten
contract as support for its claim of ownership.
It is likewise apparent that the substance of plaintiff’s
other evidence is equally lacking with respect to CEO B’s claim
of ownership in Jinfu USA. For instance, the portion of the
Master Application in which it was asked if Yousheng USA was
owned, controlled, or affiliated with another entity was left
blank, thereby providing evidence that as late as November 12,
2002, Yousheng USA was still owned by Mr. D. See Pl.’s Conf.
App. 10, Ex. 1 at 3(h) (“If this business is owned by, controlled
by, or affiliated with any other business entity, please indicate
that business entity’s name . . . [no company reported] . . .
.”). Finally, the court finds plaintiff’s assertion regarding
Jinfu USA’s 2002 tax return to be without merit. The tax return
was dated June 13, 2003. In addition, the tax return is not
signed and it is not clear that it was ever filed. Therefore,
while the tax return stated that Jinfu USA was wholly owned by
CEO B, it was reasonable for Commerce to conclude that the 2003
document was not alone sufficient to establish ownership on
November 2, 2002.
16
(...continued)
as part of the consideration for the transfer. See Pl.’s Br. at
13.
Court No. 04-00597 Page 25
Based on the foregoing, the court finds that there is no
evidence that Jinfu USA was the name of a corporate entity on
November 2, 2002. Likewise, nothing indicates that any ownership
interest in either Yousheng USA or Jinfu USA was transferred to
CEO B on or before November 2, 2002. While CEO B may have made
some effort to obtain ownership of Yousheng USA and then change
its name to Jinfu USA, the record does not reflect that he was
successful in doing so by November 2, 2002. Thus, the court
cannot find as unsupported by substantial evidence Commerce’s
determination that CEO B did not have sole ownership of either
Yousheng USA or Jinfu USA as of the claimed new shipper sale.
C. Evidence of Affiliation: Control
A conclusion with respect to ownership does not end the
court’s inquiry as a finding of affiliation does not rest on
ownership. In this regard, plaintiff further asserts that the
Department unreasonably concluded that CEO B was not in a
position to exercise control over either Yousheng USA or Jinfu
USA within the meaning of 19 U.S.C. §§ 1677(33)(F) or (G) on
November 2, 2002. See Pl.’s Br. at 27. According to plaintiff,
Commerce disregarded the changes to affiliation law imposed by
the Uruguay Round Agreements Act of 199417 with respect to the
17
The Uruguay Round Agreements Act of 1994 modified the
then existing law to include, among other things, subsection (G),
(continued...)
Court No. 04-00597 Page 26
importance of control to the agency’s analysis, as well as this
Court’s interpretation of those changes. See id. at 28.
Plaintiff first disputes the Department’s finding that the
record was devoid of evidence demonstrating CEO B’s potential to
influence Jinfu USA’s sales or pricing decisions. See Issues &
Decision Mem. at 26. In particular, plaintiff directs the
court’s attention to the interview with Mr. A, who became
Yousheng USA’s resident officer. For plaintiff,
[Commerce’s] U.S. Sales Verification Report of May 5,
2004, . . . summarized [the] interview of [Mr. A],
which unequivocally confirmed that [CEO B] controlled
Jinfu-USA. The [Department’s] conclusion also is
contradicted by the communications between [Mr. A] and
[CEO B], which confirm that [CEO B] approved [Mr. A’s]
sales price to Jinfu-USA’s customer. Finally, [the
Department’s] conclusion ignores all of the evidence
presented by the parties regarding the transfer of
ownership of Jinfu-USA to [CEO B]. Thus, even if the
parties did not complete the legal niceties of
transferring ownership prior to the actual sales
transactions in issue, there can be no serious dispute
that [CEO B] attempted to acquire 100% ownership of
Jinfu-USA and that [CEO B] and [Mr. A’s] business
relationship was based on their mutual understanding
that [CEO B] owned Jinfu-USA. . . .
Pl.’s Br. at 29.
17
(...continued)
which added the notion of control to the statute. See H.R. Doc.
No. 103-465 at 838, reprinted in 1994 U.S.C.C.A.N. (108 Stat.)
4041, 4174. As the Statement of Administrative Action states,
“[t]he Administration believe[d] that including control in the
definition of ‘affiliated’ [would] permit a more sophisticated
analysis which better reflects the realities of the marketplace.”
Id.Court No. 04-00597 Page 27
Thus, plaintiff challenges the Department’s finding that
Jinfu PRC and Yousheng USA or its successor Jinfu USA “had an
ongoing, arm’s-length commercial relationship established for the
mutual benefit of each party.” Issues & Decision Mem. at 27; see
also Pl.’s Br. at 29–30. According to plaintiff, “the
communications between the parties verified by the [Department]
clearly establish that [Mr. A] advised [CEO B] of all material
aspects of his resale, including the name of the U.S. customer,
and that the resale by Jinfu-USA was not finalized until the
resale price had been approved by [CEO B].” Pl.’s Br. at 30.
Thus, plaintiff argues that it did not deal with Yousheng USA or
its successor Jinfu USA at arm’s length, but rather enjoyed
substantial control over the company’s business decisions,
particularly those dealing with pricing.
As previously noted, a finding of control requires proof
that one person is legally or operationally in a position to
exercise restraint or direction over the other person, and that
“the relationship with the third party must have the potential to
impact decisions concerning the production, pricing, or cost of
the subject merchandise.” TIJID, Inc. v. United States, 29 CIT
__, __, 366 F. Supp. 2d 1286, 1293 (2005); see also 19 U.S.C. §
1677(33).
Court No. 04-00597 Page 28
Here, the court finds that the record contains definite and
uncontroverted evidence that CEO B not only had the potential to
influence what was then Yousheng USA’s pricing decisions, but, in
fact, exercised that control; and further that Mr. A believed his
resale prices were subject to CEO B’s approval. Indeed, the
record leaves little doubt that CEO B, while he may not have
owned the U.S. entity,18 certainly controlled that company’s
pricing decisions. In addition, Commerce fails to cite
substantial evidence that would support the opposite conclusion.
Therefore, the court finds that Commerce unreasonably concluded
that the two entities were not affiliated.
Support for this finding is found primarily in the
Department’s verification report. For instance, in the report,
Mr. A explains that for transactions where he resells honey
originally purchased from Jinfu PRC, he takes the following
steps:
(1) negotiate material terms of sale with U.S.
customer; (2) enter a non-binding sales contract with
the U.S. customer; (3) purchase merchandise from Jinfu
in the PRC; (4) inform [CEO B] by telephone of
finalized . . . material terms of sale and fax him a
copy of the sales contract; (5) receive bill of lading,
which includes on-board date of the merchandise; (6)
18
With respect to the question of affiliation, it is
simply immaterial that as of November 2, 2002, Yousheng USA had
not yet been renamed Jinfu USA. Whatever the name at a
particular time, Yousheng USA and Jinfu USA were the same
corporation.
Court No. 04-00597 Page 29
receive shipping notification of estimated arrival
date; (7) prepare sales invoices for estimated arrival
date; and (8) issue invoice to the U.S. customer once
the merchandise has cleared FDA.
Pl.’s App. 13 at 7. For the sale in question, Mr. A stated that:
Subsequent to his negotiations with [Customer C], . . .
[Mr. A] faxed a letter to [CEO B] relaying the result
of his negotiations . . . and U.S. honey market
research. . . . In a reply fax, [CEO B] agreed that
the sale with [Customer C] was a good opportunity for
Jinfu USA and that the negotiated price was reasonable.
As such, . . . [Mr. A] entered into a sales contract
with [Customer C] . . . .
Id. at 6–7.
As a result, the fax sent by Mr. A to CEO B on November 13,
2002, read as follows:
Firstly, I would like to report you that the current
market price of honey in the United States is between
[[ ]] and [[ ]] per pound. Because of the
sharp reduction of the export of honey from other
countries, the domestic sales and price of honey in the
United States is very promising.
I contacted a US local client who was willing to order
a container of honey at the ex-warehouse price of [[
]] USD per ton on the condition that it can pass
the examination of US customs and FDA. Since the
annual purchasing amount of this client is relatively
significant, if a good relationship can be established
with this client, it will be of great help to our
company’s sales to the US.
Please let me know you[r] opinion and advise me
further.
Pl.’s App. 7. CEO B sent a reply fax on the same day stating
that:
We received you[r] letter and felt happy that there are
clients are [sic] interested in the honey product of
Court No. 04-00597 Page 30
our company. You did a good job on the report of the
US market. We finished a container . . . on November
5.
In order to open the US market and better understand
the marketing information, I agree with you. We accept
the client’s quotation of [[ ]] USD per ton19 as
ex-warehouse price on the condition that it passes the
examination of the US customs and FDA. Please make the
preparation and keep in touch with the client for
purpose of long term cooperation. I hereby authorize
you to sign contract with the client.
Id.This evidence demonstrates that CEO B exercised control over
Yousheng USA’s resale price of the honey to Customer C. In his
reply to Mr. A, CEO B stated that “[w]e accept the client’s
quotation of [[ ]] USD per ton . . . .” Id. That is,
based on the quoted price, he authorized Mr. A to enter into the
transaction. See id. In addition, when speaking of the benefits
of the Customer C deal, Mr. A stated that “it will be of great
help to our company’s sales to the US.” Id. The reference to
“our” company can only be understood as a broad reference to
“Jinfu Trading,” which would encompass both Jinfu PRC and
Yousheng USA. Thus, the faxes indicate that Mr. A did not enter
into the transaction at the quoted price before getting the
approval of CEO B, and that he believed he was working for a
19
The sale price between Jinfu PRC and Yousheng USA was
[[ ]] USD per ton. See Jinfu PRC’s Response to First
Supplemental Section A & C Questionnaire at 7.
Court No. 04-00597 Page 31
single enterprise encompassing Jinfu PRC and Yousheng USA.
The record also demonstrates that Mr. A believed that his
resale prices were subject to CEO B’s control and indeed acted in
accordance with that belief. In addition to the faxes, the
Department’s discussion with Mr. A reveals that, after
negotiating a deal with a U.S. customer, Mr. A would enter a non-
binding contract with that customer, and then notify CEO B of the
pending transaction.20 See id. Once the agreed-upon price was
approved by CEO B, Mr. A would finalize the U.S. transaction.
This clearly shows that Mr. A believed he was subject to CEO B’s
control. Further, the record contains several references by Mr.
A to Jinfu PRC as his company’s “affiliate.” See, e.g., id. at 3(“[Mr. A] stated that Jinfu USA’s parent company, and only
affiliate, is Jinfu in the PRC.”); see also id. at 9 (“[Mr. A]
stated that Jinfu USA only purchases honey from its affiliate,
Jinfu in the PRC.”). Thus, it is apparent that Mr. A understood
that his pricing decisions were subject to CEO B’s approval on
November 2, 2002. At no point does the Department demonstrate
that it considered the relevance of this evidence with respect to
20
In the verification report, the Department noted that
“[a]ccording to [Mr. A], within his culture sales contracts are
not considered to be binding, and therefore, can be broken at any
time.” Pl.’s Conf. App. 13 at 7 n.1. This does not, however,
alter the fact that Mr. A would not finalize a transaction with a
U.S. customer unless and until he had received CEO B’s approval.
Court No. 04-00597 Page 32
the potential for CEO B to control Yousheng USA’s resale price
and his actual control of the price in the November 2, 2002
transaction. Rather, Commerce rests its finding on evidence
relating to the ownership of the company. See, e.g., Issues &
Decision Mem. at 21 (“For purposes of these final results, we
continue to find that Jinfu PRC and Jinfu USA were not affiliated
based on our analysis of record evidence demonstrating that Jinfu
PRC did not own Jinfu USA at the time of the relevant U.S.
sale.”). Therefore, the court finds that Commerce has not
supported with substantial evidence its conclusion that Mr. A
acted independently from CEO B’s control, and that, in fact, the
cited record evidence demonstrates the opposite conclusion. See
19 C.F.R. § 351.102(b); see also Ta Chen Stainless Steel Pipe, 23
CIT at 809, 811 (finding control where, among other things, the
controlled company had been established by officers and managers
of the controlling company, and where the controlled company only
distributed the controlling company’s products).
CONCLUSION
Therefore, in accordance with the foregoing, the court finds
that Commerce’s conclusions with respect to affiliation in the
Final Results are not supported by substantial evidence and,
thus, remands this case. On remand, Commerce is directed to
either find that Jinfu PRC and Yousheng USA were affiliated as of
Court No. 04-00597 Page 33
November 2, 2002, and to reinstate plaintiff’s new shipper
review, or to provide other record evidence to support its
conclusion that the companies were not affiliated. In the event
that the Department does not concur with the court’s finding, it
shall reopen the record to provide plaintiff with an opportunity
to place thereon further evidence with respect to affiliation and
to provide an explanation of that evidence. Remand results are
due December 6, 2006. Comments are due January 5, 2007. Replies
to such comments are due January 16, 2007.
/s/Richard K. Eaton
Richard K. Eaton
Dated: September 7, 2006
New York, New York