Slip Op. 19-28

UNITED STATES COURT OF INTERNATIONAL TRADE

JACOBI CARBONS AB AND JACOBI 

CARBONS, INC., 

Plaintiffs, 

and

NINGXIA HUAHUI ACTIVATED 

CARBON CO., LTD., et al., 

Plaintiff-Intervenors, 

 v.

UNITED STATES, 

Defendant, 

and

CALGON CARBON CORP. AND CABOT 

NORIT AM., INC, 

Defendant-Intervenors. 

Before: Mark A. Barnett, Judge

Consol. Court No. 16-00185

OPINION AND ORDER

[The U.S. Department of Commerce’s Second Remand Results are remanded with 

respect to the agency’s primary surrogate country selection and sustained with respect

to the agency’s value-added tax adjustment.]

Dated: March 5, 2019

Daniel L. Porter and Tung A. Nguyen, Curtis, Mallet-Prevost, Colt & Mosle LLP, of

Washington, DC, for Plaintiffs Jacobi Carbons AB and Jacobi Carbons, Inc.

Gregory S. Menegaz, J. Kevin Horgan, and Alexandra H. Salzman, DeKieffer & Horgan,

PLLC, of Washington, DC, for Plaintiff-Intervenors Carbon Activated Corporation,

Ningxia Mineral and Chemical Ltd., Shanxi DMD Corporation, Shanxi Industry
Consol. Court No. 16-00185 Page 2

Technology Trading Co., Ltd., Shanxi Sincere Industrial Co., Ltd., Tianjin Channel 

Filters Co. Ltd., and Tianjin Maijin Industries Co., Ltd. 

Mollie L. Finnan, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. 

Department of Justice, of Washington, DC, for Defendant. With her on the brief were 

Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia 

Burke, Assistant Director. Of counsel on the brief was Emma T. Hunter, Attorney, 

Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of 

Commerce, of Washington, DC.

R. Alan Luberda, John M. Herrmann, David A. Hartquist, Melissa M. Brewer, and

Kathleen M. Cusack, Kelley Drye & Warren LLP, of Washington, DC, for DefendantIntervenors Calgon Carbon Corporation and Cabot Norit Americas, Inc. 

Barnett, Judge: This matter is before the court following the U.S. Department of 

Commerce’s (“Commerce” or “the agency”) second redetermination upon remand in this 

case. See Final Results of Redetermination Pursuant to Court Remand (“2nd Remand 

Results”), ECF No. 124-1. 

Plaintiffs Jacobi Carbons AB and Jacobi Carbons, Inc. (together, “Jacobi”) and 

Plaintiff-Intervenors1 (collectively, “Plaintiffs”) challenged several aspects of 

Commerce’s final results in the eighth administrative review of the antidumping duty 

1 Plaintiff-Intervenors include Carbon Activated Corporation, Ningxia Mineral and 

Chemical Limited, Shanxi DMD Corporation, Shanxi Industry Technology Trading

Co., Ltd., Shanxi Sincere Industrial Co., Ltd., Tianjin Channel Filters Co., Ltd., and 

Tianjin Maijin Industries Co., Ltd. (collectively, “CAC”); Ningxia Guanghua Cherishmet 

Activated Carbon Co., Ltd., Beijing Pacific Activated Carbon Products Co., Ltd., and 

Datong Municipal Yunguang Activated Carbon Co., Ltd (collectively, “Cherishmet”); 

Ningxia Huahui Activated Carbon Co., Ltd. (“Huahui”); and M.L. Ball Co., Ltd., and Jilin 

Bright Future Chemicals Company, Ltd. (together, “M.L. Ball”). The court consolidated

cases filed by CAC, Cherishmet, and M.L. Ball under lead Court No. 16-00185, filed by 

Jacobi. See Order (Nov. 3, 2016), ECF No. 42. Those parties, along with Huahui, had 

also intervened in this action. See Order (Oct. 7, 2016), ECF No. 17; Order (Oct. 12, 

2016), ECF No. 22; Order (Oct. 20, 2016), ECF No. 36; Order (Oct. 20, 2016), ECF No. 

40. 
Consol. Court No. 16-00185 Page 3

order (“AD Order”) on certain activated carbon from the People’s Republic of China 

(“PRC” or “China”). See Certain Activated Carbon from the People’s Republic of China, 

81 Fed. Reg. 62,088 (Dep’t of Commerce Sept. 8, 2016) (final results of antidumping 

duty admin. review; 2014-2015) (“Final Results”), ECF No. 44-4, and accompanying 

Issues and Decision Mem., A-570-904 (Aug. 31, 2016) (“I&D Mem.”), ECF No. 44-5. 2

Specifically, Plaintiffs challenged Commerce’s selection of Thailand as the primary 

surrogate country and Thai surrogate values for carbonized material, hydrochloric acid, 

coal tar, and financial ratios, and Commerce’s adjustment to Jacobi’s constructed export 

price to account for irrecoverable value-added tax (“VAT”). See, e.g., Confidential 

Consol. Pls. Jacobi Carbons AB and Jacobi Carbons, Inc.’s Mot. for J. Upon the Agency 

R. and Br. in Supp. of Mot. for J. on the Agency R., ECF No. 48; Consol. Pls. Carbon 

Activated Corporation, Ningxia Mineral and Chemical Limited, Shanxi DMD Corporation, 

Shanxi Industry Technology Trading Co., Ltd., Shanxi Sincere Industrial Co., Ltd., 

Tianjin Channel Filters Co., Ltd., and Tianjin Maijin Industries Co., Ltd. Mem. in Supp. of 

Mot. for J. on the Agency R., ECF No. 53.

2 The administrative record filed in connection with the Final Results is divided into a 

Public Administrative Record (“PR”), ECF No. 44-3, and a Confidential Administrative 

Record (“CR”), ECF No. 44-2. The administrative record associated with the 2nd 

Remand Results is contained in a Public Remand Record, ECF No. 125-3, and a 

Confidential Remand Record, ECF No. 125-2. Parties submitted joint appendices 

containing record documents cited in their remand briefs. See J.A. to Parties’ 

Comments on Second Remand Redetermination (“PRJA”), ECF No. 133; Confidential 

Suppl. App. to Comments on Second Remand Redetermination (“CRJA”), ECF No. 135.

These appendices supplement the documents previously provided. See Public J.A.

(“PJA”), ECF No. 92; Confidential J.A. (“CJA”), ECF No. 91.
Consol. Court No. 16-00185 Page 4

On June 20, 2017, the court granted Commerce’s request for a remand to clarify 

or reconsider its findings regarding economic comparability and Thailand’s status as a 

significant producer of comparable merchandise based on its export quantity. See

Order (June 20, 2017), ECF No. 77.3 On September 5, 2017, Commerce issued its first 

remand redetermination. See Final Results of Redetermination Pursuant to Court Order 

(Sept. 1, 2017) (“1st Remand Results”), ECF No. 78-1. Therein, Commerce further 

explained its methodology for determining which countries are at the same level of 

economic development as the PRC and relied on evidence of domestic production 

rather than exports to support its significant producer determination. Id. at 3-21. On

April 19, 2018, following briefing and oral argument on the Final Results as amended by 

the 1st Remand Results, the court sustained Commerce’s economic comparability 

determination while remanding the agency’s determination that Thailand is a significant 

producer of comparable merchandise, irrecoverable VAT adjustment, and surrogate 

value selections. See Jacobi Carbons AB v. United States (“Jacobi (AR8) I”), 42 CIT 

___, 313 F. Supp. 3d 1344 (2018).4

3 Commerce’s request was prompted by the court’s resolution of those issues in 

connection with the seventh administrative review of the AD Order on activated carbon. 

See Def.’s Mot. for a Voluntary Remand, ECF No. 72; Jacobi Carbons AB v. United 

States (“Jacobi (AR7) I”), 41 CIT ___, 222 F. Supp. 3d 1159 (2017). In that opinion, the 

court held that Commerce’s economic comparability determination lacked reasoned 

analysis and the agency had failed to persuade that total exports, absent evidence 

regarding the influence of those exports on world trade, was a permissible method of 

construing the term “significant producer.” Jacobi (AR7) I, 222 F. Supp. 3d at 1176-82. 

4 Jacobi (AR8) I presents background information on this case, familiarity with which is 

presumed.
Consol. Court No. 16-00185 Page 5

On October 24, 2018, Commerce filed the remand redetermination at issue here.

See 2nd Remand Results. Therein, Commerce circled back to export quantity as its

basis for finding that Thailand is a significant producer of comparable merchandise, see 

id. at 4-7; further explained its selection of Thai surrogate values for carbonized material 

and hydrochloric acid, see id. at 8-15; revised its surrogate value selections for coal tar 

and financial ratios using data from South Africa and Romania, respectively, see id. at 

16-19, 20-24; and reconsidered the basis for its VAT adjustment while continuing to 

adjust Jacobi’s constructed export price for VAT, see id. at 26-37. Commerce’s 

redetermination reduced Jacobi’s weighted-average dumping margin from $1.756 per 

kilogram to $0.44 per kilogram. Compare id. at 51, with Final Results, 81 Fed. Reg. at 

62,089. The reduction in Jacobi’s margin also reduced the weighted-average dumping 

margin assigned to the non-individually-examined respondents eligible for a separate 

rate from $1.357 per kilogram to $0.34 per kilogram. Compare 2nd Remand Results at 

52, with Final Results, 81 Fed. Reg. at 62,089.

Jacobi and CAC filed comments opposing the 2nd Remand Results with respect 

to Thailand as a significant producer, the surrogate values selected for carbonized 

material and hydrochloric acid, and the VAT adjustment. See Pls.’ Comments on 

Commerce’s Second Remand Determination (“Jacobi’s Opp’n Cmts.”), ECF No. 127;

Consol. Pls. Carbon Activated Corporation, Ningxia Mineral and Chemical Limited, 

Shanxi DMD Corporation, Shanxi Industry Technology Trading Co., Ltd., Shanxi 

Sincere Industrial Co., Ltd., Tianjin Channel Filters Co., Ltd., and Tianjin Maijin 

Industries Co., Ltd. Comments in Opp’n to Second Remand (“CAC’s Opp’n Cmts.”), 
Consol. Court No. 16-00185 Page 6

ECF No. 126. No party challenged the 2nd Remand Results with respect to the 

surrogate values selected for coal tar or the financial ratios. Defendant United States 

(“the Government”) and Defendant–Intervenors Calgon Carbon Corp. and Cabot Norit 

Americas, Inc. (“Calgon”) filed comments in support of the 2nd Remand Results. 

See Def.’s Reply to Comments on the Second Remand Results (“Def.’s Reply Cmts.”), 

ECF No. 131; Def.–Ints.’ Comments in Supp. of U.S. Department of Commerce Second 

Remand Redetermination (“Def–Ints.’ Reply Cmts.”), ECF No. 132.

For the following reasons, the court remands Commerce’s determination that 

Thailand is a significant producer of comparable merchandise and directs Commerce to 

reconsider its selection of a primary surrogate country. Because Commerce relied, in 

part, on its preference to use data from the primary surrogate country when making its 

surrogate value selections for carbonized material and hydrochloric acid, see 2nd 

Remand Results at 7, 15, the court also remands Commerce’s surrogate value 

selections. The court sustains Commerce’s VAT adjustment.

JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction pursuant to § 516A(a)(2)(B)(iii) of the Tariff Act of 1930, 

as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii)(2012),5 and 28 U.S.C. § 1581(c)(2012). 

The court will uphold an agency determination that is supported by substantial 

evidence and otherwise in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i). The 

5 All citations to the Tariff Act of 1930, as amended, are to Title 19 of the U.S. Code, 

and all references to the United States Code are to the 2012 edition, unless otherwise 

stated.
Consol. Court No. 16-00185 Page 7

court's review of Commerce's interpretation and implementation of a statutory scheme 

is guided by Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 

837 (1984). See Apex Frozen Foods Private Ltd. v. United States, 862 F.3d 1322, 1329 

(Fed. Cir. 2017). First, the court must determine “whether Congress has directly spoken 

to the precise question at issue.” Id. (quoting Chevron, 467 U.S. at 842). If Congress's 

intent is clear, “that is the end of the matter,” and the court “must give effect to the 

unambiguously expressed intent of Congress.” Id. (quoting Chevron, 467 U.S. at 842-

43). Only “if the statute is silent or ambiguous,” must the court determine whether the 

agency's action “is based on a permissible construction of the statute.” Id. (quoting 

Chevron, 467 U.S. at 843). Additionally, “[t]he results of a redetermination pursuant to 

court remand are also reviewed for compliance with the court’s remand order.”

SolarWorld Ams., Inc. v. United States, 41 CIT ___, ___, 273 F. Supp. 3d 1314, 1317 

(2017) (internal quotation marks and citation omitted). 

DISCUSSION

I. Significant Producer of Comparable Merchandise

A. Legal Framework

An antidumping duty is “the amount by which the normal value exceeds the 

export price (or the constructed export price) for the merchandise.” 19 U.S.C. § 1673. 

When an antidumping duty proceeding involves a nonmarket economy country, 

Commerce determines normal value by valuing the factors of production6 in a surrogate 

6 The factors of production include but are not limited to: “(A) hours of labor required, (B) 

quantities of raw materials employed, (C) amounts of energy and other utilities 
Consol. Court No. 16-00185 Page 8

country, see id. § 1677b(c)(1), and those values are referred to as “surrogate values.” 

In selecting surrogate values, Commerce must use “the best available information” that 

is, “to the extent possible,” from a market economy country or countries that are 

economically comparable to the nonmarket economy country and are “significant 

producers of comparable merchandise.” Id. § 1677b(c)(1), (4). Commerce generally 

values all factors of production in a single surrogate country.7

Commerce has adopted a four-step approach to selecting a primary surrogate 

country. Pursuant thereto:

(1) the Office of Policy (“OP”) assembles a list of potential surrogate 

countries that are at a comparable level of economic development to the 

[non-market economy] country; (2) Commerce identifies countries from the 

list with producers of comparable merchandise; (3) Commerce determines 

whether any of the countries which produce comparable merchandise are 

significant producers of that comparable merchandise; and (4) if more 

than one country satisfies steps (1)–(3), Commerce will select the country 

with the best factors data.

Jiaxing Brother Fastener Co., Ltd. v. United States, 822 F.3d 1289, 1293 (Fed. Cir. 

2016) (citation omitted); see also Import Admin., U.S. Dep't of Commerce, Non-Market 

Economy Surrogate Country Selection Process, Policy Bulletin 04.1 (2004), available at 

http://enforcement.trade.gov/policy/bull04–1.html (last visited Feb. 27, 2019) (“Policy 

Bulletin 04.1”). 

consumed, and (D) representative capital cost, including depreciation.” 19 U.S.C. 

§ 1677b(c)(3).

7 See 19 C.F.R. § 351.408(c)(2) (excepting labor). But see Antidumping Methodologies 

in Proceedings Involving Non-Market Economies: Valuing the Factor of Production: 

Labor, 76 Fed. Reg. 36,092 (Dep’t Commerce June 21, 2011) (expressing a preference 

to value labor based on industry-specific labor rates from the primary surrogate 

country).
Consol. Court No. 16-00185 Page 9

Neither the statute nor Commerce’s regulations define “significant

producer.” See 19 U.S.C. § 1677b; 19 C.F.R. § 351.408. However, in its Policy Bulletin 

04.1, Commerce described its practice for evaluating significant producer countries:

[t]he extent to which a country is a significant producer should not be 

judged against the [subject non-market economy] country’s production 

level or the comparative production of the five or six countries [that are 

considered potential surrogate countries]. Instead, a judgement [sic]

should be made consistent with the characteristics of world production of, 

and trade in, comparable merchandise (subject to the availability of data on 

these characteristics). Since these characteristics are specific to the 

merchandise in question, the standard for “significant producer” will vary 

from case to case. For example, if . . . there are ten large producers and a 

variety of small producers, “significant producer” could be interpreted to 

mean one of the top ten. If, in the example above, there is also a middlesize group of producers, then “significant producer” could be interpreted as 

one of the top ten or middle group. In another case, there may not be 

adequate data available from major producing countries. In such a case, 

“significant producer” could mean a country that is a net exporter, even 

though the selected surrogate country may not be one of the world's top 

producers.

Policy Bulletin 04.1 at 3.

Because the term is otherwise undefined and ambiguous, the court must assess 

whether Commerce’s interpretation of significant producer “is based on a permissible 

construction of the statute.” Apex Frozen Foods, 862 F.3d at 1329 (quoting Chevron,

467 U.S. at 843). To effectuate judicial review, Commerce must provide “a reasoned 

analysis or explanation for [its] decision” so the court may “determine whether a 

particular decision is arbitrary, capricious, or an abuse of discretion.” Thai I-Mei Frozen 

Foods Co., Ltd. v. United States, 616 F.3d 1300, 1304 (Fed. Cir. 2010) (citation 

omitted).
Consol. Court No. 16-00185 Page 10

B. Commerce’s Interpretation of “Significant Producer” in This Proceeding

The 2nd Remand Results reflect Commerce’s third effort to justify its 

determination that Thailand is a significant producer of comparable merchandise. 

Therein, Commerce explained that it would “compar[e] data for comparable 

merchandise to establish whether any country that is at the same level of economic 

development as [the PRC] was: a) a significant net exporter; or b) a major exporter to 

the United States.” 2nd Remand Results at 5-6 & n.25 (citing Yantai Oriental Juice Co. 

v. United States, 27 CIT 477, 481 (2003)) (emphasis added). To that end, Commerce 

noted that the record contained Global Trade Atlas (“GTA”) import and export data for 

the potential surrogate countries as well as Malaysia and the Philippines, and 2014 

UNCOMTRADE data for 65 activated carbon exporting countries. Id. at 6. The GTA

data indicated that Malaysia and the Philippines were net exporters, but Thailand was 

not. Id. Commerce did not, however, examine whether Thailand (or any of the potential 

surrogate countries) was “a major exporter to the United States,” its stated alternative 

metric for evaluating significant production. See id. Rather, Commerce discussed

Thailand’s total global exports. See id. at 6-7. 

Commerce prefaced its discussion of export quantity by explaining that although 

“[t]he [c]ourt has suggested that significant production means production ‘having or 

likely to have influence or effect’ on world trade[,] . . . Commerce instead interprets

‘significant’ to mean a noticeably or measurably large amount.” Id. at 6 & n.31 (quoting

Jacobi (AR8) I, 313 F. Supp. 3d at 1358 & n.26). According to the 2014 

UNCOMTRADE and GTA data sets, Thailand exported more than nine million kilograms
Consol. Court No. 16-00185 Page 11

(“kg”) of activated carbon worldwide. See id. at 6 & n.32 (citations omitted). Commerce 

characterized this amount as “noticeably or measurably large.” Id. at 7. Commerce 

further characterized Thailand as “among the top global exporters of activated carbon”

because it is the 14th largest global exporter of activated carbon according to the 2014 

UNCOMTRADE data, with 51 countries exporting less than Thailand, and 38 countries 

exporting less than one million kilograms.8 Id. at 7, 39. Thailand also was the largest 

exporter among the potential surrogate countries. Id. at 7. Commerce relied on this 

evidence to conclude that Thailand is a significant producer of comparable 

merchandise. See id. at 7, 38, 39-40.

C. Parties’ Contentions

CAC contends that Commerce’s interpretation of significant as “noticeably or 

measurably large” is “unreasonably subjective.” CAC’s Opp’n Cmts. at 4. CAC also 

contends that the 2014 UNCOMTRADE data show that the top nine countries on the list 

may be considered “significant exporters” and, thereafter, the remaining countries,

including Thailand, each account for less than two percent of total global exports. Id. at 

6-7. CAC further contends that Thailand’s status as a net importer undermines 

Commerce’s reliance on total exports. Id. at 4-5.9

8 The 2014 UNCOMTRADE data show that 40 countries exported less than one million 

kilograms of activated carbon, and 38 countries exported less than one million U.S. 

dollars’ worth. See Jacobi’s Comments on Economic Comparability (July 20, 2015) 

(“Jacobi’s EC Cmts.”), Attach. E, PR 82-83, PJA Tab 18, ECF No. 92-3 (2014 

UNCOMTRADE data). This minor error does not impact the court’s analysis.

9 Jacobi did not comment on this issue.
Consol. Court No. 16-00185 Page 12

The Government and Calgon contend that Commerce has permissibly 

interpreted an ambiguous statutory term and the 2014 UNCOMTRADE data provide 

substantial evidence that Thailand is a significant producer. Def.’s Reply Cmts. at 5-6; 

Def.-Ints.’ Reply Cmts. at 7-8.

D. Commerce’s Determination is Remanded for Reconsideration

Upon consideration of the agency’s second remand redetermination and the 

briefing to the court, Commerce’s finding that Thailand is a significant producer must be 

remanded. Commerce has effectively divorced the term “significant” from the term 

“production” and applied its interpretation of “significant” without the context and 

explanation necessary to ensure that its determination is not arbitrary. Although 

Commerce is within its discretion to define “significant” as “noticeably or measurably 

large,” see Juancheng Kangtai Chem. Co., Ltd. v. United States, Slip Op. 17-3, 2017 

WL 218910, at *4 (CIT Jan. 19, 2017) (holding that Commerce’s corresponding 

interpretation of the term “significant” merited Chevron deference), Commerce has not 

supplied the court with a well-reasoned explanation supporting its consideration of total 

exports as a substitute for production. Overall, the agency has failed to interpret or 

apply the statutory criterion in its entirety and has not supported its determination that 

Thailand is a significant producer with substantial evidence. 

Commerce’s Policy Bulletin 04.1 does not discuss the use of total exports to 

identify significant producers. It indicates that, in the absence of production data, a 

“‘significant producer’ could mean a country that is a net exporter.” Policy Bulletin 04.1

at 3 (emphasis added); cf. H.R. Rep. No. 100–576, at 590 (1988) (Conf. Rep.), reprinted 
Consol. Court No. 16-00185 Page 13

in 1988 U.S.C.C.A.N. 1547, 1623 (“The term ‘significant producer’ includes any country 

that is a significant net exporter.”).10 The use of net exports provides at least some 

assurance that a country’s exports do not consist entirely of transshipped imports. 

When a country imports more than it exports, that assurance is lacking. Here, Thailand 

imported 696,685 kg more activated carbon than it exported during the relevant period. 

See Pet’rs’ Comments on Surrogate Country Selection (Aug. 31, 2015), Attach. 4, PR 

155, PJA Tab 33, ECF No. 92-5 (Thailand’s import and export quantities). Commerce’s 

failure to address this aspect of the record undermines its reliance on total exports as a 

substitute for production. See Nippon Steel Corp. v. United States, 337 F.3d 1373, 

1379 (Fed. Cir. 2003) (the court’s review must consider “the record as a whole, 

including evidence that supports as well as evidence that fairly detracts from the 

substantiality of the evidence”) (internal quotation marks and citation omitted).11

Commerce also failed to adequately explain its determination that Thailand’s total 

export quantity was significant. While Commerce appears to suggest that countries 

ranked among the top 15 exporters represent the “top global exporters,” see 2nd 

Remand Results at 7, 39, the lack of further explanation or any clear delineation

10 While Commerce correctly notes that the legislative history’s reference to significant 

net exports does not preclude reliance on other metrics, 2nd Remand Results at 5, 

Commerce must still explain why its chosen metric represents a permissible 

construction of the term “significant producer.”

11 Indeed, in the case upon which Commerce relied to support its consideration of 

significant net exports and major exports to the United States, the agency explained that 

India was not a significant producer because it did not fulfill either of those criteria and

was a net importer of subject merchandise. See Yantai, 27 CIT at 481; 2nd Remand 

Results at 6 & n.25.
Consol. Court No. 16-00185 Page 14

between countries ranked proximately above and below 15 leaves the court unable to 

discern the reasons for Commerce’s conclusion. See NMB Singapore Ltd. v. United 

States, 557 F.3d 1316, 1319 (Fed. Cir. 2009) (noting that although Commerce’s 

“explanations do not have to be perfect, the path of Commerce's decision must be 

reasonably discernable to a reviewing court”); Jacobi’s EC Cmts., Attach. E.12

Commerce’s seemingly arbitrary delineation contrasts with Policy Bulletin 04.1’s 

recognition of the contextual nature of the significant producer determination and 

corresponding examples that evaluate significance in terms of the particular 

characteristics of overall global trade in the subject merchandise. See Policy Bulletin 

04.1 at 3 (noting, “[f]or example, [that] if there are just three producers of comparable 

merchandise in the world, then arguably any commercially meaningful production is 

significant”).

Commerce’s assertion that Thailand’s export quantity is “noticeably large” in 

comparison to countries exporting less than one million kilograms is also unavailing.

See 2nd Remand Results at 39. While perhaps true, the import of this observation for 

12 CAC asserts that the line between significant and insignificant exports is more 

suitably drawn after Mozambique, ranked ninth with 35,035,750 kg of activated carbon 

exports, because the volume of exports decreases thereafter to roughly 15,000,000 kg, 

or from five to ten percent of global exports to one to two percent of global exports. 

CAC’s Opp’n Cmts. at 6. The Government and Calgon respond to CAC’s assertion by 

attempting to place Thailand within the “middle-sized group of producers” contemplated 

by Policy Bulletin 04.1. See Def.’s Reply Cmts. at 6; Def.-Ints.’ Reply Cmts. at 8; Policy 

Bulletin 04.1 at 3. Regardless of the degree of merit in the Government’s and Calgon’s 

approach to interpreting the available evidence, it departs from Commerce’s decision, 

and the court may not accept “post hoc rationalizations for agency action.” Burlington 

Truck Lines, Inc. v. United States, 371 U.S. 156, 168–69 (1962).
Consol. Court No. 16-00185 Page 15

purposes of Commerce’s significant producer determination is unclear. For example, 

Chile’s export quantity of 2,200 kg is “noticeably larger” than El Salvador’s 41 kg export 

quantity. See Jacobi’s EC Cmts., Attach. E. Chile, which is ranked 60th and accounts 

for roughly 0.00027 percent of total global production, would not be considered a

significant producer on the basis of export quantity. See id. Commerce’s reliance on 

particular rankings or isolated data points highlights the relevance of appropriate 

contextual analysis in order to determine whether descriptors such as “large” or 

“significant” reasonably apply.

Lastly, Commerce’s reliance on Thailand’s status as “the largest exporter of 

activated carbon among the countries identified as being at the same level of economic 

development as China” lacks merit. See 2nd Remand Results at 7. As the Government 

points out, Commerce’s practice is not to evaluate “[t]he extent to which a country is a 

significant producer . . . against . . . the comparative production of the five or six 

countries on [Commerce’s] surrogate country list.” Def.’s Reply Cmts. at 6 (quoting 

Policy Bulletin 04.1 at 3). Commerce’s policy recognizes that a country’s level of 

economic development is irrelevant to whether that country’s production (or exports) of 

a given product may be considered “significant.” Nevertheless, while Commerce is not 

irrevocably committed to this statement of policy, its diametrically opposite approach in 

this case, absent any explanation, cannot be sustained. Accordingly, Thailand’s ranking 

among this group of countries is not substantial evidence that Thailand is a significant 

producer of comparable merchandise.
Consol. Court No. 16-00185 Page 16

Commerce has now had three opportunities to justify its selection of Thailand as 

the primary surrogate country. Once again, Commerce has failed to provide a reasoned 

explanation or substantial evidence supporting its determination that Thailand is a 

significant producer of comparable merchandise. Commerce’s reliance on Thailand’s 

export quantity and various rankings among global exporters is untethered to its own 

statements of practice regarding the significant producer determination and appears 

arbitrary. While Commerce is not bound by its statements of practice, it must explain its 

departures therefrom and has seemed unable. Therefore, the court finds that the 

record does not support the selection of Thailand as a significant producer. On remand, 

Commerce must identify a surrogate country, whether from its list of countries at the 

same level of economic development as the PRC or another country at a comparable 

level of economic development not on the list, which meets the statutory criteria and is 

supported by substantial evidence. Because Commerce justified its selection of 

surrogate values for carbonized material and hydrochloric acid, in part, on the basis that 

they are derived from Thailand as the primary surrogate, Commerce must revisit these 

surrogate values on remand.

II. Value-Added Tax

A. The Application of Section 1677a(c)(2)(B) to Nonmarket Economies

When calculating export price and constructed export price, Commerce may 

deduct “the amount, if included in such price, of any export tax, duty, or other charge 

imposed by the exporting country on the exportation of the subject merchandise to the 

United States, other than an export tax, duty, or other charge described in section 
Consol. Court No. 16-00185 Page 17

1677(6)(C) of this title.”13 19 U.S.C. § 1677a(c)(2)(B). Such price adjustments must be 

“reasonably attributable to the subject merchandise.” 19 C.F.R. § 351.401(c).

Prior to 2012, Commerce did not apply 19 U.S.C. § 1677a(c)(2)(B) in 

proceedings involving imports from nonmarket economy (“NME”) countries. Commerce 

reasoned that “pervasive government intervention in NMEs precluded proper valuation 

of taxes paid by NME respondents to NME governments.” Methodological Change for 

Implementation of Section 772(c)(2)(B) of the Tariff Act of 1930, as Amended, In Certain 

Non–Market Economy Antidumping Proceedings, 77 Fed. Reg. 36,481, 36,482 (Dep't 

Commerce June 19, 2012) (“Methodological Change”) (citing Pure Magnesium and 

Alloy Magnesium From the Russian Federation, 60 Fed. Reg. 16,440 (Dep’t Commerce 

Mar. 30, 1995) (notice of final determination of sales at less than fair value) (“Pure 

Magnesium from Russia”)). Commerce had taken the position that nonmarket economy 

countries are 

governed by a presumption of widespread intervention and influence in 

the economic activities of enterprises[ and a]n export tax charged for one 

purpose may be offset by government transfers provided for another 

purpose. . . . To make a deduction for export taxes imposed by a NME 

government would unreasonably isolate one part of the web of 

transactions between government and producer. 

Id. (citation omitted). Commerce’s declination to apply section 1677a(c)(2)(B) in NME 

proceedings accorded with its former practice of declining to countervail subsidies paid 

by a NME government to a NME producer. See id. Commerce reasoned that 

13 Section 1677(6)(C) concerns “export taxes, duties, or other charges levied on the 

export of merchandise to the United States specifically intended to offset the 

countervailable subsidy received” and is not relevant here.
Consol. Court No. 16-00185 Page 18

“[a]ttempts to isolate individual government interventions in this setting—whether they 

be transfers from the government or from exporters to the government—make no 

sense.” Id. (citation omitted).

As the countries that Commerce considered to be nonmarket economies 

evolved, so did Commerce’s practices. In 2002, Commerce revoked Russia’s status as 

a NME country. See Silicon Metal From the Russian Federation, 68 Fed. Reg. 6,885, 

6,887 (Dep’t Commerce Feb. 11, 2003) (notice of final determination of sales at less 

than fair value) (citation omitted). In 2007, Commerce determined that China (and 

Vietnam), while still regarded as NME countries, had nevertheless become sufficiently 

dissimilar from the centrally-planned economies of the Soviet-era such that Commerce 

could determine whether those governments bestowed countervailable subsidies on 

certain companies or industries. See Methodological Change, 77 Fed. Reg. at 36,482; 

Issues and Decision Mem. for the Final Determination in the Countervailing Duty 

Investigation of Coated Free Sheet Paper from the People’s Republic of China, C-570-

907 (Oct. 17, 2007) at Cmt. 1, available at https://enforcement.trade.govfrn/summary 

/prc/E7-21046-1.pdf (last visited Feb. 27, 2019).14 In accordance with its determination 

that countervailable subsidies from China and Vietnam could be measured, Commerce 

14 Commerce’s initial application of the countervailing duty laws to NME countries was 

challenged in court and held unlawful. See GPX Int’l Tire Corp. v. United States, 666 

F.3d 732, 745 (Fed. Cir. 2011), reh’g granted, 678 F.3d 1308 (Fed. Cir. 2012). 

However, Congress subsequently amended the statute to confirm that Commerce was 

authorized to apply the countervailing duty laws to nonmarket economy countries. See

Application of Countervailing Duty Provisions to NonMarket Economy Countries, Pub. L. 

No. 112–99, 126 Stat. 265 (2012); 19 U.S.C. §§ 1671(f), 1677f–1(f).
Consol. Court No. 16-00185 Page 19

reconsidered whether taxes, duties and other charges paid by NME producers to those 

NME governments could likewise be identified and measured. See Methodological 

Change, 77 Fed. Reg. at 36,482.

In 2012, Commerce concluded that it could now identify and measure certain 

taxes paid by Chinese producers to the Chinese government and announced that, 

henceforth, it would consider whether the PRC “has imposed an export tax, duty, or 

other charge upon export of the subject merchandise during the period of investigation 

or the period of review,” including, for example, “an export tax or VAT that is not fully 

refunded upon exportation.” Id. at 36,482 (internal quotation marks omitted). Thus, 

when the PRC does so, and “the respondent was not exempted, [Commerce] will 

reduce the respondent's export price and constructed export price accordingly, by the 

amount of the tax, duty or charge paid, but not rebated.” Id. at 36,483. When “the 

export tax, VAT, duty, or other charge” is “a fixed percentage of the price,” Commerce 

announced that it would “adjust the export price or constructed export price downward 

by the same percentage.” Id. “[B]ecause these are taxes affirmatively imposed by the 

Chinese . . . government[],” Commerce “presume[s] that they are also collected.” Id.

B. Commerce’s Application of the Statute to Chinese VAT 

Pursuant to the Methodological Change, for the Final Results, Commerce 

reduced Jacobi’s constructed export price by an amount it described as “irrecoverable 

VAT.” I&D Mem. at 7. According to Commerce, irrecoverable VAT constituted an 

“export tax, duty, or other charge” pursuant to section 1677a(c)(2)(B) because it 

represented the amount of VAT Jacobi paid on inputs and raw materials used in the 
Consol. Court No. 16-00185 Page 20

production of activated carbon (“input VAT”) that was nonrefundable when those inputs 

and raw materials were consumed in the production of exported subject merchandise.

Id. at 7-8.15 Commerce calculated irrecoverable VAT by multiplying the free on board 

(“FOB”) value of the subject merchandise by the difference between the standard VAT 

rate (here, 17 percent) and the applicable VAT rebate rate (here, zero). Id. at 8. When 

Jacobi’s entered values were less than an “estimated customs value,” which Commerce 

defined as “ex-factory net U.S. price plus foreign movement expenses,” Commerce 

applied the irrecoverable VAT rate to the estimated customs value as a proxy for the 

FOB China port value. Id. at 9-10.

In Jacobi (AR8) I, the court remanded the VAT adjustment for reconsideration in 

accordance with its resolution of this issue in the seventh administrative review.16 313 

F. Supp. 3d at 1373. In that proceeding, the court found that section 1677a(c)(2)(B) 

was ambiguous. See Jacobi (AR7) I, 222 F. Supp. 3d at 1186–87. Because the statute 

is ambiguous, pursuant to Chevron prong two, Commerce could reasonably determine 

that an input VAT that becomes nonrefundable when the finished product is exported 

15 Commerce explained that

[i]n a typical VAT system, companies do not incur VAT expense for 

exports. Instead, they receive on export a full rebate of the VAT they pay 

on purchases of inputs used in the production of exports (“input VAT”),

and, in the case of domestic sales, the company can credit [input VAT] . . . 

against the VAT they collect from customers [“output VAT”].

I&D Mem. at 7. In the PRC, however, “some portion of the input VAT that a company 

pays on purchases of inputs used in the production of exports is not refunded.” Id.

16 The Government had acknowledged that there were no material differences in 

Commerce’s VAT calculations in the seventh and eighth administrative reviews. See 

Jacobi (AR8) I, 313 F. Supp. 3d at 1373.
Consol. Court No. 16-00185 Page 21

constitutes, at the very least, an “other charge” that is “imposed by the exporting country 

on the exportation of the subject merchandise” because it remains recoverable (as a 

credit or offset against output VAT) until the product is exported. Id. The court further 

found that Commerce’s determination that certain of Jacobi’s entered values were 

unreliable was supported by substantial evidence and thus affirmed its use of estimated 

customs values. Id. at 1190–92. The court, however, remanded Commerce’s VAT 

calculation because the agency’s application of the irrecoverable VAT rate to the price 

of the finished good potentially overstated an adjustment intended to account for 

unrefunded input VAT. Id. at 1192-94.

In its first redetermination in the seventh administrative review, Commerce 

continued to characterize its adjustment as accounting for irrecoverable VAT (i.e., 

unrefunded input VAT). See Jacobi Carbons AB v. United States (“Jacobi (AR7) II”), 42 

CIT ___, 313 F. Supp. 3d 1308, 1341 (2018). As the basis for its adjustment, however, 

Commerce pointed to the 17 percent output VAT rate applicable to Jacobi’s foreign and 

domestic sales and found that it was, thus, included in Jacobi’s U.S. price. See id. The 

court again remanded the adjustment, this time because Commerce’s revised 

explanation introduced an inconsistency between the calculation methodology (based 

on output VAT) and the theory underlying the adjustment (unrefunded input VAT). Id. at 

1341-44. Pointing to the record on remand, the court further instructed: 

[t]o the extent that Commerce continues to justify the adjustment as 

accounting for irrecoverable VAT defined as unrefunded input VAT,

Commerce must address record evidence demonstrating that Jacobi, in 

fact, recovers the input VAT it incurs by the offset it takes before remitting 

the output VAT it collects. . . .
Consol. Court No. 16-00185 Page 22

On the other hand, if Commerce asserts that the adjustment is based on 

an export tax due to Jacobi’s collection of output VAT, Commerce must (a) 

address the record evidence regarding Jacobi's offset for input VAT paid 

on inputs taken against the output VAT collected, and (b) explain why the 

VAT adjustment is properly made on the basis of an estimated customs 

value instead of the FOB value on which the PRC assesses it.

Id. at 1342-43 (internal citations omitted). 

In addition to reconsidering its VAT adjustment in accordance with Jacobi (AR7) I 

and Jacobi (AR7) II, in a subsequent order, the court instructed Commerce to include in 

its redetermination consideration of Aristocraft of Am., LLC v. United States, 42 CIT 

___, 331 F. Supp. 3d 1372, 1379 (2018), in which that court posed several questions for 

Commerce to address on remand regarding the evidentiary basis for the adjustment. 

See Order (Aug. 22, 2018), ECF No. 120. Commerce’s explanation for the VAT 

adjustment as discussed in Aristocraft differed significantly from the explanation offered 

in this proceeding.

In its second remand redetermination in this action, Commerce changed the 

basis for its VAT adjustment from irrecoverable VAT (i.e. unrefunded input VAT) to the 

17 percent output VAT imposed on foreign and domestic activated carbon sales. 2nd 

Remand Results at 30-31. Commerce supported its revised explanation by way of 

reference to a more recent iteration of Chinese VAT law, the relevance of which it had 

not previously considered. Id. at 27-28 & n.133 (citing Notice of the Ministry of Finance 

and the State Administration of Taxation on VAT and Consumption Tax Policies for

Exported Goods and Labor Services (“2012 VAT Notice”)); see also Jacobi’s Second 

Suppl. Sec. C Questionnaire Resp. (Nov. 25, 2015), Ex. C-6, PR 266, PRJA Tab 3 (the 
Consol. Court No. 16-00185 Page 23

2012 VAT Notice). Commerce’s revised explanation recognizes that Chinese VAT law 

treats products differently depending on their eligibility for an export VAT refund. See 

id. at 26-30.

Pursuant to that law, companies that produce exported goods that are ineligible

for an export VAT rebate do not incur a reduction in the input VAT amount credited 

against the output VAT. See 2nd Remand Results at 29-30. Export sales of such 

goods are treated as domestic sales and are, thus, subject to the collection of output 

VAT. See id. at 29-30 & n.136 (citation omitted); 2012 VAT Notice, Art. 7.2(1)). In 

contrast, companies that produce exported goods that are eligible for a VAT rebate 

incur “a reduction in or offset to the input VAT that can be credited against output VAT” 

when the company calculates its net VAT payable amount. 2nd Remand Results at 27;

see also 2012 VAT Notice, Art. 5.1(1). Export sales of such products are not subject to 

output VAT; instead, these companies incur a reduction in the input VAT amount they 

may credit against the output VAT collected solely on domestic sales. See 2nd

Remand Results at 29. That reduction in the input VAT credit represents “irrecoverable 

VAT.” See id. at 28-29.

In accordance with the foregoing description of Chinese VAT law, Commerce 

explained that activated carbon is one of the products that is ineligible for an export 

rebate. Consequently, Commerce found that producers of activated carbon do not incur 

a reduction in the amount of input VAT creditable against output VAT. Id. at 30; see 

also 2012 VAT Notice, Art. 7.1(1). Instead, export sales of activated carbon are treated 

in the same manner as domestic sales and are subject to the collection of output VAT. 
Consol. Court No. 16-00185 Page 24

2nd Remand Results at 30 & n.141 (citations omitted). Commerce concluded that it 

previously erred in adjusting Jacobi’s constructed export price by an amount purportedly 

representing irrecoverable VAT. Id. at 30-31. Commerce nevertheless retained the 

downward adjustment to Jacobi’s U.S. price to account for the 17 percent output VAT, 

which the agency concluded represented an “export tax, duty, or other charge imposed 

by the exporting country on the exportation of the subject merchandise to the United 

States” pursuant to section 1677a(c)(2)(B). Id. at 31. Commerce explained that 

deducting output VAT from Jacobi’s constructed export price ensured the calculation of 

a tax-neutral dumping margin because normal value in a nonmarket economy 

proceeding is based on the factors of production, which are VAT-exclusive. Id. at 30 & 

n.139.

Commerce further noted that certain questions raised by the Aristocraft court 

concerning the calculation of irrecoverable VAT were now irrelevant to Commerce’s 

adjustment in this case. Id. at 31-32. Additionally, in response to the court’s instruction 

that any assessment based on output VAT should include consideration of record 

evidence regarding Jacobi’s ability to offset the output VAT with input VAT, see Jacobi 

(AR7) II, 313 F. Supp. 3d at 1343, the agency explained that “Commerce’s adjustment 

is not intended to account for the total amount of net VAT creditable,” 2nd Remand 

Results at 34. Rather, pursuant to the Methodological Change, “when the ‘export tax, 

VAT, duty, or other charge [is] a fixed percentage,’ Commerce ‘will adjust the export 

price or constructed export price downward by the same percentage.’” Id. at 35 (citing 

Methodological Change, 77 Fed. Reg. at 36,483). 
Consol. Court No. 16-00185 Page 25

Commerce calculated the VAT adjustment pursuant to the following formula set 

forth in Chinese law:

output VAT = FOB * exchange rate / (1 + legal VAT rate) * legal VAT rate.

Id. at 36 & n.164 (citing Jacobi’s Sec. C Questionnaire Resp. (Aug. 14, 2015) (“Jacobi’s 

§ CQR”), Ex. SC-18, CR 56, CRJA Tab 6; 2012 VAT Notice). Commerce reconsidered 

its prior reliance on estimated customs values to calculate the adjustment and instead 

used Jacobi’s entered values because those “are the FOB China port values used in the 

Chinese tax authorities’ output VAT calculations.” Id. at 36 & n.165 (citation omitted).

Commerce thus adjusted Jacobi’s U.S. price downwards by the output VAT amount 

calculated using the above formula and Jacobi’s entered values. Id. at 36.

Commerce further explained that because Jacobi’s sales of subject merchandise 

are subject to output VAT, Jacobi’s U.S. price “necessarily include[s]” output VAT. Id. at 

35. In response to Jacobi’s argument that Commerce had not shown its sales price to 

include output VAT because the invoice on the record of the remand proceeding does 

not reflect the collection of output VAT, Commerce pointed to Jacobi’s questionnaire 

response explaining that its sales to foreign and domestic buyers are subject to 17 

percent output VAT and Jacobi’s calculation of its net VAT payable that includes 

amounts representing the collection of output VAT for each POR month. Id. at 49 &

nn.207-08 (citations omitted).

C. Commerce’s Authority to Deduct Output VAT from U.S. Price

Jacobi contends that “Commerce’s revised reasoning still fails to satisfy the 

statutory requirement for an adjustment” pursuant to section 1677a(c)(2)(B). Jacobi’s 
Consol. Court No. 16-00185 Page 26

Opp’n Cmts. at 13. Jacobi does not, however, develop any particular argument that 

output VAT does not fulfill the statutory criteria of an “export tax, duty, or other charge 

imposed by the exporting country on the exportation of the subject merchandise to the 

United States.” Nevertheless, the court recognizes that since it issued Jacobi AR7 I,

two opinions from the court have called into question Commerce’s legal authority to 

adjust export price or constructed export price to account for VAT (whether 

irrecoverable or not) pursuant to 19 U.S.C. § 1677a(c)(2)(B). See Qingdao Qihang Tyre 

Co., Ltd. v. United States, 42 CIT ___, ___, 308 F. Supp. 3d 1329, 1338-47 (2018); 

China Mfrs. Alliance, LLC v. United States, Slip Op. 19-7, 2019 WL 221237, at *4-8 (CIT 

Jan. 16, 2019). The court does not find those opinions persuasive and declines to 

follow them.

In Qingdao and China Manufacturers, the court, upon reviewing the statute in its 

current form and as enacted prior to the adoption of the Uruguay Round Agreements 

Act (“URAA”),17 concluded, pursuant to Chevron prong one, that section 1677a(c)(2)(B) 

is unambiguous and does not permit Commerce to adjust export price or constructed 

export price for VAT imposed on export sales indirectly through an input VAT that 

becomes irrecoverable or, by extension, directly through an output VAT. Qingdao, 308 

F. Supp. 3d at 1338-42, 1346; China Mfrs., 2019 WL 221237, at *4-8. The court 

characterized VAT as a domestic tax that is distinct from an export tax imposed on the 

17 On December 8, 1994, Congress enacted the URAA, including section 1677a in its 

current form. See Uruguay Round Agreements Act, Pub. L. No. 103–465, § 223, 108 

Stat. 4809, 4876 (1994). 
Consol. Court No. 16-00185 Page 27

exportation of finished goods. See Qingdao, 308 F. Supp. 3d at 1339, 1341, 1345; 

China Mfrs., 2019 WL 221237, at *6. The court reasoned that an “export tax, duty, or 

other charge” is “limited to one that is ‘imposed by the exporting country on the 

exportation of the subject merchandise to the United States,’” Qingdao, 308 F. Supp. 3d 

at 1343 (quoting 19 U.S.C. § 1677a(c)(2)(B)) and is, thus, “by definition” not included “in 

the home-market price,” id.; see also China Mfrs., 2019 WL 221237, at *4. 

Previously, when considering Commerce’s irrecoverable VAT theory for the 

adjustment, this court held that “the catchall phrase ‘other charge’ captures any financial 

obligation provided it is ‘imposed by the exporting country on the exportation of the 

subject merchandise,’ regardless of whether the imposing country explicitly labels the 

charge as one pertaining to exports.” Jacobi (AR 7) I, 222 F. Supp. 3d at 1186-87 

(emphasis added). In other words, the court considered “other charge” inherently 

ambiguous and Commerce reasonably interpreted the phrase to encompass 

irrecoverable VAT. 

Upon Commerce’s further consideration of the record and recognition that, with 

regard to activated carbon, China simply imposes an output VAT on domestic and 

export sales, the issue is now whether Commerce may apply the statute, 19 U.S.C. 

§ 1677a(c)(2)(B), to a VAT that is equally applicable to domestic and export sales. This 

court determines that section 1677a(c)(2)(B)’s reference to “export tax[es], dut[ies], or 

other charge[s] imposed by the exporting country on the exportation of the subject 

merchandise” is ambiguous as to whether the statute applies to such assessments

imposed solely upon export sales or assessments imposed upon sales at the time of 
Consol. Court No. 16-00185 Page 28

export, regardless of whether the assessment is also applied to domestic sales. But cf.

Qingdao, 308 F. Supp. 3d at 1343; China Mfrs., 2019 WL 221237, at *4.

The notion that the imposition of a tax, duty or other charge that is generally 

applicable to both domestic and export sales does not alone preclude it from providing 

the basis for an adjustment pursuant to section 1677a(c)(2)(B) finds support in the U.S. 

Supreme Court’s Export Clause jurisprudence. The Export Clause provides: “No Tax or 

Duty shall be laid on Articles exported from any State.” U.S. Const., Art. 1, § 9, cl. 5. In 

United States v. International Business Machines Corp. (“IBM”), the Court held that the 

Export Clause bars the imposition of a generally applicable federal tax on goods in 

export transit, even if the tax is nondiscriminatory and equally applicable to non-export 

transactions. 517 U.S. 843, 845, 863 (1996); see also United States v. U.S. Shoe 

Corp., 523 U.S. 360, 363, 370 (1998) (holding that a harbor maintenance tax collected 

from exporters, importers, and domestic shippers and imposed at the time of loading for 

exports and unloading for other shipments violated the Export Clause as applied to 

exports). While the context in which those cases arose is arguably distinct, 

notwithstanding any such distinctions, IBM and U.S. Shoe support the proposition that a 

statutory reference to an export tax, duty, or other charge imposed upon exportation 

may include such a tax, duty or other charge also imposed on domestic sales. 

The court now turns to consideration of whether Commerce’s interpretation of 

section 1677a(c)(2)(B) was reasonable when applied to China’s output VAT in this case. 

Here, Commerce interpreted section 1677a(c)(2)(B) to permit a reduction to EP/CEP in 

order to achieve a tax neutral comparison between EP/CEP and normal value, see 2nd 
Consol. Court No. 16-00185 Page 29

Remand Results at 30 & n.139, and such an interpretation, as discussed more fully 

below, was reasonable.

As an initial matter, it is important to bear in mind that here, normal value is not

based on home-market (i.e., domestic) sales prices, but is based on the respondent’s 

factors of production and corresponding surrogate values, which are determined on a 

tax-exclusive basis.18 In such a case, the principle that dumping margin calculations 

should be tax-neutral supports Commerce’s adjustment.19

The Federal Circuit recognized more than two decades ago:

Buried in the language of statute and case law, and obscured by the fog of 

litigation, is a simple policy issue: whether Congress, in the Tariff Act of 

1930 (the Act), precluded Commerce from determining dumping margins 

in a tax-neutral fashion.

Federal Mogul Corp. v. United States, 63 F.3d 1572, 1577 (Fed. Cir. 1995). The 

question, then, is whether Congress, when it did not substantively alter section 1677a in 

18 In a proceeding involving a market economy country, a comparable tax-neutral 

comparison would be achieved by reducing the normal value for “taxes imposed directly 

upon the foreign like product . . . which have been rebated, or which have not been 

collected, on the subject merchandise, but only to the extent that such taxes are added 

to or included in the price of the foreign like product.” 19 U.S.C. § 1677b(a)(6)(B)(iii).

19 Indeed, the Qingdao court recognized that Congress intended for Commerce to 

deduct export taxes from U.S. price in order to “achieve a tax-neutral comparison [with] 

normal value” in a market economy proceeding precisely because an export tax is not 

included in the home-market or comparison market price used to calculate normal 

value. 308 F. Supp. 3d at 1342-43. So too here, output VAT is not included in the 

surrogate values used to calculate normal value and, thus, notwithstanding the facts 

that output VAT is assessed on domestic sales of activated carbon and this is a 

nonmarket economy proceeding, the same principle of tax neutrality supports 

Commerce’s deduction of output VAT from U.S. price. 
Consol. Court No. 16-00185 Page 30

the URAA,20 intended to prohibit Commerce from using that provision to achieve tax 

neutrality in nonmarket economy cases? This court can find no such intention. 

First, the pre-URAA version of the statute clearly permitted Commerce to make 

tax-neutral dumping calculations. Whether it was through adjustments to foreign market 

value or purchase price/exporter’s sales price, Federal Mogul confirms that “one thing is 

clear[:] . . . in administering the Act, [Commerce] over the years has pursued a policy of 

attempting to make the tax adjustment called for by the Act tax-neutral.” 63 F.3d at 

1580 (further holding that nothing in the pre-URAA version of section 1677a precluded 

Commerce from achieving tax-neutrality in its administration of the provision requiring 

an upward adjustment to U.S. price to account for taxes included in the home market 

sales price and rebated or exempted in the context of exports sales).21 Commerce’s 

policy accords with the principle that differences in sales prices due to differential tax 

treatment between the home market and export market “does not constitute unfair 

pricing behavior” but, rather, “is a difference created by forces outside the control of the 

20 The Statement of Administrative Action accompanying the URAA explained that 

although Congress gave new labels to “purchase price” and “exporter’s sale price,” now 

“export price” and “constructed export price,” respectively, the adjustments to those 

prices pursuant to section 1677a were unchanged. See Qingdao, 308 F. Supp. 3d at 

1339-40 (citing Uruguay Round Agreements Act, Statement of Administrative Action ,

H.R. Doc. No. 103–316, vol. 1, at 822–23 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 

4163) (“SAA”)). Congress likewise renamed “foreign market value” to “normal value.” 

SAA at 820, 1994 U.S.C.C.A.N. at 4161. The SAA is the authoritative interpretation of 

the statute. 19 U.S.C. § 3512(d); RHP Bearings Ltd. v. United States, 288 F.3d 1334, 

1345 n.7 (Fed. Cir. 2002).

21 At least as early as 1991, Commerce adjusted export price to enable a tax-neutral 

comparison to foreign market value. See U.S. Dep’t Commerce, Int’l Trade Admin.,

Import Admin., Antidumping Manual Chapter 7, pp. 8-10 (1991). As noted, the URAA 

did not affect any substantive change to these adjustments. See supra, note 20.
Consol. Court No. 16-00185 Page 31

competitor, and does not involve the idea behind the antidumping act,” which is to 

prevent unfair competition from dumping. Id. at 1575 (citation omitted). 

Second, the suggestion that Congress, by providing for adjustments to normal 

value or EP/CEP, is legislating adjustments to increase or decrease the margin of 

dumping is unsupported. But cf., e.g., Qingdao, 308 F. Supp. 3d at 1341, 1343 

(discussing congressional intent to impact the dumping margin through certain 

adjustments). To the contrary, Congress, when it enacted the URAA, intended to 

ensure that Commerce could continue to make the adjustments to normal value and 

EP/CEP necessary in order to place both prices, to the extent possible, on the same 

basis, permitting a “fair, ‘apples-to-apples’ comparison.” Maverick Tube Corp. v. United 

States, 861 F.3d 1269, 1274 (Fed. Cir. 2017) (quoting Torrington Co. v. United States,

68 F.3d 1347, 1352 (Fed. Cir. 1995)); see also SAA at 827, 1994 U.S.C.C.A.N. at 4166 

(noting that a new statutory provision regarding deductions from normal value to 

account for indirect taxes represents a change from the pre-URAA statute that 

accounted for indirect taxes through an upward adjustment to export price, which 

change “is intended to ensure that dumping margins will be tax-neutral”). Typically, 

these adjustments lead to ex-factory prices, packed in the same manner, and on the 

same tax basis. See SAA at 827.

Third, as discussed above, there is no indication that before 2012, Commerce (or 

Congress) considered section 1677a to be inapplicable in NME cases. See 

Methodological Change, 77 Fed. Reg. at 36,482; Pure Magnesium from Russia, 60 Fed. 

Reg. at 16,448 (noting that, in NME cases, “pecuniary aspects of internal transactions 
Consol. Court No. 16-00185 Page 32

are considered meaningless and thus ignored”). Rather, Commerce considered itself 

unable to apply the provision in NME cases because “pervasive government 

intervention . . . precluded proper valuation of taxes paid by NME respondents to NME 

governments.” Methodological Change, 77 Fed. Reg. at 36,482. Thus, while it may be 

the case that, all other things being equal, a dumping margin calculated before 

Commerce’s policy shift would be lower than a margin calculated inclusive of an 

adjustment pursuant to section 1677a(c)(2)(B), there is nothing to indicate that the latter 

is not in accordance with law. Instead, the latter margin calculation simply includes an 

additional data point that Commerce was unable to include in the former. 

Finally, returning to the “policy issue” identified in Federal Mogul, adjusting 

EP/CEP for VAT imposed on export sales allows Commerce to calculate a tax-neutral 

dumping margin when normal value is calculated exclusive of VAT. In this case, as 

discussed in more detail below, the constructed export price reported by Jacobi includes 

17 percent output VAT imposed by the Chinese government, whereas the normal value, 

to which it is to be compared, is determined using surrogate values that are taxexclusive. See 2nd Remand Results at 30 & n.139. To interpret section 1677a(c)(2)(B) 

as unambiguously barring Commerce from adjusting EP/CEP for these taxes when 

comparing those prices to a tax-exclusive normal value would be to require that it 

understate the margin of dumping. The court finds no support for such a requirement in 

the language of the statute. Thus, Commerce’s conclusion that China’s output VAT is 

an “export tax, duty, or other charge imposed by the exporting country on the 

exportation of the subject merchandise” is a permissible interpretation of section 
Consol. Court No. 16-00185 Page 33

1677a(c)(2)(B), 2nd Remand Results at 31, and the court now turns to Jacobi’s 

arguments that the adjustment is unsupported by substantial evidence.

D. Commerce’s Adjustment is Supported by Substantial Evidence

Jacobi argues that Commerce’s determination that 17 percent output VAT is 

included in Jacobi’s constructed exported price lacks substantial evidence. See 

Jacobi’s Opp’n Cmts. at 13-14, 16. According to Jacobi, the existence of a “legal 

requirement” to collect output VAT on its U.S. sales is not evidence that it includes 17 

percent output VAT in sales prices to the United States. Id. at 16. Jacobi points to its 

sales documentation submitted on the record and notes the lack of any reference to 

output VAT. See id. at 13-14 (citing Jacobi’s Sec. A Questionnaire Resp. (July 15, 

2015) (“Jacobi’s § AQR”), Ex. A-17, CR 27, 30, CRJA Tab 5). Jacobi further contends 

that Commerce has ignored the court’s instruction to address evidence that Jacobi

offsets paid input VAT against the output VAT due. Id. at 14. Jacobi also contends that 

Aristocraft remains relevant and Commerce erred in failing to address the opinion. Id.

at 15-16.

The Government contends that Jacobi’s reporting of its output VAT collection 

obligations represents substantial evidence that output VAT was included in its U.S. 

prices and Jacobi’s sales documentation does not detract from the substantiality of that

evidence. Def.’s Reply Cmts. at 16-17. The Government further contends that 

Commerce properly discounted the relevance of Jacobi’s ability to offset input VAT from 

output VAT and its calculation of a net VAT payable amount because Commerce’s 
Consol. Court No. 16-00185 Page 34

margin calculations are intended to account for the amount of VAT included in U.S. 

price, not Jacobi’s net VAT burden. Id. at 17-18.

Calgon contends that because “the cost of output VAT falls on the buyer of the 

good, not on the [seller],” Def.-Ints.’ Reply Cmts. at 14 (quoting 2nd Remand Results at 

27), it is “necessarily included in Jacobi’s price,” id. Calgon further contends that 

Commerce adequately addressed the court’s questions regarding the relationship 

between input VAT and output VAT and the relevance of the Aristocraft opinion in light 

of activated carbon’s treatment under Chinese VAT law. Id. at 15-16.22

The court sustains Commerce’s VAT adjustment. The absence of a line item for 

output VAT on Jacobi’s sales documents is not dispositive and the record supports 

Commerce’s determination that Jacobi’s export prices include output VAT. See

Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed. Cir. 1984) (the 

possibility of drawing two inconsistent conclusions from the evidence does not preclude 

the agency’s finding from being supported by substantial evidence) (citing Consolo v. 

Fed. Mar. Comm’n, 383 U.S. 607, 619–20 (1966)). 

Here, Jacobi concedes that its U.S. sales were subject to the collection of 17 

percent output VAT pursuant to the 2012 VAT Notice. See Jacobi’s Opp’n Cmts. at 16; 

2012 VAT Notice, Art. 7.2(1). Jacobi suggests, however, that it calculates the net VAT 

payable amount as if it collected output VAT on U.S. sales, but that it does not actually 

collect output VAT on those sales. See Jacobi’s Opp’n Cmts. at 16. In making this 

22 CAC did not comment on this issue.
Consol. Court No. 16-00185 Page 35

claim, Jacobi points to no affirmative evidence demonstrating that the FOB China port 

value reflected in its sales documents is output VAT-exclusive. See Jacobi’s § AQR, 

Ex. A-17 at ECF p. 94. The record reasonably supports Commerce’s conclusion that 

Jacobi’s U.S. prices included output VAT—regardless of whether Jacobi itemized that 

charge in its sales documents. 

Moreover, contrary to Jacobi’s arguments, see Jacobi’s Opp’n Cmts. at 14-15,

Commerce did not impermissibly base its adjustment on the contemporaneous Chinese 

law while ignoring evidence of Jacobi’s net VAT payment. The statute directs 

Commerce to make adjustments based on certain amounts included in U.S. price, not 

amounts remitted to the subject nonmarket economy government.23 See 19 U.S.C. 

§ 1677a(c)(2)(B).

In sum, Commerce’s redetermination on this issue complies with the court’s 

remand instructions set forth in Jacobi (AR8) I and the agency’s deduction of output 

VAT from Jacobi’s constructed export price is lawful and supported by substantial 

evidence.

CONCLUSION AND ORDER

In accordance with the foregoing, it is hereby

ORDERED that Commerce’s 2nd Remand Results are remanded for Commerce 

to reconsider its surrogate country selection as well as the surrogate values for 

23 The court also notes that Jacobi’s argument that it “only pays the Chinese 

government the ‘net’ VAT amount,” Jacobi’s Opp’n Cmts. at 14, is inaccurate. While the 

net VAT payment may represent Jacobi’s direct VAT payment to the Chinese 

government, Jacobi is simply reducing the output VAT it collected by the input VAT it 

has already paid to the Chinese government, albeit indirectly via its purchases of inputs. 
Consol. Court No. 16-00185 Page 36

carbonized material and hydrochloric acid, as set forth in Discussion Section I above; it

is further

ORDERED that Commerce’s 2nd Remand Results are sustained with respect to

the agency’s VAT adjustment, as set forth in Discussion Section II above; it is further

ORDERED that, in the event Commerce amends the antidumping margin 

assigned to Jacobi, Commerce reconsider the separate rate assigned to non-mandatory

respondents; it is further

ORDERED that Commerce shall file its second remand results on or before

June 3, 2019; it is further

ORDERED that the deadlines provided in USCIT Rule 56.2(h) shall govern 

thereafter; and it is further

ORDERED that any opposition or supportive comments must not exceed 6,000 

words.

/s/ Mark A. Barnett

Mark A. Barnett, Judge

Dated: March 5, 2019

New York, New York