Shanghai Tainai Bearing Co. v. United States

658 F.Supp.3d 1269

SHANGHAI TAINAI BEARING CO., LTD. and C&U Americas, LLC, Plaintiffs,andPrecision Components, Inc., Xinchang Newsun Xintianlong Precision Bearing Manufacturing Co., Ltd.,and Hebei Xintai Bearing Forging Co., Ltd., Consolidated Plaintiffs, v. UNITED STATES, Defendant.

Slip Op. No. 23-132 Consol. Court No. 1:22-cv-00038

United States Court of International Trade

September 14, 2023

David Craven, Craven Trade Law LLC, of Chicago, IL, for Plaintiffs and Consolidated Plaintiffs.

L. Misha Preheim, Assistant Director, and Kelly Geddes, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for Defendant United States. With them on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General; Patricia M. McCarthy, Director, Commercial Litigation Branch; Claudia Burke, Assistant Director, Commercial Litigation Branch; and Jesus N. Saenz, Of Counsel, U.S. Department of Commerce, Office of the Chief Counsel for Trade Enforcement & Compliance.

OPINION

Vaden, Judge:

Plaintiffs Shanghai Tainai Bearing Co., Ltd. and C&U Americas, LLC filed suit objecting to Commerce's resolution of the thirty-third administrative review of the antidumping order on tapered roller bearings from China. Joined by several Consolidated Plaintiffs, Shanghai Tainai brings multiple claims of error against Commerce's final determination. They find moderate success. Commerce failed to consider the necessary factors established by the Federal Circuit before applying a partial adverse inference to Shanghai Tainai to punish it for the non-compliance of its suppliers in the underlying investigation. Commerce also failed to justify its decision to deduct certain surcharges Shanghai Tainai included as extra profit on top of the Section 301 duties when calculating the U.S. price. Plaintiffs' winning streak stops there, however, as the Court rejects their remaining claims, including the claim that the Section 301 duties themselves should have been deducted from the U.S. price. Consequently, the Motions for Judgment on the Agency Record shall be GRANTED IN PART AND DENIED IN PART.

BACKGROUND

Shanghai Tainai is a Chinese manufacturer of tapered roller bearings (TRBs), a type of precision bearing that facilitates the rotational movement of an axle.¹ Tapered roller bearings are made out of four basic components: rollers, cages, cups, and cones. Rollers are small steel cylinders that are held together in a circular housing called a cage. The caged rollers are inserted between two steel rings, allowing them to move. The inner ring is called the cone, and the outer ring is called the cup. The antidumping order on tapered roller bearings from China (the Order) has been in place since June 15, 1987, and covers

. . . tapered roller bearings and parts thereof, finished and unfinished, from China; flange, take up cartridge, and hanger units incorporating tapered roller bearings; and tapered roller housings (except pillow blocks) incorporating tapered rollers, with or without spindles, whether or not for automotive use.

Decision Memorandum for the Final Results of the 2019-2020 Administrative Review of the Antidumping Duty Order on Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China (Decision Memo) at 2-3 (Jan. 4, 2022), J.A. 1,004-05, ECF No. 43. Shanghai Tainai's Motion for Judgment on the Agency Record challenges the final results of the thirty-third administrative review of the Order, which covers imports of tapered roller bearings from China during the period of June 1, 2019 through May 31, 2020 (the Period of Review). See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 85 Fed. Reg. 47,731 (Dep't of Com. Aug. 6, 2020).

I. The Disputed Administrative Review

On August 6, 2020, Commerce initiated the present administrative review of the Order. See id. Commerce selected Shanghai Tainai as the sole mandatory respondent because it was the largest exporter of tapered roller bearings from China during the Period of Review. See Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China, 86 Fed. Reg. 36,099 (Dep't of Com. July 8, 2021) and accompanying Preliminary Decision Memorandum at 3, J.A. at 13,073, ECF No. 43. Commerce received questionnaire responses from Shanghai Tainai and subsequently published its Preliminary Results on July 8, 2021. See 86 Fed. Reg. 36,099 (Dep't of Com. July 8, 2021).

In its Preliminary Results, Commerce took issue with a number of Shanghai Tainai's questionnaire responses. Commerce noted that Shanghai Tainai had not provided "bills of materials" from its suppliers that could substantiate Shanghai Tainai's reported "factors of production." Preliminary Decision Memorandum at 15, J.A. at 13,085, ECF No. 43. 19 U.S.C. § 1677b(c)(1)(B) requires that Commerce determine the normal value of subject merchandise from non-market economies such as China "on the basis of the value of the factors of production utilized in producing the merchandise" and that such value "be based on the best available information regarding the values of such factors in a market economy country . . . considered to be appropriate by [Commerce]." Commerce therefore requires that Chinese respondents such as Shanghai Tainai provide factors of production data that describe the inputs used to manufacture the merchandise as well as the price of each input in a surrogate market-economy country.² See Response to Section D of the Department's Initial Questionnaire by Shanghai Tainai Bearing Co., Ltd. (Section D Questionnaire Response) at D-1, J.A. at 81,156, ECF No. 44. In the current review, Shanghai Tainai reported the following inputs as factors of production: chrome steel, cold-rolled steel, turned cups and cones, rollers, cages, and antirust oil. Id. at D-15, J.A. at 81,170. Commerce chose Romania as the surrogate country to value these inputs.³ However, when Commerce requested that Shanghai Tainai substantiate its reported factors of production by submitting bills of materials from its input suppliers, Shanghai Tainai responded that its affiliated suppliers "do not maintain production slips" and that it " 'had no way of knowing the direct input bills of materials for the unaffiliated suppliers.' " Preliminary Decision Memorandum at 15, J.A. at 13,085 (quoting Response to the Department's A, C and D Supplemental Questionnaire by Shanghai Tainai Bearing Co., Ltd. at 27, J.A. at 82,201, ECF No. 44). Commerce further noted that Shanghai Tainai did not report all the necessary factors of production data for its products. For example, it omitted a factor of production value for "rollers" despite a product description indicating that rollers should be included as a cost. Id. at 15-16, J.A. at 13,085-86.

For its Preliminary Results, Commerce used Shanghai Tainai's reported factors of production as "facts available," averaged this data to assign a value to missing fields, calculated an estimated dumping margin of 36.75 percent, and issued additional supplemental questionnaires to both Shanghai Tainai and its unaffiliated suppliers that sought to substantiate the factors of production data. Id.; 86 Fed. Reg. at 36,100. The unaffiliated suppliers did not respond to Commerce's supplemental questionnaires sent directly to them. See Decision Memo at 7, J.A. at 1,009, ECF No. 43. Shanghai Tainai maintained that, despite its requests, its suppliers remained unable to provide the factors of production data. See Response to the Department's Second Supplemental Questionnaire by Shanghai Tainai Bearing Co., Ltd. (Second Supplemental Questionnaire Response) at 6, J.A. at 84,320, ECF No. 44. Shanghai Tainai attached letters it had sent to suppliers requesting bills of materials for inputs it had purchased. Id. at Ex. SSD-2, J.A. at 84,406-16. Shanghai Tainai also attached a single response email from a supplier, who declined to provide the information. Id. at J.A. 84,415. Shanghai Tainai claimed that, because it was not affiliated with these suppliers, "Tainai has no power to compel their assistance." Id. at J.A. 84,320.

Along with its response to the Second Supplemental Questionnaire, Shanghai Tainai submitted a case brief that challenged numerous other aspects of Commerce's Preliminary Results. See Administrative Case Brief of Shanghai Tainai Bearing Co., Ltd., Sept. 10, 2021 (Shanghai Tainai Case Brief), J.A. at 84,449, ECF No. 44. Shanghai Tainai first objected to Commerce's use of financial statements from Timken Romania SA, a bearings manufacturer, as the basis for calculating the surrogate values of Shanghai Tainai's factors of production. Id. at 2, J.A. at 84,450. It claimed that Timken Romania's complex manufacturing operations and use of related-party transactions made it an inappropriate comparator and that Commerce should have instead used the financial data of alternative surrogate value candidates URB Rulmenti Suceava or Compa S.A. Sibiu. Id. at 4-5, J.A. at 84,452-53. Shanghai Tainai next objected to what it termed "double counting" in the valuation of rollers, a factor of production in its tapered roller bearings. Id. at 7, J.A. at 84,455. It argued that, although it purchased finished rollers, Commerce refused to value them using the purchase price. Instead, Commerce used a surrogate value that "included the cost for the materials as well as the cost of the processing to convert the materials into rollers and the profit for the producer of the rollers." Id. Shanghai Tainai also claimed that Commerce's dumping margin defied "commercial and economic reality," citing to Baoding Mantong Fine Chemistry Co., Ltd. v. United States, 113 F. Supp. 3d 1332 (CIT 2015) for the proposition that such margins must be discarded. Id. at 11, J.A. at 84,459. Plaintiff asserted that its significant operating profit would be impossible if it were dumping at the margin Commerce calculated in the...