Slip Op. 05-80 UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: CARMA N, JUDGE

________________________________________________ : HANGZHOU SPRING WASHER CO., LTD., : : Plai ntiff, : : v. : : UNITED STATE S, : Court No. 04-00133 : Defendant, : : and : : SHAKEP ROOF ASSEM BLY COMP ONENTS : DIVISION OF ILLINOIS TOOL WORKS, INC., : : Defendant-Intervenor. : ________________________________________________: [Upon consideration of Plaintiff’s Rule 56.2 motion for judgment upon the agency record, Defend ant and D efenda

nt-I nterven or’s re sponses, a

nd Plaintif

f’s rep ly, Plaintiff

’s motion is granted in part and denied in part. The D epartment of Commerce’s determination in Certain Helical Spring Lock Washers from the People’s Re public of China, 69 Fed. Reg. 12,119 (Dept’s Commerce Mar. 15, 2004) (notice of final results of antidumping duty admin. review) is affirmed in part and remanded in part.] Dated: July 6, 2005 White & Case LLP ( William J. Moran, W illiam J. Clinton, Adams C. Lee , Emily Lawson ), Washington, D.C., for Plaintiff. Peter D. Keisler , Assistan t Attorne y G eneral ; David M. Cohen, Director, Commercial Litigation Branc

h, Civil Division, United States Department of Justice; Jeanne M. Davidson , Deputy Direc

tor, Commercial Litigation Bra nch, Civil Division, United States Department of Justice; David S. Silverbrand , Trial Attorney, Commerc ial Litigation Branc h, Civil Division, United Sta

tes Depa rtment of Justice; James K. L ockett, Senior Attorney, Off ice of Chief Counsel for I mport Admi

nistration, United

States De

partmen t of Commer

ce, Of Co unsel, for Defen

dant. Hume & Associate

s PC ( Robert T. Hume ), Washington, D.C., for Defendant-I ntervenor.Court No. 04-00133 Page 2

1 19 C.F.R. § 351.222( e)(1) s tates: Antidumping proceeding. During the third and subsequent annual anniversary

months of the publication of an antidumping order or suspension of an antidumping investigation, an exporter or producer may request in writing that the Secretary revoke an order or terminate a O PINI ON CARMAN, Judge: This matter comes before this Court on a motion for judgment on the agency

record filed by

Plaintiff Hangzhou Spring Washer Company (“Plaintiff” or “Hangzhou”). Plaintiff challenges the final results by the United States De partment of Commerce (“Defendant” or “Commerc e”) in Certain Helical Spring Lock Washers from the People’s Republic of China , 69 Fed. Reg. 12,119 (Dep’t Commerce Ma r. 15, 2004) (notice of final results of antidumping duty a dmin. review) [hereinafter Final Resu lts ]. Plaintiff seeks remand on the following four issues: (1) valuation of steel wire rod; (2) valuation of plating; (3) valuation of overhead, selling, gene ral and administrative expenses (“SG&A”), and prof it; and (4) request for revocation. The par ties concur regarding

the remand request on the issue of the subsidy suspicion determination. This Court affirms in part and r emands in part the Final Results as set forth below. This Court has jurisdiction over this case pursuant to 28 U.S.C. § 1581(c) (2000) and 19 U.S.C. § 1516a(a)(2)(A) (i) (2000).

B ACKGROUND This is the ninth administrative review of the antidumping duty order pertaining to helical spring lock washers (“HSL W”) from the People’s Republic of China (“China”), and the period of review (“POR”) is from October 1, 2001, throug h September 30, 2002. Pursuant to 19 C.F.R. § 351.222(e)(1) (2004), 1 Hangzho u reques ted revo cation of the antid umping du

ty in thisCourt No. 04-00133 Page 3

suspended investigation . . . .

2 19 C.F.R. § 351.222(

b)(1)( i), in rel evant pa

rt, rea ds: In determining whe

ther to revoke an antidumping duty order or terminate a suspended antidumping investigation, the Secretary will consider: (A) whether all exporters and producers cove red at the time of revocation by the

order or the suspension agreement ha ve sold the subject merchandise at not less than normal value for a pe riod of at least three consecutive y

ears . . . administr ative re view, cla iming this

is the thir

d consec utive y ear it sol d the subje ct merchandise not below normal value. ( Pl.’s Mem. of P. &

A. in Supp. of Hangzhou’s Mot. for J. on the Agency R. at 38 (“Pl.’s Mem.”).) However, Commerce f ound that HSLW were being sold in the United States at below normal value by Hangzhou during this POR. Final Resu lts , at 12,120. Accord ingly , Commerc e deter

mined not to

revoke t he antidu mping dut

y or der with r espect t o Hangzhou pursuant to 19 C.F.R. § 351.222(b)(1) (2004). 2 Id

. On October 2, 2002, Commerce published Antidumpi ng or Counte

rvailing D uty Orde

r, Finding, or Suspended Investigation , 67 Fed. Reg. 61,849 (Dep’t Commerce Oc t. 2, 2002) (opportu nity to reque st administ

rative r eview). In re sponse to H angzhou and DefendantIntervenor Shakepr

oof Assembly Components Division of I llinois Tool Works, Inc.’s (“Defendant-I

ntervenor” or “Shakeproof”) timely request, Commerce initiated a review. Initiation of Antidumping and Countervailing Duty Administrative Reviews and Requests for
Revoca tion in Part

, 67 Fed. Reg. 70,402 (Dep’t Commerce Nov. 22, 2002)

. Because it is undisputed that the China qualifies as a non-market ec onomy (“NME”) , Commerce constructed a normal value for the va rious factors of production by gathering surrogate normal value data fr om market economy sour ces using a factors of productionCourt No. 04-00133 Page 4

methodolo gy . Commerc e invited interest ed parti es to submit

informat ion reg arding

surrog ate values. ( Public Rec ord (“P.R .”) 13-1 4.) Afte r Commerc e issued t

he initial and firs t suppleme ntal ques tionnaire s and rec eived re sponses f rom Hang

zhou and de ficienc

y c omments from Shakeproof, the concept of subsidy suspicion against this subject merchandise appeare d on the record. (P.R. 19, 23, 24, 28, 30, 39, 49.) On June 20, 2003, Shakeproof requested that Commerce apply its subsidy suspicion policy in its pre-preliminary determination comments. Shakeproof cited subsides found in earlier Commerce countervailing duty investigations involving cut-to-length steel from the United Kingdom (“UK”) and contended tha t Hangzhou’s wire rod supplier may have benefitted. Commerce

then issue d a secon

d suppleme

ntal ques tionnaire

to Hang zhou and su

bsequen tly conducted a verification of Hang zhou’s second supplemental questionnaire responses. (P.R. 45.) On October 31, 2003, Commerce issued a memorandum on the valuation of the f actors of production, which determined that India w ould be the surrogate country and detailed the valuation of the factors of production. (P.R. 49.) On November 7, 2003, Commerce published Certain Helical Spring Lock Washers from the People’s Republic of China, 68 Fed. Reg. 63,060 (Dep’t Commerce Nov. 7, 2003) (preliminary r

esults of antidumping duty admin. re view) [hereinafter Prelimina ry Result s ]. In the Prelimina ry Result

s , Commerce declined to value wire rod at the price Hangzhou paid its market economy supplier be cause Hangzhou’s supplier may have benefitted from subsidies. Prelimina ry Result

s at 63,063. Commerce instead used surrogate countr y data to deter

mine the value of the stee l wire ro d and the v alue of t he platin g fact ors of pr oduction. Commerce

also opted to us e more c ontempor aneous su rroga te data than forme

rly used in pr

ior revie ws.Court No. 04-00133 Page 5

In De cem ber 200 3, H ang zh ou s ubm it ted add it io nal in for mat io n on sur rog ate val ue. In January 2004, Hang

zhou and Shakeproof submitted case and rebuttal briefs. (P.R. 58-61.) On March 15, 2004, Commerce issued the Final Resu lts . Commerc e found that Hang zhou sold HSLW at below normal value during the POR, ca lculated Hangzhou’s dumping margin to be 28.59 per cent ad valorem , and rejected Hangzhou’s reque st for revocation. Final Resu lts , 69 Fed. Reg. at 12,119-20. Hang zhou timely appealed.

S TAND ARD O F R EVIEW In reviewing

a challenge to Commerce’s final dete rmination in an antidumping administrative review, the Court will uphold Commerce’s decision unless it is “unsupported by substantial evidence on the record, or otherwise not in ac cordance with law . . . .” Tariff Act of 1930, § 516A(b)(1)(B) (codified as a mended at 19 U.S.C. § 1516a(b)(1)(B)(i) (2000) ). “Substant ial evide nce is mor

e than a mere sci

ntilla. I t means su

ch rele vant evid ence as a reasonable mind might accept as adequa te to support a conclusion.” Consol. Edison Co. v.
NLRB , 305 U.S. 19 7, 229 (19 38) (cita tions omitte d); see also Micron Tech., Inc. v. United States , 117 F.3d 1386, 1393 (Fed. Cir. 1997). “As long as the a gency ’s methodology a

nd procedures are reasonable means of effectuating the statutory pur pose, and there is substantial evidence in the record supporting the age ncy’s conc lusions, the court will not impose its own views as to the sufficiency

of the agency ’s investigation or question the agency ’s methodology.” Ceramica Regiomontana, S.A. v. United States , 10 CIT 399, 404-05, 636 F. Supp. 961 (1986) (citations omitted), aff’d , 810 F.2d 1137 (Fed. Cir. 1987).Court No. 04-00133 Page 6

In determining whe

ther Commerce’s interpretation and application of the antidumping statute is in accor dance w ith law, th

is Court mus t conside

r “whether Cong

ress has directly spoken to the precise question at issue,” and if not, whether the ag ency’s inter pretation of the statute is reasonable. Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc. , 467 U.S. 837, 842- 43 (1984). “[A] court must defer to an agency ’s reasonable interpretation of a statute eve n if the court might have preferred a nother.” Koyo Seiko Co. v. United States , 36 F.3d 1565, 1570 (Fed. Cir. 1994) (citation omitted). Deference is based upon a r ecognition that Commerce has special expertise in administering the anti-dumping law. Ta Chen Stainless Steel Pipe, Inc. v. United States, 298 F.3d 1330, 1335 (Fed. Cir. 2002)

.

P ARTIES ’ C ONTENTI ONS Plai ntiff appeal s four main i ssues : (1) v aluat ion o f stee l wire rod; ( 2) val uatio n of pl ating; (3) valuation of overhead, SG&A, and prof it; and (4) request for revocation. The contentions of the parties are set forth below. A. Plaintiff’ s Content ions (1) Valuation of steel wire rod Hangzhou argues that Commerce’s r ejection of its market economy prices for steel wire rod is an a

rbitrar y a nd unrea sonable d

epartur e from its past pra ctice. H angzhou

points to Commerce’s longstanding prefer ence for using market economy prices. (Pl.’s Mem. at 8.) Hangzhou cites to case law requiring that Commerce rely

upon “particular, specific and objective evidence” to reject market price s under the subsidy suspicion policy

. ( Id. at 9.) Hangzhou contends that Shakeproof’s speculation that Hangzhou’s supplier bene fitted from additionalCourt No. 04-00133 Page 7

3 In Color TVs , Commerce reasoned: The reg ulation do es not add

ress thos e instanc es wher e subsidize d exports are shipped through a third-country trading company

to its final destination. The trading company in the third country is not subject to the investigation, and cannot therefore be pr esumed to have benefitted from any subsidies rec eived by the produc er or exporter of the merchandise. Issues and Decision Memorandum for the Antidumping Duty Investigation of Certain Color Television Receivers from the People’s Republic of China , A-570-884, cmt. 8 (Apr. 16. 2004). subsidies does not meet the evidentiary requirements to invoke the subsidy suspicion policy . ( Id. at 14.) Hangzhou also argues that there is no evide nce that any

possible subsidy from its UK supplier benefitted Hangzhou since it purchased steel wir e rod imports through a third country tradi ng comp any in Hon g Kong. (Pl.’s Me m. at 24.) H angzhou

cites to Certain Color Television Receivers from the People’s Republic of China , 69 Fed. Reg. 20,594, 20,597 (Apr. 16, 2004) (notice of final determination) [hereinafter Color TVs 3 ], in support of its assertion that the presumption of a subsidy does not automatica lly pass through to an inter mediate trading company. (Pl.’s Mem. at 24.) (2) Valuation o f plating Hangzhou contends Commerce’s decision to use a single surrogate price quote for plating services is contrary

to established practice and not in accordance with law. Hangzhou argues that Commerce

improper ly u sed a sing

le surro gate pr

ice rather than f

ollowing its past pr

actice to value the factors of production used by Hangzhou’s plating subcontractors. ( Id. at 25.) Hangzhou argues that Commerce de viated from its practice followed in the eight previousCourt No. 04-00133 Page 8

4 19 C.F.R. § 351.401(

h) states : Treatment of subcontractors (“tolling” ope rations). The Secretary

will not consider a toller or subcontractor to be a manufa cturer or producer where the toller or subcontractor does not acquire ownership, and does not control the relevant sale, of the subject mercha ndise or foreign like product. reviews by disre garding Hangzhou’s subcontra ctor’s factors of production for plating. Ha ngzhou asserts that in the prior reviews Commerce rejecte d the very method a pplied in this review because the use of a single surrogate price impermissibly double- counts the amounts for overhead, SG&A and profit. ( Id. at 26 ( citing Certain Helical Spring Lock Washers from the People’s Republic of China , 67 Fed. Reg. 8,520, 8,522, cmt. 2 (Dep’t Commerce F eb. 25, 2002) (final results of antidumping duty admin. review) [hereinafter Seventh Review ].) Hangzhou also asserts that using a surrog ate value for plating will effectively treat Hangzhou’s plating subcontractor as an inde pendent producer by

calculating separate overhe ad, SG&A, and profit values, in violation of 19 C.F.R. § 351.401(h) (2004). 4 Accord ing to Hangzhou, this methodology is inexplicably inconsistent with past reviews, in which Commerce found that Hangzhou controlled its subcontractors. (Pl.’s Mem. at 27.) Bec ause Hangzhou controlled its subcontractors, Commerce did not consider the subcontractors to be pr oducers for purposes of calculating plating expenses.

In past administrative reviews of HSL Ws, [Commerce] acknowledged that apply

ing the surrogate overhe ad, SG&A, and profit to the subcontracted plating operations before being incorporated as a material input in the respondent’s normal value calculation would result in double-counting because a ll overhead, SG&A, and profit expenses were already captured by

the application of the surrogate overhea d, SG&A[,] and profit ratios at the final production stage.Court No. 04-00133 Page 9

5 The ge neral RB I Bu

lletin dat a is from 2 000 to 2001 , and the i ndustry specific metals data is from 1992. (Def.’s Resp. at 30.) (Pl.’s Mem. at 28 ( citing Certain Helical Spring Lock Washers from the People’s Republic of China , 65 Fed. Reg. 31,143, 31,144, cmt. 3 (Dep’t Commerce Ma y 16, 2000) (final r

esults of antidumpin

g duty admin. re

view); Certain Helical Spring Lock Washers from the People’s Republic of China , 64 Fed. Reg. 13,401, 13,404, cmt. 2 (Mar. 18, 1999) (final r esults of antidumping duty admin. revie w)).) (3) Valuation o f overhead , SG&A, a nd profit Hangzho u contend s that Comme

rce’s d ecision to use ge neral, c ontempor

aneous d ata rather than industry

specific, less recent data to calculate sur rogate financial ratios is unsupported by reg ulations, evidence and facts on the record. ( Pl.’s Mem. at 32.) Hangzhou asserts that Commerce ’s use of

1,927 publ ic compa

nies’ ra tios from t

he Reser ve Bank of In dia Bulle tin (“RBI Bulletin data

”) is not industry-specific and therefore not representative of Hangzhou’s operations. (

Id. ) Hangzhou argues that Commerce should have continued to use the RBI data se t “Proces sing and

Manufac turing: Metals, Ch emicals, and Produ cts Ther eof” (“ metals da ta”) tha t it used in all the prior administrative reviews. ( Id. at 33.) Hangzhou claims that availability of

more re cent but g eneric

data is ins

ufficie nt justific ation to de

part from Commerc e’s pra ctice in the previous reviews, in which the agenc y used the older but more industry specific da

ta. 5 ( Id. at 35.) Han gzhou as serts tha

t Commerc e failed

to explain it s rationa

le for imp osing time parameters on the available data and why these chosen parameters have an impac t on the reliability of the financ ial data. ( Id. at 37.)Court No. 04-00133 Page 10

(4) Request for revocation Hangzhou contends that Commerce’s chang e in factors of production methodology is of particular concern because the antidumping duty orde r against its HSLW was eligible f or revocation in this review. (Pl.’s Mem. at 38.) Hangzhou pointed out that in the two previous reviews Commerce found that Hangzhou had not sold subject merc handise at less than fair value. (Pl.’s Mem. at 38 ( citing Seventh Review ; Certain Helical Spring Lock Washers from the People’s Republic of China , 67 Fed. Reg. 69, 717 (Dep ’t Commerc e Nov. 19, 2002) (f inal resu lts of antidumping duty admin. re view) [hereinafter Eighth Review ]).) Hangzhou argues that Commerce’s unwarranted chang e in established practice resulted in “substantially increasing Hangzhou’s margin in this review and disqualify ing Hangzhou for revocation.” ( Pl.’s Mem. at 38.) Hangzhou claims that Commerce “must be bound by its prior actions so that parties have a chance to ‘purge themselves’ of antidumping liabilities.” ( Id. ( citing Shikoku Chem. Corp. v. United States, 16 CIT 382, 387, 795 F. Supp. 417 (1992))

. ) Hangzhou requests that any remand decision include a direction to Commerce to reconsider Hang zhou’s request for revocation of the antidumping duty order . ( Id. at 39.)
B. Defendant’ s Content ions (1) Valuation of steel wire rod Although Commerce admits to using market prices in the past revie ws, Commerce explains that the record in this review is different. Issues and Decision Memorandum for the Final Results of Antidumping Duty Administrative Review of Certain Helical Spring Lock Washers from the People’s Republic of China , A-570-822, cmt. 1 (Mar. 8, 2004) [hereinafter
Decision Memo ]. In th

is review , Commerc e rece ived evid ence tha t sugg ested for the fir st timeCourt No. 04-00133 Page 11

that Hang zhou’s ste el wire r

od price s may

have be en distor

ted by subsidies . Commerc e claims that its “past findings in this proceeding do not preclude [it] from considering [new] information and changing its treatment of Hang zhou’s [steel wire rod] prices based on that information.” Id. Although Commerce acknowledge s its preference for using ac tual market prices to value factors of produc tion, Comme

rce expla ins that le gislativ e history limits the us e of mar

ket econ omy prices to “only untainted ma rket economy pr

ices,” and in this review, the market prices may have been tainted by subsidy . (Def.’s Resp. at 14.) Although Commerce contends that its decision to invoke the subsidy suspicion policy was reasonable based upon Shakeproof’s submissions, Commerce a dmits that the subsidies were generally used by the UK stee l industry and admittedly were not tied to a particular steel product. Commerce points out that this Court has recognized that even a gene ral subsidy may

provide a reasonable basis to conclude that Hangzhou’s supplier may have benefitted from the alleged subsidy. (Def.’s Resp. at 18-19 ( citing China Nat’l Mach. Imp. & E xp. Corp. v. United States , 264 F. Supp. 1229, 1238 (CIT 2003)).) While Commer

ce conc edes tha

t Color TVs , 69 Fed. Reg. at 20,59 4, rep resent s a chan ge of policy , Commerc e points ou

t that this c

hange occurr ed afte r this matte

r’s Final Resu lts were issued. Notwithstanding the subsequent timing, Commerce requests a voluntary remand on the issue of the subsidy suspicion policy . (Def.’s Resp. at 19.) “Specifically, upon remand, Commerce would consider the issue of whether the trading company included a

ny benefit fr

om the subsidy when it sold to Hangzhou.” ( Id. ) Hang

zhou conse

nts to this r

emand re quest. (Reply Br. in Supp. of Pl.’s Rule 56.2 Mot. for J. upon the Agency R. at 1.)Court No. 04-00133 Page 12

6 Plating build-up is when the factors of production are consumed by unaffiliated plating subcontractors. See Decision Memo at 16. (2) Valua tion of plating Commerce

admits tha

t it veere d from its p ast practice in thi s review by u sing a si

ngle surrogate plating price instead of a plating build-up price. Decision Memo at 16. Ne verthel ess, Commerce

notes tha t it prefe rs surro gate pr

ices ove r build-u p prices when the responde nt is not a fully integr

ated producer. 6 Id. at 17. Ha ngzhou is n

ot a fully integr ated pro ducer be cause it

is unable to plate its own HSLW. However, in prior re views, the only available

plating data was Hangzhou’s platers’ factors of production. Id. In contrast, in this review, Shakeproof introduced another option – a single plating price quote. The refore, Commerce could employ its preference for surrogate prices. Id. Commerce asserts its change in this review ac tually reflec

ts its “normal practice.” Id. Moreove

r, Commer

ce found that the si

ngle sur rogate plating price wa s the best available information because “it accur ately ref lects Hangzhou’s business operations and the costs it incurs to produce plated HSLWs.” Id. Finally, Commerce asserts that it has “broad discretion in selecting surrogate va lues,” and it has exercised this discretion. Id. at 19. (3) Valuation o f overhead , SG&A, a nd profit Commerce

contends that its de cision to u se more c ontempor aneous a nd nonspe cific da

ta rather than spec ific and

less cont emporaneous data

is statutor

ily p ermissibl e pursua

nt to its discr etion ary power au thori zed i n 19 U. S.C. § 1677 b(c) (2 000). (Def.’ s Resp . at 27 .) Alt hough conced ing that the metal s data is more spec ific than RBI Bulletin data, Commerce r

esponds it exercised its discretion in valuing contemporaneity over specificity . ( See id. ; see also Decision
Memo at 21.) Commerce argues that contemporane ous data is the best available information “because the I

ndian economy ha s been quickly tra nsforming in the past few y ears, negating theCourt No. 04-00133 Page 13

relevancy of the nine yea

r old data.” (Def.’s Resp. at 27.) Commerce fur ther asserts that using

more con tempora neous da ta was consistent with its duty to calcu late anti dumping r

ates with maximum accuracy. (

Id. at 29.) (4) Request for revocation Commerce contends it properly determined that Hangzhou did not qualify for revocation of the antidumping order because Ha ngzhou did not meet the regulatory requirement of three consecutive zero or de minimi s margins pursuant to 19 C.F.R. § 351.222(b)(1). (Def.’s Resp. a t 36.) Although Commerce found Hangzhou to have de minimi s margins in the two previous reviews, Commerce determined that Hang zhou sold subject merchandise at less than normal value during this review. ( Id .) Commerce contends that it must consider new evidence pre sented during each review without considera tion that the review might be determinative of a revoc ation. ( Id. ) C. Defendant-Interve nor’s Cont entions (1) Valuation of steel wire rod Shakepr oof conte nds that Com

merce properly rejected Hangzhou’s submission of market
economy prices f or the va luation of steel wir e rod. Al though n oting tha t Commerc e ty

pically prefers market e conomy

import pri ces, Sha

keproof emphasize s that such prefe rence i s discretionary a

nd “does not override Commerce’s established practice to disregard a market price if Commerce has a ‘reason to believe or suspec t’ the market economy

input benefitted from subsidies.” (Def.-Inter

venor’s Resp. in Opp’n to Pl.’s Mot. for J. upon the Agency R. at 3-4. (“Def. -Int .’s Resp. ”).) Citin g leg islative h

istory , Shakepr

oof arg ues that Commerce should disregard market economy prices where there is a rea son to believe or suspect the prices may beCourt No. 04-00133 Page 14

dumped or subsidized. (Def.-Int.’s Resp. at 9.) Shake proof purports that it is sufficient that Commerce suspected subsidization for it to apply the subsidy suspicion policy to the valuation of steel wir e rods. (2) Valuation o f plating Shakeproof contends that Commerce’s decision to use a single surrogate price for the valuation of plating services was supported by substantial evidence and otherwise in accordanc e with law. (Def.-Int.’s Resp. a t 17.) Shakeproof supplied a single surroga te price quote that involved a

n arm’s le ngth tra nsaction in quantiti es similar

to Hang zhou’s and

was comp arable

to the plating value calculated from separ ate inputs. (

Id .) Commer

ce used S hakepro of’s single price quote to value plating. ( Id. ) Shakeproof’s contentions are essentially the same as Commerce ’s ( id. at 16-17) , have be en duly consider ed, and need not be

reitera ted in the ir

en ti re ty. (3) Valuation o f overhead , SG&A, a nd profit Shakepr oof conte nds Commer

ce corr ectly chose the more con tempora neous RB I Bu

lletin data to value overhead, SG&A, and prof it. ( Id. at 18.) As with the previous subsection, Shakepr oof’s contentions

are vir tually similar to C ommerce ’s ( id. at 17-18) , have be en duly considered, and will not be repeated.

A NAL YSIS Congress provided Commerce with a statutory scheme for calculating dumping mar gins. When the antidumping investigation involves a non-market economy , as is China, 19 U.S.C. § 1677b(c) governs. This section provides that Commerce c onstruct a normal value of theCourt No. 04-00133 Page 15

7 19 U.S.C. § 1 677b(c) , in pertinent part , states: (1) In general If-- (A) the subject merchandise is exported from a nonmarket c ountry, and (B) the administering authority finds that available information does not permit the normal value of the subject merchandise to be dete rmined under subsection (a) of this section, the administering authority shall determine the normal value of the subject mercha ndise on th e basis of

the value of the fa ctors of producti on utilized i

n producing the merchandise and to which shall be a dded an amount for general expenses and profit plus the cost of containers, coverings, and othe r expenses. Except as provided in paragraph (2), the va luation of the factors of production shall be based on the best available information reg arding the values of such factors in a market country or countries considered to be appropriate by the ad mi ni st er in g a ut ho ri ty.

. . . (3) Factors of production For purposes of paragra

ph (1), the factors of production utilized in producing merchandise include, but are not limited to-- (A) hours of labor required, (B) quantities of raw materials employ ed, (C) amounts of energy

and other utilities consumed, (D) representative capital cost, including depreciation. (4) Valuation of factors of production The administering authority , in valuing factors of production under para graph (1), shall utilize , to the exte

nt possible , the pric es or cos ts of factors of pr oduction i

n one or more market economy countries that are-- (A) at a level of economic development compar able to that of the nonmarket economy

country, and (B) significant producers of c omparable merchandise. subject merchandise from the best available information on the va luation of the factors of production. 19 U.S.C. § 1677b(c). 7 Court s have noted that “ the pr ocess of con struc ting fo reign market v alue for

a produc er in a nonmarket economy country is diffic ult and ne cessar

ilyCourt No. 04-00133 Page 16

imprecise. ” Nation Ford Chem. Co. v. United States , 166 F.3d 1373, 1377 (Fed. Cir. 1999) (citation omitted). The critical question when valuing the factors of production is “whether the methodology used by

Commerce is based on the best available information and establishes antidumping margins as accurate ly as possible.” Shakepr oof Assem bly Compon ents, Div . of Ill. Tool Works, Inc. v. United States , 268 F.3d 1376, 1382 (Fed. Cir. 2001) (“Shakeproof I II ”). Because there is no statutory definition, courts have read this provision to give broad discretion to Commerce on what constitutes the best available information. See, e.g. , Luoyang Bearing Corp. v. United States, 347 F. Supp. 2d 1326, 1333 (CIT 2004) (“The sta tute, however, does not define t he phras e ‘best a

vailable informat ion’ . . . . C ommerce

is given broad dis cretion

‘to determine margins as accura tely as possible . . . . ’”) ( internal citation omitted); Shakeproof Assembly Components Div. of Ill. Tool Works, Inc. v. United States , 23 CIT 479, 481 , 59 F. Supp. 2d 135 4 (1999) ( “Shakeproof I ”) (“The statute require s Commerc e to use th e best av ailable information, but does not define that term . . . . If Cong ress had desired to restrict the material on which Commerce could rely , it would have defined best available information.”) (citations omitted). Therefore, a reviewing court’s role is “not to evaluate whether the information Commerce

used was the best a

vailable , but rath er whether Commer ce’s choice of i

nformati on is reasonable.” Peer Bearing Co.-Changshan v. United States , 29 8 F. Su pp. 2d 1 328 , 13 36 ( CIT 2003). Ac cordingly, the hallma rk of a r eviewing court’s standar d of best a

vailable informat ion is

reasona bleness. Furthermore, there is no statutory requirement for Commerce to use a particular methodology to ca

lculate valuation for factors of production. See, e.g., Shakeproof III , 268 F.3d at 1382 (“ the statut e does no t require

the fac tors of pr

oduction t

o be asce rtained in a sing leCourt No. 04-00133 Page 17

8 In Shikoku , the plaintiff relied on Commerce’s permission to adjust home market prices to reflect repackaging

costs paid to its subcontractor. However, in the final determination, Commerce retroactively

applied a new methodology excluding those repackaging costs. On these facts, this Court held that Commerce’s change in methodolog y at this late stag e went against principles of fairness. 16 CI T at 388. The facts of the instant case are disting uishable. There is no argument about retroac tive changes of methodology on the record. Thus, any reliance on Shikoku is misplaced. fashion”) ( citing Lasko Metal Prod., Inc. v. United States , 43 F.3d 1442, 1446 (Fed. Cir. 1994)); Peer Bearing , 298 F. Supp. 2d at 1336 n.3 (“the statute does not require Commerce to follow any single a pproach ”). Not o nly

can it chose which methodol ogy to employ

, Commerc e can al so change it. Although courts have found tha t Commerce should not change its methodology in the final hour, 8 more recent case law upholds a new me thodology if found r

easonable. See, e.g. , Luoyang , 347 F. Supp. 2d at 1339 (“an agency decision to change its methodology should be examined under the Chevron test and s ustained if the ne w methodo logy

is reaso nable”) ; Koyo Seiko , 36 F. 3d at 1 575 (h oldi ng that Comm erce’s state d rati onale for cha nging i ts met hodol ogy was reasonable). Nevertheless, whe n an agency

departs from its practice, it must “clearly set forth” the ground “so that the reviewing court may under

stand the basis of the agency ’s action and so may judg e the consistency of that action with the agency ’s mandate.” Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Bd. of Trade , 412 U.S. 8 00, 808 (1 973); see also Shanghai Foreign Trade Enter. Co., Ltd. v. United States , 318 F. Supp. 2d 1339, 1346 (CIT 2004) (“Commerce

. . . has an additional ‘duty to explain its departure f rom prior norms.’”) (citations omitted). Althoug h courts have view ed the sta tute as a guideli ne to assi st Commerc e in the pr ocess of constructing foreign marke t value for a producer in a non-marke t economy, they

have recognized “this section also accords Commerce wide discretion in the valuation of factors of production in the application of those guidelines.” Nation Ford, 166 F.3d a t 1377; see alsoCourt No. 04-00133 Page 18

Fuyao Glass Indus. Group Co., Ltd. v. United States , Slip Op. 03-169, 2003 Ct. Int’l Trade
LEXI S 171, at *22 (CIT Dec. 18, 2003) (“ this Court and the Court of Appeals for the Federal Circuit have repeatedly

upheld Commerce’s broad discretion in valuing factors of production”). Commerce ’s discre

tion is not without limita

tion, howe

ver, as t he statute ’s directive is “to construct the subject merchandise’s normal value as it would have been if the [non-market economy] country

were a market economy

country.” Peer Bearing , 298 F. Supp. 2d at 1336 (citation omitted) ; see also CITIC Trading Co., Ltd. v. United States , SlipOp. 0 3-23 , 2003 WL 1587093, at *6 n.12 (CIT Mar. 4, 2003) (“ This discretion . . . is constrained by the unde rlying objective of the statute; to obtain the most accurate dumping marg ins possible.”). (1) Valuation of steel wire rod In this review, valuation of steel wire rod embodies the issue of the subsidy suspicion policy . In li ght of it s recen t Color TVs determination, 69 Fed. Reg. at 20,597, Commerce requests voluntary r

emand on this issue, and Hangzhou consents. This Court grants Commerce’s request for volun tary remand. Howeve

r, Commer

ce requ ests a limit

on its review on re

mand to whether any

benefit was transferred to Hang zhou from its third country trading c ompany. Because this request is for a limited review, this Court believes the issue of subsidy suspicion policy merits a short discussion. Contrary to prior re

views where Hangzhou’s market ec onomy prices we re used, Commerce invoked a subsidy suspicion policy in this review. For the first time in HSLW review history, Shakeproof plac ed on the record a subsidization issue. Commerce reasonably notes that its “past findings in this proceeding do not preclude [it] from considering [new] information and chang ing its tr

eatment o f Hang

zhou’s [stee l wire ro d] prices b ased on [ne w] informa

tion in thisCourt No. 04-00133 Page 19

9 19 C.F.R. § 351.408( c)(1) s tates: Information us ed to valu e factors. The Se cretar

y will normal ly u se public ly available information to value factors. However , where a factor is purchased f rom a market economy

supplier and paid for in a market economy currency , the Sec ret ary n orm all y wil l u se t he p ric e pa id to th e ma rke t ec ono my su ppl ier . In those insta

nces whe re a por tion of the

factor is purcha sed from

a market economy supplier and the remainder from a nonmarket ec onomy supplier, the Secre tary normally will value

the fac tor using

the pric e paid to t

he marke t economy supplier. administrative review.” Decision Memo at 7. By i nv ok in g t he su bs id y su sp ic io n p ol ic y, Commerce went against its own regulator y norm of using ma

rket economy pr

ices pursuant to 19 C.F.R. § 351.408(c)(1) (2004). 9 Commerce defends its position by pointing to leg islative history which states, “In valuing

such factors [of production], Commerce shall avoid using any prices which it has reason to believe or suspect may be dumped or subsidized prices.” H.R. Conf. Rep. No. 100-576, at 590 (1988) [hereinafter OTCA Legis. Hist. ]. This Court finds Commerce and Shakeproof’s arguments persuasive that the Cong ressional directive for subsidy suspicion and regulatory

preference for marke

t prices are not mutually e xclusive. Rather, Commerce’s rationa le that ma rket pric es will be

used, as i n past re views, when the sub sidy

suspicion

policy is not invoked is reasonable. As aptly stated in China National , “given that the overarching
purpose o f the ant

idumping and coun tervaili ng duty law is to c ountera

ct dumping

and subsid

ies, the cour t cannot c onclude t

hat Cong ress wou ld condon e the use

of any value wh ere the

re is a ‘reason to belie

ve or susp ect’ tha

t it refle cts dumpin

g or sub sidies.”

264 F. Sup

p. 2d at 12 38; see also Luoyang , 347 F. Supp. 2d at 1340. Because the subsidy

suspicion policy has no statutory definition, this Court has provided instruction regarding the interpre tation of the subsidy suspicion standard:Court No. 04-00133 Page 20 In a ttempting to define a similar phrase, “reasonable g

rounds to believe or suspect,” which appears in 19 U.S.C. § 1677b(b)(1) (1999), this Court observed that “in order for reasonable suspicion to exist there must be ‘a particularized and objective basis for suspecting’ the existence of certain proscribe d behavior, taking into account the totality of the cir cumstances, the whole picture.” . . . This insistence on “a particularized and objective basis” has been interpreted to mean a “‘demand f or specificity.’ ” . . . Therefore, the “reason to believe or suspect” standard at issue here must be predicated on particular, specific, and obje ctive evidence. China Nat’l , 264 F. Su

pp. 2d at 1 239 (inte

rnal cita tions omitte d); see also Peer Bearing , 298 F. Supp. 2d at 1336. Although invocation of the suspect standard requires spec ificity, this does not mean tha t subsidies

must be co mpany

specific . This Cour

t has foun d subsidie s “gen erally available in the exporting market-economy country,” but not company specific, as sufficient evidence on the record to affirm applica tion of the suspect suspicion policy. See Peer Bearing , 298 F. Supp. 2d at 1337 (“The Court finds that Commerce made a logic al inference that [the respondent’s] supplier may have benefit ted from t he generally

availab le subsidie s.”) (e

mphasis added). This Court notes that Congress did “not intend for Commerce to conduct a formal investigation to ensure that such prices are not dumped or subsidized, but rather intend[ed] that Commerce

base its d

ecision on informa

tion generally

availab le to it at that time.” OTCA L egis. Hist., at 590-91; see also Luoyang , 347 F. Su pp. 2d at 1 341; Peer Bearing , 298 F. Supp. 2d at 1336; Fuyao , 2003 Ct. Intl. Trade L EXIS 717, at *36-37. I

n Peer Bearing , the subsidies were generally available, but this Court held that “[a]ny level of subsidization found in the exporting country is enoug

h evidence to support a determination that Commerce had ‘re ason to believe or suspect’ that pric es are d

istorted. ” 298 F. Su

pp. 2d at 1 337. Once

Commerce

present s adequa

te evidence to support a subsidy suspicion, a rebuttable presumption is established that prices areCourt No. 04-00133 Page 21

distorted. Luoyang , 347 F. Su pp. 2d at 1 342. “The

presumpt ion shifts t

he burde n to the pa

rty challen ging Commerce’ s determi nation to present e

vidence demonstr

ating th at its suppl ier did not benefit from such subsidies.” Id. In Luoyang , this Court suggested that the challenger ’s burden would be met by suf ficient evidence that the prices paid were market-determined or credible evidence that the supplier did not participate in any subsidies programs. Id. at 1342 n.10. This Court does not decide whether the challenging party has met its burden in this case , but rather, this Court grants voluntary remand for Commerce to conduct its review consistent with the discussion herein. (2) Valuation o f plating Commerce valued plating using a single surrogate price submitted by Shakeproof rather than build

-up pric es from su

bcontra ctors of Hangzho u. Althoug

h Hangzhou claims t

his is a departure from past practice in prior re views and Commerce concedes this point, Commerce explains that this change is consistent with its established preferences. Commerce ha s articulated its prefe rence f or surro gate pr

ices ove r build-u p prices in its dete

rmination s when a producer is not fully integra

ted. See Issu es and Decision Me morandum for the Ant

idumping D uty Investigation of Polvinyl Alcohol from the People’s Republic of China , A-570-879, cmt. 1 (Dep’t Commerce Aug. 4, 2003) (“I f the NME [] self-produces an input, we take into account the factors utilized in each stage of the production process. . . . I f, on the other hand, the firm was not integrated, . . . [Commerce] valued the purchased [product] and not the factors [of production]

. )” Commerce stated that because Hang zhou does not have the capacity to plate HSLW but rather must subcontract out this task, it is not a fully integrate d producer. Decision Memo at 17.Court No. 04-00133 Page 22

Commerce

explained

that in pa st review s, the buil d-up pric e was the only option, but

in this review, another

option wa s introduc ed so Comme rce cou ld exercis e its discr

etionar y a uthority and utilize

its prefe rred pol icy . Commerc e reasoned that a single s urroga te price was the b est availab le information in thi s review “becau se it acc

urately reflects Hangzhou’s busi ness operations and the costs it incurs to produce plated HSL Ws.” Id. This Court does not find that Commerce

chang ed its methodology in this situa

tion, as Ha

ngzhou su

gges ts. Bec ause Commerce had two choices in this review, where in prior r eviews it had only one, this Court finds that Commerce considered the available new infor mation and acted within the bounds of reason when making its decision based on the best ava ilable information. Moreover, the record reflec ts Commerce’s assertion of its preferred policy for valuing factor s for inte grate d versus n on-integ rated pr oducers , and the r

ecord do es not re flect an

y di spute that Hangzhou is a non-integrated produce r. Although Commerce may have previously f

ound that Hangzhou controlled its subcontractors, this does not negate Commerc e’s current finding that Hangzhou remains a non-integrate d producer. This Court cannot make a judgment on Commerce’s preferred policy of using a surrogate priceover a build-up approach for nonintegr ated pro ducers b

ut instead finds tha t Commerc e did not a

ct arbitr arily in reaching its decision to use a single surrogate pric e. See Peer Bearing , 298 F. Supp. 2d at 1336 (“Commerce may not act ar

bitrarily in reac

hing its decision.”). Regarding the issue of the single surrogate price as double-c ounting of overhead, SG&A, and prof it, Hang zhou arg ues that th

is Court sho

uld trea t its subcon

tractor s as “af

filiated ” despite the fact that “Hangzhou explained that it is not affiliated with [its] platers.” Decision Memo at 18; see also P.R. 45. This Court declines to create facts on the record. Explaining that the re cordCourt No. 04-00133 Page 23

containe d surrog ate value informa tion for two group s of compa nies that b oth lacke d specif ic informat ion on inte gration, Commerc e analy zed the re cord and

selecte d the best

availab le information without regard to the surrogate overhead, SG&A, and profit. Decision Memo at 18. This Court defers to Commerce as to what constitutes the best available information and finds that Commerce’s decision regarding the issue of double-counting for overhead, SG& A, and profit has a “rational connection between the f acts found and the choice made.” Shanghai Foreign Trade , 318 F. Su pp. 2d at 1 346 (quota

tion and c itations om

itted); see also Timken Co. v. United Sta tes, 25 CIT 939, 944, 166 F. Supp. 2d 608 (2001) (“[T]he statute gra nts to Commerce broad discretion to determine the ‘best available information’ in a reasonable manner on a caseby-case basis.”). Accord ingly , this Court

holds that

Commerce ’s chang e in metho dology to use a si

ngle
surrog ate pric e in this re

view is sup

ported by substantia

l evidenc e on the r

ecord or otherwis e in accordance with law. (3) Valuation o f overhead , SG&A, a nd profit Regula tion 19 C.F .R. § 351.4 08(c)(4) (2004) states tha t Commerc e “norma

lly w ill use
non-prop rietary informat ion gathered fr

om produc ers of id

entical or compar

able mer chandise in the surrogate country

” to value overhead, SG&A, and profit. I n this review, however, Commerce decided to use the

gener al but more

contemporaneous

data subm

itted by Shakepr oof. This was a departu re from t he previ ous revie

ws, wher e Commerc e used the

specific but less contemporaneous

industry specific data pro vided by

Hangzho u. As state d above, a chang e in methodology is per

missible, but it must be supported by substantial evidence on the re cord. See Atchison , 412 U.S. at 808.Court No. 04-00133 Page 24

10 The Court notes that Commerce has favored specificity where there was a five y

ear span between the specific versus non-spec ific data. See Heavy Forged Hand Tools from the People’s Republic of China , 62 Fed. Reg. 11,813, 11,816 (Dep’t Commerce Ma r. 13, 1997) (final results of antidumping duty a dmin. review) [hereinafter 1997 Hand Tools ] (in valuing labor costs, Commerce chose to use industry specific data from 1990 rather than less specif ic data from 1992 during the period of review for 1995-96) ; Partial-E xtensionSteel Dra wer Slides with Rollers from the People’s Republic of China , 60 Fed. Reg. 54,472, 54,474-76 (Dep’t Commerce Oct. 24, 1995) (notice of final determination of sales at less than fa ir value) [hereinafter Drawers ] (in valuing rivet inputs, Commerce chose to use industry specific data from 1994 rather than the less specific data from the pe riod of investigation during 1995). Commerce defends its decision in the present matter, however, in that the “meta ls data are eight y

ears older than the RB I [Bu

lletin] data , and are

much fur ther re moved fr om the POR th an the da

ta availa ble to [Commerce] in 1997 Hand Tools and Drawers .” Decision Memo at 21. Commerce, therefore, has two tasks to explain: (1) why it chose to ignore the regulatory norm and (2) why

it departed from past practice. This Court finds that Commerce provided sufficient reasons for both. This Court recognizes that the reg ulations, like the statute, establish a structure that is not mandatory but r ather provides guidance. See Shakeproof III , 268 F.3d at 1381. Since neither the statute nor the regulations speak to the issue of c ontemporaneity ver sus specificity and c ase law has not delineated a bright line rule on the matter, Commerce has the statutory discretion to g ive greater weig ht to one over the other, provided it offers a rea soned explanation when such a decision deviates from past practice. 10 Here, Commerce explained that the use of more con tempora neous da ta is “co nsistent with its duty to ensure antidumpin

g duty

rates . . . are as accurate

as possible” (Def.’s Resp. at 29), given that “the Indian economy

has been transforming quickly in the past few ye ars, negating the releva ncy of the nine y

ear old data” (Def.’s Resp. at 27). This Court finds this explanation reasonable for both inquires. Although this Court has upheld the favoring of specificity , it was not done so at the expense of contemporaneity . The court in Yantai Oriental Juice Co. v. United States considered that the generalized data was “dra matically more outdated” than the specific data. Slip Op. 02-Court No. 04-00133 Page 25

56, 2002 WL 1347018, at *11 (CIT June 18, 2002) (f inding that Commerce’s decision to value SG&A on the basis of outdated genera lized rather than contemporaneous specific data wa s not supporte d by

substantia

l evidenc e on the r

ecord) ; see also CITIC , 2003 WL 1587093, at *6 (“This c ourt, how ever, ha s repea tedly recog nized that C ommerce ’s prac tice is to u se surro gate prices from a period contemporaneous with the per iod of investigation.”). This Court does not decide, however, whether contempora neity should be valued over specificity without direct statutory instruction because a reviewing court is prohibited from substituting its judgment for that of the agency

. See Koyo Seiko , 36 F.3d at 1570 (“[A] court must defer to an agency ’s reasonable interpretation of a statute even if the court might have preferred a nother.”) (citation omitted). Accordingly , this Court holds that Commerce’s decision to use the more contemporaneous but general data is supporte d by substantial evidence on the record or otherwise in accordance with law. (4) Request for revocation This Court notes that this ninth review was determinative of a revocation. Pursuant to 19 C.F.R. § 351.222(b), Commerce denied revocation beca use it found Hangzhou sold subject mercha ndise at le ss than nor

mal value in this rev

iew. Although the

decision as it stand s is supported by substantial evidenc e or otherwise in accordance w ith law, this Court finds that the issue of revocation may

be affected by

the voluntary re

mand. If upon review Commerc e finds Hangzhou’s dumping margin to be de minimi s , then revocation may

be warranted. This Court remands the issue of revocation along with the issue of subsidy suspicion policy, as these issues may aff ect each other.Court No. 04-00133 Page 26

C ONCLUSI ON For the foregoing r

easons, this Court affirms in part and remands in part Commerce’s Final Resu lts . This Court affirms Commerce’s determinations on the issues of valuation of plating, and overhead, SG&A, and pr ofit as being supported by substantial evidence on the record or otherwise in accorda nce with law. This Court grants Defendant’s re quest for voluntary remand on the issue

of subsidy

suspicion

policy regar ding the valuatio n of stee l wire ro d. This Court also directs remand on the issue of revocation insofar as the voluntary rema

nd review may affect the outcome of the revoca tion.

/s/ Gregory W. Carman Gregory W. Carman Judge

Dated: July 6, 2005 New York, New York