Clearon Corp. v. United States

CLEARON CORP., and OCCIDENTAL CHEMICAL CORP., Plaintiffs,and JUANCHENG KANGTAI CHEMICAL CO. LTD.,HEBEI JIHENG CHEMICAL CO., LTD., and ARCH CHEMICALS, INC., Consolidated-Plaintiffs, v. UNITED STATES, Defendant, and ARCH CHEMICALS, INC.,and JUANCHENG KANGTAI CHEMICAL CO., LTD., Defendant-Intervenors.

Slip Op. 14-88 Consol. Court No. 13-00073

UNITED STATES COURT OF INTERNATIONAL TRADE

Dated: July 24, 2014

Before: R. Kenton Musgrave, Senior Judge

OPINION AND ORDER

[On sixth administrative review of antidumping duty order on chlorinated isocyanurates, requests for voluntary remand granted, and motions for judgment on the agency record granted in part.]

James R. Cannon, Jr. and Thomas M. Beline, Cassidy Levy Kent (USA) LLP, of Washington, DC, for the plaintiffs.

James K. Horgan, John J. Kenkel, and Gregory S. Menegaz, DeKieffer & Horgan, of Washington, DC, for the consolidated-plaintiff and defendant-intervenor Juancheng Kangtai Chemical Co., Ltd.

Peggy A. Clarke, Law Offices of Peggy A. Clarke, of Washington, DC, for the consolidated-plaintiff Hebei Jiheng Chemical Co., Ltd. and the consolidated-plaintiff and defendant-intervenor Arch Chemical Co., Ltd.

Jane C. Dempsey, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for the defendant. On the brief were Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of counsel on the brief was David W. Richardson, Senior Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington DC.

Musgrave, Senior Judge: This opinion addresses challenges to Chlorinated Isocyanurates From the People's Republic of China, July 18, 2014. Reg. 4386 (Jan. 22, 2013), PDoc 169 ("Final Results"), the sixth administrative review of an antidumping duty ("AD") order on chlorinated isocyanurates¹ from the People's Republic of China ("PRC") conducted by the International Trade Administration of the U.S. Department of Commerce ("Commerce"). Before the court in this consolidated action² are three motions for summary judgment on the agency record brought under USCIT Rule 56.2. One motion is brought by the consolidated-plaintiff anddefendant-intervenor Arch Chemicals Inc. ("Arch"), an importer of the subject merchandise, and by the consolidated-plaintiff Hebei Jiheng Chemical Co., Ltd. ("Jiheng"), a producer and exporter of the subject merchandise from the PRC.³ A second motion is brought by the consolidated-plaintiff and defendant-intervenor Juancheng Kangtai Chemical Co., Ltd. ("Kangtai"), a producer and exporter of the subject merchandise from the PRC.⁴ The third motion is brought by the plaintiffs Clearon Corp. and Occidental Chemical Corp., U.S. producers of domestic like product (together "Clearon").⁵ Collectively, the motions contest ten aspects of the Final Results: Commerce's (1) calculation of the selling, general, and administrative expense financial ratio ("SG&A ratio") using data pertinent to the Philippines, (2) alleged use of a 2011 financial statement not on the record, (3) treatment and calculation of intra-company transportation of intermediate products, (4) application of new methodology for valuing ammonia gas and sulfuric acid by-products, (5) selection of the Philippines as the primary surrogate country, and the surrogate value selection for (6) chlorine, (7) hydrogen gas, (8) sodium hydroxide, (9) electricity, and (10) urea.

Commerce asks the court to grant voluntary remand for three of its determinations, namely (1) its calculation of the SG&A ratios using Philippine data, (2) its calculation ofintra-company transportation of intermediate products, and (3) its by-product valuation methodology, and it opposes the remaining issues of the three Rule 56.2 motions.⁶ Arch and Kangtai contest three aspects of Clearon's Rule 56.2 motion, and in doing so argue that Commerce's surrogate value selection for urea and hydrogen gas was the best available information on the record and that Clearon failed to exhaust administrative remedies concerning its by-product claims.⁷

For the reasons below, the court grants the three voluntary remand requests and also orders remand on the issue of surrogate country selection from the Final Results.

I. Jurisdiction and Standard of Review

Final administrative AD review determinations are evaluated under 19 U.S.C. §1516a(b)(1)(B)(i). Commerce's determinations, findings, or conclusions are sustained unless they are found to be "unsupported by substantial evidence on the record, or otherwise not in accordance with law." NSK Ltd. v. United States, 481 F.3d 1355, 1359 (Fed. Cir. 2007), citing 19 U.S.C. §1516a(b)(1)(B)(i)); see also United States v. Eurodif S.A., 555 U.S. 305, 316 n.6 (2009). Substantial evidence is "more than a mere scintilla", it is "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), citing Consol. Edison Co. v. N.L.R.B., 305 U.S. 197, 229 (1938).

In determining if Commerce's interpretation of a statute is in accordance with law, the court applies a two-step analysis set forth by Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984). First, the court examines whether "Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency must give effect to the unambiguously expressed intent of Congress." Id. Second, if the statute is silent to the specific issue or the legislative intent is not clear, the court must determine "whether the agency's answer is based upon a permissible construction of the statute." Id. at 843-44. See also, e.g., Wheatland Tube Co. v. United States, 495 F.3d 1355, 1359-60 (Fed. Cir. 2007). The court provides the agency deference on interpreting the statutes the agency administers and has found that "[a]ny reasonable construction of the statute is a permissible construction." Timken Co. v. United States, 354 F.3d 1334, 1342 (Fed. Cir. 2004), citing Torrington v. United States, 82 F.3d 1039, 1044 (Fed. Cir. 1996).

II. Background

Commerce initiated the review covering four producers/exporters of the subject merchandise from the PRC and selected Jiheng and Kangtai as the two mandatory respondents in the review.⁸ Commerce's Office of Policy issued a Surrogate Country Memorandum as part of the review which included the following "non-exhaustive" list of six potential surrogate countries that it determined were "most likely to have good data availability and quality" and were "at a level ofeconomic development comparable to [the PRC] in terms of per capita gross national income" for the review based on figures from the World Bank's 2011 World Development Report:

Country

Per Capita GNI, 2009 ($USD)

PRC

3,590

Philippines

1,790

Indonesia

2,230

Ukraine

2,800

Thailand

3,760

Columbia

4,930

South Africa

5,770

See Memorandum to Mark Hoadley, Request for a List of Surrogate Countries for an Administrative Review of the Antidumping Duty Order on Chlorinated Isocyanurates from the People's Republic of China (Sep. 9, 2011), PDoc 37 ("Surrogate Country Memorandum"), referencing World Development Report 2011, World Bank. Commerce asked the parties to comment on the surrogate country selection and provide it with information for valuing factors of production. In response, the parties submitted surrogate country comments and surrogate value data from India, Thailand, the Philippines, and South Africa.⁹

Commerce published its preliminary results and selected South Africa as the primary surrogate country for valuing factors of production, finding it was the largest exporter of comparablemerchandise among the countries on the potential surrogate list. For factors of production ("FOPs") where data was not placed on the record from South Africa or other countries on the list, Commerce relied on India data stating that it was the only alterative on the record, and that "even though India is not on the list of possible surrogate countries in the Surrogate Country Memorandum, India is a significant producer of comparable merchandise that has the data needed to calculate certain surrogate values." See Chlorinated Isocyanurates From the People's Republic of China: Preliminary Results of Antidumping Duty Administrative Review, 77 Fed. Reg. 41746, 41479 (July 16, 2012) ("Preliminary Results") (citation omitted).

Commerce received comment and rebuttal briefs from the parties including a brief from Kangtai claiming India should be selected as the primary surrogate country or in the alternative South Africa should be selected. See Kangtai Rebuttal Brief at 1-2 (Dec. 10, 2011), PDoc 159. Commerce then issued its Final Results and choose the Philippines as the primary surrogate country, finding that it is economically comparable to the PRC, that it is a significant producer of comparable merchandise, and that the record now contained Philippine surrogate value data for all but one factor of production (steam). I&D Memo at cmt. 2. Responding to Kangtai's argument that India was the appropriate surrogate country, Commerce stated that when selecting a primary surrogate country it will normally first look to the potential surrogate list in the Surrogate Country Memorandum, and that "the list did not include India because India's per capita GNI did not fall within the range of countries proximate to the PRC." Id.

III. Claims

The first claim of Arch, Jiheng and Kangtai challenges Commerce's decision to treat employment and retirement benefits as SG&A instead of labor expenses when calculating the financial ratios. The parties aver that Commerce's determination is not supported by substantial evidence, that Commerce failed to provide an adequate explanation for its determination, and that its decision resulted in the double-counting...