Slip Op. 06-47

UNITED STATES COURT OF I NTERNATIONAL

TRADE

________________________________________ : 

### T A 

### C HEN 

### S TAINLESS 

### S TEEL 

### P IPE , 

### L TD ., :

Plaintiff , : v. : 

### U NITED 

### S TATES , :

Defendant , : and : 

### A LLOY 

### P IPING 

### P RODUCTS , 

### I NC ., ET AL ., : Defendant-Inter

venors . ________________________________________: Consolidated ________________________________________ Court No. 01-00027 : 

### A LLOY 

### P IPING 

### P RODUCTS , 

### I NC ., 

### F LOWLINE 

### D IVISI ON , 

### M ARKOVITZ : 

### E NTERPRISES , 

### I NC ., 

### G ERLIN , 

### I NC . and 

### T AYLOR 

### F ORGE 

### S TAINLESS , 

### I NC ., :

Plaintiffs , :

v. : 

### U NITED 

### S TATES , :

Defendant

. :

________________________________________ [U.S. Department of Commerce’s Final Results Pursuant to Remand are sustained.] Decided: April 6, 2006 Miller & Chevalier Chartered

( Pet er J. Koenig ), for Plaintiff Ta Chen Stainless Steel Pipe, Ltd.Court No. 01- 00027 Page 2

1 Ta Chen is a T aiw a nese p roduc er and e xpor ter of stain less s teel b utt-w eld pi pe fit tings subject to the unde

rlying anti dump ing du ty o rder. Ta Chen sells its pipe fittings to i ts U.S. su bs id ia ry, Ta Chen International (“ TCI”), which – in turn – sells them to unaffiliated U. S

. customers. See generally Ta Chen Stain

less Steel Pipe, Ltd. v. United States , 28 CIT ____, ____, 342 F. Supp. 2d 1191, 1195 (2004) (“ Ta Chen I ”).

2 The Do me st ic Pr od uc er s – Al lo y Pi ping Pro ducts, I nc.; Flow line Divis ion, Mark ovitz Enterpr ises, Inc.; Gerlin, I

nc.; and Taylor

Forge Stainless, I

nc. – were the domestic petitioners in the underlying

administrative review. CollierSh ann on S cot t, PLLC ( David A. H artquist and Jeffrey

S. Beckin gton ), for Plaintiffs/Defendant-Interve nors Alloy Piping Products, I nc., et al

. Peter D. Keisler , Assistan

t Attorne y General ; David M. Cohen , Director, and Jeanne E. Davidson , Deputy

Di rector, Commercial Litigation Bra nch, Civil Division, U.S. Department of Justice ( Stephen C. Tosini ); R acha el E. Wenth old , Office of the Chief Counsel for I mport Administra

tion, U.S. D epartme

nt of Comme

rce, Of Counsel; f

or Defe ndant United State s.
OPINION RIDGWAY, Judge: At issue in this action are the fina l result s of the U. S. Depar tment of Co mmerce’ s sixth administrative review of

the antidumping duty order c overing certain stainless steel butt-weld pipe fitt ings from Taiwan. See Final Re sults of An tidumping

Administra

tive Revie

w: Certai n Stainles s Steel Butt-Weld Pipe Fittings From Taiwan, 65 Fed. Reg . 81,827 (Dec. 27, 2000) (“Final Results”). The Final Results were challenged by Ta Chen, 1 as well a s the Dome stic Produ cers, 2 in two sepa rate appeals which were consolidated into this action. In brief, Ta Chen I

addressed a total of four issues disputing the Final Results, remanding two of those issues to Commerce. See generally Ta Chen Stainless Steel Pipe, Ltd. v. United States , 28Court No. 01- 00027 Page 3

3 Familiarity with Ta Chen I is presumed.

4 In contrast, Ta Chen I

rejected the Domestic

Producers’ attack on Commerce’s calcula tion of TCI’ s indirec t selling

expenses, as wel l as Ta Chen’ s chal lenge to the agency ’s decision denying the company a CEP Off

set Adjustment. See generally Ta Chen I , 28 CIT at ____, 342 F. Supp. 2d at 1203-07. CIT ____, 342 F. Supp. 2d 1191 (2004) (“ Ta Chen I ”). 3 Specifically, Ta Chen I instructed Commerce to recon sider its d etermina tion to doub le Ta Chen’s dumping margin based on an agreement

dating from 1992 to 1994 under which the ag ency

found tha

t Ta Chen h ad agr

eed to reimburs e antidump ing duties paid by TCI

. See Ta Chen I , 28 CIT at _____, 342 F. Supp. 2d at 1197-99. In addition, Commerce was directed to justify its pra ctice of using recognized expenses in some parts of its standard equation for calculating Constructe d Export Pr ice (“CE P”) Profit, in light of its use of

imputed expenses elsewhere in that equation. See Ta Chen I , 28 CIT at _____, 342 F. Supp. 2d at 1199-1203. 4 Now pending before t he Court are C ommerce’s Fi n al Results Pursuant to Remand (“Remand Results”), togethe

r with the parties’ comments thereon. See Plaintiff Ta Chen Stainless Steel Pipe, Ltd.: Opposition to August 16, 2004 Final Results Pursuant to Remand of the U.S. Department of Commerce (“Ta Chen Remand Brief”); De fendant-Interve

nors’ Comments Regardi ng t he U.S. Department

of Commerce’s Final Resul ts P ursuant to Remand (“Dom. Prods. Remand Brief”); Defendant’s Response

to the Par ties’ Comme

nts Conce rning th e Remand Results (“Gov’t Remand Brief”).Court No. 01- 00027 Page 4

As a result of its reconsideration on remand, Commerce has r ecalculated thean tidumping margin for Ta Chen. As revised, Ta Chen’s weig hted-average marg

in for the period of

review i s 6.42%. See Remand Results at 29, 31. As discussed more fully below, the Remand Results that Commerce ha s filed with the Court comply with Ta Chen I . They ar e, therefore, sustained.

I. The Rem and Results on the Alle ged Reim

bursem ent Agreement As Ta Chen I

explained , Ta Chen’ s thresho ld attack on the results of the administrative review challenged Commerce’s determination to double Ta

Chen’s dumping margin based on the agency ’s finding that company financial statemen ts evidenced an agreem ent by Ta Chen to

reimburs e TCI (its U. S. su bs id ia ry) for antidumping duties imposed on Ta Chen’s merchandise. The agency concluded

that “evidence pointing to a reimbursement ag reement dating from 1992 to 1994 raised ‘a rebuttable presumption that the agreement [was] still in effect during [this period of review].’” Ta Chen I , 28 CIT at ____, 34 2 F. Supp. 2d at 1196-97 ( quoting final results of administrative review). Ta Chen argued

that the mere existence of an agree ment to reimburse duties incurred from 1992 through 1994 cannot constitute evi denc e that reimbursement occurred during the period of review her e at is sue . In addition, Ta Chen asserted that Commerce abused its discretion by refusing to consider evidence proffere d by the company to prove that there was no reimbursement agreement and that no reimbursement had occurred during the relevant period. Finally, Ta Chen challenged the validity of Commerce’s “reimbursement reg ulation” – t he regula

tion that th

e age ncy invoked in doubling Ta Chen’s duty ra te. According to Ta Chen, be cause t hat regulation authorizes the imposition of anti dump ing duties in excess of the calculated dumping margin, the regulationCourt No. 01- 00027 Page 5

contravenes both

the U.S. antidumping statute and the United States’ international obligations. See Ta Chen I , 28 CIT at ____, 342 F. Supp. 2d at 1197-98. The Government vigorously defended the legality

of Commerce’s regulation. But even the Government

had to concede that Commerce’s rejection of the infor mation tha

t Ta Chen s ought to submit to the age ncy in the cour se of the a dmini stra tive r evie w had “den ied [T a Chen] a

meaningful opportuni ty to rebut [the Commerce Department’s] presumption of reimbursement.” Ta Chen I , 28 CIT at ____, 342 F. Supp. 2d at 1198 ( quoting Government’s opening brief). Ac co rd in gl y, with the support of the Government as well as the Do m estic Producers, Ta Chen I remanded

the reimbursement issue to Commerce, with instructions to “reconsider the bases for it s determination concerning the alleg ed reimbursement agreement, in lig ht of any re

leva n t factual evidence, as well as the age ncy’s own finding s, conclusi ons, and determinations in other matters . . . , and the applicable law.” Ta Chen I , 28 CIT at ____, ____, 342 F. Supp. 2d at 1198-99, 1207. On remand, Commerce requested and revie wed additional information from T a Chen. Based

on that information, the agency found that

the reimbursemen

t agreement “e

xpressly mentions o nly the 1992-1994 per iod.” Remand Re sults at 28. Concludin g that “ an agr eement to

reimburs e antidumping duties . . . was not in effect” for any subsequent period (including the period of review here at issue), Commerce has rescinded its decision to double Ta Chen’ s antidump in g margin (reducing the margin to 6.42%). Id . at 28-29, 31.Court No. 01- 00027 Page 6

5 See Gov’t Remand Brief at 2 (noting that no party objecte d to the Remand Results on the issue of the reimburs ement ag reemen t, and asse

rting th at “thus, the Remand Determ ination sh ould be sustained upon that issue” ); Dom. Pro ds. Reman d Brief at 1 n.1 (a

dvising t hat the Do mestic Produce rs’ comments on the Rema nd Results “ do not add

ress the . . . quest io n of reimbursement of antidumping duties”). Ta Chen’s brief is entirely silent on the issue.

6 See generally Ta Chen I , 28 CIT at ____, 342 F. Supp. 2d at 1193-95.

7 All statutory citations are to the 1994 version of the U.S. Code. The pertinent text of the cited provisions remained the same at all times relevant herein. Becau se the Reman d Results o n the issue of the re imburseme

nt agreement co mply

in full withthe Court’s instructions in Ta Chen I , and absent any objection by

the part ies, 5 those Remand Results are sustained.

II. The Rem and Results on Calculat

ion of CEP P

rofit As Ta Chen I

sets fort h in great er deta il, 6 dumping occurs when goods are imported into the U.S. and sold a

t a price lower than their “normal value.” 19 U.S.C. §§ 1673, 1677(34). 7 When normal value is compared to the U.S. price and dumping is found, antidumping duties equa l to the “dumping margin” – thedifference between the norma l value and the U.S. price – may be imposed. 19 U.S.C. §§ 1673(2)(B), 1677(35)(A). Normal va

lue is ca lculated using the exporting

(home) ma

rk et price ( i.e. , the price in the market where the goods are produced), an appropriate third country market price, or the cost of production of the goods. 19 U.S.C. § 1677b. Where – as in this case – the U. S. purcha ser is affiliated with the pr

oducer o r exporte r, the U. S. price i s based on the first sale from the affiliated purchaser (here, Ta Chen’ s subsidia ry , TCI) to an unaf

filiated purchas er in the

U.S. This is the basis for constructed export price (“CEP”). 19 U.S.C. § 1677a(b).Court No. 01- 00027 Page 7

Becau se the prices used to deter mine norma

l value a nd the U.S. price oc cur at di ffere nt points in the stre a m of comme

rce, an d under d

iffere nt circumstance s, certa

in adjustme

nts are ma

de to attempt to make them compa

rable, t o ensure “apples to apples” price comparisons. Where – as here

–the pr ice to be calc ulate d is C EP, ad diti onal s pecial adjus tment s are m ade. Am ong t hese ar e adjustmen

ts to account for

selli ng e xp enses incurred in the U.S. by the entity affiliated with the forei gn producer or exporter (including expenses s uch as co mmissions, guara ntees an d warra

nties, and credit expenses). 19 U.S.C. § 1677a(d)(1). In addition to

the adjus tments for

selling expense s, the CEP is reduced to account for the portion of profit attributable to those selling expenses. 19 U.S.C. § 1677a(d)(3). It is the calculation of this CEP Profit adjustment that is the focus of Ta Chen’s remaining claim. Specifically , Ta Chen maintains that the “ enormous . . . inven tory carry ing and credit c osts” in thi s case a re not pr operly accounted for by

Commerce’s applicationof its standa

rd methodology

for cal culating

CEP Profit, which treats such costs as “embedded” in a respondent’s actua l, recognized

expenses in certa

in parts of the CEP Profit equation, while accounting for the same costs with imputed expenses elsewhere in the equation. See Ta Chen Remand Brief at 13; SNR Roulements v. United States , 402 F.3d 1358, 1361, 1363 (Fe d. Cir . 2005) (explaining assumptions underlying Commerce’s standard methodology).Court No. 01- 00027 Page 8

8 See U.S. Department of Co mmerce Policy B ulletin 97/1, Calculation of Profit for Constructed Export Price Tr ansacti ons (Sept. 4, 1997) ( “CEP ProfitPolicy Bulletin ”); see also The Timken Co. v. United States , 26 CIT 1072, 1087, 240 F. Supp. 2d 1228, 1244 (2002), aff’d on other grounds , 354 F.3d 1334 (Fed. Cir. 2004) (Commerce’s official CEP Profit Po licy

Bulletinis “wellestablished” and “consistently applied” by the a

gency ). As out li ned in Commerce’s CEP Profit Policy Bulletin, 8 CEP Profit is determined by allocating a portion of the “Total Actual Profit” for all production and selling activities of the subject

me rchandi se to U

. S . CEP selling and furt her-ma nufactu ring activities. T

he calculation of

CEP Profit can be expressed in an equation: Tota l CEP Pr ofit a lloca ted = Tota l Act ual Pr ofit x Total U.S. Expenses to U.S. expe

nses Total Expenses For purposes of the CEP Profit e quation, C ommerce calcula tes the “ Total Ac tual Prof it” multiplier by (1) adding

the revenue attributable to sales of subjec t (or like ) merch andise in both the U.S. and the home market; (2) deducting from that sum the cost of the mercha ndise for both mark

ets; and (3) deducting the selling , packing, and distribution expenses for both markets. See Remand Results at 4 ( citing 19 U.S.C. § 1 677a(f) (2)(D) ; CEP Profit Po licy Bulletin ). The “ Total Expen ses” denominator

is calculated by a

dding (1) the cost of merchandise for both mar kets and (2) the selli ng, packi ng, and distr

ibution expe

nses for both markets. See Remand Re sults at 4 ( citing 19 U.S.C. § 1677a(f)(2)(C); CEP Profit Policy Bulletin). Under Commerce’ s stan dard met hodology for calculating CEP Profit, in bot h the “To tal Expense s” denomi nator an d the “To tal Actua l Profit” multiplier, recognized financ ial expe nses are included in the cost of both the U .S. and the

home market merchandise. See Remand Results at 4 & n.1 ( citing CEP Profit Policy Bulletin); Urug uay Round Agreements Act, Statement of Administrative Action, H.R. Doc. No. 103-316, at 825 (1994),Court No. 01- 00027 Page 9

9 See gen erally

n.14, infra

. 10 Commer ce notes that “inclusion of the imputed financial expenses in the ‘Total U. S

. Expenses’ numerat

or is cons istent with

19 U.S.C. § 1677a(f)(2)(B), which def ines the term ‘Total reprinted in 1994 U.S.C.C.A.N. 4040, 4164 (stating that “[t]he

total prof it is calc ulated on

the same basis as the total expenses”). As Commerce

explains its standar

d methodol ogy , “[w]hen c alculating both the ‘Total Actual Profit’ multiplier and the ‘Total Expenses’ denominator, net financial expenses are calculated from the [foreig n produc er/expor ter’s] co nstructe d value ( ‘CV’) da tabase in determining the cost o f U.S. merchandise, and from the [foreign producer/exporter’s] cost of production (‘ COP’) datab ase in determining the cost of home market merchandise.” Rem and Results at 5 ( citing 19 U.S.C. §§ 1677b(e), 16 77 b( b) (3 )) . C om me rc e n ot es th at “[ g] en er al ly, net financial expenses are calculated by offsetting the total financi al expense s incurr ed with any financ ial income earned during the period.” Remand Results at 5. Because net financi al expense s are inc luded in bo th the “Tota l Actual Pr

ofit” multiplier and the “Total Expenses” denominator as a cost ite

m, and bec ause Comme

rce histo rically has read the

statute to

require that those

two numbe

rs b e ac tual ( i.e. , recognized ) amounts , 9 the agency ’s standard methodology does not include imputed financial expenses as an expense it

em in the CEP Profit calculation. See Remand Results at 5-6 ( citing CEP Profit Policy Bulletin at n.5). In contrast to the recognized figures used in

other parts of the CEP Profit equation, “Total U.S. Expenses” – the numerator of the ratio in th at equat

ion – inclu des imputed credit and inventory carry ing costs, as an appro ximation of t he borro wing co sts associated with U.S. se lling ac tivities. See Re mand Results at 5. 10 As Commerc e observ es, “[t]he i mputed fin ancial e xpenses re

lated toCourt No. 01- 00027 Page 10

U.S. Expenses’ as described under 19 U.S.C. § 1677a(d)(1) and (2) .” Remand Results at 5; see also Gov’t Remand Brief at 4. selling activitie s [ i.e. , imputed credit and inventory carry ing costs] simply represent the oppor tunity cost of ha ving . . . mercha

ndise sit in inventory prior to sale, a nd of extending credit after the sale. To the extent that a company incurs a longer waiting period be tween pr oduction a

nd pay ment, it will nothave recourse to such funds and will gen erally incur g reater financi al expense s” than it w ould if the company r

eceived pay

ment immediately upon production. Remand Results at 6-7. As the Remand Results explain, imputed expenses a

re used i n the “To tal U.S. Expe nses” numerator

largely b ecause , as a

practical matter, appropriate recognized figures do not exist. In other words, becaus e m on ey is fun gibl e, “it is di ffic ult to asce rtai n exac tly

whic h por

tion o f [a produce r/exporte r’s] financial expenses arises as a result of ce rtai n specific operations of the

co mp an y, suc h as U.S. selling activities.” The imputed expenses are an estimate of that a mount. See Remand Results at 5-6, 17, 22. Fi na ll y, as the Remand Results note – be ca use a company ’s total recognized financial

e xpen ses reflec t its costs o f carr yin g merc handise i n inventor y a nd extendin g cred

it, and be cause those recogn ize d expenses are included in the “Total Expenses” denominator and in the “Total Actual Profit” multiplier

– the cor responding impute d expensesmust be exc luded fr om those pa

rts of the CEP Profit equation, to avoid double-counting. By the same toke

n, beca use the “ Total U.S. Expenses” numerator includes imputed expenses, the corresponding recognized expenses must be excluded from that part of the equation. See Remand Results at 5-7, 15-16.Court No. 01- 00027 Page 11

A. The Gene

ral Suff iciency of the Remand Resul

ts From the inception of this case, Ta C hen has asserted that the Commerce Department’ s application here of

its standa

rd methodolo gy f

o r calculating CEP Profit essentially “ignore[d]

enormous . . . inventory car rying a nd credit costs,” making U.S. sa les of Ta Chen’s me

rchandi se appear overly profitable

in comparison to home market sales. See Ta Chen I , 28 CIT at ____, 342 F. Supp. 2d at 1199-1200 ( quoting Ta Chen’s opening brief); Ta Chen Remand Brief at 3-4, 8, 10, 13-16. Base d on the ar

guments raised b y Ta

Chen, as w ell as the

then-exist

ing con flicts i n th e relevant case law, Ta Chen I

instructed the Commerce Department to explain in greater detail why the recognized expenses i ncluded i n the “To tal Expenses” d enominator and in the “Total Actual Prof it” multiplier are an adequate proxy for the imputed

expenses i ncluded in the “To tal U.S. Expenses” numerator. See gen erally Ta Chen I , 28 CIT at ____, 342 F. Supp. 2d at 1199-1203. Ta Chen now claims th at Commerce’s Remand Results do little more than parrot the agency ’s previous argume nts and an aly ses, and thus fail to co mply with the r

emand ins tructionsin Ta Chen I

. See , e.g. , Ta Chen Remand Brief at 2-6, 15-16. There is, however, no truth to that charge. The Remand Results amply evidenc e Commerce’s compliance with the Court’s mandate. See Remand Res ults at 1-4 , 13-14 & passim ; see generally Gov’t Remand Brief at 2-3; Dom. P

rods. Remand Brief at 1. Sp ec if ic al ly, as summarized above, the Remand Results elaborate on the statutory basis for Commerce’s standard methodology , and describe in greater de tail the methodolo gy

in gene ral. See generall y Rem and Res ul ts at 4 -8, 14; Gov ’t R ema nd B rie f at 4. In particular, the Remand Re sultsCourt No. 01- 00027 Page 12

11 The reasoning advanced by Commerce here ha s been sustained in other cases, some of which have expressly re cognized that, although the imputed figures and rec ognized figures may not be exactly the same, they

are reasonable surrog ates for one another. See , e.g. , SNR Rouleme nts , 402 F.3d at 1361-6 3; SNR Roulements v. United States , 28 CIT ____, ____, 341 F. Supp. 2d 1334, 1340 (2004) (citation omitted), appeal docketed , Nos. 05-1297, 05-1322 & 05-1323 (Fed. Cir. April 11, 2005); The Timken Co. , 26 CI T at 1090, 240 F. Sup

p. 2d at 1247; Thai Pineapple Canning Indu s. Corp. v. United States , 24 CIT 107, 115 (2000), aff’d in pa rt , and rev’d in part on other grounds , 273 F.3d 1077 (Fed. Cir. 2001). See also Remand Results at 16. explain how the imputed financial ex pense s included in the “Total U.S. Expenses” numerator are

a reasonable surrogate for

the relevant recognized financial e xpenses included in both the “Total Expenses” denominator and the “Total Actual Profit” multiplier. See gen erally Remand Results at 1-2, 4-10, 14, 16; Gov’t R emand B rie f at 4-5. 1 1 The Rema nd Results f

urther d emonstra te that, in principle, the application of Commerc e’s s tandard methodology properly a

ccounts for a produ cer/exporter’s financial expenses in all parts of the CEP Profit equation. See gen erall y Remand Results at 3-8, 14; Gov’t Remand Brief at 3-4. Moreover, as discus sed more fully in section II .D below, the supplemental administrative record filed with the Remand Results includes the test program that Commerce ranin this case. As the Remand Re sults explai n, that te st progr am demons trates th at –

even if the imputed expenses had been included

in the “To tal Actua

l Profit” m

ultiplier and the “ Total Expen ses” den ominator in this

case – such a change would have had only a minimal effect on Ta Chen’s dumping marg in. See Remand Results at 10-11, 21. Indeed, the Remand Results ind

ic ate that – contrary

to Ta Chen’s assertions – the addition of imputed expenses t o those parts of the CEP Profit equation that already include corres pondi ng recognized financial expenses would not re nd er a more accurate dumpingCourt No. 01- 00027 Page 13

12 See generall

y Ta Chen Re

mand Br ief at 2, 4-6, 13-1 6; but see Gov’t Remand Brief at 5-6. margin but, rather , would itse

lf result in distortion (due to double-counting). See Remand Re sults at 11-12; see also i

d . at 5-7, 15-16. For its part, T a Chen ha s failed t o adduce any real evidence t

o substant

iate its c la ims that Commerce’s standar

d methodol ogy

for cal culating

CEP Profit i mproper

ly disto rted the

results in this

case. 12 See SNR Rouleme nts , 402 F.3d at 1361 (Commerce’s standard methodology for calculation of CEP Profit to be sustained absent challenging party ’s “showing tha t the amount of imputed expenses is not accurately reflected or embed ded in its actual e

xpenses”) ; see also SNR Rouleme nts , 28 CIT at ____, 341 F. Supp. 2d at 1340 (Commerce’s standard methodology to be sustained absent demonstration th at (1) including imputedexpenses in denominator and multiplier parts of calculation would not result in double-cou n ting, or (2) that s tandard

methodolo gy

results in distortion ); Thai Pineapple , 24 CIT at 114-15 (sustaining Commerce ’s standard methodology be cause plaintiff failed to demonstrate any sig

nificant discrepancy ). Ta Chen’s brief contesting the Remand Results is not a model of clarity, to s ay the leas t. However, distilled to its essence, it appears to press two principal challenges to the a pplication of Commerce’s standard methodology in this case. As discussed below, neither of those ar gumentsis well- found ed; an d Ta Ch en’s o ther p oint s are eq ually una vaili ng.

B. The Magnitude of the Numerator vs. the De nominator Ta Chen first seeks to make much of the fact that the imputed credit and inventory carry ing expenses reflected in the numerator of Commerce’ s CEP Profit equation exceed the recognizedCourt No. 01- 00027 Page 14

13 See also Remand Results at 16 (“The imputed expenses are an estimate of the amount of gross financ ial costs associated with the respondent’s U.S. selling activities. The rec ognized financial expenses a

re net a mounts of f

inancia l expenses associa

ted with a ll production andselling activitie s, bo th in the United States and the home market.”), 22 (“The imputed expenses are an estimate of the amount of financial costs associated with the respondent’s U.S. selling activities. The recognized

expenses are net financial costs associated with all pr

oduction a

nd selling activitie s, both in the United States and the home market.”), 23 ( addressing claim that “Ta Chen had larg e imputed financial expenses f

or U.S. selling ac tivities, y et . . . TCI had very little rec ognized interest e xpense during the [Period of Review]” at issue). The gravamen of Ta Chen’s ca se – and the apparent ba sis for i ts preference for the use of imputed figure s – seems to be that it has “enormous . . . inventory car rying a nd credit costs” which, it contends, are not

adequately

reflected (i.e., are understa ted) in the recog nized fig

ures use d in both the “Total Expe

nses” denominator and the “Total Actual Profit” multiplier of Commerce’s standard CEP Profit equation. See , e.g. , Ta Chen Rem and Bri e f at 13. However, contrary to Ta Chen’s financial expenses included in the denominator. See Ta Chen Remand Brief at 6, 8, 11. I ndeed, Ta Chen characterizes this point as the “basic distortion at issue” here. See Ta Chen Remand Brief at 6. Ta

Chen simply misunderstands the CEP Profit equation. See generally Gov’t Remand Brief at 6-7. Contrary to Ta Che n’s implication, “there is no theoretical or logical requir ement that the imputed U.S. inven

tory carry ing cost [s] and impute d U.S. c redit expense[s] [reflected in the numerator

of Commerce’s equation] should somehow be limited to or less than the total amount of recognized

net fina ncial expe

nses . . . included in

the ‘Tota

l Expenses’ denomina

tor.” Rema nd Results at 10. The operative word in tha t sentenc e is “net .” As the Remand Re sults explain, “the imputed expenses in the numerator are gross expenses, while the rec ognized f

inancia l expenses in the denominator are net of interest income, which itself may not be allocable to U.S. sel li ng activitie s. Thus, the imputed expenses may rea sonably exceed the a mount of recognized financial expenses in the denominator without the existence of a distortion.” Remand Results at 13. 13Court No. 01- 00027 Page 15

claims, Commerce has not ignored any of the company’ s costs. See Remand Results at 16; Gov’t Remand Brief at 7. Indeed, in the Remand Results, Commerc e expressly acknowledged Ta Chen’s relativel y high credit and inventory ca

rrying costs. But, as Commer ce o bserves, there is no apparent reason why all such costs – whatever their magnitude – would not be fully and accurately

reflected in Ta Chen’s cons olida ted financial statements. See Remand Re sults at 9, 1 2-13, 14. Ta Chen ha s failed t o advance any

such rea son (much

less to pro ffer a

ny e vidence to substantiate such a claim). And it is Ta Chen’s consolidated financial statements that are the source of the “recognized” figure s that the company see

ks to avoid. See , e.g. , Remand Results at 17, 22. Moreover, althoug

h Ta Chen s e ems to vie w “impute d” figu res as e manating from some mystical source, they

are, in f act, derived directly

from “recognized” figure s. See Remand Re sults at 6-7, 12, 1 6; Dom. Pro ds. Remand Brief at 3-4. Ta Chen’s claim that Commerce

ignore d certa

in of its expenses thus finds no support in the record here.

1 4 Ta Chen continues to criticize Commerce’s reliance on ge nerally ac cepted accounting principle s. Ta Chen accuses the agency of improp erly

invoking accoun ting pri nciples to

justify its use of recognized expenses, which – according to Ta Chen – violates the agency ’s stat utory obligation to calculate dumping margins as acc urately as possible. Ta Chen RemandBrief at 4, 6, 10-12. C. Commerce ’s Use of Data for Subject Me

rchandi se vs. All Pr

oducts Ta Chen’s second principal argument turns on its claim that the recognized expenses used in th e e qu at io n a re “i mp er mi ss ib ly company-wide versus for the subject m erchand ise in particular.” Ta Chen Remand Brief at 4. See also Ta Chen Remand Brief at 6 (a sserting that Co mmerce “erroneously

uses [‘company-wide . . . actual expenses on all products’] as a proxy for [the] c osts of the subject me

rchandise in particular”), 9-10 (ar guing that Commerce “failed to ca lculate the profit on the subject me

rchandi se” and “ did not con sider impu ted cre dit and inv entory

carry ing cost s incurred specifically on the

subject merchandise”), 11 (alleging that Commerce “impermissibly uses . . . company-wide

costs”). 14Court No. 01- 00027 Page 16

The Government emphasizes that Commerce’s standard methodology for calculating CEP Profit is based on the statute, and that the agency ’s normal practice is to value costs using recog nized financial expenses. See Gov’t Remand Brief at 12-13 ( citing Remand Re sults at 5, w hich in tur n cite CEP Profit Policy Bulletin; Urugua y Round Agr

eements Act, Statement of Administrative Action, H.R. Doc. No. 103-316, at 825 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4164-65). Indeed, the Remand Resul ts stateflatly that “the statute indica tes that [‘Total Actual Profit’ and ‘Total Expenses’] are to be

actual ( i.e. , recog nized) amounts.” Remand Results at 5. But see SNR Roulement s , 402 F.3d at 1361-6 2 (hol ding t hat the statute “does not unambiguously address the issue” of the use of recognized expenses vs. imputed expenses in calculating “Total Expenses”). In a ny e vent, Comme

rce has the discr

etion todepart from its standard methodology whe

re nece ssary to ac hi ev e a mo re ac cu ra te re su lt . B ut Ta Ch en ha s f ai le d t o e st ab li sh th at an y suc h departure is warranted here

. See Gov’t Remand Brief at 13. This argument, too, reflects a fundamenta l misconception as to Co mm er ce ’s me th od ol og y. As Ta Chen correctly

points out, its financial statements report its financial expenses related to all of its products – not just those expenses related to subject merchandise. But, contrary to Ta Chen’s implication, Commerce

did not use

the raw n

umbers in

its CEP Profi

t equati on. Inste ad, in accordance

with its standard methodology, Commerc e calcula te d the portion of the total net financial expenses that are reflected in Ta Chen’s consolida ted fina ncial sta tements w

hich are attributa ble to the subject merchandise. See Remand Results at 23-24. Thus, as the Remand Results explain, “the recognized

net fina ncial e xpense s in the ‘T otal Actu al Profit’ multiplier and the ‘ Total Expen ses’ denominator . . . in fact represent a fig ure for subject m erchand

ise only , excluding the appropr iate amounts for any non- subject products.” Remand Results at 24 (emphasis added).

D. Commerce’s Test Program The validity of Commerce’s standa rd methodology a s applied to the fact s of thi s case is buttressed by t

he resul ts of the test program that the age ncy ran in the c ourse of

the administrativeCourt No. 01- 00027 Page 17

15 The Government takes pains to emp hasize tha t the test p

rogra m “does no t repre sent a change in practice or an approach which Commerc e intends to employ in the future.” Gov’t Remand Brief at 8-9; see also

Remand Res ults at 10, 12, 21. The Gove rnment c haract

erizes the exercise instead as “a unique and extraordinary attempt to pro be the potential factual basis underly ing Ta Chen’s argument, and an effort to resolve Ta Chen’s assertions that

Commerce’s longstanding CEP profit methodology r

esults in inaccuracies.” Gov’t Remand Brief at 8-9. As the Remand Results explain, “the [alternative] methodology f or calculating CEP profit set forth in [the test program] is flawed”: Accord in g to t he Depa

rtment’s [standard] methodolog y, t he impute d intere st expenses are already

reflected in the recognized f inanc ial expenses, which [are] included in the cost of merchandise in thedenominator and the multiplier of the CEP profit equation. By a

dding the imputed int

erest expenses to the denominator and the multi plier, the se amounts are then double-counted in the denominator and in the multiplier, such that

the denom

inator a nd the multi

plier wou

ld hav e both the recognized

amount and the imputed measurement of the r espon dent’s in

terest expenses. Furthermore, the CEP profit equation applied in [the test program] is not accura te or sy mmetrica l. By adding only the U.S. imp

uted inte rest expe nses, bu t review a t issue. I n accor dance w ith Ta Chen I , all documentation related to that test program was disclosed to Ta Chen and included in the supplemental administrative record compiled on remand. See Ta C hen I , 28 CIT at ____, 342 F. Supp. 2d at 1202; Remand Results at 11, 20, Att. A ; Draf t Results Pursuant to Remand at Att. I (including both “L og for CEP Test Program” and “Output for CEP Test Program”). Commer ce’s te st progr

am includ ed Ta Che n’s impute d expensesin all par ts of the CE

P Profit equation. See Remand Results at 10, 19-20. Still, the results that the test program yie lded did not differ signific antly

from the results reached using Commerce’ s standard methodology

. See Remand Result s at 10-11, 21. The Government highlights this fact as further proof that “Commerce’s standardmethodolo gy

did not re sult in a dis torte d calcul ation.” Gov’t Remand Brief at 8 ( citing Remand Results at 21). 15Court No. 01- 00027 Page 18

ignoring the home market imputed interest expenses and any imputed expenses related to production, purchasing, financing, or admin istrative

activitie s, [the test progra m] places u

ndue emph asis on Ta

Chen’s imputed U.S. s elling e xpenses. Rema nd Results at 11-12; Dom. Prods. Remand Brief at 5. See also Remand Re sults at 25-2 6 (cataloguing a few

of the “additional adjustments” that would be necessary to remed y f laws in the test program methodo logy, whi ch “leaves much room for improvement”; even so, Commerc e’s standard methodology

would still “represent[ ] the most accurate methodology ”). Ta Chen attacks Commerce’s test program, asser ting (a) that there is no evidenc e that the test program actually eve

r even “considered, much less adequate ly [considered], imputed

c redit and inventory costs,” and (b) that – more genera lly – there must be

an erro r in the te st progr

am beca use there is no gr eat discrepan cy betwe en the results yielded by that program and the results of the agency ’s standard methodology

. See Ta Chen Remand Brief at 2, 7-9. The Government argues that Ta Chen’s challenges to the test progr am come too late. In the

course of the remand proceedings, Commerce served Ta Chen with copies of

both the c omplete te st program and the output log. According to the Gove rnment, T a Chen wa s obliga ted to ra ise all

o bjections to the test

progra m with the a

gency at that time . The Gov ernment mainta ins that an y attempt to raise such concerns now – for the first time – is barred by the doctrine of exhaustion of administrative remedies. Se e Gov’t Remand Brief at 9; Remand Results at 20. See gen erally Ta Chen I , 28 CIT at ____, 342 F. Supp. 2d at 1205-0 7 (discus sing doc trine of e xhaustion) ; 28 U.S.C. § 2637(d). Th e Government is only about half r ight. It is true that Ta Chen fa iled to raise the secon d (more general) point at the administrative level. But, contr ary to the Gove

rnment’s claim, it appears that Ta Chen’s comments on the Draft Remand Results in fact did fl ag the first point (concerningCourt No. 01- 00027 Page 19

16 See Letter to U.S. Sec’y of Commerce from Counsel to Ta Chen (Aug. 9, 2004 ) at 2 (arguing that, in the

Draft Re mand Resu lts , “the Departm ent purports

. . . to recalculate the CEP Profit adjustmen

t per Ta C hen’s ar

guments that i mp uted cost s must be c onsidere d”) (em phasis added); Remand Results at 21 (stating that “the test program did in fact include the U.S. imputed financial expenses i n the ‘Tot al Actua l Profit’ m

ultip l ier and the ‘Total Expenses’ denominator, despite Ta

Chen’s c laims to the

contrary ”) (emphasis added).

17 The Rema

nd Results d

escribe the test pr

ogram i n detail: As evidenced by

the equation s set forth in the test program, the Department adde d the imputed expenses to the “Total Expenses” denominator, thus increasing “Total Expenses” by

the amount of the imputed expenses. [Commerce] also dedu cted this recalculated

“Total Expenses,” which now includes the imputed expenses, from Ta Chen’s “Total Revenue” to recalculate the “ Total Actual Profit” multiplier. See CEP Test Pr ogram Log at lines 3293-3391. Thus, [Commerce] did in fact increase the “Total Expenses” denominator by the amount of the imputed expenses, and . . . also didin fact decrease “Total Actual Profit” multiplier by including the same imputed expenses as a deduction from “Total Revenue.” . . . .

. . . . As evide

nced fr om the ac tual calc

ulations in

the CEP tes t progr

am and the

test prog ram computer language, the test prog ram did in fact include the U.S. imputed financial expenses in the “Total Actual Profit” multiplier and the “Total Expe nses” denominator, despite Ta Chen’s claims to the contrary

. the test program’s use of

imputed expenses). Indeed, Ta Chen’s c ommenton that issue precipitated a respon se from Co mmerce i n the ag ency ’s final R emand Re sults file d with the C ourt. 16 In any eve

nt, and more to the point, neither of Ta Chen’s argument s is pers uasive on the merits. As the G over

nmen t puts it, “T a Chen tak

es fr agm ents o f the

test p rogram o ut of c onte xtto incorre ctly

argue that impute d costs ar

e not i ncluded in T otal United States Selling Expenses (‘TOTSELL

U’).” See Gov’t Remand Brief at 9-10; Ta Chen Remand Br ief at 7-8. Ta Chen appare ntly examined o nly

a part of the test program. A more compre hensive review of the relevant parts of the program confirms that Commerce did indeed inc lude Ta Chen’s imputedexpenses in the Total Selling Expenses (“TOTSELL U”) line item. See generally Remand Results at 19-21. 17Court No. 01- 00027 Page 20

Remand Re sults at 20- 21; see also Gov’t Remand Brief at 10. Equally lacking in substance is Ta Chen’s claim that t he rela tivel y insigni ficant change in the results yielded by

the test program

somehow “defies mathematical logic” and c onstitutes proof of

some fundamental error. See ge nerally Ta Chen Remand Brief at 2, 8-9. Apart fr om its general expressions of skepticism and incredulity , Ta Chen l argel y f ails to elu cidate th

is point, or

to proffer any real evidence t

o support it. As the Government observes, “The test progr amresulted in a difference of 6.5% in the total United States selling expenses. This, in turn, [would] lower[ ] Ta Chen’s margin slightly.” Gov’t Remand Brief at 10 ( citing Remand Results at 11). According to the Government, the differe nce in results between the test program and the appl ication of t he ag en cy’ s s ta nd ar d m et ho do lo gy – however modest tha

t difference may

be in Ta Chen’s ey es – itself constitutes “evidence that Commerce did in

fact add imputed expenses to two parts of the calculation.” Gov’t Remand B rief at 10-11. Notwithstanding its various criticisms of the test program, Ta Chen seeks to avail itself of the progra

m’s resul ts. Specif

ically , Ta Chen a

rgues t hat, at a minimum, the

results of

the test program “confir med that it does make a difference in the dumping mar gin to consider imputed expenses on U.S. sales” in calculating CEP Profit. Ta Chen Remand Brief at 2-3. Emphasizing that the statute and judicial prece d ent require that dumping margins be ca lculated as accurately

as possible, Ta Chen a

pparent ly c ontends th at its dumping margin must be recalculated to reflect the test program results: “The statute does not say that minor inaccuracies may be ignored.” Ta ChenCourt No. 01- 00027 Page 21

18 In the Remand Results, Commerce noted – as an aside – that, in the event that one were to consider actually re

lying on the appr oach emp loy ed in the t

est prog ram, nume

rous ref inements and adjustmen

ts wo ul d be necessary

. See Remand Results at 11-12, 25-26. Ta Chen pounces on the agency ’s observations, dismissing them as mere “speculation without record suppor t.” T a Chen Remand Br ie f a t 8 . T o t he co nt ra ry, the points that Commerce makes are well-reasoned and clea rly articulated, and (am ong o ther thin gs) further illuminate the deficiencies in Ta Chen’ s proposed alterna tive appr oach to th e calculation of C EP Profit.

19 It has become increasingly

unclear precisely

how Ta Chen would propose to calculate CEP Profit. Although Ta Chennow denie s advoca ting the use of TCI’s financial statements, it appea rs that, in fact, it has urged exactly that in the past. Compare Ta Chen Remand Brief at 9 (asserting that it is not proposing use of TCI’s financ ial statements) with Ta Chen Memorandum of Law In Support of Motion For Judgment On the Agency Record (Sept. 4, 2001) at 28 (argui ng fo r use of “TCI’s relevant financial statement ending Octobe r 31, 1998”). As the Remand Results de tail, howe ver, any such use of TCI ’s finan cial stat

ements wo

uld pose a panoply of pr

oblems. See generally Remand Results at 16-17, 21-23. As Commer ce explains, it

would be i napprop

riate fo r the ag ency

to “rely on the individual fina ncial statements of a si ng le su bs id ia ry [ i.e. , TCI] to reflect the f ull fi nancial results and position of the consolidated Remand Brief at 2-3, 15-16 ( citing D & L Supply Co. v. United States , 113 F.3d 1220, 1223 (Fed. Cir. 1997)). But Ta Chen’s claim is wide of the mark, and must be rejected. Asdetailed in note 15 above, the test pr ogram h as a

number of inherent flaws. See generally Remand Results at 11-12, 21, 25- 26. 18 Thus, there can

be no suggestion that the test program is more a ccurate than Commerce’s standard methodology

. See Remand Results at 25. E. Commerce’s Departure from Its Standard Methodology in Other Cases Ta Chen continues to emphasize that there are other cases whe re Commerce has deviated from its standard met hodology fo r calcu lating CE P Profit. Ta

Chen urg es that the

same cou

rse should be followed here. See generally Ta Chen Remand Brief at 14-16. 19Court No. 01- 00027 Page 22

correspondent

[ i.e. , Ta Chen].” Id . at 17. For example , becau se TCI “sells a full rang e of prod

ucts which are outside the sc ope o f [the ] [anti dumpi ng] order [at is sue], and has si gnific ant rela ted-par ty transactions with other Ta Chen companies,” there is no basis for

treating TCI’ s financ ial state

ments as though they “ effectivel y isola te the proper portion of Ta Chen’s recognized financial expenses that may be attributable to

U.S. selling activities of subject merchandise.” Id . at 17, 23. For this reason, and others, “[n]either [Commerce] nor the Court has contemplated using TCI’s recognized financial expenses as a substitute for Ta Chen’s recognize d financ ial expens es or as a substitute for Ta Chen’s imputed financial expenses.” Id . at 23; see also i d . at 17. Further, as the Remand Results note, Ta Chen has previ ousl y argued tha t “Ta C hen ha d large imputed financial expenses for U.S. selling activities, y et that TCI had very

little rec ognized interest expe nse during the [period of review].” Remand Results at 23 (citation omitted). As Commerce observe s, “[t]his suggests that any re cognized financing expenses related to imputed credit or inventory carry ing costs are not being borne by TCI, but rather by

the parent company

[Ta Chen] or other Ta Chen companies. Suchamounts are not reported in TCI’ s separate financial statements, but would be reflected in Ta Chen’s consolidated statements.” Id

. Most recently, T a Chen has sug gested that – to avoid the “double counting” that results from including both impute d and rec ognized n umbers in the same parts of the equation (a phenomenon that Ta Chen apparently now

concedes) – Commerce “need only include imputed and not recognized expenses”

in all par ts of its CEP Pr

ofit equation. Ta Chen Remand Brief at 8. But it is fa r too late in the day

to start vet ting new proposed alternative methodologies. I n any eve nt, Commerce’s preference

for the u se of actual, recognized, “booked” figures, where available ( rather than imputed figures), is entirely rea sonable and in accordance with g enerally a ccepted accounting pr

incip les. See , e.g. , The Timken Co. , 26 CIT at 1090, 240 F. Supp. 2d at 1246 ( citing Antidumping Manual). Cf

. The Thai Pineapple Public Co. v. United States , 187 F.3d 1362, 1366 & n.5 (Fed. Cir. 1999). Absent some showing

that Comme

rce’s u se of re cognize d figur es in its CEP Pr

ofit calculations improper

ly skews the results, there is no basis f or requi ring the agenc y to use some o ther set o f data. Ce rtainly Ta Chen has made no such showing here.

20 S ee NTN Bearing Corp. of Americ a v. United States , 25 CI T 664, 155 F . Su pp. 2d 71 5 (2001) ; FAG Kugel fischer Georg Schafer AG v. United States , 25 CIT 74, 131 F. Supp. 2d 104 But the case s that Ta Ch

en invoke s are an omalies. See generally Gov’t Remand Brief at 11- 12. In e ach of th ose case s, Commerce departed from its standard methodology only because

it was required to do so by the court – not because the agency viewed the alternative methodology as more accurate. 20 In each of those c ases, al though Co mme rce complied with the court’s directive, theCourt No. 01- 00027 Page 23

(2001); FAG Italia, S.p.A. v. United States , 24 CIT 1311 (2000); SNR Roulements v. United States , 24 CIT 1130, 118 F. Supp. 2d 1333 (2000)

.

21 The Government summarizes some of Commerce’s concerns about its depar tures from its standar d methodol ogy

in the three (outda

ted) ca ses on whi ch Ta Che n relies: Commerce respectfully obje cted to t h e court-ordered methodology because the change distorted the ratio of United States selling expenses to total expenses. A distortion was created because the a ddition of imputed expenses incurred upon sales of the subject merchandise in the United States does not resu lt in the addition of imputed expenses i ncurre d upon sale s of fore ign like product s old in

the exporting co un tr y. This overstatement of costs understates the ratio of United St ates selling expenses to total expenses and, thus, understates the amount of actual profit allocated to selling , distribut

ion, and f urther ma nufactu ring activities in t

he United States. Gov’t Remand Brief at 11-12.

22 Ob vi ou sl y, these decisions by the Court of A ppeals also dispose of Ta Chen’s claim that judicial precedent

mandate s th e inclusio n of impute d expensesin all par ts of the CE

P Profit equation. See Ta Chen Remand Brief at 13-16. agency re sp ec tf ul ly o bj ec te d t o t he de pa rt ur e f ro m i ts st an da rd me th od ol og y. 21 And, in each of those cases, the age

ncy prevail ed on app eal. See SNR Rouleme nts , 402 F.3d

1358; FAG Italia S.p.A. v. United States , 402 F.3d 1356 (Fed. Cir. 2005). 22 See generally Gov’t Remand Brief at 11-12. Indeed, Ta Chen it self has been dow n this road bef ore. Ano ther cou

rt has pr eviously rejected basical ly the same arguments that Ta Chen presses her e, in a case in which Ta Chen ch allengeda different administrative review of

the same underly

ing antidumping order at issue in this action. See generall y Alloy Piping Prods . Co. v. United States , 28 CIT ____, 2004 WL 2418314 (2004) ; Ta Chen Remand Brief at

4 n.3 (acknowledging that Ta Chen r aised same challenges to Commerce’s standardCEP Profit calculation methodology bo th in instant case and in Alloy Piping ). In Alloy Piping , the court sustained Commerce’s application of its standard CEP Profit calculationCourt No. 01- 00027 Page 24

method ol og y, be cause Ta Chen was unable to demonstrate that imputed expenses were not adequa tely reflected. Alloy Piping , 28 CI T at _ ___, 2 004 WL

2418314 at * 5. So too Ta Chen has failed to demonstrate that imputed expenses were not properl y r eflected in Commer

ce’s CEP Pr

ofit calculations in the case at bar. In sum, pursuant to Ta Chen I and in accordance with the Court of Appeals’ holding in SNR Roulement s , Ta

Chen has been accorded more than ample oppor tunity to demonstrate that – under t he facts of

this case – the Comme

rce De partmen t’s use of actual, recog nized expen ses in th e calculation of “Tota

l Expenses”

and “Tot al Actua l Profit” d id not fully

accoun t for U.S. credit and inventory carry ing costs. See Ta Chen I , 28 CI T at ____, 342 F. Sup

p. 2d at 11 99-1203; SNR Roulement s , 402 F.3d at 1361, 1363. Yet Ta Chen has pointed to nothing in the record tha t casts doubton the agenc y’ s d etermina tion that it s standar

d methodol ogy

for cal culating

CEP Profit (including the use of

recog nized fig

ures) r emains “ the most

accurate methodology .” See Remand Results at 25. Under the circumst ances, C ommerce

was well within its rights to decline to depart fr om th at me th od ol og y.
III. Conclusion For all the reasons set forth ab ove , the Final Results Pursuant to Remand filed by the De pa rt me nt of

Co mm er ce in th is ac ti on ar e s us ta in ed . J ud gm en t w il l e nt er ac co rd in gl y.

________________

/s/

________________ De li ss a A . R id gw ay

Judge Decided: April 6, 2006 New York, New York