Slip Op. 10-47 UNITED STAT ES COURT OF INTERNATIONAL TRADE

___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ _ : MI D CONTI

NENT NA I LCORPORATI ON, : DAVI S W I RE CORP ORATI ON, MAZ E NAI L S : (DIVI SI ON OF W.H. MAZE COMPANY) and : TREASURE COAST FASTENERS, I NC., :

: Plaintiffs, : v. : Be fore : J ane A . Restani, Chief J udg e : UNI TED STATES, : Court No. 08-00224 : Def endant. : P ubl ic Ver sion

_________________________________________ :

OP INION [P laintiffs’ motion for judg ment on the ag ency rec ord in targ eted dumpingcase is denied and judgme nt is entered f

or the de fenda

nt.] Dated: Ma y 4, 2010 Wil ey Rein, L L P (Adam He nry Gordon a nd Maure en Elizabeth Thorson) f or the plaintiffs. Tony

West, Assist ant Attorney Gene ral; Jeanne E. Da

vidson, Director , Patricia M. McCarthy , Assistant Director , Commercial L itigation B ranc h, Civil Division, U.S. Department of Jus tice (D avid F. D ’Alessa ndris); Off

ice of Chief Counsel for Import Administration, U.S. Depa rtment of Commerce (Will iam G. I sasi, Har deep K . J osan and B rian Soiset), of c ounsel, for the def endant. Restani, Chief J udg e: This court a ction challeng es the De partment of Commerc e’s (“Commerc e”) final dete rmination rende red in a targ eted a

ntidumping duty

investigation of

cer tain steel nails from the United Ara b Emirates (“ UAE” ). See Cer tain Steel Nails from the United Ara

b Emirates: Notice of F inal Deter mination of Sales at Not L ess Than F air Va lue, 73 Fe d. Reg . 33,985 (De p’t Commerce J une 16, 2008) ( “F inal Deter mination”). The pla intiffs, MidCourt No. 08-00224 Pag e 2

Continent Nail Corporation, Davis Wire Corporation, Maze Nails and Tre asure Coast Faste ners, Inc., collec tively

the domestic industry , submitt ed a motion for judg ment on the ag ency rec ord. For the re asons stated be low, the cour t denies the plaintiffs’ motion and gr ants judg ment on the ag ency rec ord in favor

of the United States.

BACK GR OUND I. Targete d Dumping

Targ eted dumpinganaly sis is “an alternative method for de termining the exist ence of marg ins of dumping in an inve stigation . . . .” Targ eted Dumpingin Antidumping Investig ations; Request for Comment, 72 Fe d. Reg . 60,651, 60,651 (De p’t Commerce Oct. 25, 2007) (“ Request for Comment”) . The purpose of this methodology is to enable Commerc e to identify dumping whe n a seller

is providing lowe r price s to only cer tain United States purcha sers “by compar ing the weighted ave rag e of the normal value s to the export prices (or c onstructed export prices) of

individual transactions for compar able mer chandise .” 19 U.S.C. § 1677f1(d)( 1)(B ); see Re quest for Comment. B y contra st, during a

n ordinary

antidumping investigation, Com merc e dete rmines “whe ther the subjec t mercha ndise is beingsold in the United States at less than fa ir value . . . by compar ing the weighted ave rag e of the normal value s to the weig hted ave rag e of the export prices (a nd constructe d export prices) f or compa rable

merc handise” or by

“compa ringthe normal va lues of individual transac tions to t he export prices (or c onstructed e x port price s) of individual transa ctions for c ompara ble merc handise.” 19 U.S.C. § 1677f-1( d)(1) (A). II. Com m erc e’s Investigation of Certain Stee l Nails f rom the UAECourt No. 08-00224 Pag e 3

In May 2007, the plaintiffs filed pe titions with Comm erc e conc erningcer tain steel nails from the UA E. Certain Steel Na ils from the People’s Republic of China and the United Ara b Emirates: Initiation of Antidumpi ngDuty Investig ations, 72 Fe d. Reg . 38,816, 38,817 (De p’t Commerce J uly

16, 2007). In J uly

2007, Commerce initiated a targ eted dumping investigation of cer

tain steel nails from the UAE for the per iod of April 1, 2006, through Marc h 31, 2007. I d. In August 2007, Comm erc e sele cted Duba i Wi re F Z E (“D W”), “the la rg est produce r/exporter of na ils from the UAE,” as the mandatory responde nt in the investiga tion. Certain Steel Na ils From the United Ar ab Emirate s: Notice of Pre liminary Deter mination of Sales at L ess Than F air Va lue and Postponement of F inal Deter mination, 73 Fed. Reg . 3945, 3945 (De p’t Commerce J an. 23, 2008) ( “Preliminary Deter mination”). In October

2007, the plaintiffs submitted an alleg ation of targ eted dumpingag ainst DW. I d.

In its P reliminary

Deter mination, publis hed on January 23, 2008, Commerce use d the methodolog y

it had acc epted in a pr evious investiga tion to conclude that tar g eted dumping had occ urre d at an a

ntidumping duty

(AD) marg in of 4.47%. I d. at 3950. At that time, howeve r, 1 Commerce stated that it intended to develop a new methodolog y

to assess DW’s alleg ed tar g eted dumping a

nd reque sted comments on the matter . I d. at 3947. On April 21, 2008, Commerce informed the pla intiffs of its new methodolog y The P/2 test provides “that whe re the weig hted-a vera g e net pr ice to an a lleg ed tar g eted 1 purcha ser or

reg ion is more than 2 per cent lowe r than the w eig ht-ave rag e net pr ice to nontarg eted pur chase rs or re g ions in [ merc handise]/month combinations repr esentinga preponde ranc e of the targ eted qua ntity , a ‘pattern’ of

‘sig nificant’ price diff

ere nces” exis ts. I ssues and De cision Memorandum for the Fina l Deter

mination of the L ess-Tha n-F air-V alue Investig ation of Coated F ree Sheet Paper from the Republic of

Kore a, A- 580-856, POR 10/01/05-09/30/06, at 3–4 (Oct. 17, 2007), a vailable at http:// ia.ita.doc.g ov/frn/summary /KOREA-SOUTH/E7- 21035-1.pdf ( last visited Apr. 29, 2010).Court No. 08-00224 Pag e 4

(“the nails test”) a

nd set a sixt een da

y deadline f

or comments. (Pls.’ Confidential App. in Supp.

2 of Pls.’ Rule 56.2 Mot. for J . Upon the Ag ency R. (“Pls.’ App.”) Tab 10 at 7–9.) The na ils test consists of two stag es. Proposed Methodolog y for I dentifying a

nd Analy zing Tar g eted Dumping in Antidumping Investig ations; Request for Comment, 73 Fe d. Reg . 26,371, 26,372 (De p’t Commerce Ma

y 9, 2008) (“ Proposed Methodolog y ”). The first stag e, the “ standard de viation test,” re quires Commerce to calculate a standa rd deviation for all of the sa le price s of an item from a pa rticular e x porter. I d. Commerce the n must add toge ther the volume f or all of the items sold at a price below one sta ndard de viation from the we ighte d-ave rag e pric e. I ssues and Dec ision Memorandum at 19. I f this combined volume exceeds thirty -three perc ent of the total volume of sales of

that item from the par

ticular e x porter, the first stag e of the test is satisfied. I d. The sec ond stag e of the test, the g ap test, is satisfied if the volume of sales that qualify

under a price g ap compa

rison exceeds five perc ent “of the total [vol ume] of sales of subjec t mercha ndise 3 The plaintiffs point out that they wer e af forde d only

fourtee n day s to comment beca use 2 Commerce ma de cla

rifications on April 24, 2008. See I ssues and De cision Memorandum for the Final De termination in the L ess-Tha n-F air-V alue Investig ation of Certa in Steel Nails from the United Ara

b Emirates (UAE), A- 520-802, at 4 (June 6, 2008) (“ I ssues and De cision Memorandum” ), ava ilable at http://ia.ita.doc.g ov/frn/summary /UAE/E8-13490-1.pdf

(last visited Apr. 29, 2010). To perf orm a pric e g ap compa

rison, Commerce must: 3 [D] eter mine the total [vol ume] for which the diff ere nce be tween ( i) the salesweig hted ave rag e pric e to the alleg edly targ eted c ustomer and ( ii) the next hi g her sales-w eig hted ave rag e pric e to a non- targ eted c ustomer exceeds the aver ag e pric e g ap (w eig hted by

sales value ) for

the non-tar g eted group. Eac h of the pric e g aps in the non-tar g eted group would be w eig hted by the combined sa les associated with the pair of

price s to non-targ eted c ustomers that make up the g ap. Proposed Methodolog y , 73 Fe d. Reg . at 26,372, amende d by I ssues and De cision Memorandum

(continued...)Court No. 08-00224 Pag e 5

to the alleg edly

targ eted c ustomer.” Proposed Me thodology , 73 Fe d. Reg . at 26,372, amende d by I ssues and De cision Memorandum at 20 n.6.

The plaintiffs f

iled their ca se brief

in response to the na ils test on May 7, 2008. (See Pls.’ App. Ta

b 13.) On May

9, 2008, Commerce published the nails test and provided the public thirty

day s to comment. Proposed Methodolog y , 73 Fe d. Reg . at 26,372. Commerce subsequently

extended this deadline until J une 23, 2008. Antidumping Me thodologies f or Procee dings that I nvolve Signific ant Cost Change s Throug hout the Period of Investig ation (POI )/ Period of Review(POR) that May Require Using

Shorter Cost Avera g ing Periods; Request for Comment and Proposed Methodolog y for I dentify

ing a nd Analy zing Tar g eted Dumpingin Antidumping Investig ations; Request for Comment, 73 Fe d. Reg . 32,557, 32,557 (De p’t Commerce June 9, 2008). On June 16, 2008, howeve r, Commerce published its Final Deter mination, which adopted the na ils test, and used it to calculate a dumpingmarg in of zero. Final De termination, 73 Fe d. Reg . at 33,988. In addition, Comm erc e dete rmined that it had proper ly calc ulated DW’s financ ial expense rate without including the f inancial e x penses of Global Fa steners Ltd. (“GF ”), a n entity that Commerce ha d previously collapsed w ith DW. I ssues and De cision Memorandum at 28–30. Finally , Commerce a lso allowed a r evised scr ap offse t that included the sale price of extraneous mate rials that wer e not the by -produc t of nail production. I d. at 30–31.

In August 2008, the plaintiffs filed a c omplaint contesting the Final Deter mination. I n Fe bruar

y 2009, the plaintiffs filed a motion for judgme nt on the ag ency rec ord (...continued) 3 at 20 n.6.Court No. 08-00224 Pag e 6

pursuant to USCI T Rule 56.2. STANDARD OF REVIEW

The c ourt has jurisdiction pursuant to 28 U.S.C. § 1581(c). The court will uphold Commerce’ s final deter

minations in AD investigations unless they are “unsupported by substantial evidence on the re cord, or otherwise not in ac corda nce w ith law.” 19 U.S.C. § 1516a(b) (1)( B) (i). DISCUSSIO N I. Reasonable Time und er 19 U .S.C. § 1677m (g)

The plaintiffs a lleg e that Commerce ’s ac tions deprived them of the ir due proc ess rig hts under the F ifth Amendment. (Pls.’ Mem. of L aw in Supp. of Pls.’ Rule 56.2 Mot. for J

. Upon the Ag ency

R. (“Pls.’ Mem.”) 16.) The plaintiffs c laim that by providing the domestic industry only six teen da

y s to comment on the nails test, Commerce did not af ford e noug h time to submit m eaning ful comments to demonstrate a ll of the nails test’s err ors. (See I d. at 17–24.) In support of their position that the comment per iod was unre asonable , the plaintiffs cite the fac ts that Commerce ne eded “ sever al months” to develop the na ils test, that C ommerce ty pically aff ords par ties fifty day s to comment on preliminary deter minations, and that Commerce

4 provided the public ove r thirty day s to comment. (I d.) This claim lac ks merit. Congr ess has provide d a fa ir proce ss for commentingwithin the statutory languag e of 19 U .S.C. § 1677m . See 19 U.S.C. § 1677m(g ). Subsection (g ) provides that:

Under 19 C.F.R. § 351.309(c) (1)( i), any interested pa

rty for a final dete rmination in an 4 antidumping investig ation, may submit a case br ief “ 50 day s after the date of

publication of the preliminary

deter mination or results of re view . . . unless the Sec reta ry alters the time limit.” 19 C.F.R. § 351.309(c) (1)( i).Court No. 08-00224 Pag e 7

Information that is submitted on a timely basis to the administeringauthority or the Commiss ion duringthe cour se of a proce edingunder this subtitle shall be subject to comment by

other pa rties to the proc eedingwithin such rea sonable time as the a dminist eringauthority or the Commission s hall provide. The administering authority and the Commission, before making a final dete rmination . . . shall cea se collectinginformation and sha ll provide the par ties with a final opportunity to comment on the information obtained by the administeringauthority or the Commi ssion . . . upon which the par ties have not pre viously

had an oppor

tunity to comment. Comments containing ne w fa ctual information shall be disreg arde d. 19 U.S.C. § 1677m(g) . Whether or not a c onstitut ional due proc ess rig ht exi sts in these circ umstances is an issue that need not be de cided he re be cause such a r ight would not re quire any more time to be a ffor ded to the plaintiffs than is alr eady require d by

statute. I f Commerce provides a time pe riod for c omments that is unreasonable , it would be in violation of the statute. Compare 19 U.S.C. § 1677m(g ), with Bor den I nc. v. United States, 23 CI T 372, 375 n.3 (1999), rev’ d on other g rounds, 7 F. A pp’x 938, 938–39 (2001) (holding that “[t] he cour t applies a rule of re ason in eva luating a dminist rative due proce ss claims”). Ac cording ly , the cour t considers the plaintiffs due proc ess ar g ument as a c laim that Comm erc e violated the statutory due proc ess require ment of 19 U.S.C. § 1677m(g ).

Gene rally , “[w]here a right to be he ard e x ists, due proce ss require s that rig ht be

acc ommodated at a me aning ful time and in a mea ningf ul manner.” Ba

rnhar t v. United States Trea sury Dep’ t, 588 F. Supp. 1432, 1438 (CI T 1984). Rec og nizi ngthat “[w]i th more time most parties c ould improve the quality of their c omments,” courts a sk whether there is “evidenc e that g iven more time [a plaintiff] would have, in fa ct, provided more meaning ful comments.” Sichuan Chang hongElectric Co. v. United States, 466 F. Supp. 2d 1323, 1328 (CI T 2006). I f, howeve r, a pla intiff makes thoughtful comments that Commerce a ddresse s in its determination,Court No. 08-00224 Pag e 8

then, “a s a pra ctical matter , [t he plaintiff] was not substantially deprive d of an oppor

tunity to be hear d befor e the a g ency .” B orden, 23 CI T at 375 n.3. This understa nding ha s previously

led the court to conc lude that a c omment period as br ief a s four da y s can be rea sonable. See Sichuan, 466 F. Supp. 2d at 1329.

Despite having a

full opportunity

to demonstrate that the c omment period wa s

unrea sonable by

prese nting the c ourt with additional critiques of the na ils test that they wer e not previously

aff orded the opportunity

to develop, the plaintiffs ha ve fa iled to provide any

new a nd convincingarguments. Although the plaintiffs filed a thor oug h case brief, the court notes that most of their arguments are simil ar, if not identica l, to the ones raise d at the administrative leve l. (Compare Pls.’ App. Tab 13, with Pls.’ Mem.) The plaintiffs c laim that they would have ma de many additional arguments if they wer e af forde d more time to comment, y et now provide only one such e x ample. (Pls.’ Mem. 22.) The y argue that the mea

n price was incor

rec tly used to calc ulate the standa

rd deviation. (I d.) The pla intiffs contend that if the statisti cally corr ect median pric e we re use d, Commerce might have f ound dumping in this case . (I d.) Contrary to the plaintiffs cla im, however , the use of a mean to ca lculate a

standard de viation is, by

definition, a per fec tly

acc eptable sta

tisti cal method. Christine Ammer & Dea n S. Ammer, Dictionary

of Business a

nd Economics 397 (1977) . Although me dian ca n be substituted for mea

n in cer tain situations, such a substitut ion is not required. See g ener ally Yulia Gel, Weiwen Mia o & Joseph L . Gastwirth, The I mportance of Checkingthe Assumptions Underlying Statistical Ana ly sis: Gra phical Methods for

AssessingNormality , 46 J urimetrics J. 3, 26 (2005). In addition, such claims are mere ly

speculative—the plaintiffs do not offe r any numerica l evidence to support theirCourt No. 08-00224 Pag e 9

contention that using a median w ould yield a diffe rent re sult. 5

There is no evidence befor e the c ourt, there fore , to sugg est that the plaintiffs would have pr ovided more me aning ful comments if they wer e af forde d additional time to comment. Acc ording ly , the cour t holds that Com merc e af forde d the plaintiffs a r easona ble time to comment under 19 U .S.C. § 1677m (g ). II. The Nails T est

The plaintiffs c halleng e the F inal Deter mination on the gr ounds that the nails test violates 19 U.S.C. § 1677f-1(d)( B) and 19 C.F.R. § 351.414(f )(1) (i) and the ref

ore, Commerc e’s conclusion is not supported by substantial evidence . Specifica lly , the plaintiffs ar g ue that in investigating their

claim of tar g eted dumping , Commerce imprope rly considere d only

identical products, used a

statistically

invalid methodology , and unre asonably define d terms. (Pls.’ Mem. 24–25.) This claim lac ks merit.

Under 19 U.S.C. § 1677f-1(d)( 1)(B ), which e ssentially define s the targ eted dumping r emedy , Commerce “ may deter mine whether

the subject mer chandise is beingsold in the United States at less than f air va lue by

compar ing the weig hted ave rag e of the normal value s to the export prices (or

constructe d export prices) of individual transactions for compar able

merc handise,” but only

if “ther e is a pattern of e x port price s (or c onstructed e x port price s) for compar able mer chandise that differ signific antly

amongpurcha sers, re g ions, or periods of time.”

Fur thermore , the plaintiffs have failed to e stablish that it would have been f utile to seek 5 additional time for comment. The plaintiffs stated at or al ar g ument that althoug h no formal reque st was made, inf

ormal conve rsations with Commerce indicated that a r equest would be denied. Give n the lack of a re cord on this, and in the c ontext of this case there is no reason to presume what Commerce would have done in the fac e of a formal r equest.Court No. 08-00224 Pag e 10

19 U.S.C. § 1677f-1(d)( B) . In addition, 19 C.F.R. § 351.414(f)( 1)(i) pr ovided that Commerce must use “standar d and appr opriate statistical tec hniques” whe n deter mining whe ther sale s qualify for this section. 19 C.F.R. § 351.414(f )(1) (i). 6 Gene rally , courts lac k an “inde pendent a uthority to tell the [ ag ency] how to do i ts job” when a

statute does not spec ify

“any Congr essionally

mandated pr ocedur e or me thodology for a ssessment of the statutory tests.” U.S. Steel Group v. United States, 96 F .3d 1352, 1362 (F ed. Cir. 1996). This silence has bee n interpre ted as “ an invitation” for a n ag ency administering unfair tr ade la

w to “per form its duties in the way it believes most suitable” and c ourts will uphold these dec isions “[ s]o l ongas the [ag ency]’s analy sis does not violate any statute and is not otherwise a

rbitrar y and ca pricious.” I d. A. Com m erc e’s dec ision to consider only identical p roducts is sup ported by sub stantial evidence. The plaintiffs f

irst claim that Commerce’ s decision to test only identical produc ts was in violation of the cle ar la ng uag e of 19 U .S.C. § 1677f-1(d)(B ), which instruc ts Comm erc e to consider “ compar able mer chandise .” (Reply Br . of Mid Continent Nail Corp., Davis Wire Corp., Maze Nails and Tr easur e Coast Fa steners, I nc. 7.) I dentical mer chandise is compara ble

merc handise. See 19 U.S.C. § 1677(16). In some ca ses it may be a sma ller subset of a ll compar able mer chandise . I d. In a ca se such a s this, however, where the g reat bulk of the 7

Commerce w ithdrew 19 C.F.R. § 351.414(f ) on De cembe r 10, 2008. Withdrawal of the 6 Regulatory

Provisions GoverningTarg eted Dumpingin Antidumping Duty Investig ations (“Revoc ation”), 73 F ed. Reg74,930, 74,932 (De p’t Commerce , Dec . 10, 2008). At the time of the Fina l Deter

mination, however , this regulation was ef fec tive. I f Commerce must use other compa rable merc handise to compa re to U.S. sales, it must 7 (continued...)Court No. 08-00224 Pag e 11

alleg edly targ eted sa les had identica l matches, the statutory languag e does not re quire Commerc e to do more. (De f.’s Supp. Br . and Confidential App. 2.) Ba sed on this rec ord, the c ourt

8 conclude s that Commerce’ s decision to consider only identical mer chandise was supporte d by substantial evidence and wa s in acc ordanc e with law. B. Com m erc e’s use of standard d eviation is statistically valid . The plaintiffs c laim that Comm erc e’s use of standar d deviation in the nails test is

unrea sonable be cause “[a] st andar d deviation is simply a desc riptive measur e of a population; in other wor ds, standard de viation measure s descr ibe the dispersion of data, and then c alculate how sprea d out prices a

re f rom the ave rag e pric e.” ( Pls.’ Mem. 26.) The plaintiffs g o on to claim that “[a]t t he most basic leve l, then, the Depa rtment’s startingpoint violated the regulatory require ment that it use a ‘standa rd and a ppropriate ’ statistical technique to determine whether targ etingwas oc curring” beca use, contra

ry to Comm erc e’s a ssertion, “the standa rd deviation cannot va lidly

be used a s a method to ca lculate a ‘re lative measur e.’” (I d.) Gene rally , a standa

rd deviation is defined as “ a mea sure of the tendenc y

of individual values to differ from the mea

n.” Christine Ammer & Dea n S. Ammer, Dictionary

of Business a

nd Economics 397 (1977) . “The standard de viation is the most common m easur e of

(...continued) 7 make a djustments to get close to a price which may be compa

red. 19 U .S.C. § 1677b(a) (6)( C)(ii); 19 C.F.R. § 351.411. These a djustments provide an opportunity for the introduction of inacc urac ies into the proce ss. In fac t, [ [ ] ] percent of the alleg edly

targ eted sa les had identica l matches. 8 (De f.’s Supp. Br . and Confidential App. 2.) Confidential Data Delete dCourt No. 08-00224 Pag e 12

dispersion,” whic h is “the total sprea d of the va lues in a fr equenc y distribution.” I d. at 122. In statistics, a fre quency

distribution i s “the org anization of data to show how of ten ce rtain value s

or ra ng es of va lues occ ur.” I d. at 170.

As previously

descr ibed, the nails test uses standa rd devia tion to measure the dispersion of value s in an exporter’s pric e data , to aid in identifying which of the e x porter’ s sales

wer e re latively

low compar ed to others. See Proposed Me thodology , 73 Fe d. Reg . at 26,372. 9 After the dispersion is identified, the na ils test requires Commerc e to use the thirty -three perc ent test to determine whe ther a “patter n” existed under the statute. I d. Thus, contra ry to the plaintiffs’ asse rtions, Comm erc e’s use of standar d deviation was, by definition, statisti cally

valid beca use it was used to mea sure the dispe rsion of the sale s prices. This aspec t of the nails test, 1 0 there fore , is not in vi olation of 19 U.S.C. § 1677f-1(d)( B) (i). C. The nai ls test’ s defi nition s of “p atte rn” and “d if fer signif icantly” do n ot violate 19 U.S.C. § 1677f-1(d)(B)(i).

The plaintiffs a lso contend that Commerce ’s re liance on the word “ low” is ultra vire s 9 beca use it is not used within t he statute. (Pls.’ Mem. 27.) A lthough the pla intiffs are corr ect that the word “ low” does not a ppear within the lang uag e of 19 U .S.C. § 1677f-1(d)(B ), Commerce explains t hat this interpretation “strikes a ba lance betwee n two extremes, the first beingwher e any price below the avera g e pric e is sufficie nt to dist inguish the a lleg ed tar g et from other s . . . and the se cond beingwher e only price s at the ver

y bottom of the price distribution are sufficie nt to disti ng uish the alleg ed tar g et from other s.” I ssues and De cision Memorandum at 16. Ba sed on the e vidence , the cour t is not convinced that the P/2 test is an inherently better 1 0 test. The P/2 test, which draw s a har d line at two-pe rce nt, is arguably only well suited for a particula r ty pe of ma rket. Hy pothetically , if the price s of the mar ket g reatly

varie d, most prices are likely to satisfy the two-pe rce nt require ment and this test may captur e too many

sales. Alternatively , if the price s were near ly uniform, fe w sales would satisfy the two-pe rce nt threshold and the te st may not capture enoug h. In contra st, a standar d deviation ca n be ca lculated for a ll ty pes of disper sions and there fore , provides Commerce with a consistent method to analy ze all markets.Court No. 08-00224 Pag e 13 The plaintiffs f

urther c halleng e Commerce ’s def initions of “pattern” a

nd “diffe r signific antly ” as a

rbitrar y , unexplained, and unre asonable . (Pls.’ Mem. 26.) Particular ly , the plaintiffs claim that Commerce ’s use of thirty -three perc ent in its “pattern” definition and five perc ent in its “differ

signific antly ” def

inition are see mingly

random va lues with no meaning . (I d. at 36–38.) The plaintiffs contend that, in this case , these unre asonable definitions cause the nails test to overlook obvious targ eting

. (I d. at 24–25.) This cla im lacks merit. 1 1 As previously

discussed, Commerce included a thirty -three perc ent threshold require ment in its definition of “pattern.” I ssues and De cision Memorandum at 19. Comm erc e explained that it considered thirty -three perc ent re asonable for e stablishing a pa ttern of a ctivity

. I d. The c ourt has no re ason to disag ree .

Commerce de fined “ differ signific antly ” as a

ny situation when the five pe rce nt price g ap test is satisfied. I d. at 20–21. Commerce stated that it considere d a five perc ent differ ence as sig nificant, whe n used in combination with the thirty -three perc ent threshold, under the statutory

languag e. I d. at 21. Althoug h these tests may cre ate a standard that is more difficult The plaintiffs spe nd sever al pag es in their brie f deta iling hy pothetical data

sets in an 1 1 attempt to illus trate this point and thus, expose Com merc e’s test a s unrea sonable. (See Pls. Mem. 30–34.) The pla intiffs argue that these examples clear ly illust rate “tar g eted dumping ” under 19 U.S.C. § 1677f-1(d)( B) (i), but would not be cla ssified as such unde r Commerce ’s test. (I d.) The plaintiffs furthe r conte nd that much like these e x amples, the fa cts of this case clea rly support a finding of targ eted dumpingand that any finding otherwise c annot be supporte d by substantial evidenc e. (I d. at 38–39.) The plaintiffs’ examples, howeve r, ar e unconvinc ing be cause they oversimplify

a mar ket. Eac h example contains only a fe w hy pothetical pric es spre ad out at a g reat varianc e, cr eatinga mar ket wher e all of the extremely low price s fall within one standar d deviation of the a

vera g e pric e. (See id. at 30–34.) Such a r esult occur s beca use the hy

pothetical marke ts also contain extremely high pr ices that off

set the low ones. ( See I d.) The pr ice va riation of these ma

rkets ar e unre alistic, and there fore , raise f ew pr actica l conce rns re g ardingthis methodology

.Court No. 08-00224 Pag e 14

to satisfy than the domestic industry would have pr efe rre d, the nails test “does not violate a ny statute and is not otherwise a rbitrar y and ca pricious.” U.S. Steel Gr oup, 96 F.3d at 1362. I n other AD contexts, and for a longperiod of time f ive per cent tests have been use d to measure signific ance for AD purposes. See , e.g ., 19 U.S.C. § 1677b(a)(1) (C) (1994) (usingfive pe rce nt test to determine home ma rket viability); id. § 1677b(a) (1)( B) (ii)(I I ) (1994) (usingfive pe rce nt test to determine third-c ountry marke t viability); 19 C.F.R. § 351.403(d) ( 1998) (usingfive perc ent test to determine whether to “ca lculate nor

mal value ba sed on the sale by an af filiated party”). F urthermor e, plaintiff ha s done nothing to attempt to establish that on this rec ord the five pe rce nt require ment is unreasona bly high. T he var ious aspects of the nails test do not violate the statutory

languag e of 19 U .S.C. § 1677f-1(d)(1) (B )(i) a nd are applied re asonably based on this recor d. 1 2 III. Withdraw al of

the Re gulatory P rovisions Gover nin g Targete d Dumping in Antidu m pin g Duty Investigations (“Revoc ation”), 73 F ed. Reg 74,930 ( Dep’t Com m erc e, De c. 10, 2008). In Dec ember

2008, Commerce issued a n “interim final r

ule for the purpose of withdrawingthe re gulatory provisions gove rningthe targ eted dumpinganaly sis in antidumpi ng duty investigations.” Revocation, 73 F ed. Reg . at 74,930. Commerce explained that it “may have e stablished thresholds or other criter ia that have preve nted the use of this comparison The plaintiffs a lso contend that Commerce ’s test masks targ eted dumpingbeca use it 1 2 improperly

aver ag es all sales, both a lleg edly targ eted a

nd non-targ eted to ca lculate the a vera g emean pr ice. ( Pls.’ Mem. 28.) The plaintiffs c laim that this practice is “ distorting or bia sing the compar ison to a finding that targ etingdoes not exist .” (I d. at 28–29.) While including the alleg ed tar g eted sa les in the ave rag e-me an ca lculation could lower the mean, e x cludingsuch sales could lea d to the opposite result, perha ps raisingthe mean too hig h and incr easing the chanc e that an othe rwise non- targ eted sa le be c lassified as tar g eted. An inc lusion of these price s, there fore , is no less reasona ble than the e x clusion that the plaintiffs desire

.Court No. 08-00224 Pag e 15

methodology

to unmask dumping, c ontrary to the Congr essional intent. In that case , these provisions would act to deny relief to domestic industries suffer ing material injury from unfa irly trade d imports.” I d. at 74,931. The pla intiffs now cite these statements as e vidence to support their ar g uments that g iven more time they could have provided more meaning ful comments and that the nails test violates 19 U.S.C. § 1677f-1(d)( B)

. Contrary to this proposit ion, courts have made it clea r that unre asonable ness ca nnot be inferr ed fr om a subsequent withdra wal. See F CC v. Fox Television Stations, I nc., 129 S. Ct. 1800, 1811 (2009) ( holding that a n ag ency “nee d not demonstrate to a c ourt’s satisfac tion that the

rea sons for the ne w policy are better tha

n the re asons for the old one; it suffices that the ne w policy is permissible under the statute, that there a re g ood rea sons for it, and that the a g ency believes it to be be tter, which the conscious cha ng e of c ourse a dequate ly

indicates” ); GPX Int’l Tire Corp. v. United States, 645 F . Supp. 2d 1231, 1238 (CI T 2009) (holdingthat “[i] f the statutes are ambig uous, it does not matter whethe r Commerce ' s new interpr etation of the statutes conflicts with its old int erpr etation, bec ause the court is now lookingat Commerce ' s new interpre tation and will give that interpre tation defe renc e if it is rea sonable” ).

Fur thermore , in the Revocation, Com merc e stated that it “believes the w ithdrawa l of this rule is not significa nt. Wi thdrawa l will allow the Depar tment to ex erc ise the discre tion intended by

the statute and, the reby , develop a prac tice that will allow intere sted parties to pursue all statutory

avenue s of re lief in this area .” Revoc ation, 73 Fe d. Reg . at 74,931. Commerce also provided that it “is not repla cingthese provisions with new pr ovisions. I nstead, the D epar tment is returningto a ca se-by -ca se adjudication, until additional experience allows the De partment toCourt No. 08-00224 Pag e 16

g ain a greater unde rstandingof the issue.” I d. By its very terms, there fore , the Revocation is not an admission by

Commerce that the nails test is unlawful—it merely demonstrates that Commerce is dubious as to whe ther this particula r methodolog y

should be universa lly

applicable and announc es that Commerce will continue to searc h for a widely applicable test. 1 3 Acc ording ly , the Revocation has no eff ect on the c ourt’s conc lusions in t his case. IV. Com m erc e’s F inan cial Expense Rate Calc ulation

Duringits investigation, Commerce deter mined that DW had no viable home marke t, and there fore , based nor mal value on c onstructed va lue, which r equire d it to consider DW’s costs. Preliminary Deter mination, at 3948–49; 19 U.S.C . § 1677b(a) (4), ( e). The plaintiffs cha lleng e Commerce ’s dec ision to calculate D W’s financial e x pense r ate without including the financ ial expenses of GF . (Pls.’ Mem. 39–40.) Specific ally , the plaintiffs asse rt that Commerce de parte d from its established pra ctice of using a combined fina

ncial expense rate in case s involving collapse d entities. (I d. at 45.) This cla im lacks merit.

Commerce’ s authority

to collapse a ffiliated pr oducer s into a single e ntity for the

The c ourt notes that the nails test has be en used by Commerce in thre e subseque nt 1 3 investigations, two of which occ urre d afte r the issuanc e of the Revoca tion. See Poly ethylene Retail Carrier

Ba g s from Indonesia: Preliminary Deter mination of Sales at L ess Than F air Va lue and Postponement of F inal Deter mination, 74 Fed. Reg . 56,807, 56,809 (De p’t Commerce Nov. 3, 2009); Poly ethylene Reta il Carrier B ag s From Ta iwan: Preliminary Deter mination of Sales at L ess Than F air Va lue and Postponement of F inal Deter mination, 74 Fed. Reg . 55,183, 55,188 (De p’t Commerce Oct. 27, 2009); Cer tain New Pneumatic Off- The-Roa d Tires fr om the People' s Republic of China: Fina l Affirmative Deter mination of Sales at L ess Than F air Va lue and Par tial Affir mative Dete rmination of Critical Circumstance s, 73 Fe d. Reg . 40,485, 40,485 (De p’t Commerce July

15, 2008).Court No. 08-00224 Pag e 17

purposes of a

n antidumping investig ation, codified in 19 C.F.R. § 351.401(f ), has bee n aff

irmed 1 4 by the cour t. See Quee n’s Flowe rs de Colom. v. United States, 981 F. Supp. 617, 622 (CI T 1997). When dea ling with collapse d entities, Commerce ha s established a “ normal methodolog y of ca lculatingthe financ ial-expense ratio based on the fina ncial stateme nts at the hig hest level of consolidation normally

prepa red by the companie s.” I ssues and De cision Memorandum for the Final Results of the AntidumpingDuty Administrative Review of Ce rtain Softwood Lumber Products Fr om Canada, A -122-838, POR 05/22/2002-04/30/2003, at 83 (Dec . 13, 2004) (“Softwood L

umber” ), ava ilable at http://ia.ita.doc.g ov/frn/summary /cana da/E4-3751- 1.pdf (last visited Apr. 29, 2010). “ [W ]here consolidate d audited fina ncial stateme nts do not ex ist and are not easily prepa red, [Commerce ha s deeme d] i t appropriate to base the interest expense calc ulation on the audited fina ncial stateme nts of the re spondent.” I ssues and De cision Memorandum f

or the Antidumping Duty Administrative Review on F rozen Concentrated Ora ng e J uice f rom Br azil - May

1, 1998, through April 30, 1999, A-351- 605, at comment 2 (O ct. 11, 2000), ava ilable at http://ia.ita.doc.g ov/frn/summary /brazil/00-26074-1.tx t (last visited Apr. 29, 2010). I f “using

mere ly one compa

ny ’s financ ing inf

ormation would not yield a more acc urate result,” Commerc e has “ based f inancingexpenses on the unconsolidated f inancial state ments for 19 C.F.R. § 351.401(f) (1) pr ovides that: 1 4 In an antidumpingproce edingunder this par t, the Secre tary

will treat two or more aff iliated produce rs as a

single entity

wher e those produc ers have produc tion fac iliti es for

simil ar or

identical produc ts that would not require substantial retoolingof either

fac ility in order to r estructur e manuf actur ing pr iorities and the Secre tary conclude s that there is a

signific ant potential for the manipulation of price or produc tion. 19 C.F.R. § 351.401(f) (1).Court No. 08-00224 Pag e 18

the [collapsed] entiti es . . . .” I d. In such a c ase, “ the hig hest level of c onsolidation is t he individual financial stateme nts of eac h company .” Softwood L umber at 83. In this case, Commerc e collapse d DW and GF, but c oncluded that it was not

nece ssary to include GF ’s financ ial expenses in the financ ial expense ratio ca lculation beca use GF “ did not sell the mercha ndise under c onsideration in the United States a nd its home market was not viable dur ing the [period of investigation] . . . .” I ssues and De cision Memorandum a t 29. Although Commerc e stated a t oral ar g ument that it had the prope r docume ntation to include GF’ s financia l expenses in its calc ulation, Comm erc e maintained that its practice is to cate g orica lly

exclude such expenses for the purposes of

consistency

beca use financ ial documents from compa

nies that do not sell mercha ndise in the US are not alway s rea dily available . In response to this i nformation, the plaintiffs a cknowledg ed Commerce ’s normal pra ctice, but argued that the de g ree of intertwiningwas a ny thing but norma l in this case . Some level of intertwining , by

definition, will alway s exi st betwee n collapsed e ntities and the plaintiffs have failed to show that the inter twining in this case is so advance d beyond the norm that Commerce must deviate fr om its practice. T here has bee n no showing that Commerce’ s decision to follow its usual methodology

is inherently

flawe d. Commerce’ s decision to calc ulate DW’s individual financ ial expense rate , there fore , was supporte d by substantial evidence and wa s not arbitrar y beca use it was base d on the financ ial statements of DW, which produc ed the mer chandise . See Gulf States Tube D iv. of Quane x Corp. v. United States, 981 F. Supp. 630, 647–48 (CI T 1997). V. DW’s Scrap Adjustm ent

Finally , the plaintiffs cha lleng e Commerce ’s dec ision to acce pt the second por tionCourt No. 08-00224 Pag e 19

of DW’s claimed sc rap “ offse t” as a reduc tion to it s repor

ted cost of pr oduction as not supported by substantial evidence . In support of this proposition, the plaintiffs cite to rec ord evide nce that a sig nificant portion of the se items included mater ials “cle arly unrela ted to the cost of pr oducing nails,” and the ref

ore, should not have been inc luded in the scra p “off set.” (Pls.’ Mem. 46–49.) In addition, the plaintiffs claim that the re cord de monstrates that: (1) the sale pric e of the miscellaneous items did not approximate the purcha se cost, (2) the cost of the misce llaneous items were not included in the cost of pr oduction, and (3) the cost re lated to the re venues f rom the sale of

scra p wer e not included in DW’s re ported c ost of production. (I d.) Under 19 C.F.R. § 351.401(b), Commerc e may make a djustments “to ex port price , constructe d export price, or nor mal value,” so long a s the Secre tary ensure s that “[t] he interested pa

rty that is in possession of the releva nt information has the burde n of establishingto the satisfac tion of the Secre tary the amount and nature of a particula r adjustment,” a

nd does not “double- count adjustments.” 19 C.F.R. § 351.401(b) (1)–( 2). Commerce has cla rified its ty

pical prac tice re g ardingby -produc t offsets as: [A] responde nt must first provide and substantiate the qua ntity of by -produc t it produce d from subjec t mercha ndise duringthe [period of re view]. Thus, in order to gr ant a by -produc t offset, it is [ Commerce’ s] practice to re quire re spondents to provide suff

icient documentation of the ac tual amount of by -produc t produce d. The re ason for

this practice is that [ Commerce] must determine whe ther the responde nt’s production proc ess for subje ct merc handise a ctually g ener ated the amount of scr ap cla imed as a by -produc t offset. I ssues and De cision Memorandum for the Fina l Results of Antidumpi ngDuty Administrative Review a nd New Shipper

Review of Wooden B edroom F urniture f rom the People’s Republic of China, A-570-890, POR 01/01/2006-12/31/2006, at 70 (Aug . 11, 2008), ava ilable atCourt No. 08-00224 Pag e 20

http:// ia.ita.doc.g ov/frn/summary /PR C/E8-19303-1.pdf (la st visit ed Apr . 29, 2010). In its cost verification, Com merc e found that DW included the sale of e x trane ous materia ls as an off

set bec ause it had pr eviously improperly

added the cost of such items to its manufa cturingcost. (Pls.’ App. Tab 17 at 17–18.) Althoug h Commerce inc orre ctly ag ree d with DW’s description of this cost corr ection a “ scra p offse t,” its decision to allow DW to back out improperly

added c osts is supported by its cost verification. (See I d.) Any further 1 5 discrepa ncies ra ised by

the plaintiffs ar e de minimis and do not rende r the de termination unsupported or a

rbitrar y . 1 6 The plaintiffs c ite sever al pre vious issues and decision memora nda in support of their 1 5 proposition that the inclusion of these mater ials do not meet Commerce ’s “sc rap of fset cr iteria that the scra

p offse t must be related to the g ener ation of scr ap duringthe produc tion of the merc handise unde r consider ation . . . .” (Pls.’ App. Ta b 22 at 5.) Althoug h if a true scra p offse t wer e at issue, this argument might have weig ht, these dec isions do not provide such a require ment g iven the cir cumstance s of this case. See I ssues and De cision Memorandum for the Final Results of Poly ethylene Reta il Carrier B ag s (“PRCBs”) from the People’ s Republic of China (“PRC”), A-570- 886, POR 08/1/ 05-7/31/06, at 10–11 (Mar ch 10, 2008), a vailable at http:// ia.ita.doc.g ov/frn/summary /PR C/E8-5300-1.pdf (la st visit ed Apr . 29, 2010); I ssues and Dec ision Memo for the Antidumping D uty Administrative Review of Stainless Steel F lang es from India - F ebrua

ry 1, 2005 throug h J anuar

y 31, 2006, A-533-809, at comment 2 (Aug . 13, 2007), ava ilable at http://ia.ita.doc.g ov/frn/summary /I NDIA/E7-15810-1.pdf

(last visited Apr. 29, 2010). F urther, in those inve stigations, Com merc e indee d denied the by -produc t offset be cause the produc er c ould not substantiate the ty pe of sc rap g ener ated. I d. This information, howeve r, was only nece ssary

beca use Commerce neede d to verify that the amount of the sc rap of fset claimed wa s corr ect, not whe ther the materials sold qualified f or such a n offse t. See I d. Thus, these e x amples do not aid plaintiffs. The plaintiffs a

rgue that the e vidence on the re cord de monstrates that the scr ap 1 6 adjustment was over stated. F irst, the plaintiffs point to the fact that the r ecor d indicates that DW purcha sed wire rod at a

n aver ag e cost pe r metric ton of [[ ]] and sold the extraneous wire rod at a pr ice of

[[ ]] and [[ ]] , resultingin an offse t value that bac ked out more c ost than DW init ially

put in. (Pls.’ App. Tab 25 at 4.) The differ ence betwee n these pric es, howe ver, (continued...) Confidential

Data Delete dCourt No. 08-00224 Pag e 21

CONCLUSION For the af oreme ntioned rea sons and base d on this recor d, the cour t concludes that utiliz ation of the “ nails test” for the targ eted dumpinganaly sis was rea sonable a nd Commerce’ s deter minations were suppor

ted by substantial evidence , and in ac corda nce w ith law. Acc ording ly , the plaintiffs’ Rule 56.2 motion for judg ment on the ag ency rec ord is denied. J udg ment, there fore , will be enter ed for the def endant.

/s/ J ane A . Restani

J ane A . Restani Chief J udg e Dated: This 4th day

of May , 2010. New Y ork, Ne w York.

(...continued) 1 6 results in a diffe renc e in value that is less than [ [ ] ] percent of the total value of

the total scra p. The re cord a lso indicates that the ag g reg ate of DW’s output weighe d [[ ]] pounds, which excee ds the input quantity of [[ ]] pounds. (Pls.’ App. Tab 17 at 18.) The diff ere nce be tween the se two value s, howeve r, is only [[ ]] pounds.

Confidential

Data Delete d