Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-19-01207/USCOURTS-ca13-19-01207-0/pdf.json

Parties Involved:
CP Kelco US, Inc.
Appellant
Neimenggu Fufeng Biotechnologies Co., Ltd.
Appellee
Shandong Fufeng Fermentation Co., Ltd.
Appellee
United States
Appellee

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________

CP KELCO US, INC.,

Plaintiff-Appellant

v.

UNITED STATES, NEIMENGGU FUFENG 

BIOTECHNOLOGIES CO., LTD., SHANDONG 

FUFENG FERMENTATION CO., LTD.,

Defendants-Appellees

______________________

2019-1207

______________________

Appeal from the United States Court of International 

Trade in Nos. 1:13-cv-00288-RWG, 1:13-cv-00289-RWG, 

Senior Judge Richard W. Goldberg.

______________________

Decided: February 10, 2020

______________________

NANCY NOONAN, Arent Fox, LLP, Washington, DC, argued for plaintiff-appellant. Also represented by MATTHEW 

L. KANNA, FRIEDERIKE GOERGENS. 

 KELLY A. KRYSTYNIAK, Commercial Litigation Branch, 

Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee United States. 

Also represented by JOSEPH H. HUNT, JEANNE DAVIDSON,

PATRICIA M. MCCARTHY; BRANDON JERROLD CUSTARD, Office of the Chief Counsel for Trade Enforcement and 

Case: 19-1207 Document: 54 Page: 1 Filed: 02/10/2020
2 CP KELCO US, INC. v. UNITED STATES

Compliance, United States Department of Commerce, 

Washington, DC. 

 JORDAN CHARLES KAHN, Grunfeld, Desiderio, Lebowitz, 

Silverman & Klestadt LLP, Washington, DC, argued for 

defendants-appellees Neimenggu Fufeng Biotechnologies 

Co., Ltd., Shandong Fufeng Fermentation Co., Ltd. Also 

represented by DHARMENDRA NARAIN CHOUDHARY,

BRANDON M. PETELIN, ANDREW THOMAS SCHUTZ; BRUCE M.

MITCHELL, NED H. MARSHAK, New York, NY. 

 ______________________

Before NEWMAN, MOORE, and CHEN, Circuit Judges.

MOORE, Circuit Judge.

CP Kelco U.S., Inc. appeals the decision of the United 

States Court of International Trade (Trade Court) upholding the Department of Commerce’s treatment of Xanthomonas Campestris (X. Campestris) as an asset rather 

than a direct material input, and Commerce’s decision to 

use the Thai Fermentation Industry Ltd. (Thai Fermentation) financial statements to calculate surrogate financial 

ratios. For the reasons described below, we affirm the 

Trade Court’s decision to uphold Commerce’s treatment of 

X. Campestris as an asset. We reverse its decision regarding Commerce’s use of the Thai Fermentation financial 

statements to calculate surrogate financial ratios and reinstate Commerce’s determination to use the Ajinomoto 

(Thailand) Co., Ltd. (Thai Ajinomoto) financial statements. 

BACKGROUND

This appeal comes to us following a long and complicated procedural history, both at Commerce and the Trade 

Court. On June 5, 2012, CP Kelco filed a petition concerning imports of xanthan gum from the People’s Republic of 

China (PRC). On July 2, 2012, Commerce initiated an antidumping duty investigation of xanthan gum from the 

PRC for the period of investigation of October 1, 2011 

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CP KELCO US, INC. v. UNITED STATES 3

through March 31, 2012. Appellees Neimenggu Fufeng Biotechnologies Co., Ltd. and Shandong Fufeng Fermentation Co., Ltd. (collectively, Fufeng) export xanthan gum 

from the PRC.1

A. Commerce’s Determination

On January 3, 2013, Commerce preliminarily determined “that xanthan gum from the People’s Republic of 

China (PRC) is being, or is likely to be, sold in the United 

States at less than fair value (LTFV).” Commerce considers the PRC to be a non-market economy (NME) country. 

For a NME country, Commerce must “determine the normal value of the subject merchandise on the basis of the 

value of the factors of production utilized in producing the 

merchandise . . . . based on the best available information 

regarding the values of such factors in a market economy 

country . . . .” 19 U.S.C. § 1677b(c)(1). The normal value 

is calculated as “the price at which the foreign like product 

is first sold . . . in the exporting country.” Id.

§ 1677b(a)(1)(B)(i). Commerce values factors of production 

by utilizing “prices or costs of factors of production” from a 

market economy country that is “at a level of economic development comparable to that of the nonmarket economy 

country” and is a “significant producer[] of comparable 

merchandise.” Id. § 1677b(c)(4). Commerce chose Thailand as the primary surrogate country for the investigation

because it “is economically comparable to the PRC and is a 

significant producer of comparable merchandise.”2 

1 Commerce determined that Neimenggu Fufeng Biotechnologies Co., Ltd. and Deosen Biochemical Ltd. exported the largest volume of xanthan gum from the PRC 

during the period of investigation. Deosen is not a party to 

this appeal.

2 The comparable merchandise selected is monosodium glutamate (MSG) and l-lysine because, like xanthan 

gum, they are added to foods and have substantially 

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4 CP KELCO US, INC. v. UNITED STATES

Commerce used the audited financial statements of Thai 

Ajinomoto to value factory overhead, selling, general, and 

administrative expenses, and profit. Commerce preliminarily assessed an antidumping margin of 21.69 percent 

for Fufeng.

In the Final Determination, Commerce concluded 

Fufeng was selling xanthan gum in the United States at 

less than fair value and assessed Fufeng a 12.90 percent 

dumping margin. Xanthan Gum from the People’s Republic 

of China, 78 Fed. Reg. 33,351 (Dep’t of Commerce June 4, 

2013) (final determ.), as amended, 78 Fed. Reg. 43,143 

(July 19, 2013) (amend. final determ.). As part of its determination, Commerce considered whether X. Campestris

is (1) a direct material that should be valued as a factor of 

production or (2) was accounted for in the surrogate financial ratios and therefore did not need to be valued separately as a direct material input. Commerce did not value 

X. Campestris as a factor of production, or a direct material 

input, because Fufeng’s costs associated with the maintenance and use of X. Campestris bacteria are similar to 

those of Thai Ajinomoto’s costs associated with maintaining the bacteria used to produce comparable merchandise 

(i.e. MSG and l-lysine). Commerce found that evidence on 

the record of the present investigation shows that (1) 

Fufeng and Deosen “acquired [their] [X. C]ampestris strain 

for payment-in-full long before the [period of investigation],” (2) “the acquisitions included the right to further 

grow and exploit the resulting bacteria for the production 

of xanthan gum,” and (3) Fufeng and Deosen continually 

regenerate the bacteria for use in their xanthan gum production. Due to their “ownership and regenerative use of 

similar production processes based on bacteria fermentation. Therefore, the manufacturing facilities, materials, 

and energy amounts required for production are similar.

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CP KELCO US, INC. v. UNITED STATES 5

the bacteria,” Commerce determined that it is more similar 

to an asset than a direct material input. J.A. 8174. 

In calculating the surrogate financial ratios, Commerce 

used the Thai Ajinomoto financial statements. The financial statements of Thai Fermentation were also on the record, however, Commerce determined them to be incomplete 

and that it would not have been able to fully evaluate the 

financial information contained therein. The parties disagreed as to which financial statements were appropriate

for use. CP Kelco supported the use of Thai Ajinomoto’s 

financial statements, arguing that all other available statements are incomplete, not fully translated, or from companies that do not produce comparable merchandise. Fufeng 

argued that Thai Ajinomoto’s financial statements are distorted by countervailable subsidies and supported the use 

of Thai Fermentation’s financial statements. Commerce

determined that the Thai Fermentation financial statements are incomplete because they lack complete English 

translations, precluding Commerce from fully evaluating 

the financial information contained therein, and noted its 

practice to exclude such statements. J.A. 8154. Specifically, two complete paragraphs at the bottom of Accounting 

note twelve, concerning depreciation of assets, are untranslated. Id. at n.70; compare J.A. 6280–81 with J.A. 6305–

06. Although Commerce agreed with Fufeng that the Thai 

Ajinomoto statements show evidence of the receipt of countervailable subsidies, it noted that its general practice to 

exclude such statements presupposes the existence of other 

sufficiently reliable data. Having no such data, it found 

Thai Ajinomoto’s statements to “represent the only complete and fully translated financial statements on the record” and therefore “the best available information within 

the meaning of the statute.” J.A. 8152, 8154–55.

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B. First Trade Court Remand Order and Resulting 

First Redetermination

CP Kelco appealed Commerce’s final determination to 

the Trade Court, as relevant here, with respect to Commerce’s decision to treat X. Campestris as an asset, rather 

than as a direct material input, and Fufeng appealed Commerce’s selection of the Thai Ajinomoto financial statements over the Thai Fermentation statements for

calculating surrogate financial ratios. CP Kelco U.S., Inc. 

v. United States, 2015 WL 1544714, at *1 (Ct. Int’l Trade 

Mar. 31, 2015) (CP Kelco I). The Trade Court upheld Commerce’s decision to treat X. Campestris as an asset rather 

than as a direct material input determining it was supported by substantial evidence and was otherwise in accordance with law. Id. at *4. The Trade Court determined 

it was “reasonable for Commerce to use the time that 

Fufeng paid for the X. Campestris as evidence that the bacteria was an asset: Fufeng’s one-time purchase and the bacteria’s self-regenerating properties made it look like an 

asset.” Id. It further determined that it was proper for 

Commerce to conclude that the bacteria was an asset based 

on grounds that the “bacteria self-regenerated, such that 

Fufeng only needed to pay for the bacteria once,” rendering

it “unlike direct material inputs used up in the production 

process.” Id. 

The Trade Court remanded Commerce’s decision to use 

the Thai Ajinomoto financial statements to calculate surrogate financial ratios for further explanation, stating that 

“Commerce never addressed why the weakness of the Thai 

Fermentation statements—incompleteness—was worse 

than the weakness of the Thai Ajinomoto statements: evidence of subsidies.” Id. at *6. The Trade Court explained 

that Commerce created its own conundrum by preemptively rejecting the Thai Fermentation statements, which 

then required it to accept the Thai Ajinomoto statements, 

the only other statements left on the record, despite evidence that Thai Ajinomoto had received countervailable 

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CP KELCO US, INC. v. UNITED STATES 7

subsidies. Id. at *7. Specifically, the Trade Court instructed that Commerce must “compare and contrast the 

Thai Fermentation and Thai Ajinomoto financial statements, and . . . explain why the Thai Ajinomoto statements 

constitute a better source.” Id. at 8. 

In its first remand redetermination, on July 24, 2015,

Commerce compared Thai Fermentation’s financial statements with Thai Ajinomoto’s financial statements and

again found that Thai Ajinomoto’s statements constituted

“the best available information on the record.” Commerce

noted that both companies’ statements “are flawed in different ways” and that it must “decide which is the more

serious flaw.” J.A. 8242. It further noted its “well-established practice of excluding incomplete financial statements from consideration, whether due to missing 

information or a lack of full translation.” Id. After considering the weaknesses of each financial statement, Commerce found the possibility that the Thai Fermentation 

statements are missing vital information to be the greater 

flaw. It found that Thai Ajinomoto’s statements, although 

containing evidence of countervailable subsidies, are “complete and reliable” and the “parties . . . had an opportunity 

to comment on the complete financial statements.” J.A.

8244–45. In rejecting the Thai Fermentation statements 

once again, Commerce explained that missing information 

in a financial statement could have a significant impact on 

the antidumping calculations and “parties cannot be allowed to selectively decide which portions of a financial 

statement to . . . leave untranslated,” depriving other parties the opportunity to comment on potentially important 

information. J.A. 8244. Finally, it noted that “Fufeng had 

every opportunity to provide a full translation of Thai Fermentation’s financial statements but that it failed to do so.” 

Id.

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8 CP KELCO US, INC. v. UNITED STATES

C. Second Trade Court Remand Order and Resulting

Second Redetermination 

Fufeng again appealed Commerce’s selection of the 

Thai Ajinomoto statements to the Trade Court. This time, 

the Trade Court determined that Commerce did not “faithfully compare the financial statements side by side” and 

had not “plumbed the implications [of the Thai Ajinomoto 

statements’ countervailable subsidies] as it had plumbed 

the issues caused by incompleteness” affecting the Thai 

Fermentation statements. CP Kelco U.S., Inc. v. United 

States, 2016 WL 1403657, at *5 (Ct. Int’l Trade Apr. 8, 

2016) (CP Kelco II). It further determined that Commerce 

does not have a “well-established” practice of rejecting all 

incomplete financial statements that would justify rejecting the Thai Fermentation statements summarily. Id. 

Therefore, the Trade Court again remanded, instructing

Commerce to comply with the “court’s main remand instruction to compare the Thai Ajinomoto and Thai Fermentation financial statements side by side in an evenhanded 

manner, evaluating the relative strengths and weaknesses 

of each.” Id. Alternatively, the Trade Court offered that 

Commerce may find the Thai Fermentation statements to 

be missing “vital information,” which the Trade Court previously recognized as a past practice of Commerce. Id. n.5. 

As another alternative, the Trade Court offered that Commerce could explain a change in practice, “from rejecting 

statements when they are missing vital information . . . to 

invariably rejecting any incomplete statements.” Id. 

On August 22, 2016, after adopting a practice of rejecting incomplete financial statements unless there are no 

other financial statements on the record, Commerce for a 

third time determined that the Thai Ajinomoto statements

were the best available information to calculate surrogate 

financial ratios. It first acknowledged that Commerce has 

not always rejected incomplete financial statements without qualification but has at times rejected incomplete statements that are missing key information when it was 

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CP KELCO US, INC. v. UNITED STATES 9

“vital.” J.A. 8260 (citing Ass’n of Am. Sch. Paper Suppliers

v. United States, 791 F. Supp. 2d 1292, 1304 (Ct. Int’l Trade

2011)). It then explained that because it considers that any 

missing information may be “vital,” Commerce “intends to 

follow a practice of rejecting from use financial statements 

that are incomplete, whether due to missing or removed 

components of those statements or due to a lack of full English translation where the record evidence indicates that 

any part of the specific financial statements in question 

was not provided by a filer, unless there are no other financial statements left on the record.” J.A. 8262. Commerce 

reasoned that this practice avoids Commerce’s “speculation 

as to whether the missing information is a ‘critical’ or ‘key’ 

component necessary for the calculation of the surrogate 

financial ratios.” J.A. 8262–63. Commerce then rejected 

Thai Fermentation’s financial statements because they 

lack complete translations, finding that while the Thai 

Ajinomoto statements “show evidence of countervailable 

subsidies, [they] are complete and reliable and all parties 

have been afforded the opportunity to comment on their

full content.” J.A. 8263. 

D. Third Trade Court Remand Order and Resulting

Third Redetermination

Fufeng again challenged Commerce’s remand results

before the Trade Court. Despite having given Commerce 

the opportunity to explain a change in its practice, CP 

Kelco II, 2016 WL 1403657, at *5 n.5, the Trade Court determined that Commerce’s new policy is not consistent 

with its statutory mandate because it is “not reasonably 

aimed at identifying the best available information or calculating the antidumping margins as accurately as possible” and “leads to an unreasoned outcome not supported by 

the record in these proceedings.” CP Kelco U.S., Inc. v. 

United States, 211 F. Supp. 3d 1338, 1341–42 (Ct. Int’l 

Trade 2017) (CP Kelco III). The Trade Court explained 

that Commerce has “yet to provide any discussion of the 

issues presented by the use of the Thai Ajinomoto 

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10 CP KELCO US, INC. v. UNITED STATES

statements or, more generally, by the use of financial statements that reflect countervailable subsidies.” Id. at 1344. 

It again remanded Commerce’s redetermination explaining that “Commerce should not select the Thai Ajinomoto 

statements unless it first compares the Thai Ajinomoto and 

Thai Fermentation financial statements side by side in an 

evenhanded manner, evaluating the relative strengths and 

weaknesses of each.” Id. at 1345. Alternatively, it stated

that “Commerce can reject the Thai Fermentation statements after making a reasoned finding that the two untranslated paragraphs in footnote twelve are ‘vital’ to the 

Department’s analysis of the data.” Id. The Trade Court

instructed that “Commerce must specifically discuss what 

is missing from the Thai Fermentation statements and 

how the fact of the missing information impedes [Commerce’s] calculations.” Id. It gave Commerce the option of 

“either (1) explicitly exploring the relative impact of the imperfection in the Thai Ajinomoto statements (evidence of 

subsidies) and that in the Thai Fermentation statements 

(incompleteness) or (2) making a fact-sensitive finding that 

the Thai Fermentation statements are missing ‘vital’ information.” Id. 

On September 18, 2017, in its third remand redetermination, Commerce chose to reject the Thai Fermentation 

statements “after making a fact-sensitive finding that the 

Thai Fermentation statements are missing ‘vital’ information.” J.A. 8280. In support of its finding, Commerce 

explained that “Thai Fermentation’s financial statements

are missing complete translations for two paragraphs of 

the property plant and equipment (i.e., fixed asset) footnote,” a key component of a company’s financial statements. Id. Among other reasons, it explained that “the 

fixed asset footnote supports the use of depreciation expense,” a critical component in ratio calculations. J.A.

8281. It also explained that “by virtue of comprising all or 

most of a company’s overhead costs, depreciation expense 

is an integral component of the denominator of the selling, 

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CP KELCO US, INC. v. UNITED STATES 11

general and administrative (SG&A) expense and profit ratios.” Id. Because depreciation can significantly impact 

the surrogate financial ratios, such information is vital. 

Although Accounting note twelve contains a fully translated depreciation schedule, it is not reasonable to only rely 

on such a schedule because “the narrative portions of a 

company’s footnotes can provide vital information regarding asset impairments, changes in useful lives of fixed assets, revaluations of fixed assets and the capitalization of 

production costs, among other things that are not shown on 

the numeric fixed asset schedule.” J.A. 8283. Accordingly, 

Commerce concluded it could not reasonably rely on Thai 

Fermentation’s financial statements as the best available 

information because the information missing from Thai 

Fermentation’s fixed asset footnote is of “critical importance” to its analysis. J.A. 8283–84. 

E. Fourth Trade Court Remand Order and Resulting 

Fourth Redetermination 

After another appeal, the Trade Court again remanded 

to Commerce stating that “[u]nlike the prior proceedings 

cited by Commerce, here the Department has not identified 

a particular depreciation methodology, class of fixed assets, 

or statement by the auditor in the Thai Fermentation 

statements that is questionable or unreliable.” CP Kelco 

U.S., Inc. v. United States, 2018 WL 1703143, at *3 (Ct. 

Int’l Trade Apr. 5, 2018) (CP Kelco IV). It explained that 

the “28-page Thai Fermentation financial statements provided to Commerce have full English translations with the 

exception of two paragraphs in a footnote concerning fixed 

assets,” which no one has alleged were intentionally omitted. Id. Although Commerce has stated that the statements might be more reliable if fully translated, 

“Commerce has not made the case that the statements are 

unreliable, warranting their wholesale rejection.” Id. The 

Thai Ajinomoto statements, on the other hand, “are in fact, 

as opposed to hypothetically, unreliable, due to evidence of 

countervailable subsidies.” Id. The Trade Court found 

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12 CP KELCO US, INC. v. UNITED STATES

that “Commerce’s general discussion about depreciation 

does not comply with the [Trade Court’s] instruction to 

make ‘a fact-sensitive finding that the Thai Fermentation 

statements are missing “vital” information.’” Id. (quoting

CP Kelco III, 211 F. Supp. 3d at 1345). Finding that the 

record does not support more than one reasonable result

and does not contain substantial evidence supporting Commerce’s decision to discard the Thai Fermentation statements, and that “any mystery surrounding the Thai 

Fermentation statements is essentially of [Commerce’s] 

own making” where “Commerce is—and has always been—

in possession of the ‘missing’ information” yet has failed to 

solicit a translation or translate the paragraphs itself, the 

Trade Court instructed that on remand, Commerce may 

“either translate the two paragraphs or leave them as is. 

Regardless, Commerce must use the Thai Fermentation 

statements to calculate surrogate financial ratios.” Id. at

*3–4. The Trade Court made clear that “the court will not 

provide [Commerce] any further room to maneuver.” Id. at 

*4.

Although Commerce continued to find that the Thai 

Fermentation statements are missing “specific information 

that is vital in nature” and “should not be used to calculate 

the surrogate financial ratios,” pursuant to the Trade 

Court’s directive, on July 5, 2018, Commerce relied upon 

the Thai Fermentation financial statements to calculate

Fufeng’s weighted-average dumping margins for the final 

remand redetermination results. J.A. 8297 (Fourth Redetermination). As a result, the weighted-average dumping 

margin for Fufeng changed to 0.00 percent. J.A. 8300.

F. Fifth Trade Court Decision 

In light of Commerce’s use of the Thai Fermentation 

statements, the Trade Court found that the remand results 

were supported by substantial evidence and sustained the

Fourth Redetermination. CP Kelco U.S., Inc. v. United 

States, 2018 WL 4469912 (Ct. Int’l Trade Sept. 17, 2018) 

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CP KELCO US, INC. v. UNITED STATES 13

(CP Kelco V). CP Kelco appealed the Trade Court’s decisions sustaining Commerce’s: (1) treatment of X. Campestris as an asset rather than a direct material input (CP 

Kelco I); and (2) determination to use Thai Fermentation’s 

financial statements to calculate surrogate financial ratios 

(CP Kelco V). We have jurisdiction under 28 U.S.C. 

§ 1295(a)(5). 

DISCUSSION

We review Commerce’s decision using the same standard of review applied by the Trade Court, while carefully 

considering that court’s analysis. Diamond Sawblades 

Mfrs. Coal. v. United States, 866 F.3d 1304, 1310 (Fed. Cir. 

2017). We decide legal issues de novo and uphold factual 

determinations if they are supported by substantial evidence. 19 U.S.C. § 1516a(b)(1)(B)(i); see Diamond Sawblades, 866 F.3d at 1310. For factual findings, substantial 

evidence is “such relevant evidence as a reasonable mind 

might accept as adequate to support a conclusion” considering the record as a whole. See Novartis AG v. Torrent 

Pharm. Ltd., 853 F.3d 1316, 1324 (Fed. Cir. 2017). For legal conclusions, Commerce, in carrying out its statutorily 

assigned tasks, must make reasonable choices within statutory constraints. See, e.g., Nucor Corp. v. United States, 

927 F.3d 1243, 1248–49 (Fed. Cir. 2019). Related principles govern the interpretation of regulations by an agency. 

See Kisor v. Wilkie, 139 S. Ct. 2400, 2414–18 (2019). 

Commerce must provide an explanation that is adequate to enable the court to determine whether its choices 

are actually reasonable. See CS Wind Vietnam Co. v. 

United States, 832 F.3d 1367, 1376–77 (Fed. Cir. 2016). It 

must “examine the record and articulate a satisfactory explanation for its action.” Yangzhou Bestpak Gifts & Crafts 

Co. v. United States, 716 F.3d 1370, 1378 (Fed. Cir. 2013). 

Although we uphold “a decision of less than ideal clarity if 

the agency’s path may reasonably be discerned,” Bowman 

Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 

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14 CP KELCO US, INC. v. UNITED STATES

281, 286 (1974), the required explanation must reasonably 

tie the determination under review to the governing statutory standard and to the record evidence by indicating 

what statutory interpretations the agency is adopting and 

what facts the agency is finding. “[A]n agency’s statement 

of what it ‘normally’ does or has done before . . . is not, by 

itself, an explanation of ‘why its methodology comports 

with the statute.’ Whether it does so in a particular agency 

decision or in a cited earlier decision, the agency must 

ground such a normal or past practice in the statutory 

standard.” CS Wind Vietnam, 832 F.3d at 1377 (quoting 

SKF USA Inc. v. United States, 263 F.3d 1369, 1383 (Fed. 

Cir. 2001).

A. Treatment of X. Campestris as an asset rather than 

a direct material input (CP Kelco I)

We begin with Commerce’s decision to treat X. Campestris as an asset rather than a direct material input. CP 

Kelco contends that Commerce’s decision not to treat the 

production strain of X. Campestris as a factor of production 

and assign it a surrogate value is unsupported by substantial evidence and is not in accordance with law. Appellant’s 

Br. 31–32. It argues that the plain language of the statute 

instructs Commerce to value factors of production, such as 

raw materials, used in producing the subject merchandise,

and X. Campestris is a factor of production necessary for 

the production of xanthan gum. Id.; Appellant’s Reply Br. 

19 (citing 19 U.S.C. § 1677b(c); Chevron, U.S.A. Inc. v. Nat.

Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984)). It 

further argues that X. Campestris meets the factors Commerce has previously used to determine whether an input 

is a direct material input. Appellant’s Br. 33–36 (citing 

Seamless Refined Copper Pipe and Tube from the People’s 

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CP KELCO US, INC. v. UNITED STATES 15

Republic of China, 75 ITADOC 60725 (Oct. 1, 2010) (“Copper Pipe and Tube”) (cmt. 7)).3 

Fufeng contends that substantial evidence supports 

Commerce’s finding that Fufeng and Deosen “acquired 

[their] [X]. [C]ampestris strain for payment-in-full long before the POI, and that the acquisitions included the right 

to further grow and exploit the resulting bacteria for the 

production of xanthan gum.” Appellees’ Br. 55 (citing J.A.

8174). It argues that the Trade Court correctly held that 

the factors in Copper Pipe and Tube did not preclude Commerce’s record-based finding that the bacteria was like an 

asset properly valued through the surrogate financial ratios. Id. at 55–56 (citing J.A. 10). The United States4 argues that the statute does not speak to what criteria to use 

to determine whether something is a factor of production,

and Commerce properly exercised its discretion to determine that X. Campestris was already accounted for in the 

surrogate financial ratios such that it did not need to be 

separately valued as a raw material. United States’ Appellee Br. 12–14. 

3 “[T]he Department will typically value a material 

as a direct material input if it is 1) consumed continuously 

with each unit of production, 2) required for a particular 

segment of the production process, 3) essential for production, 4) not used for ‘incidental purposes,’ or 5) otherwise a 

‘significant input into the manufacturing process rather 

than miscellaneous or occasionally used materials.’” Copper Pipe and Tube at cmt. 7.

4 The United States did not appeal the judgment below and therefore takes no position on Commerce’s selection of financial statements. It responds solely to CP 

Kelco’s challenge to the Trade Court’s March 31, 2015 decision concerning X. Campestris.

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The relevant statute directs Commerce to “determine 

the normal value of the subject merchandise on the basis 

of the value of the factors of production utilized in producing the merchandise” and the “valuation of the factors of 

production shall be based on the best available information 

regarding the values of such factors in a market economy 

country or countries considered to be appropriate by the 

administering authority.” 19 U.S.C. § 1677b(c)(1). The 

statute requires Commerce to consider the value of factors 

of production, but does not specify what factors Commerce 

must use to determine whether something is or is not a factor of production.5 Commerce evaluates whether something is a factor of production by determining whether it is 

a direct material input. As the Trade Court recognized, 

“Commerce has not used one monolithic test to evaluate 

whether or not an item is a direct material input or not, but 

has instead proceeded case by case.” J.A. 10. Here, Commerce determined that X. Campestris is not a direct material input, but instead is an asset because it is selfreplicating and does not require ongoing purchases to replenish its supply. See, e.g., Copper Pipe and Tube. 

Commerce’s decision to treat X. Campestris as an asset 

rather than a direct material input is supported by substantial evidence and is in accordance with law. Commerce 

found that evidence on the record of the present investigation shows that Fufeng and Deosen “acquired [their] [X]. 

[C]ampestris strain for payment-in-full long before the [period of investigation], and that the acquisitions included 

the right to further grow and exploit the resulting bacteria 

5 Section 1677b(c)(3) merely indicates that “factors 

of production utilized in producing merchandise include, 

but are not limited to” (A) hours of labor required, (B) quantities of raw materials employed, (C) amounts of energy 

and other utilities consumed, and (D) representative capital cost, including depreciation. 

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CP KELCO US, INC. v. UNITED STATES 17

for the production of xanthan gum,” and that Fufeng continually regenerates the bacteria for use in its xanthan 

gum production. J.A. 8174. Due to Fufeng’s “ownership 

and regenerative use of the bacteria,” Commerce determined that it is more similar to an asset than a direct material input. Id. Because substantial evidence supports 

Commerce’s findings, the Trade Court did not err in sustaining its decision. 

B. Commerce’s use of Thai Fermentation’s financial 

statements to calculate surrogate financial ratios 

(CP Kelco V)

As an initial matter, Fufeng argues that CP Kelco 

failed to exhaust its administrative remedies and is precluded from challenging the Fourth Redetermination by 

failing to provide comments in response to the Draft Fourth 

Redetermination. CP Kelco responds that it filed comments before the Draft arguing Commerce should interpret 

the Trade Court’s Fourth Remand Order to use an average 

of the financial ratios derived from the two companies’ financial statements, which Commerce addressed in its 

Fourth Remand Redetermination. It argues that even had 

it repeated comments that it made throughout the entire 

proceeding, its efforts would have been futile as the Fourth 

Remand Order compelled Commerce to use the Thai Fermentation statements. CP Kelco’s efforts would have likely 

been futile given the Trade Court’s directive, but regardless, CP Kelco is not precluded from challenging the Fourth 

Remand Redetermination because it raised the arguments 

before the Draft and Commerce briefly addressed them. 

See J.A. 8298.

CP Kelco argues that the Trade Court exceeded its authority by directing Commerce to use the Thai Fermentation statements to calculate surrogate financial ratios

rather than review the determination for substantial evidence. Appellant’s Br. 18. It contends that Commerce provided a reasoned explanation as to why the Thai Ajinomoto 

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18 CP KELCO US, INC. v. UNITED STATES

statement should be used, id. at 19, and that Commerce’s 

reliance in its Fourth Remand Redetermination on Thai 

Fermentation’s partially translated statements to calculate dumping margins is unreasonable, unsupported by 

substantial evidence, and is otherwise not in accordance 

with law, id. at 23–26. Fufeng responds that the Trade 

Court properly ordered Commerce to use Thai Fermentation data after it repeatedly failed to conduct the comparison required by the substantial evidence and best available 

information standards that would be required to use the 

Thai Ajinomoto data. Appellees’ Br. 49–50. It contends 

that Commerce, each time, gave short shrift to the Thai 

Fermentation statements, because they were missing two 

untranslated paragraphs, yet chose to use Thai 

Ajinomoto’s subsidy-distorted data. Id. at 34–35. 

It was reasonable for Commerce to rely on the Thai 

Ajinomoto data. In CP Kelco III, the Trade Court gave 

Commerce the option of “either (1) explicitly exploring the 

relative impact of the imperfection in the Thai Ajinomoto 

statements (evidence of subsidies) and that in the Thai Fermentation statements (incompleteness) or (2) making a 

fact-sensitive finding that the Thai Fermentation statements are missing ‘vital’ information.” CP Kelco III at 

1345. On September 18, 2017, in its third remand redetermination, Commerce chose the option to reject the Thai 

Fermentation statements “after making a fact-sensitive 

finding that the Thai Fermentation statements are missing 

‘vital’ information.” J.A. 8280. In support of its finding, 

Commerce explained that “Thai Fermentation’s financial 

statements are missing complete translations for two paragraphs of the property plant and equipment (i.e., fixed asset) footnote,” a key component of a company’s financial 

statements. Id. Among other reasons, it first explained 

that “the fixed asset footnote supports the use of depreciation expense,” a critical component in ratio calculations. 

J.A. 8281. It also explained that “by virtue of comprising 

all or most of a company’s overhead costs, depreciation 

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CP KELCO US, INC. v. UNITED STATES 19

expense is an integral component of the denominator of the 

selling, general and administrative (SG&A) expense and 

profit ratios.” Id. Therefore “depreciation can significantly 

impact the surrogate financial ratios,” and such information is vital. Id. Although Accounting note twelve contains a fully translated depreciation schedule, Commerce 

determined that it is not reasonable to only rely on such a 

schedule because “the narrative portions of a company’s 

footnotes can provide vital information regarding asset impairments, changes in useful lives of fixed assets, revaluations of fixed assets and the capitalization of production 

costs, among other things that are not shown on the numeric fixed asset schedule.” J.A. 8283. Accordingly, Commerce concluded, because the information missing from 

Thai Fermentation’s fixed asset footnote is of “critical importance” to its analysis, it could not reasonably rely on 

Thai Fermentation’s financial statements as the best available information. J.A. 8283–84. 

At least as of this third redetermination by Commerce

where it determined that the missing information in the 

untranslated financial statement was vital information 

and of “critical importance,” Commerce had adequately explained the reasoning underlying its decision to use the 

Thai Ajinomoto financial statements rather than the Thai 

Fermentation financial statements. To be clear, we do not

decide today whether Commerce must accept or refuse a 

partial translation of financial statements in every case, or 

that it is required to do so. But we are satisfied that here,

with its third redetermination, Commerce sufficiently explained its reason for choosing between two flawed financial statements. We therefore reinstate Commerce’s

decision to use the Thai Ajinomoto financial statements to 

calculate the surrogate financial ratios. 

CONCLUSION

For the foregoing reasons, we affirm the Trade Court’s

decision sustaining Commerce’s treatment of X. 

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20 CP KELCO US, INC. v. UNITED STATES

Campestris as an asset rather than a direct material input.

We reverse its decision sustaining Commerce’s use of the 

Thai Fermentation financial statements and reinstate 

Commerce’s determination to use the Thai Ajinomoto financial statements to calculate the surrogate financial ratios. We have considered the parties’ remaining arguments

and find them unpersuasive.

AFFIRMED-IN-PART AND REVERSED-IN-PART

COSTS

Each party shall bear its own costs.

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