Laizhou Auto Brake Equipment Co. v. United States , 32 Ct. Int'l Trade 711 ( 2008 )


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  •                          Slip Op. 08-71
    UNITED STATES COURT OF INTERNATIONAL TRADE
    Before: Nicholas Tsoucalas, Senior Judge
    ________________________________________
    LAIZHOU AUTO BRAKE EQUIPMENT COMPANY;    :
    LONGKOU HAIMENG MACHINERY CO., LTD.;     :
    LAIZHOU LUQI MACHINERY CO., LTD.;        :
    LAIZHOU HONGDA AUTO REPLACEMENT          :
    PARTS CO., LTD.;                         :
    HONGFA MACHINERY (DALIAN) CO.; and       :
    QINGDAO GREN (GROUP) CO.                 :
    :
    Plaintiffs,                    :
    : Court No.:   06-00430
    and                            :
    :
    LONGKOU TLC MACHINERY CO., LTD.          :
    :
    Plaintiff-Intervenor,          :
    :
    v.                             :
    :
    UNITED STATES OF AMERICA,                :
    :
    Defendant,                     :
    :
    and                            :
    :
    COALITION FOR THE PRESERVATION OF        :
    AMERICAN BRAKE DRUM AND ROTOR            :
    AFTERMARKET MANUFACTURERS                :
    :
    Defendant-Intervenor.          :
    ________________________________________:
    June 26, 2008
    Held:   The  United   States  Department   of  Commerce’s     Final
    Determination sustained in part, remanded in part.
    Trade Pacific PLLC, (Robert G. Gosselink) for Laizhou Auto Brake
    Equipment Company; Longkou Haimeng Machinery Co., Ltd.; Laizhou
    Luqi Machinery Co., Ltd.; Laizhou Hongda Auto Replacement Parts
    Co., Ltd.; Hongfa Machinery (Dalian) Co.; and Qingdao Gren (Group)
    Co.; Plaintiffs.
    Court No. 06-00430                                           Page 2
    Gregory G. Katsas, Acting Assistant Attorney General, Commercial
    Litigation Branch, Civil Division, United States Department of
    Justice, Jeanne Davidson, Director, Commercial Litigation Branch,
    Civil Division, United States Department of Justice, Patricia M.
    McCarthy, Assistant Director, Commercial Litigation Branch, Civil
    Division, United States Department of Justice (Courtney Sheehan);
    Of Counsel: Melanie A. Frank, Office of Chief Counsel, Department
    of Commerce, for the United States, Defendant.
    Porter, Wright, Morris & Arthur, LLP, (Leslie Alan Glick) for The
    Coalition for the Preservation of American Brake Drum and Rotor
    Aftermarket Manufacturers, Defendant-Intervenor.
    OPINION
    TSOUCALAS, Senior Judge: This matter is before the Court on a
    motion   for   judgment   upon   the   agency   record   brought   by   the
    Plaintiffs pursuant to USCIT Rule 56.2.1
    Plaintiffs challenge numerous aspects of the U.S. Department
    of Commerce’s final determination with respect to the eighth
    antidumping administrative review of the antidumping order in Brake
    Rotors From the People’s Republic of China: Final Results and
    Partial Rescission of the 2004/2005 Administrative Review and
    Notice of Rescission of 2004/2005 New Shipper Review (“Final
    Determination”), 
    71 Fed. Reg. 66304
     (Nov. 14, 2006).          Plaintiffs
    contend certain aspects of Commerce’s determination is contrary to
    law, constitutes an abuse of discretion and is not supported by
    substantial evidence on the record. See Revised Mem. of P. & A. in
    1
    Plaintiff-Intervenor Longkou TLC Machinery Co., Ltd. filed
    a notice of dismissal on July 18, 2007 and is not a party to this
    case.
    Court No. 06-00430                                                       Page 3
    Supp. of Pls.’ Mot. for J. upon the Agency R. (“Pls.’ Br.”).2                      For
    the    reasons       set    forth    below,   the   Court     sustains    the     Final
    Determination in part, and remands it in part.
    BACKGROUND
    Laizhou       Auto    Brake   Equipment      Company   (“LABEC”);    Longkou
    Haimeng Machinery Co., Ltd. (“Haimeng”); Laizhou Luqi Machinery
    Co., Ltd. (“Luqi”); Laizhou Hongda Auto Replacement Parts Co., Ltd.
    (“Hongda”); Hongfa Machinery (Dalian) Co. (“Hongfa”); and Qingdao
    Gren       (Group)   Co.    (“Gren”)    (collectively       “Plaintiffs”)   contest
    aspects of the U.S. Department of Commerce’s Final Determination.
    Plaintiffs are producers and exporters of the subject merchandise
    covered by the antidumping duty order on brake rotors from the
    People’s Republic of China.
    On April 1, 2005, Commerce published a notice of opportunity
    to request an administrative review of the antidumping duty order
    of brake rotors from China for the period April 1, 2004 through
    March 31, 2005 (“the period of review” or “POR”).                 See Antidumping
    or Countervailing Duty Order, Finding, or Suspended Investigation;
    Opportunity to Request Administrative Review, 
    70 Fed. Reg. 16799
    .
    On May 27, 2005, Commerce initiated the eighth administrative
    review of brake rotors from China for twenty-seven individually
    2
    Unless otherwise noted, reference to all documents herein
    shall refer to the public version of those documents.
    Court No. 06-00430                                                    Page 4
    named      firms.     See    Notice    of    Initiation   of    Antidumping        and
    Countervailing        Duty    Administrative        Reviews    and   Request       for
    Revocation in Part (“Initiation Notice”), 
    70 Fed. Reg. 30694
    .
    On June 7, 2005, Commerce issued a letter to all firms named
    in the Initiation Notice indicating that “[d]ue to the large number
    of   requests       for   administrative      review    and    the   Department’s
    experience regarding the resulting administrative burden to review
    each company for which a request has been made, the Department is
    considering to exercise its authority to select respondents by
    sampling,”     and    requiring       that   each   company    subject      to   this
    administrative review submit certain business information.                   Letter
    to   All    Interested      Parties,    Public   Record   (“PR”)     Doc.    No.    5.
    Plaintiffs’ responded to Commerce’s request on June 24, 2005.3 See
    Letters from Law Firm of Trade Pacific, Confidential Record (“CR”)
    Doc. Nos. 5, 7, 8, 10 and 12; Pls.’ Br. at 4.             On October 14, 2005,
    Commerce instructed interested parties that it had decided to use
    a probability-proportional-to-size (“PPS”) sampling methodology to
    limit the number of respondents in the review (“Sample Proposal
    Letter”).4     See Sample Proposal Letter, PR Doc. No. 91.                  Commerce
    indicated in the Sample Proposal Letter that it intended to include
    3
    Commerce sent another letter on September 15, 2005
    requesting additional information to which Plaintiffs responded
    on September 19, 2005. Pls.’ Br. at 5.
    4
    Commerce stated that it intended to individually review
    four respondents. See Sample Proposal Letter.
    Court No. 06-00430                                               Page 5
    in the calculation of the sample rate any respondent margins based
    on facts available, including adverse fact available, zero and de
    minimis rates.
    After receiving comments on its proposed sampling method from
    several of the Plaintiffs, Commerce announced in a letter dated
    November 10, 2005 (“Sample Decision Letter”), that it decided to
    apply the PPS methodology previously described in its Sample
    Proposal Letter.5        See Sample Decision Letter, PR Doc. No. 98.
    Commerce noted that it would individually review five companies,
    adding     that   “if   a     respondent   selected   for   review    fails   to
    participate in the review, the Department will not choose another
    respondent in its place.” On November 16, 2005, Commerce conducted
    its sampling and chose the five companies to be individually
    examined.6    See Released Letter to Interested Parties, PR Doc. No.
    100.
    Ultimately,      the     administrative   review     covered    sixteen
    5
    Plaintiffs LABEC, Haimeng, Hongda, Hongfa and Luqi
    submitted comments on October 24, 2005, among other things,
    contesting the inclusion in the sample rate of any respondent
    margins that were based on facts available. See Repondents
    Comments re Sampling Methodology Letter, PR Doc. No. 96.; Pls.’
    Br. at 7.
    6
    Among the five companies chosen were Plaintiffs Hongfa
    and Haimeng. Plaintiffs LABEC, Luqi, Hongda and Gren were not
    among the sampled group. The three companies chosen for the
    sampled group who are not a party to this case are Qingdao Meita
    Automotive Industry Co., Ltd.; Yantai Winhere Auto-Part
    Manufacturing Co., Ltd.; and Xiangfen Hengtai Brake Systems Co.,
    Ltd. See Preliminary Results at 26737; Complaint at 3.
    Court No. 06-00430                                              Page 6
    participating firms, including all of the Plaintiffs.            See Brake
    Rotors From the People’s Republic of China: Preliminary Results and
    Partial Rescission of the 2004/2005 Administrative Review and
    Preliminary Notice of Intent to Rescind of 2004/2005 New Shipper
    Review (“Preliminary Results”), 
    71 Fed. Reg. 26736
     (May 8, 2006).7
    In the Preliminary Results, Commerce assigned an adverse facts
    available rate of 43.32% to mandatory respondent Hengtai Brake
    Systems Co., Ltd. (“Hengtai”), based on Hengtai’s failure to
    provide   Commerce   with   accurate   and   complete   data.     Commerce
    included that 43.32% adverse facts rate in the calculation of the
    sample antidumping duty rate (the “sample rate”) for the non-
    sampled respondents (including Plaintiffs LABEC, Hongda, Luqi and
    Gren).    In its Final Determination Commerce confirmed the adverse
    facts available rate was warranted as to Hengtai and again included
    that 43.32% adverse facts rate in the calculation of the group
    sample rate assigned to the non-sampled respondents. See 
    71 Fed. Reg. 66304
    .
    Plaintiffs seek judgment on the agency record under USCIT Rule
    56.2 with respect to six issues.       Three issues involve Commerce’s
    valuation of certain factors of production (i.e., pig iron, steel
    7
    Of the twenty-seven firms named in the Initiation Notice,
    only eighteen had shipments of subject merchandise into the U.S.
    during the POR, and two of those were participating in an on-
    going new shipper review. The resulting administrative review,
    therefore, covered sixteen firms, including all the Plaintiffs.
    See Preliminary Results, 71 Fed. Reg. at 26737.
    Court No. 06-00430                                      Page 7
    scrap, and labor wage rate), and three issues involve certain
    decisions Commerce undertook with regard to the calculation and
    application of a sample antidumping rate.
    JURISDICTION
    The Court has jurisdiction over this matter pursuant to 19
    U.S.C. § 1516a(a)(2) and 
    28 U.S.C. § 1581
    (c).
    STANDARD OF REVIEW
    In reviewing Commerce’s antidumping duty determination, the
    Court will uphold such determination unless it is “unsupported by
    substantial evidence on the record, or otherwise not in accordance
    with law.”   19 U.S.C. § 1516a(b)(1)(B)(i) (2000).      Substantial
    evidence is “more than a mere scintilla.     It means such relevant
    evidence as a reasonable mind might accept as adequate to support
    a conclusion.” Universal Camera Corp. v. NLRB, 
    340 U.S. 474
    , 477
    (1951) (quoting Consolidated Edison Co. v. NLRB, 
    305 U.S. 197
    , 229
    (1938)).   Substantial evidence “is something less than the weight
    of the evidence, and the possibility of drawing two inconsistent
    conclusions from the evidence does not prevent an administrative
    agency's finding from being supported by substantial evidence.”
    Consolo v. Federal Maritime Comm'n, 
    383 U.S. 607
    , 620 (1966)
    (citations omitted).
    Court No. 06-00430                                           Page 8
    DISCUSSION
    I.   Analysis of Surrogate Value Issues
    In    an   antidumping   investigation,   Commerce   must   determine
    whether the subject merchandise is being, or is likely to be, sold
    at less than fair value in the United States by comparing the
    export price with the normal value of the merchandise. See 19
    U.S.C. § 1677b(a). In cases involving exports from a nonmarket
    economy (“NME”), Commerce must determine normal value “on the basis
    of the value of the factors of production utilized in producing the
    merchandise.”8 19 U.S.C. § 1677b(c)(1).
    According to the statute, Commerce must value 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.”        19 U.S.C. § 1677b(c)(1).        The
    statute does not define “best available information.”
    In this review Commerce calculated normal value by multiplying
    8
    The relevant portion of 19 U.S.C. § 1677b(c)is set forth
    below:
    (c) Nonmarket economy countries
    (1) In general
    If- (A) the subject merchandise is exported from a nonmarket
    economy country, and
    (B) the administering authority finds that available information
    does not permit the normal value of the subject merchandise to be
    determined under subsection (a) of this section,
    the administering authority shall determine the normal value of
    the subject merchandise on the basis of the value of the factors
    of production utilized in producing the merchandise.
    Court No. 06-00430                                                 Page 9
    the reported per unit factor quantities by publicly available
    Indian surrogate values.      See Def.’s Resp. in Opp’n to Pls.’ Mot.
    for J. upon the Agency R. (“Commerce Br.”) at 28. Commerce notes
    that it considered the “quality, specificity, and contemporaneity
    of the data.”    Id.
    Plaintiffs contest Commerce’s Final Determination with respect
    to three factors of production: (i) pig iron,              (ii) steel scrap,
    and (iii) labor wage rate.
    A.   Selection of Import Data to Value Pig Iron
    In order to value pig iron, Commerce used publicly available
    import statistics obtained from the World Trade Atlas (“WTA”)
    relating to India.        Commerce selected Harmonized Tariff System
    (“HTS”) subheading 7201.10.00 for this product, which covers non-
    alloy pig iron containing less than 0.5% phosphorus.                   See Issues
    and Decision Memorandum for the Final Results in the 2004/2005
    Administrative Review and New Shipper Review of Brake Rotors from
    the   People’s   Republic    of     China   (the    “Issues      and     Decision
    Memorandum”) at 23.
    Plaintiffs argue that Commerce’s valuation is unsupported by
    substantial evidence and contrary to law. Specifically, Plaintiffs
    contend that Commerce should have used the publicly-available
    information   that     Plaintiffs   submitted      from   four   Indian     steel
    producers for valuation, which in total purchased and consumed
    Court No. 06-00430                                                      Page 10
    681,675.70 metric tons of pig iron during the POR.                    See Pls.’ Br.
    at   24.   Plaintiffs     note   that    during    the    POR        India   imported
    approximately     6,860   metric   tons    of     pig    iron    under       this    HTS
    subheading.9    Id. at 24.
    Additionally, Plaintiffs point to prior decisions of the Court
    to argue that (i) in order for Commerce to use import data “there
    must be reason to believe that the industry in question would use
    imported inputs,” Dorbest Ltd. v. United States, 
    462 F. Supp. 2d 1262
    , 1278 (2006), and (ii) Commerce may use import statistics as
    the basis for a surrogate value only “after concluding that they
    {the import statistics} are based on commercially and statistically
    significant quantities,” Polyethylene Retail Carrier Bag Committee
    v. United States, 
    29 CIT 1418
    , 1444 (2005) (alteration in original)
    (citing Shanghai Foreign Trade Enter. Co. v. United States, 
    318 F. Supp. 2d 1339
    , 1352-53 (2004)).          See Pls.’ Br. at 26.
    In defense of its position, Commerce explains that it used the
    WTA data because it was “contemporaneous with the period of review
    and . . . specific to the inputs used in the production of subject
    merchandise.” Commerce Br. at 30-31.              Commerce further explains
    that it did not use the alternative surrogate value data proposed
    by   Plaintiffs   because    “it   was    not   specific        to    the    types    of
    9
    Plaintiffs point out that the amount encompassed in
    their alternative data is about 100 times the quantity imported
    into India during the same period. See Pls.’ Br. at 24.
    Court No. 06-00430                                                Page 11
    materials used by the Chinese producers in the review.”10             Id. at
    31.   Commerce adds that the raw material values reported for one of
    the Indian companies related to “inter plant transfers,” which
    raises     questions   as   to   whether   these   sales   were   arms-length
    transactions.    Id. at 32.      Lastly, Commerce notes that the WTA data
    “represent a broader, overall more representative data source”
    because it was collected from imports into all of India, as opposed
    to collected from a few select companies. Id.
    In examining the record and considering the arguments the
    Court finds that Commerce’s determination, that the WTA data
    constituted the best available information for valuing pig iron,
    was reasonable and based on substantial evidence on the record. In
    the process, Commerce determined that a relatively smaller amount
    of data that was representative (in both contemporaneity and
    specificity to the raw material at issue) was preferable in this
    case to a larger amount of data whose representativeness was
    dubious.     Plaintiffs’ arguments supporting their alternative data
    as a better valuator of pig iron fall in one of two categories: (i)
    the amount of steel imported into India is objectively low and
    therefore likely to be commercially insignificant; and (ii) the
    Indian companies data is of a much larger sample size and therefore
    10
    Commerce noted that two of the Indian companies did not
    specify the types of pig iron consumed in the production of their
    merchandise. Commerce Br. at 32.
    Court No. 06-00430                                           Page 12
    is better.    As Commerce has demonstrated, both contentions are
    flawed.
    Commerce answers Plaintiffs’ argument that the volume of
    import trade is too small to be significant by noting correctly
    that “a smaller volume of trade may still be commercially or
    statistically   significant   if    it   includes   values    that     are
    representative of the product in question.” Commerce Br. at 33.
    Here, Commerce has sufficiently detailed the representativeness of
    the WTA data set.      Additionally, in its Issues and Decision
    Memorandum,   Commerce notes that the volume of non-alloy pig iron
    imported into India “significantly exceeds the volume of pig iron
    consumed by several of the respondents.”     See Issues and Decision
    Memorandum at 25.
    As to the alternative data set pertaining to the Indian
    companies, Commerce adequately detailed the numerous reasons why
    that data was not preferable.      Commerce explained, for instance,
    that a few of the Indian companies did not specify the types of pig
    iron consumed in the production process and therefore Commerce
    could not be confident that the data from the Indian companies is
    specific to the type of pig iron consumed in the production of the
    subject merchandise here.11   Commerce Br. at 32.
    11
    Plaintiffs contention that “it is not clear . . . that
    the ‘pig iron’ being imported into India under HTS 7201.10.00 is
    similar to the pig iron consumed by the mandatory respondents,”
    (continued...)
    Court No. 06-00430                                          Page 13
    Lastly, Plaintiffs’ reliance on Dorbest for the proposition
    that in order for Commerce to use import data “there must be reason
    to believe that the industry in question would use imported inputs”
    is misplaced, as the quoted language is taken out of context.
    Dorbest,        
    462 F. Supp. 2d at 1278
    . Commerce need only show why
    domestic data is not reliable, or less reliable than the import
    data, which it has done here.12
    It is clear that a larger data set, in and of itself, is not
    necessarily better in valuing factors of production than a smaller
    one.        As is the case here, representativeness and reliability are
    two important factors that distinguish one data set from another.
    The representativeness and reliability of the WTA data set is
    discussed above, and the record here shows that as a data set it
    was contemporaneous with the period of review, specific to the
    inputs used in the production process, and was broadly collected
    11
    (...continued)
    is not convincing. Reply Mem. in Supp. of Mot. for J. upon the
    Agency R. (“Pls.’ Reply Br.”) (confidential version) at 20. The
    facts Plaintiffs cite, without anything more, do not weaken
    Commerce’s determination as to the representativeness of the
    data. See id. at 20-21.
    12
    Dorbest states that “[i]f it is unlikely that the domestic
    industry would use imported inputs, and there is domestic data
    available, then Commerce’s choice of import data to value factor
    inputs may not be reasonable.” 
    462 F. Supp. 2d at 1279
    . Contrary
    to Plaintiffs’ contention, there is no prerequisite that Commerce
    establish in all cases that the industry in question would use
    imported inputs. Commerce has established here that the domestic
    data, although available, is less reliable than the WTA import
    data, and therefore it is not the best available information.
    Court No. 06-00430                                             Page 14
    from imports into all of India as opposed to from a few companies.
    Plaintiffs’ proposed data set, in contrast, was collected from a
    handful of companies and was found lacking in specificity to the
    inputs used in the production process.
    The Court must therefore conclude that the WTA import data is,
    whatever    its   failings,   the   best   available    information      for
    calculating this factor of production.      For all the reasons above,
    the Court is satisfied that Commerce’s determination here is
    reasonable and based on substantial evidence on the record.
    B.    Valuation of Steel Scrap
    Commerce valued the industrial metal scrap that Plaintiffs
    purchased and consumed in the production of brake rotors using HTS
    classification 7204.10.00, which covers “cast iron scrap.”13             See
    Issues and Decision Memorandum at 28. Commerce explains that it
    used the cast iron scrap category because the foreign producers
    indicated in their submissions that they consumed “steel scrap,
    including   scrapped   and    rejected   rotors,   as   well   as   casting
    strands/handles (extrusions from the actual rotor that are removed)
    and filings from the lathing process.”       Commerce Br. at 33 citing
    Plaintiffs Haimeng and Hongfa’s Questionnaire Responses, CR Doc.
    13
    Commerce notes that this was an option suggested by
    certain of the Plaintiffs as an alternative to the “other ferrous
    scrap” classification they sought during the administrative
    proceedings. Commerce Br. at 33.
    Court No. 06-00430                                                  Page 15
    Nos. 63, 64. Commerce further explains that because “the scrap was
    comprised of casting strands and handles, as well as scrapped and
    rejected rotors (which in this case are made from gray cast iron),”
    it selected the HTS classification corresponding to cast iron
    scrap. Commerce Br. at 33. Commerce concludes that “because these
    are cast iron brake rotors the most relevant steel scrap to value
    for this factor of production would be cast iron steel scrap.”                Id.
    at 34.
    Lastly, Commerce argues that “the basket category proposed by
    plaintiffs would not include cast iron scrap - the predominant
    scrap used in the production of these cast iron rotors.” Id. at 35.
    Plaintiffs        argue   that      Commerce     should     have   used HTS
    classification 7204.49.00, which covers “other ferrous scrap” to
    value the steel scrap purchased by Plaintiffs. Pls.’ Br. at 32.
    Plaintiffs argue that the “other ferrous scrap” category is more
    specific to the factor of production being valued and “is of better
    quality because it covers a larger volume of imports.”                  Id.
    The    crux      of   Plaintiffs’    argument     is   that   Commerce   is
    incorrectly “focusing on the production process rather than on the
    specific factor to be valued.” Pls.’ Reply Br. at 13. Plaintiffs
    admit    that   the    brake   rotor     production    process     includes   the
    reintroduction of scrapped and rejected rotors but contend that
    “the issue is not what types of scrap generally are used in the
    production process [but] [r]ather . . . what type of scrap did the
    Court No. 06-00430                                        Page 16
    respondents report in the factor field ‘STLSCRAP,’ which Commerce
    needs to value in the calculation of normal value.” Id. Plaintiffs
    state that there is no such thing as “cast iron steel scrap” and
    argue that this “misunderstanding exposes the irrationality of
    Commerce’s conclusion that an iron scrap price would ever be a
    preferred surrogate price for valuing steel scrap.” Id. at 15.
    Plaintiffs, by way of support, point to the fact that Commerce
    itself states in its brief that invoices obtained during the
    verification process indicated that the input was “steel scrap.”14
    See id. at 16; Commerce Br. at 35. Furthermore, Plaintiffs contend
    that Commerce’s statement that cast iron scrap is the predominant
    scrap used in the production process is “patently false.”       Pls.’
    Reply Br. at 16, n.3.
    Finally, in Plaintiffs’ Reply Brief they contend that in the
    two subsequent administrative reviews of brake rotors from China
    (i.e., the final results of the ninth review and the preliminary
    results of the tenth review), Commerce has valued the steel scrap
    under subheading 7204.49.00 (“other ferrous scrap”) of the HTS, as
    Plaintiffs argue should have been done in this review.15      See id.
    14
    Commerce notes that invoices obtained during its
    verification process “indicated that the input was ‘steel scrap’
    and did not indicate the exact type of scrap.” Commerce Br. at
    35.
    15
    See Brake Rotors From the People’s Republic of China:
    Final Results of Antidumping Duty Administrative and New Shipper
    (continued...)
    Court No. 06-00430                                     Page 17
    at 16-17.
    In reviewing the record and arguments of both sides, the Court
    finds that Commerce failed to adequately explain its decision to
    value the steel scrap at issue here, if it is in fact “steel”
    scrap, under HTS classification 7204.10.00. The parties here agree
    generally on the type of scrap Plaintiffs use in the production
    process (i.e., some combination of cast iron scrap (from casting
    strands, handles and rejected rotors) and steel scrap).   It is not
    clear, however, in what proportion each is used, nor if both should
    even be considered in this factor of production valuation of what
    both parties refer to as “steel” scrap.   Commerce does not address
    Plaintiffs’ argument that the scrap composed of scrapped and
    rejected rotors is not properly accounted for here, nor does it
    support with evidence its statement that cast iron scrap is the
    predominant scrap used in the production process.
    The Court therefore remands back to Commerce to specifically
    address and adequately explain (i) whether the rejected rotors,
    casting strands/handles, etc., reintroduced into the production
    process should be properly accounted for in this specific factor of
    15
    (...continued)
    Reviews and Partial Rescission of the 2005/2006 Administrative
    Review (the “Ninth Review”), 
    72 Fed. Reg. 42386
     (August 2, 2007);
    Brake Rotors From the People’s Republic of China: Preliminary
    Results of the 2006/2007 Administrative and New Shipper Reviews
    and Partial Rescission of the 2006/2007 Administrative Review
    (the “Tenth Review”), 
    73 Fed. Reg. 6700
     (February 5, 2008).
    Court No. 06-00430                                     Page 18
    production analysis; (ii) the composition of the predominant scrap
    used in the production process; (iii) Plaintiffs’ argument that
    Commerce should be solely focusing on the type of scrap the
    respondents reported in the factor field “STLSCRAP”;      and (iv)
    whether it has in fact reassessed its position in subsequent
    reviews as to the proper HTS classification of the scrap at issue
    here.
    C.   Calculation of Labor Rate
    When constructing the “normal value” of products from NMEs
    under 19 U.S.C. § 1677b(c), Commerce is required to value the
    “hours of labor required” as a factor of production.    Commerce’s
    regulations provide that when valuing labor rates for NMEs it will
    use regression-based wage rates reflective of the
    observed relationship between wages and national income
    in market economy countries. [Commerce] will calculate
    the wage rate to be applied in nonmarket economy
    proceedings each year. The calculation will be based on
    current data, and will be made available to the public.
    
    19 C.F.R. § 351.408
    (c)(3).   Consistent with this statute Commerce
    publishes a single set of labor wage rates that are applicable to
    all NMEs during the period. See Commerce Br. at 36.
    In order to better understand the issue and arguments involved
    here an abbreviated timeline of the relevant events is necessary:
    •    May 23, 2005: Commerce initiated the underlying administrative
    Court No. 06-00430                                                   Page 19
    review in this case;
    •    June 30, 2005: Unrelated to the administrative review here,
    Commerce sought comments on its regression-based methodology
    for   calculating       NME   wage   rates   (See    Expected    Non-Market
    Economy Wages: Request for Comment on Calculation Methodology,
    
    70 Fed. Reg. 37761
    );
    •    May 8, 2006: Commerce published the Preliminary Results,
    applying to the margin calculation for the mandatory sampled
    respondents a surrogate PRC wage rate of $0.97 per hour;
    •    October       19,    2006:    Commerce    published     its     antidumping
    methodologies announcement. See Antidumping Methodologies:
    Market Economy Inputs, Expected Non-Market Economy Wages, Duty
    Drawback;      and    Request    for     Comments,    (the     “Antidumping
    Methodologies Announcement and Requests for Comments”) 
    71 Fed. Reg. 61716
    ;
    •    November 14, 2006: Commerce published the Final Determination
    continuing to apply a surrogate PRC wage rate of $0.97 per
    hour; and
    •    February 2, 2007: finalized rates that took into account the
    new methodology were released. Commerce Br. at 37, n.6.
    Plaintiffs argue that Commerce knowingly used a surrogate
    hourly rate that did not represent the best available information
    at   the   time,    adding    that    when     Commerce    issued    its   Final
    Court No. 06-00430                                               Page 20
    Determination it “already had settled on significant revisions” to
    its methodology.         Pls.’ Br. at 38.       Plaintiffs contend that
    Commerce’s Antidumping Methodologies Announcement and Requests for
    Comments,    published    approximately   one   month   before    the   Final
    Determination in this case, “announced significant, overarching,
    and final changes in its NME labor rate calculation methodology.”
    Id. at 39.
    In support of its determination Commerce argues that in this
    case it applied the labor wage rate that was published and in
    effect at the time of the Final Determination and that this rate
    was therefore the best available information at the time.16                See
    Commerce Br. at 36.       Specifically, in this review Commerce relied
    on the 2003 wage rate data because “such rates were the most
    current data available as of November 2005.”             Id. at 38.        In
    response to Plaintiffs’ arguments, Commerce notes that the new
    methodology and rates were not final and effective until February
    2007 (i.e., after the Final Determination), and thus Commerce
    reasonably decided to apply the new rate prospectively.17            See id.
    16
    Commerce noted that the labor rate here was determined
    based on a methodology that had been in existence for nearly ten
    years. See Antidumping Duties; Countervailing Duties, 
    62 Fed. Reg. 27296
    , 27367 (May 19, 1997).
    17
    Specifically, Commerce noted that the revised methodology
    was never applied to the 2003 data because the new methodology
    was finalized in 2007 (i.e., subsequent to its Final
    Determination) when Commerce revised the calculations utilizing
    (continued...)
    Court No. 06-00430                                                       Page 21
    at 36-37.     Additionally, Commerce stresses that the notice and
    comment    period    did       not   end   with   the    Change   in     Methodology
    Announcement but that an additional request for comments was
    published on January 9, 2007. See id. at 37, n.6.
    The Court finds that Commerce’s decision to use the labor wage
    rate that was published and in effect at the time of the Final
    Determination was based on the best available information. As
    Commerce points out, the new methodology was not finalized at the
    time of the Final Determination and therefore Commerce’s decision
    to refrain from applying that methodology until it was finalized
    was   reasonable.         It    is   not   dispositive    here    that    Commerce’s
    methodology was being revised because of improvements that Commerce
    was planning to enact in the future. The revision process included
    a period of requesting comments on the new methodology, and until
    that comment period was complete, and the resulting comments
    assessed,   the     new    methodology       cannot     necessarily      be   said   to
    constitute the best available information.                 Therefore, Plaintiffs
    may not presume that the Antidumping Methodologies Announcement and
    Requests for Comments necessitated an application of the non-
    finalized new rate and methodology in this case.
    At the time the new methodology is finalized and effective it
    becomes the best available information, but until that point,
    17
    (...continued)
    the 2004 wage rate data. See Commerce Br. at 38.
    Court No. 06-00430                                           Page 22
    Commerce must be granted some discretion to assess the advantages
    and disadvantages of applying a work-in-progress methodology in
    place of an existing one which is in the process of improvement.
    The Court does not address Plaintiffs’ argument regarding the
    Dorbest Limited v. United States, 
    462 F. Supp. 2d 1262
     (Oct. 31,
    2006) and Wuhan Bee Healthy Co., Ltd. and Presstek Inc. v.        United
    States, 31 CIT __ (July 20, 2007) decisions, nor the specific facts
    and arguments involved in those opinions.       See Pls.’ Reply Br. at
    22-23.   Under the narrow facts and circumstances in this case, the
    Court is satisfied that Commerce’s determination to apply the labor
    wage rate that was published and in effect at the time of the Final
    Determination   was   based   on   the   best   available   information.
    II.   Analysis of Sampling Approach Issues
    In determining weighted average dumping margins Commerce needs
    to determine the individual weighted average dumping margin for
    each known exporter and producer of the subject merchandise.           See
    19 U.S.C. § 1677f-1(c)(1).     If it is not practicable to make an
    individual weighted average dumping margin determination “because
    of the large number of exporters or producers involved in the
    investigation or review,” Commerce may limit its examination to a
    reasonable number of exporters or producers by conducting “a sample
    of exporters, producers, or types of products that is statistically
    valid based on the information available to the administering
    Court No. 06-00430                                          Page 23
    authority at the time of selection.” 19 U.S.C. § 1677f-1(c)(2).
    A.   Inclusion in the Sample Rate of Respondent Margins based
    on Adverse Facts Available
    In arriving at the sample rate for non-selected respondents
    Commerce included the adverse facts available rate of 43.32% it
    assigned to mandatory respondent Hengtai, due to Hengtai’s failure
    to provide Commerce with accurate and complete data.       In assigning
    this rate to Hengtai, Commerce exercised its authority under
    section 776(b) of the Tariff Act, which provides that:
    [i]f the administering authority . . . finds
    that an interested party has failed to
    cooperate by not acting to the best of its
    ability   to   comply  with   a   request  for
    information . . . the administering authority
    . . . in reaching the applicable determination
    under this subtitle, may use an inference that
    is adverse to the interests of that party in
    selecting from among the facts otherwise
    available.
    19   U.S.C.   §   1677e(b).   In   addition,   the   Statement   of
    Administrative Action accompanying the Uruguay Round Agreements Act
    (“SAA”) states that “[w]here a party has not cooperated, Commerce
    . . . may employ adverse inferences about the missing information
    to ensure that the party does not obtain a more favorable result by
    failing to cooperate than if it had cooperated fully.” H.R. REP . NO .
    103-316 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4199.
    Plaintiffs argue that since Commerce made no finding that
    Court No. 06-00430                                             Page 24
    LABEC, Hongda, Luqi, and Gren (i.e., the four Plaintiffs not
    selected   for   the   sampled    group)    were   uncooperative   in     this
    proceeding, the antidumping statute does not permit Commerce to
    assign these companies a sample rate based in whole or in part on
    adverse facts available.18       See Pls.’ Br. at 13-14.
    Commerce notes that it calculated the sample rate in this case
    by “weight-averaging the individual rates of all five of the
    mandatory respondents, including two de minimis rates, one rate
    based on ‘adverse facts available’ and two additional calculated
    rates.” Commerce Br. at 22-23.         Additionally, Commerce stresses
    that it is not applying adverse facts available to the voluntary
    respondents, but instead it is “applying a statistically valid
    sample rate that is representative of producers as a whole.”              Id.
    at 23.    The Court agrees.
    Computing    a    statistically       valid   sample   rate   that    is
    representative of the population as a whole may include the margins
    determined for all selected respondents, even if that sample rate
    happens to be composed in part on a respondent’s rate which is
    based on adverse facts available.       Accordingly, assigning a sample
    18
    The result was a weighted-average sample rate of 8.9%.
    This sample rate was based in part on the 43.32% adverse fact
    available rate that Commerce assigned to uncooperative mandatory
    respondent Hengtai. Commerce, in accordance with § 1677f-
    1(c)(2)(A), applied this weighted-average rate to all non-
    selected voluntary respondents. See Commerce Br. at 23; Pls.’ Br.
    at 11; Final Determination.
    Court No. 06-00430                                                     Page 25
    rate to a group which was calculated including an adverse facts
    available rate is not an application of adverse facts available as
    to that group, and is in accordance with Commerce’s statutory
    authority to sample.19
    It is important to note that Commerce is not cherry picking
    here,        nor   is   there   anything    arbitrary   about   the    way   it   is
    constructing this sample. As stated above, the overall sample rate
    was based on a weighted-average which happened to include two de
    minimis rates along with the rate based on adverse facts available.
    This Court therefore need not address Plaintiffs’ contention that
    Commerce’s         approach     “punishes    fully   cooperative      parties     by
    assigning them a rate unfairly inflated by the non-cooperation of
    [another] party,” as this is more a moral argument than a legal
    one. Pls.’ Br. at 12-13.           A sample rate by its nature cannot meet
    the precision of an individualized rate as to any given party.
    Therefore,         companies    that   would    otherwise   have      received    an
    individualized rate lower than the sample rate will in a sense be
    19
    Commerce notes that 19 U.S.C. § 1677f-1(c)(2) directs it
    to obtain a “statistically valid” sample while § 1677e(b)
    authorizes the use of “adverse inferences” where a respondent is
    non-cooperative. Commerce argues that its determination here
    “reads these two provisions consistently rather than in conflict,
    is reasonable, and should be sustained by the Court,” and cites
    to the deference standard under Chevron U.S.A., Inc. v. Natural
    Resources Defense Council, Inc., 
    467 U.S. 837
     (1984) and its
    progeny. Commerce Br. at 25. As the Court agrees with Commerce’s
    alternate argument supra, that this is not a case of applying
    adverse facts as contemplated under 19 U.S.C. § 1677e(b), this
    argument need not be addressed.
    Court No. 06-00430                                       Page 26
    punished while those that would otherwise have received a higher
    rate will benefit.20   This element is an inherent and accepted part
    of any sample.
    Lastly, Plaintiffs state that there is a distinction between
    determining a statistically valid dumping rate and selecting from
    a statistically valid pool of respondents.   See Pls.’ Reply Br. at
    5; 19 U.S.C. § 1677f-1(c)(2).     Plaintiffs argue that Commerce’s
    statutory obligation is to the latter, and conclude, therefore,
    that “Commerce’s action [including an adverse facts available rate
    to calculate the sample rate] rests on its false assumption that
    the law requires a ‘statistically valid’ dumping rate to result
    from the ‘statistically valid’ pool of respondents.”21   Pls.’ Reply
    Br. at 5.   While Plaintiffs initial distinction is an accurate
    statement in and of itself, the conclusion they draw from it is
    erroneous. Suffice it to say that the point of requiring selection
    from a statistically valid pool of respondents is to arrive at a
    statistically valid dumping rate.
    20
    It is important to note that Plaintiffs’ “punishment”
    argument would apply to any rate factored into the sample rate
    that would be higher than its own individualized rates.
    21
    Plaintiffs contend that “[t]he law does not require that
    the sample rate be the most statistically valid rate available.”
    Pls.’ Reply Br. at 5 (emphasis added). The implication appears
    to be that Commerce may throw out any rates based on adverse
    facts and still calculate a statistically valid group rate,
    albeit not the most statistically valid group rate.
    Court No. 06-00430                                             Page 27
    B. Not Allowing for Voluntary Respondents
    As   stated   above,   if   it   is   not   practicable   to   make   an
    individual weighted average dumping margin determination, Commerce
    may limit its review to “a sample of exporters, producers, or types
    of products that is statistically valid based on the information
    available to the administering authority at the time of selection.”
    19 U.S.C. §   1677f-1(c)(2). However, Congress provided that where
    Commerce limits its examinations to a sample it
    shall establish an . . . individual weighted
    average dumping margin for any exporter or
    producer not initially selected for individual
    examination . . . who submits to the
    administering   authority    the   information
    requested from exporters or producers selected
    for examination, if - (2) the number of
    exporters or producers who have submitted such
    information is not so large that individual
    examination of such exporters or producers
    would be unduly burdensome and inhibit the
    timely completion of the investigation.
    19 U.S.C. § 1677m(a) (emphasis added); Pls.’ Br. at 16.
    Plaintiffs argue that “[b]y formally announcing in advance
    that it would not accept any voluntary respondents,” Commerce
    violated the intent and language of the statute.         Pls.’ Br. at 17.
    Plaintiffs stress that Commerce decided not to allow voluntary
    respondents even before the ultimate number of respondents was
    known. See id.       This decision, Plaintiffs contend, “rendered
    nugatory the law’s Section 782(a) voluntary respondent provision,
    and illegally truncated a two-step ‘sample respondents/consider
    voluntary respondents’ process into a one-step decision.”            Id.
    Court No. 06-00430                                                          Page 28
    Plaintiffs       point    to    the    fact    that     Commerce      calculated
    individual company-specific rates for twelve companies in the 2001-
    2002 review, twelve companies in the 2002-2003 review, and fourteen
    companies in the 2003-2004 review. See id. at 16.                      These previous
    reviews, Plaintiffs contend, demonstrate that “the five respondents
    individually examined by Commerce in the underlying proceeding were
    far from ‘particularly high,’” and therefore Commerce should have
    “endeavored     to    calculate       individual      rates     for    as    many   more
    companies as possible.” Id.
    Commerce defends its determination by stressing that “the
    agency itself is the only entity with the ability to assess its
    administrative capacity and resources.”                     Commerce Br. at 13.
    Additionally, Commerce notes that “[t]he fact that in prior reviews
    of   the   brake     rotors    antidumping      order,    Commerce      was      able   to
    individually       investigate       every   company     that    sought      a   review,
    including all of the plaintiffs, has no bearing on plaintiffs’
    present challenge.” Id. at 14.
    As   to      Plaintiffs’       argument       objecting     to    the      advance
    announcement to not accept any voluntary respondents, Commerce
    counters by contending that if it “selects the maximum number of
    companies that it can feasibly review, there is no requirement or
    reason that [it] should refrain from giving notice of this fact to
    parties.” Id. at 17.
    The Court finds that Commerce’s determination to limit review
    Court No. 06-00430                                                   Page 29
    in advance to five of the sixteen companies was in this case within
    the bounds of its statutory authority.
    Since it is not disputed that Commerce has the statutory
    authority to sample, the two questions in need of answering are
    (i) whether Commerce is authorized to make an advanced assessment
    of the anticipated resources that it can devote to a given review
    and announce any constraints accordingly (here, limiting individual
    reviews to the five mandatory sampled respondents); and (ii)
    whether in this case Commerce reasonably selected the maximum
    number of companies that it can feasibly review.
    The   Court   agrees    with   Commerce     that   it   is    within    its
    authority    to   make   an   advanced   assessment       of   the   anticipated
    resources that it can devote to a given administrative review and,
    having made such an assessment, may announce any administrative
    limitations.      The United States Court of Appeals for the Federal
    Circuit has recognized that “agencies with statutory enforcement
    responsibilities enjoy broad discretion in allocating investigative
    enforcement resources.” Torrington v. United States, 
    68 F.3d 1347
    ,
    1351   (citing    Heckler     v.   Chaney,   
    470 U.S. 821
    ,      831   (1985)).
    Commerce, like any organization seeking efficient operations, plans
    for the proper management of its time and resources.                 There is no
    statutory requirement for Commerce to apply a pro forma bifurcated
    approach as Plaintiffs contend.
    As to the second question, the Court finds that Commerce’s
    Court No. 06-00430                                     Page 30
    determination to limit review in this case to five companies is
    reasonable.   The record does not show, and Plaintiffs did not
    demonstrate, that Commerce could have conducted more individual
    examinations without undue burden and without inhibiting the timely
    completion of the investigation.   It is not enough to merely point
    to past reviews which included more companies, as administrative
    capacity and resources may change from year to year.
    C. Sample Rate as Applied to Plaintiffs Not Supported or
    Representative
    Commerce calculated the sample rate in this review by “weight-
    averaging the individual rates of all the selected respondents,
    chosen through a statistically valid, random sampling exercise, and
    applied that weighted-average rate to the non-selected voluntary
    respondents,” including Plaintiffs. Commerce Br. at 19.
    Plaintiffs argue that the Final Determination rate assigned to
    LABEC, Hongda, Luqi and Gren was contrary to law because the record
    evidence demonstrates that the rate assigned through the sample is
    not representative of the companies’ actual level of dumping.    See
    Pls.’ Br. at 20.     Plaintiffs contend that Commerce “should have
    used the U.S. sales and [factors of production] data and/or the
    quantity and value data submitted by each of the companies as the
    best available information to calculate company-specific margins.”
    Id. at 19. Plaintiffs add that Commerce “ignored this information,
    and examined the sales and [factors of production] data only of
    Court No. 06-00430                                             Page 31
    those companies selected through Commerce’s sampling exercise.”
    Id. at 20.
    Plaintiffs also point to § 1677m(e) of the statute which
    states that Commerce “shall not decline to consider information
    that is submitted by an interested party . . . but does not meet
    all the applicable requirements established by the administering
    authority” if certain criteria is met. Id. at 19-20.
    Plaintiffs’ argument, accurately restated by Commerce, is that
    “although [Plaintiffs] were not selected for the review, Commerce
    should   have   nevertheless   relied    upon   [Plaintiffs’   respective]
    company-specific submissions for purposes of calculating their
    antidumping margins.”        Commerce Br. at 19.       Commerce correctly
    points out that Plaintiffs argument is contrary to § 1677m of the
    statute which, as discussed supra, allows Commerce the authority to
    decline individual reviews when conducting such reviews would be
    unduly   burdensome   and    inhibit    the   timely   completion    of   the
    investigation.    See § 1677m(a)(2).
    In response to Plaintiffs’ § 1677m(e) argument, Commerce
    correctly counters that this provision of the statute does not
    apply, as “Commerce did not reject plaintiffs’ submission for
    failure to meet applicable requirements; rather, it determined not
    to   conduct    individual   reviews    (including     calculation   of   an
    individual antidumping rate) as a result of lack of administrative
    resources.” Commerce Br. at 20.         Additionally, Commerce stresses
    Court No. 06-00430                                                        Page 32
    that “[t]he mere submission of an initial questionnaire response
    normally will not provide a basis for determining an antidumping
    rate” and that “[i]n many cases, there are multiple additional
    submissions and verification of data.” Commerce Br. at 21-22.
    The Court finds that Commerce’s determination to apply the
    weighted-average         sample      rate   to     the   non-selected       voluntary
    respondents, including Plaintiffs, was reasonable and in accordance
    with Commerce’s statutory authority.                Since it is reasonable for
    Commerce to select the maximum number of companies that it can
    feasibly review based on administrative resources available (which
    can be a number less than the total number of companies seeking
    review), then it must be understood that companies not selected for
    review will not have individual rates applied.
    Conducting an administrative review, as Commerce points out,
    is   not   as   simple    as   Plaintiffs        would   suggest    and    additional
    submissions and/or verification can be required.                   See Commerce Br.
    at   21-22.      The   Court      agrees    with    Commerce’s     assessment      that
    “Plaintiffs’ approach would create an untenable result that negates
    Commerce’s      authority      and     ability     to    internally       manage    its
    administrative resources.” Id. at 22.                     As Commerce correctly
    states it, Plaintiffs would have this Court impose a standard under
    which Commerce would be required to either: (i) conduct a review
    for every respondent that claims to have submitted complete sales
    and production data, regardless of the agency’s decision to limit
    Court No. 06-00430                                     Page 33
    the number of producers examined; or (ii) rely upon potentially
    incomplete and unverified questionnaire responses for determining
    all voluntary respondent rates. See id. This standard is contrary
    to the statute.
    CONCLUSION
    In accordance with the foregoing, the Court affirms Commerce’s
    determination in part and remands in part.
    /s/ Nicholas Tsoucalas     ___
    NICHOLAS TSOUCALAS
    SENIOR JUDGE
    Dated:    June 26, 2008
    New York, New York