### Slip Op. 05- 32

UNITED ST ATES COURT OF INTE RNATIONAL T RADE

________________________________________ : HEBEI METALS & MINERALS IMPORT & : EXPORT CORPORATION AND HEBEI : WUXIN METAL S & MINERAL S TRADING : CO., LTD., : : Plaintiff, :

: Court No. 03-00442 v. :

: UNITED STATES, : : Defend ant. :

_ ______________________________________ : [Antidumping duty redetermination re manded for reconsideration of surrog ate coal values.]

Dated: March 10, 2005 Gru nfe ld , De si der io , Leb owi tz , S il ver man & Kl est adt LLP , ( Bruce M. Mitchell, Mark E. Pardo , and Paul Figueroa) for plaintiff. Peter D. Keisler , Assistant Attorney Gene ral, David M. Cohen , Director, Patricia M. McCarthy , Assistant Director, Commercial Litiga tion Branch, Civil Division, United States Department of Justice ( David S. Silverbrand ) , Ada Bosque , Office of the Chief Counsel for Import Administration, United States Department of Commerce, of counsel, for defendant. 

### OPINION RESTANI, Chief Judge: In Hebei Metals & Minerals I mp. & Exp. Corp. v. United States , No. 03-00442, Slip Op. 04-88 (Ct. Int’l Trade July 19, 2004) [hereinafter Hebei Me tals I ], the court remanded to the United States Department of Commerce two issues pertaining to its calcula tion of the antidumping duty marg

in for lawn and garden steel fe nce posts from the People’s Republic ofC OURT N O . 03-00442 P AGE 2

1 The court assumes familiarity with Hebei Me

tals I , which r

eviewe d the mar

gin calculations made in Final Determination of Sales at Le ss Than Fair Value: La wn and Garden Fence Posts from the People’s Republic of China , 68 Fed. Reg. 20, 373 (Dep ’t Commerc e April 25, 2003) [hereinafter Final Determination ], and explained in Decision Memorandum for the Final Determination of the Antidumping Duty Investigation of Lawn and Garden Steel Fence Posts from the People’s Republic of China (Dep’t Commerce April 18, 2003), P.R. 158, Pls.’ App., Ex. 2 [hereinafter Decision Memorandum ]. China (“PRC”), a country designated by

Commerce as having non-market economy (“NME”). 1 Each issue i nvolved th e use of surrogat e data from India becau se 19 U.S.C . § 1677b(c)( 1)(B) (2000) requires that an antidumping duty on a product from a NME country be calculated using surrogate values from an appropr iate market economy

country or c ountries. First, with regard to Commerce’s use of I ndian import data for surrogate coal va lue, Hebei Me tals I instructed Commerce either to “provide further explanation based on r ecord evidenc e” that the Indian impor t data wa s more ac curate

than the a

vailable India n domestic

data or to “conduct fur

ther inve stigations to dete rmine whe

ther I ndian impo rt or dome stic data provides a value that more accurately reflects the coal consumption patterns of producers in the relevant industry.” Hebei Me tals I , Slip Op. 04-88 at 16–17. Second, with regard to the removal of internal consumption from the denominators but not the numerators of the surrog ate financial ratios, th e court i ssued a se ries of in struction s that esse ntially require d Commerc e to explain its decision on the bas is of rec ord evide nce or to adopt an a

lternati ve method

for surr ogate r atio calculations based on record evidence

. Id. at 35–36. Now before the court is Commerce’s remand de termination, Final Results of Redetermination Pursuant to Remand, Hebei Metals & Minerals I mp. & Exp. Corp. and HebeiC OURT N O . 03-00442 P AGE 3

2 The Remand Determination also discusses the surrogate steel pallets calcula tion that was addressed in Hebei Me tals I

. See Remand De

term. at 5–7, 15–18. Commerce complied with the court’s instructions regarding the surr ogate steel pallets calculation, see id. at 15, and the issue is not now before the court. If Commerce disagreed with the court and ha d valid reasons for not fully addre ssing this issue in its original brief, it should have asked for reconsider ation, but it may not add new information or a rgument on remand as to an issue that was not remande d for reconsideration or re-explanation. Wuxin Metals & Minerals Trading Co., Ltd. v. United States (Dep’t Commerce Oct. 20, 2004) [hereinafter Remand Determination ]. In the Remand Determination , Commerc e discuss ed these two issues

at gre ater len

gth and redete rmined tha

t the surr ogate c oal value

and the su

rroga te financial ratios had been calculated prope rly in the Final Determination

. 2 The explan ations as to the calculation of the surrogate financ ial ratios are adequate. The Remand Determination , however, falls short of the requirements imposed on Commerce by statute as interpreted by

the federal courts and articulated in Hebei Me tals I with respect to the surrogate coal value

. Accordingly , the court must remand again.

JURISDIC TION AND STA NDARD OF

REVIEW The court has jurisdiction over this case pursuant to 28 U.S.C. § 1581(c) (2000) and 19 U.S.C. § 151 6a(a)(2)(B)( i). Commer ce’s an tidumping

duty calcula tion shall b e sustain ed if it is supported by substantial evidenc e and is otherwise in accordance with law. See 19 U.S.C. § 1516a(b)(1)(B). BACKGROUND I. C OMMERCE ’ S U SE OF I NDIAN I MPORT D ATA FOR THE S URROGA TE C OAL V ALUE A. Commerce ’s Investigation and Determination Coal is used in the production of the subject fence posts to genera te heat that aids in theC OURT N O . 03–00442 P AGE 4

drying of coating materials. Decision Mem. , at cmt. 4, Pls.’ App., Ex. 2, at 11. Commerce’s questionnaire asked Plaintiffs Hebei Metals & Minerals I mport & Export Corporation and Hebei Wuxin Metals &

Minerals Trading Co., L td. (ref erred t o collec tively

hereina fter as “Hebei” ) to “[r]eport the ener gy used to pr

oduce on e unit of the subjec t mercha ndise. I f you used a

fuel to generate electricity

, please report the fuel actually used.” Letter from Commerce to Gr unfeld, Desider io (July 15, 2002), attachment at sec. D , sixth page, P.R. Doc. 16 [hereinafter Questionnaire ]. Hebei r

esponde d as follo ws: The . . . factory

has reported the consumption of coal consumed, including the coal used by its subcontra ctor, in metric tons required to produce one metric ton of Fence Posts . . . . Coal usage was dete rmined by allocating the coal consumed from the monthly workshop record for coal consumpti on to the pr

oducts pr oduced in the fac tory

based on their respec tive weig

ht. Lette r from Gr unfeld, D esiderio

(Sept. 11, 2002), at Part B, p. 15, P.R. Doc. 88 [hereinafter Questionn

aire Res ponse ]. Shortly thereafter, He bei submitted publicly available surrog ate coal data but did not state that it used a particular category and grade of coal. I

n the main text of the Hebei First Surrogate Data Submission , the brief discussion of coal refers initially to “steam coal” a nd then to “

non-cok ing stea m coal:” Steam Coal

should be v alued usi

ng data from the T eri Ener

gy Data Directory & Yearbook for 2000/2001. The value is derive d from price for non-coking steam coal as of April 20, 2000. These stea m coal prices are based on grades for non-coking coal that are determined by coals UHV (“Useful Heat Value”). The U HV is measured by

a range of kcal/kg . The averag e values

for non- coking

steam co al are a s follows: GRADE A (UHV over 6200 kcal/kg.) 1109.26 RS/M T GRADE B (UHV 5600–6200 kcal/kg.) 1017.89 RS/M T GRADE C (UHV 4940–5600 kcal/kg.) 870.42 RS/MTC OURT N O . 03–00442 P AGE 5 GRADE D (UHV 4200–4940 kcal/kg.) 742.95 RS/MT Source documents for these surrogate values ha ve been provided in Exhibit

9. Lette r from Gr unfeld, D esiderio

(Sep. 18, 2002), at 6, P.R. Doc. 67, Def.’s App., Tab 7 [hereinafter Hebei First Surrogate Data Submission ]. Exhibit 9 to the Hebei F irst Surro gate D ata Submission provides pages from the Ta ta En er gy R es ea rc h In st it ut e’ s E ne rg y Da ta Di re ct or y & Yearbook for 2000/2001 , P.R. Doc. 6 7, Ex. 9, at 4 4, Def.’ s App., Ta b 7 [herei nafter “TERI data”] . The TERI domestic statistics submitted by Hebei provide prices for seven g rades and three categories of non-c oking coal in all Indian states other than Assam, Arunachal Pradesh, Meghalay a, and Nagaland. Id. In its preliminary

determination , Commerce stated only that it valued c oal using import prices f or an “ot hers” ba sket of c oal corr

esponding

to articl e code “ 27011909” as publish ed in the 2001-200 2 Monthly

Statistics of Fore ign Tra

de of I ndia Volu me II : Imports [hereinafter “Indian I mport Statistics”]

. See Memorandum Regarding Fa ctors of Production Valuation for the Prelim

inary Results (Dep’t C ommerce Nov. 27, 2 002), at 5 –6 and Ex. Y , at 113–1 5, P.R. Doc. 104, Def.’s App., Tab 12 [hereinafter Prelimina ry FOP Mem. ]; Preliminary Deter mination of Sales at Less Than Fa

ir Value and Postponement of Final Determination: L awn and Garden Steel Fence Posts from the People’s Republic of China , 67 Fed. Reg. 72,141, 72,145 (Dep’t Commerce Dec. 4, 2002) [hereinafter Preliminary Deter mination ], amended by Correction: Preliminary Deter

mination of Sales at Less Than Fair V alue and Postponement of Final Determination: Lawn and Ga rden Steel Fence Posts from the People’s Republic of China , 68 Fed. Reg . 8,737 (D ep’t Comme rce Fe b. 25, 2003 ) (corr

ecting the scope of the inv estiga

tion toC OURT N O . 03–00442 P AGE 6

correspond with the Interna tional Trade Commission’s preliminary deter mination)

. In the subsequent comment period, Hebei challenged Commerce’s use of the India n import price for imported coal

. See Br. from Grunfeld, Desiderio to Commerce (Mar. 13 , 2003), a

t 9–11, P.R. Doc. 147

. In the Final Determination , Commerce continued to use the “others” data from the I ndian Import Statistics. Decision Mem. , at cmt. 4, Pls.’ App., Ex. 2. Commerce rejected Hebei’s conte ntio n that coal s houl d be va lued u sing Indian domestic prices for f our grades of “steam coal” a s listed among the

many prices c ontained

in the TERI

data . Commerc e support ed its choice on the gr

ounds that the Indian I

mport Statistics data was contemporaneous and “free of taxes and duties,” id. , while, in compari son, Hebe i failed t o supply evidenc e showing

that “steam coal, wh ich is suita

ble for u se in boile

r gene rating steam and most ofte

n used for electri city generation, was used in the production proce ss;” and failed to “demonstrate the ‘useful heat value’ (UHV) of the coal used in the production.” Id. B. Hebei Me tals I Hebei Me tals I , recognizing the normal practice a nd conditional presumption in favor of domestic prices, concluded that “Commerce used the I ndian import price for the surrogate coa l value, but failed to provide substantial evidence demonstrating why imported coal yielded a

more accurate surrogate

value than domestic coal.” Slip Op. 04- 88 at 2 . Commerc e did not explain why an I ndian manufacturer would pay for imported coal

. The cour t reach ed its con

clusion in Hebei Me tals I despite the deficiencies in the alternative value off ered by H ebei. The court instructed that, on remand, “Commerce must either provide further explanation based on rec ordC OURT N O . 03–00442 P AGE 7

evidenc e or cond

uct further inves tigation s to deter mine whet

her I ndian impo rt or dome stic data provides a value that more accurately reflects the coal consumption patterns of producers in the relevant industry.” Slip Op. 04-88 at 16–17. C. The Remand Determination In the Remand Determination , Commerce again used the “others” c oal provision from the Indian I mport Statistics

. Commerce supported its position on the grounds that: (1) Commerce found the value sub mitted by

Hebei to b e “more

distorted and less a

ccurat e than the coal val ue in the Indian import statistics which the Department used in the or iginal investigation,” Remand Determ. at 10; and

(2) the u se of impo rt data a ssures th at taxes an d duties wi ll not be inc luded in the surrogate calculations. Id. at 13. Commerce identified four ty pes of “distortions” in the domestic data submitted by He bei. First, the Remand Determination , citi ng Hebei Me tals I , reiterated its position from the Final Determination

that Hebei failed to provide record evidenc e to explain why domestic coal price s should be drawn from TERI data for the category

“steam coal and rubble,” gra des A through D, but not ste am coal g

rades E t hrough G or othe

r categ ories of

coal. Ac cording

to Commerc e, this failure rendered the proposed value “unclear and arbitrarily

limited in scope.” Remand De term. at 11. Second, i

n compar ing the I ndian impo rt statisti cs to the T ERI da ta selected by

Hebei, Commerce determined that the import category was broader and therefore “more appropriate for use.” Id. at 11–12. Third, in c omparing

the I ndian impo rt statisti cs to all th e price s listed in t

he TERIC OURT N O . 03–00442 P AGE 8

domestic data (i.e., both the prices Hebei used to construct its proposed surrog ate value and other prices), Commerce found that the highest price in the TERI data was over 560 pe rcent greater than the lowest TERI price, while the hig hest Indian import statistics price was only 274 percent greater than the lowest I

ndian import statistics price. This led Commerce to find that “[o]verall, . . . the TERI data had a g reater variance of coa

l prices with a greater proportion of a berrational and inconsistent gaps in data.” Id. at 12. No further explanation was given as to the nature of the “aberrational and inconsistent gaps in the data.” Id. Fourth, Commerce

claimed t hat the se lection o f the impor t data ac cords wit

h its preference “to use data w hich comes from the same source, where possible, f or all factors of production.” Id. at 29. In a ddition to th e distorti ons it iden tified, Co mmerce r

ejecte d Hebei’ s domestic

data in part because it might contain taxes or duties. I n the absence of “record evidence or any clarifying information about the TERI data” pe rtaining to whether the TERI data included Indian excise and sales taxes, Commerce “determined that the domestic coal prices ma y not be fre e of taxes and duties.” Id. at 13. Because Commerce’s policy is to use surrogate value prices that are tax–exclusive, Commerce chose the import data. Id. (“The Department chose to use the I ndian import statistics knowing that the values were free of taxes and duties.”)

. Taken together, these considera tions led Commerce to find “substantial record evidence indicating that the domestic coal values in the TERI data are distorted, arbitrary, and unreliable.”C OURT N O . 03–00442 P AGE 9

Id. at 14. Commerce found that, in comparison, the import values “approximate the cost incurred by I ndian fence-post producers better than the dome stic coal values in the TERI data.” Id. II. C OMMERCE ’ S C ALCU LATION O F S URROGA TE F INANCIAL R ATIOS In the Final Determination , Commerce calculated surrogate ratios for selling, general a nd ad mi ni st ra ti ve ex pe ns es (“ SG &A ”) , a nd fa ct or y ov er he ad us in g t he 20 01 An nu al Re po rt of Su rya Roshni Ltd., an India

n manufacturer of lighting products and steel tube. See Decision Mem. , at cmt. 8, Def.’s App., Ex. 2. In the denominators of the ratios, Commerce deducted the amount listed for internal raw material consumption on Sury a’s profit and loss statement

. Id. Commerce did not, however, address the possibility that re moval of internal raw material consumption from the denominators warrants removal of internally -related SG&A and overhead e xpenses from the numerators. Hebei Me tals I concluded that Commerce’s explanation of its surrogate ra tio calculations was inadequate both in terms of (1) its determination that the “internal consumption” value s on Sury a’s fina ncial sta tements should be re

moved fr om the den

ominators of the sur

rogate ratios, and (2) its failure to explain why inter nally-rela ted SG&A and overhead expenses should not be removed from the ratios’ numerators. Slip Op. 04-88 at 33–35. Accordingly , the court remanded the issue to Commerc e for fu

rther e xplanation

and, if ne cessar

y, f urther in vestiga tion along

with these ins tructions : If Commerce is able to explain adequate ly the rationale f or removing interna l raw mat erial consumption f

rom the de

nominator

of the sur

rogate ratios, th en Commerce s hall: (1) de termine to what exten t, if any, SG&A and factory

overhead expenses are attributable to internal raw material consumption; and (2) remove appropriate amounts from the numera tors ofC OURT N O . 03–00442 P AGE 10

the SG&A

and fac tory

overhea d surrog ate rati os. I f Commerc e is unabl e to obtain sufficient evidence for this task, Commerce shall: (a) include internal raw material consumption in the denominator of the SG&A, factory overhead, and profit surrogate ratios; or (b) provide a rational explanation why more acc urate surrogate ratios result from the r emoval of internal raw material consumption from the ratios’ denominators only

. Id. at 35–36. In te rms of the

removal of “inte rnal con sumption”

from the d

enominat ors of the surrog ate ratios, the Remand Determination provided the following responses to the issues raised in Hebei Metals I : (1) “internal consumption” in Surya ’s financial statements “reflects the transfe rs of components from one facility to another facility,” Remand De term. at 21; (2) “do uble c ount ing” occurs in the recognition of sales “whe n inter-facility tra

nsfers are recognized as sa les by the transferring facilities, the total sales reve nue for the consolidated corporate entity are inflated artificially,” id. at 22; (3) double counting occurs similarly in the recognition of manufacturing costs, such that “both sides of the income statement are adjusted equally ,” id. at 22–23; and (3) removal of intern al consum

ption fro m the deno minator of the ratio s is appro

priate “ because Surya has not incurr

ed this amount in its sales to outside parties.” Id. at 24; see also id. at 25 (“Surya ne ither incurred this expenditure nor earned this income.”). In re determin

ing that removal of any interna lly– related gener al costs f rom the ra

tios’ numerat ors was inappropr

iate, Comm erce ma

de the fo llowing f

indings: (1) “ba sed upon it s study of the Sury

a’s financial statements and the company ’s history, the evidenc e indicates that there are no SG&A or factory overhe ad expenses attributable to internal raw material raw [sic] consumption,” and (2) “a reduction to the numerators of the SG& A and factory

overheadC OURT N O . 03–00442 P AGE 11

3 In discussing its continued use of the I ndian Import Statistics “others” provision for the surrogate coal value, the Remand Determination focuses on establ ishing th at the “o thers” provision provides a more reliable surrogate va lue than the prices Hebei extracted from the domestic T ERI da

ta. This w as unnec essary ; Hebei Me tals I established that “[w]ithout additional evidence, it is a matter of speculation whether [the steam coal c ited by Hebei] is used in the production of the subject fence posts.” Slip Op. 04-88 at 14. Commerce’s task on re mand was not to reiterate that Hebei’s proposed surrog ate value was unsupported by the record; it was for Commerce to demonstrate affirmatively that use of either the “others” import categ ory or some other value fulfills its statutory duty to calculate normal value as accura tely as possible. See id. at 14 n.3 (“Even where a party opposing Commerce’s position has submitted information (continued...) surrogate ratios is not warranted bec ause our purpose here is to derive a ra tio that allocates the entire amount of SG&A and factory overhead expense to the products produced and sold by the company to outside parties.” Remand De term. at 25–26. DISCUSSION I. C OMMERCE ’ S U SE OF I NDIAN I MPORT D ATA FOR THE S URROGA TE C OAL V ALUE I S A RBIT RARY AND U NSUPP ORTED BY S UBSTANTIAL E VIDENCE Hebei Me tals I remanded the surrogate coa l value issue for two reasons. First, Commerce failed generally

to provide a reasonable basis for selecting the “others” data from the I ndian Import Statistics, even though Hebei’s pr oposed surrogate value was similarly flawed. Second, Commerce lacked substantial evidence for its position that, because the import da ta was free of taxes and duties, it represented a more accurate value than the domestic data on the record. Slip Op. 04-88 at 14–17. The Remand Determination does not address these failings adequately

. Commerce , without a

n evident iary basis , continues to make an arbitrary distinction between the import data—the breadth of which it presumed to encompass the coal use d by Hebei—a nd the narrower value proposed by Hebei, which was derived from the TERI domestic data. 3 In theC OURT N O . 03–00442 P AGE 12

3 (...continued) that ultima

tely proves inadequa

te, Commer

ce is not r elieved of the re quireme

nt that it su

pport its an ti du mp in g d ut y calculation with substantial evidence.”). argume nts that ac company

this arbit rary “broad v ersus na

rrow” d istinction , Commerc e aga in fails to cite substantial evidence to demonstrate the superior acc uracy of the import data.

A. Comm erce’ s “Broad Ve rsus Narr ow” Distinction Is Arb itrary Be cause Commerce

Failed to Determine The Cate gory of Coal Used In Production of the Subjec

t Merc handise Commerce has certain core investiga tory duties, which ca

nnot be avoided. The “be st availab le information” sta ndard se t forth in 1 9 U.S.C. § 16 77b(c)( 1)(B) d oes not pe

rmit Commerce to choose between two unreasonable c hoices, i.e., two surrogate coal values that ha ve an unexplained relation to the coal used by Hebei. See Anshan Iron & Steel Co., L td. v. United States , No. 02–00088, Slip Op. 04–121 at 13 (Ct. Int’l Trade Sept. 22, 2004) (“This court has consistently held that defer ence is not due an agency determination which relies upon an inadequate factual basis or is inconsistent with congressional intent.”) . On the contrary , the objective of establishing antidumping margins as a ccurately as possible “is achieved only when Commerce’s choice of what constitutes the best available infor mation evidences a rational and reasonable relationship to the factor of production it repr esents.” Shandong Huarong Gen. Corp. v. United States , 159 F. Supp. 2d 714, 719 (Ct. Int’l Trade 2001). In Shandong Huarong , the Court aff irmed on the basis of

“little mor

e than the barest s upport” i n the rec ord Commer

ce’s use of an Indian HTS category for f orged steel bars “that most closely reflected the ty

pe of steel imported by the responde nt” because one of the respondents had imported for ged steel bars. Id.C OURT N O . 03–00442 P AGE 13

4 In its comments to the Remand Determination , Hebei a sserts tha t “[t]he re cord pla

inly shows that Hebei does not import its coal,” but does not cite the record to support this view. Pls.’ Remand Cmts. at 5. On the other hand, Hebei correctly observes that “there is absolutely no record evidenc e sugg esting t

hat I ndian fe nce post producer

s use impor

ted coal in their operations.” Id. at 722. Here, there is not even a bare indication of the specific ty pe of coal used by

Hebei or by other producers of the subject merchandise, y et Commerce nevertheless selected a surr ogate coal value. 4 The Remand Determination failed to identify the ty

pe of coal used by

Hebei or by othe

r producers of the subject merchandise and, e ven if it had done so, it failed to establish that the coal used in the production process corresponds to the “others” Indian import value selecte d by Commerce. Commerce was not obligated to help Hebei obtain information that would allow Hebei to add into the record a reasonable domestic surrogate coal value, but Commerce was required to obtain adequate evidence for the value it selected. The record does not indicate that Commerce asked H ebei explicitly to identify the specific type

and grade of the coal it uses. See Questionnaire , attachment at sec. D, sixth page, P.R. Doc. 16. If some of Commerce’s r equests for information could be construed as requiring specific coal information, Commerce, contrary to its statutory obligation, did not inform Hebei that its responses were inadequate. Section § 1677m(d) of title 19 require s Commerce to take action in response to a part y’ s deficie

nt submission: “[Commerce] shall promptly inform the person submitting the response of the nature of the def iciency a nd shall, to the extent practicable, provide t hat pers on with an

opportuni

ty to remedy or explain

the defi ciency

in light o f the timeC OURT N O . 03–00442 P AGE 14

limits established for the completion of investigations or reviews under this title.” 19 U.S.C. § 1677m(d). Commerce’s first supplemental questionnaire does not appear in the record, but Hebei’s response and the second supplemental questionnaire indicate that Commerce requested additional information on numerous issues but not the type and g rade of coal. See Letter from Grunfe ld, Deside

rio (Nov. 1, 2 002), P.R. D oc. 88; Lette r from Com

merce to Grunfe ld, Deside

rio (Nov. 6, 2002), P.R. Doc. 92. Contrary to Commerce’ s contention, Hebei’s unsupported use of some, but not all, of the TERI data doe s not lead

inexorabl

y to the conc lusion tha

t the “oth ers” import data is the best available information. Instead of explaining how the “others” provision relates to the coal used by Hebei, Commerc e implies that it is better to use an import category that may be broa

der than a narrow domestic category on the theory that the br

oader import category

is more likely to capture some of th e coal ty

pes used by H ebei: When comparing the TERI da ta to that of the Indian import statistics, the Department finds that the definition of coal in the I ndian import statistics indicates a value for a basket category of coa l rather than grades of coa l specifically se lected and presented by the respondent. Thus, the Department defends its assertion that the coal value in the I ndian import statistics was more appropriate for use in the Final Determination

. Remand De

term. at 11–12. Althoug h it may be evide nt that the India n Import Statistic s “other s” provis ion is a broader categ ory than four grade s of “ste am coal a

nd rubble ,” it is not e

vident tha t the “oth ers” provision even includes a type of coal comparable to that used by Hebei, nor is it evident that such coal cannot be found within the TERI data.C OURT N O . 03–00442 P AGE 15

Hebei us ed only

a portion of the TE RI da

ta to der ive its pro posed dome stic coa

l value; it did not exhaust the domestic data in the record. In the c omments to the draft redetermination, Hebei proposed that Commerce could value coal “using the prices for all grades and a ll types of coal contained in the TERI data .” See id. at 27. Commerce apparently rejected this proposal because of the same lack of specif ic information: “The categories in the TERI data include do me st ic co al va lu e c at eg or iz ed by ‘ steam co al and ru bble ,’ ‘ slack coal an d wash ery middl ings ,’ and ‘ run–of–mine coal .’ The De partmen t has no re cord evi dence d emonstra ting tha t any of these coal values would be more accurate tha n the coal value within the Indian import statistics on the record in this proceeding.” Id. at 28. The Governm ent tells t

he court that Hebe i’s propo sal to derive a surrog ate value by

aggr egatin g all the TERI data fa ils beca use “the TERI data set s forth over 110 potentia l values f or coal. It is not proper

to simply calcula te a value from c oal from a ll the [TERI ] values.”

Def.’s R emand Re sp. at 7. T

he Gover nment pro vides no a

uthority for this argument. Rather, both the Remand Determination and the Government’s brief ignore the fact that “Commerce’s decision to use the I ndian Import Statistics suffers from the same fla w that Commerce alleges as a basis for re jecting plaintiffs’ alternatives.” See Shanghai Foreign Trade Enters. Co. v. United States , 318 F. Supp. 2d 1339, 1351–52 (Ct . Int’l Trade 2004). Commerce’s position is further undermined by the fact that, even if Commerce knew the specific type

of coal Hebei used, Commerce would still lack sufficient rec ord evidence to show that such coal corresponds to the “others” import statistics provision. To illustrate, Commerce stated that the “others” provision excluded “higher value c oal products (i.e., anthracite, bituminous metallurgical coal),” Decision Mem. at 11, but both the HTSUS and the Indian HTSC OURT N O . 03–00442 P AGE 16

“others” provisions seem to exclude all bituminous c oal. The India n Import Statistic s appear to use the Indian Harmonized Tarif f System heading s, not those of the HTSUS, as the HTSUS does not provide a subheading corresponding to 270111909. Cf. HTSUS 2701.19.00. HTSUS subheading 2701.19.00 encompasses “other coa l,” i.e., coal that is not anthracite, bituminous, or bituminous-metallurgical. See HTSUS 2701.19.00. Although the record does not contain any version o f the I

ndian HTS, the curr

ent I ndian HTS p

rovides s ubheadin gs for “ Anthrac ite coal” (2701 11 00), “Bituminous coal” (2701 12 00), and, under the 2101 19 hea ding for “Other coal,” “Coking coal” (2701 19 10), “Steam coal” (2701 19 20), and “Other” (2701 12 90). See India First Schedule Import–Tariff , available at

http://www.cbec.gov.in/cae/customs/cs-abc.html. Neither the Government nor Hebei contends that He bei would have used higher value bituminous metallurgical coal for the purpose of ge nerating heat to aid in the dry ing of coating materials, see Decision

Mem. , at cmt. 4, Pls.’ App., Ex. 2, at 11 (describing the role of coal in the production process), but it is not evident that no bituminous coal was used. This raises the possibility that, if non-metallurgical bituminous coal wa s used in the production process, the “others” provision would not encompass it. In sum, Commerce cannot rea sonably assume that, by using the Indian I

mport Statistics values listed for “others coal” under article code “27011909,” it was using a categ ory of coa l imports that covered the type of coal used in Hebei’s production process. A broad a nd unsupported coal value falls short of a substantial evidentiary basis just as a narrow and unsupported coal value does. During its investigation or upon remand, Commerce should have established the category

of coal used by

Hebei or at least established the categ ory or ca tegories ofC OURT N O . 03–00442 P AGE 17

5 The Gove

rnment c ites Raoping Xingy u Foods Co., Ltd. v. United States , No. 02-00550, Slip Op. 04- 111 (Ct. I

nt’l Tra de Aug. 31, 2004) , to suppor t the prop osition tha

t the fail ings in Hebei’s proposed surrogate coa l value allow Commerce to use the India n Import Statistics data. Raoping is distinguishable from the instant case, however. I n Raoping , the Court affirmed Commerce ’s choic e of valu es for “ furnac e oil” use d by an I ndian pro ducer a s the surr ogate l iquid fuel val ue. The r esponde nt failed to supply adequa te reco rd evide

nce to es tablish the

fuel oil used in its production process. Id. , Slip Op. 04-111 at 9. Commerce found that the Indian furnace oil it used as a surrogate was comparable to the furnace oil used by the respondent, id. at 8. In the instant case, Commerce ma de no such finding, nor would such a finding be warranted from the record. While the revie w in Raoping se le ct ed a f ue l o il typ e c le ar ly u se d b y a compara ble produ cer of m ushrooms, here the

re is not r ecord e vidence that the im

port coa l data used by Commerce c orresponds to a category of coal comparable to that used by Hebei or any other producer. coal normally used to produc e the subject merchandise. Commerce’s failure to do so leaves no basis for favorin g import data. B ecause

Commerce

drew no r

ational c onnection betwee n its surrogate value and the coal use d in production of the subject merchandise, its broad versus narrow distinction is arbitrary

. See Allied Tube & Conduit Corp. v. United States , 24 CIT 1357, 1370, 127 F. Supp. 2d 207, 219 (2000) (“Commerce may not act arbitrarily

. . .”). 5 B. Commerce ’s Other Explanations Fail to Overcome the Pr eference for Domestic Surrogate Data In addition to the breadth-versus-na rrowness explanation refuted above, Commerce prefers the “oth ers” import provisi on beca use it is contempora

neous with

the POI , contain s a smaller v ariation

betwee n it high a

nd low pric es, deri

ves from the same source as other su

rroga te values, and excludes taxes and duties. These explanations are irrelevant because Commerc e failed to show that the “others” coal import categ ory rela tes to the production of the subject mercha ndise. As suming f

or the sa ke of ar gument, however , that Comme rce cou ld reaso nably choose between the “others” import provision and all the TERI domestic data on the record,C OURT N O . 03–00442 P AGE 18

these expl anations

are insufficien

t to reve rse the c onditiona

l presump tion in favor of dome stic surrogate data. A domestic price is pre ferred for the calculation of surrog ate values by pr ior practice, policy , and logic. All else being equal, tax- and duty -free domestic data is clearly preferable over import data, but, as all things are rarely equal, this preference is subject to conditions. See Rhodia, Inc. v. United States , 185 F. Supp. 2d 1343, 1352 (Ct. Int’l Trade 2001) (“Rhodia I ”) (“Rhodia notes that Comme

rce has a stated prefer ence for the use

of the dom estic pri ce over the import

price, a ll else bei ng equa l. This pre ferenc e . . . doe s not requ ire Comme

rce to us e the dome stic pric e in all circumst ances.” ); see also Sulfanilic Acid Fr om the P.R.C. , 63 Fed. Reg. 63,834, 63,838 (Dep’t Commerce Nov. 17, 1998) (final admin. rev.) (acknow ledging that “domestic prices are preferred only if both dom estic and import pr ices ar e availa ble on a ta

x- and duty

-exclusive

basis, al l else being e qual.”) ; Ferrovanadium and Nitrided Vanadium from the Russian F ederation , 62 Fed. Reg. 65,656, 65,661 (Dep’t Commerce Dec. 15, 1997) (“The Department has also articulated a preference for a surr

ogate country ’s domestic prices over import values.”) (citation omitted). Becau se the pa

ramount g oal in nor

mal value calcula tions is to c alculate

as accu rately as possibl e the produ ct’s nor mal value as “it wou

ld have be en if the

NME count

ry were a market e conomy country,” the pr

eference in favor of using domestic data does not require that domestic data be used in circumstances where it would conflict with the goa l of accuracy

. See Rhodia I , 185 F. Supp. 2d at 1351–52. Most notably, Commerce may se lect import data over domestic data where the record shows that taxes distorted the domestic price. See, e .g. , Nation Ford Chem. Co. v. United States , 166 F.3d 1373, 1377–78 (Fed. Cir. 1999) ; Taiyuan He avy Mach. I mp. & Exp.C OURT N O . 03–00442 P AGE 19

6 The Government does not contest the existence of this preferenc e directly. See Def.’s Remand Re sp. at 6 (“Even if a pr esump tion in fav or of ex port d ata ex isted . . .”) . Alt hough Commerce has sometimes emphasized the preference’ s conditional nature, its past practice neverth eless ac

knowledg es the exist

ence of the pref erence : In Creatine , the Department stated that it does not have an unconditional preference for using

domestic prices over import prices to value factors of productions. Further, the Department explained that it may reject domestic prices if there is evidence that the domestic price s are distorted by certa in factors, such as high tariffs. I f no distortion exists, the Department would use domestic prices for valuing the input. (continued...) Corp. v. United States , 23 CIT 701, 709–10 (1999)

. Conversely, the pre ference for domestic data is most appropriate w here the circumstances indicate that a pr oducer i n a hy pothetic al marke

t would be

unlikely to use an i

mported f actor in its production proc ess. The most obviou s circums tance oc curs whe re the imp ort price

is significantly g

reater than the domestic price. I n Yantai Oriental Juice Co. v. United States , No. 00-07-00309, Slip Op. 02-56 (Ct. Int’l Trade June 18, 2002) (“ Yantai I ”), the Court concluded that, even though the import coal data might have be en “more contemporaneous” and not aberra tional, the se consid

eration s did not co mpensate for the f act that C ommerce

had fail ed to explain “how the use

of seemin

gly more expe

nsive impo rted coa

l data is th e best av ailable information establishing the actual costs incurred by Indian . . . producers.” Id. , Slip Op. 02-56 at 23. In Creatine

Monohy drate f rom the P.R. C. , 67 Fed. Reg. 10,892 (Dep’t Commerce Ma r. 11, 2002), Commerce found that the domestic prices, net of taxes, were “ lower than or roughly equal to the import prices,” which made it clear that “the domestic price s [were] not distorted by reason of high tariffs.” Id. at 10,893. On this basis, Commerce used the domestic prices. Id. 6C OURT N O . 03–00442 P AGE 20

(...continued) Non-Fr ozen Apple

Juice Conce

ntrate f rom the P.R. C. , 67 Fed. Reg. 68,987, 68,989 (Dep’t Commerce

Nov. 14, 2 002) (fi

nal admin . rev.) ( citations omitted); see also Certain Preserved Mushrooms

from the P .R.C. , 67 Fed. Reg. 46,173, 46,176 (Dep’t Commerce July 12, 2002) (final admin. rev.) (“I

n Creatine , the Dep artment e xplained th at it may

reject d omestic pr

ices if there is evidence that the domestic prices are distorted by certa

in factors, such as high tariffs.”) (citation omitted)

. In addition to being a Commerce policy in accor

dance with precedent, the conditional preference for domestic data is a logical starting point for achieving the objective set by Congress. In a hy

pothetical world of a NME country as a market economy

country from whic

h taxes, dutie s, and othe

r gove rnmenta l interfe rence have bee

n excluded , it is rea sonable t o assume that a domestic price reflects the value of a factor of production more accura tely than an import price. This assumption may be unde rmined by rec ord evidence showing how an import price

more ac curate ly r

eflects the actu al costs in curred by a produce r of the r elevant product, but this must be explained reasonably by Commerce. Here, Commerce fails to establish the relative merits of the import value in terms of the actual costs incurred by a producer. Inste ad, Commerce’s explanation—once the broad versus narrow distinction is discarde d (see above)— consists o f abstra

ct data c ompariso ns and spe culation regar ding the inclusion of taxes in the domestic prices. In terms of abstract da

ta comparisons, Commerce explained in the Final Determination that t he imp ort da ta is c ontem poran eous w ith t he POI, w hich r an from Octob er 1, 2 001, t hrough March 31, 2002. See Decision Mem. , at cmt. 4 , Pls.’ App ., Ex. 2; Notice of Initiation of Antidumpin

g Duty Inve stigation: La

wn & Gar

den Steel Fence Posts From

the People ’s Republi c of China , 67 Fed. Reg. 37,388, 37,389 (Dep’t Commerce Ma y 29, 2002) (stating

the POI). TheC OURT N O . 03–00442 P AGE 21

Indian I mport Statistics for 2001/2002 cover the period from April 2001 through Dece mber 2001, which overlaps with the POI by three months. The TERI domestic data re flects prices as of April 20, 2000, which is one ye ar removed from the start of I ndian Import Statistics’ coverag e. While the contemporaneity of da ta is one factor to be considered by Commerce, see Union Camp Corp. v. United States , 20 CIT 931, 939, 941 F. Supp. 108, 116 (1996), three months of contemporaneity

is not a co mpelling

factor where the altern

ative da ta is only a y ear-a nd-a-ha lf distant from the POI. I

n addition, the Court has previously found conte mporaneity to be insufficient to explain why an import price is the be st available information for establishing the actual costs incurred by

a producer. See Yantai I , Slip Op. 02-56 at 23. Second, Commerce explained in the Remand Determination that the TERI data had “a great er vari ance of

coal pri ces,” with a 560 pe rcent di ffere

nce betw een the h

ighest a nd lowest prices compared to a 274 percent var iation in the Indian I

mport Statistics. Hebei observes that the variance actually

favors the TERI data in absolute te rms, with price range of 1,119 Rs per metric ton compared to 1,682.1 Rs for the import data. Pls.’ Remand Cmts. at 4. Just as with the issue of c ontempor

aneity, price v arianc e is an ina dequate basis to e xplain Comme

rce’s s urroga te value selection. Third, Commerce claims that the selection of the import data accords w ith its preference “to use data which comes from the same source, w here possible, for all factors of production.” Remand De

term. at 29. To s

upport its c laim of pa st practi ce, Comme rce cite s Floor -Stan ding, Metal-T op Ir

oning Ta bles fro m the P.R.C. , 69 Fed. Reg. 35,296 (Dep’t Commerce June 24, 2004) (f inal dete rm.), but Ironing Tables

acknowledged a past prefe rence for using WTA I

ndianC OURT N O . 03–00442 P AGE 22

Import Statistics over unofficial statistics from I nfodriveIndia.com, not a past pre ference for using the same data source for all inputs. See id. at 35,304 –05. Acc ordingl

y, t his is not a v alid basis for selecting the import data. As for Commerce’s speculation as to the inclusion of taxes in the TERI domestic data, the Remand Determination asserted that, because “the Depa rtment had no way of

knowing whether [Indian excise and sales taxes] are included,” Commerce may c

hoose “Indian import statistics knowing that the values were free of taxes and duties.” Remand De term. at 13. Although Commerce has a clear pre ference for values that are tax-exclusive, see id. at 30 (citing Manga nese Met al From t he P.R.C. , 63 Fed. Reg. 12,441 (Dep’t Commerce Ma r. 13, 1998) (final admin. re v.)), Commerce’ s position h ere con flicts wit h its statut

ory obligat ion to base

its determinations on substantial evidence. As discussed in Hebei Me tals I , Slip Op. 04-88 at 15–16, federal courts have recog nized Comme rce’ s pre rog ative to sel ect i

mport data over dome stic d

ata o n the gro unds o f taxexclusivity only

where domestic tax distortions were evident from the record. See, e .g. , Nation Ford , 166 F.3d at 1377–78 (“NFC does not explain why Commerce should have used the Indian domestic p

rice, a price a dmittedly distorted by t he I ndian tar iff”); Taiyuan He avy Mach. , 23 CIT at 709 –710 ( citi ng record evidence that I ndia “had price controls on coal,” and Commerce ’s practice of using “import statistics when the domestic prices a ppeared to be governed by price controls.”). The Government does not cite, nor is the court aware of, any Commerce determination adopting the Remand Determination ’s position that import values may be used where there is no record evidenc e of domestic taxes or prices that would make an imported priceC OURT N O . 03–00442 P AGE 23

more reliable than a domestic price. This is not surprising, as such a position is contrary to the statutory require

ment that Commerce’s determinations be supported by substantial evidence. See 19 U.S.C. § 1516a(b)(1)(B)(i). C. Remand I nstructi ons Although Commerce claims to have done “the best it can to value coal,” Remand De

term. at 30, Hebei Me

tals I anticipa ted that th e recor

d might be

an inade quate ba sis for an y su rroga te coal value calculation and therefore offered Commerce the opportunity to conduct further investig ations tha

t would all ow Commer

ce “to de termine w

hether I ndian impo rt or dome stic data provides a value that more accurately reflects the coal consumption patterns of producers in the relevant industry.” Hebei Me tals I , Slip Op. 04-88 at 17. Apparently, the r ecord is devoid of such information. Commerce neglected the opportunity to correct their problem, making another remand necessa

ry . If C ommerce

does not c omplete th e investig ation at th is stage , the cour

t will have no choice but to direct the use of Hebei’s va lues, as it merely er

red. Hebei did not obstruct the investigation. On remand, Commerce shall re-open the rec ord to add evidence. Commerce may add any releva nt eviden ce, but it must eithe

r: (1) seek evidence of the ty pe of coal used by

Hebei in its production process, and nonaberra tional pri ce data

that best r

elates to this coal t

ype , if the re cord doe s not alre ady contain such data ; or, if that is deemed impractical at this stage, (2) obta in eviden ce of the typ e or ty

pes of co al norma

lly u sed for d

ry ing stee l fence

postsC OURT N O . 03–00442 P AGE 24

7 Commerce uses surrogate ratios to implement the provision in 19 U.S.C. § 1677b(c)(1)(B) which require s that the normal value for products of NMEs include amounts for (continued...) in China or India and non-aber rational price data that best relates to such coal ty pe(s), if the record does not already

contain such data. In e ither sce

nario, Co mmerce shall adhe re to its c onditiona

l prefe rence f or domest ic surrogate data or Commerce shall state tha t it is deviating from this practice and provide a rational explanation for doing so. If Commerce ag ain decides to use the “others” provision of coal in the I ndian Import Statistics , it must (1)

provide r ecord e vidence that this pr

ovision at least rou ghly corres ponds to the type of coa

l used to dry steel fe

nce posts; (2) determine whether the ty pe of coal used by Hebei or a reasonably

comparable ty

pe is reflected in the TERI dome stic data, and (3) provide a

reasona ble explanation as to

why the “othe rs” impor t data mor

e accur ately reflects the cos ts incurre d in produc ing the s ubject me rchandi se. I

n any event, Co mmerce may

not suppor

t the use of import data in the surrogate coal value on the ba sis of tax-exclusivity if there is no record evidence to indicate that the I ndian coal market prices are distorted by taxes and/or duties. Further, the other reasons thus far off ered for Commerce’s choice of import coa l data have been found insufficient and will not sustain the choice. II. C OMMERCE ’ S C ALCU LATION O F S URROGA TE F INANCIAL R ATIOS I S S USTAINED The Remand Determination provides a reasonable explanation as to why Surya’s interna

l raw consumption figure should be removed from the de nominators of the SG&A and factory overhead surrogate ra

tios and that a reduction to the numerators was unwarrante d. 7C OURT N O . 03–00442 P AGE 25

(...continued) “general expenses and profit” in addition to the cost of the surr ogate values for the factors of production. The amounts for general expenses and pr ofit are typica

lly obtained by

applying the following surrogate ratios to the surrog ate FOP values: selling, genera l and administrative expenses (“SG&A”), factory (or manufacturing) overhe ad, and profit. Shanghai Foreign Trade Enters. , 318 F. Supp. 2d at 1341. These three ratios derive from the fina ncial statements of one or more surrogate companies that produc e merchandise in the surrogate c ountry that is identical or comparable to the subject merchandise. Id. The ratios are calculated and incorpor ated into the normal va

lue calc ulation in t

he follow ing manner: To calculate the SG&A ratio, the Commerce pra ctice is to divide a surrogate company ’s SG&A costs by its total cost of manuf acturing. For the manufacturing overhead r atio, Commerce typica

lly divides total manufacturing overhead expenses by total direct manufacturing expenses. Finally, to determine a

surrogate ratio for profit, Commerce divides the before-tax profit by the

sum of direct expenses, manufacturing overhea d and SG&A expenses. These ratios are conver ted to percentages (“ra

tes”) and multiplied by the surrog ate values assigned by Commerce for the direct expenses, manufacturing overhea d and SG&A expenses. Id. (citation omitted). Because direct manufacturing expenses are a component in the denominator of ea ch ratio, each ratio requires data for ra w material costs. To this end, Commerce utilized the “Raw Material Consumed” line-item from the “EXPENDI TURES” column in the Surya Roshni P&L Statement

. A. Removal of Internal Consumption from the Surrogate Ratios’ Denom inators Is Reasonable and Substantially Supp orted In the Final Determination , Commerce’s determination as to the meaning of Sury a’s “internal consumption” figures was ambig uous; “internal consumption” was said to represent the production of internal assets or inter-facility transfers. Decision

Mem. , at 15; Pls.’ App., Ex. 2; see also Hebei Me

tals I , Slip Op. 04-88 at 29. On remand, Commerce clarified this ambiguity by determining that “internal consumption” represente d only inter-fac ility transfers, which would be double-counted if not removed from the expense values in the surrog ate ratios’ denominators.C OURT N O . 03–00442 P AGE 26

Remand De

term. at 21–22. In the Remand Determination , Commerc e’s principal ba ses for it s continue d adhere nce to its surrogate ratio calculations in the Final Determination are its “accounting experience a nd judgment,” Remand De

term. at 21, and

its “acc ounting e

xperienc e with re cord evi dence in past cases.” Id. at 33. I

n its brief to the cou

rt, the Go vernmen

t explains th at, base d on this accounting experience and judgme nt, Surya’s financ ial statements made it “evident” that “the ‘internal consumption’ notation reflected components consumed internally to produce finished products (i.e., lamps and luminaries) for external sales.” Def.’ s Remand Resp. at 11. The Governm ent cited

prior inv estiga

tions in whi ch Commer

ce dedu cted inte rnal con sumption in order to avoid double-counting. Id. at 12 ( citi ng Stainless Steel Sheet and Strip in Coils from Mexico , 68 Fed. Reg. 6,889 (Dep’t Commerce F eb. 11, 2003) (final admin. rev.), and Structural Steel Be ams from Sp ain , 66 Fed. Reg. 67,207 (Dep’t Commerce De c. 28, 2001) (preliminary determ.)). Despite Hebei’s contention that Commerce’s e xplanation represents nothing more than “unsupported speculation,” Pls.’ Remand Cmts. at 7, the court concludes that Commerce’s explanation is supported by reasonable inferences from the record. I n making its determination, Commerce explained what it meant by “ double-counting,” and this explanation accords with the discussion of internal consumption, inter-facility tr ansfers, and double-counting in Hebei Me tals I

. See Hebei Me

tals I , Slip Op. 04-88 at 33 (“Assuming internal consumption represents intracompany transf

ers . . . then Commerce expressed a valid concern that the inc lusion of internal consumption would overvalue raw material costs in the surroga te ratios.”).C OURT N O . 03–00442 P AGE 27

B. The Determination Not to Rem ove Internal Consumption from the Surrogate Ratios’ Numerators Is Reasonable and Substantially Supp orted Hebei a rgues t hat, if int ernal c onsumption

is to be re

moved fr om the sur

rogate ratios’ denominators, expenses related to internal transfers should be deducte d from the SG&A and factory overhead expenses reflected in the ratios’ numer ators. Pls.’ Remand Cmts. at 10. The Remand Determination , however, provides a reasonable explanation as to why the SG&A and factory overhead figures should be left intact. According to Commerce, “ SG&A and factor y ov erhead

expenses a

re not at tributabl e to the inter nal raw material

consumpti on stated

on Sury a’s fina ncial sta tements per se . Rather they should be attributed to the raw material only once.” Remand De

term. at 25. Hebei understands Commerce to mean that internal transfers “wer e performed without incurring any factory overhead or SG&A expenses.” Pls.’ Remand Cmts. at 8. This is not Commerce’s position. Co mm er ce ’s po si ti on is th at SG &A an d f ac to ry o ve rh ea d e xp en se s r ef le ct co st s i nc ur re d b y a company as it produc es and sells its products, and such costs may come from the transfer of raw material inputs among company facilities as well as transactions involving entities outside the company. See id. at 26 (“our purpose here is to derive a ra tio that allocates the entire amount of SG&A and factor

y ov erhead

expense to

the produ

cts produ ced and sold by the compa

ny t o outside parties.”). The Government elaborates: “ Commerce did not conclude that there were no overhead or administrative costs associated with the internal transf er. Rather, Commerce found there were no ‘ un-captured ’ overhead or administrative costs . . . .” Def.’s Remand Resp. at 12

. According to this logic, overhead a nd administrative costs associated with internal transfers wereC OURT N O . 03–00442 P AGE 28

8 Commerce did not address the treatment of the ratios’ numerators in the Final Determination , when it offered two different explanations—production of internal assets or interfacility transfe

rs—for its decision to recalculate the surrog ate financial ratios using Sury a’s raw materials consumption net of internal consumption. See Decision Mem. , at cmt. 8, Pls.’ App., Ex. 2, at 15. The first explanation seemed to make a strong case for r emoving amounts from the numerators, and the second explanation left the matter unclear. In its briefing for Hebei Me tals I , the Government did not improve the situation by taking the position that internal consumption of raw materials did not incur SG&A and factory overhead (continued...) “captured” by

allocation to finished products sold to outside parties. In de scribing

SG&A and factor

y ov erhead

costs in thi s manner , Commerc e provide s a

reasona ble basis for removing inte

rnal ra w materi al expendi

tures fr om the sur

rogate ratios’ denominators without making a corresponding adjustment to the numera tors. Commerce’s double-c ounting r

ationale , which su

pported i ts treatm ent of the

denomina

tors, doe s not apply

to the numerators. SG&A and factory overhead expenses do not raise a double-counting c oncern because internally

-related SG&A and factory overhead costs represent actual c osts to the company . If a

raw mate rial input is transf erred b etween

two busine ss units of a

company , this may incur som e actua

l factor y ov erhead

costs, but

it will not incur any

actual r aw mater ial costs because the company

already owns the input. The factory overhead costs would be actual in the sense tha t, all else being e qual, a c ompany

with a pro duction pr

ocess re quiring

many inter-f acility transfers would incur higher fac tory overhe ad costs than to a companythat makes no interfacility transfe

rs. Because the Remand Determination provides a reasonable explanation as to why it is not appropriate to remove any amounts from the numerators of the SG&A and factory overhe ad surrogate financial ratios, Commerce’ s determination as to this issue is sustained. 8C OURT N O . 03–00442 P AGE 29

8 (...continued) expenses. See Def.’s Br. at 37. Hebei Me tals I demonstrated that, in at least one circumstance (calculation of the indirect selling expenses ratio for the United States pr ice), Commerce attribute d expenses

to sales that “can

be constr ued as a r outine tra nsfer of mercha ndise.” Sl ip Op. 04 -88 (q uoti ng Stainless Steel Sheet and Strip in Coils from Mexico , 68 Fed. Reg. 6,889, 6,891). Hebei Me

tals I also cited Fuyao Glass Industry Group Co., Ltd. v. United States , No. 02–00282, Slip Op. 03–169 (Ct. Int’l Trade Dec. 18, 2003), whic h, although it involves the distinct issue of general expenses incurred by the sale of trade goods, addressed the evidentiary problems involved in deducting amounts from the numerators of surrog ate ratios. Slip Op. 03–169 at 40. With the Remand Determination , Commerc e has set tled fina lly o n the inte r-fac ility transfers/double-counting rationale for r emoving internal raw materials consumption from the denominator, and has explained for the first time how the double-counting ra tionale does not require an adjustment to the numerators. This is adequate, and, bec ause this case bears signific ant fac tual diff

erence s from Stainless Steel Sheet and Strip in Coils from Mexico , 68 Fed. Reg. at 6,891, it is not necessary to specifically a

ddress the methodology

used in that review for United States price as it bears on arbitrariness in the calc ulation of normal value here. CONCLUSION Commerce’s selection of India n Import Statistics data for the surrog ate coal value was arbitrary and unsupported by substantial evide nce. Accordingly , the case is remanded for

re co ns id er at io n a nd ac ti on co ns is te nt wi th th is op in io n, an d i t i s h er eb y ORDERED that the De

partmen t of Commer

ce shall file its re mand dete

rmination with the cour t on or bef

ore May 9, 2005; ORDERED that Plaintiffs are granted 25 day s from the date of the remand determination to file comments; andC OURT N O . 03–00442 P AGE 30

ORDERED that the Department of Commerce is grante d 15 days to respond to any comments filed.

/s/ Jane A. Re stani Jane A. Restani Chief Judge Dated: This 10th day of Ma rch, 2005. New York, New York