S LIP O P . 03-169 U NITED S TAT ES C OURT OF I NTER NAT IONAL T RADE B EFORE : R ICHA RD K. E ATON , J UDGE

____________________________________ : F UYAO G LASS I

NDUSTRY G ROUP C O ., L TD ., : G REENVIL LE G LASS I NDUSTRIES , I

NC ., : S HENZHEN B ENXUN A UTOMOTIVE G LASS : C O ., L TD ., TCG I

NTERNATI ONAL , I

NC ., : C HANGCHUN P IL KIN GTON S AFETY G LASS : C O ., L TD ., G UIL IN P IL KIN GTON S AFETY : G LASS C O ., L TD ., W UHAN Y AOHUA : P IL KIN GTON S AFETY G LASS C O ., L TD ., AND : X INY I A UTOMOTIVE G LASS (S HENZHEN ) : C O ., L TD ., : : P LAINTIFFS , :

: V . : C ONSOL . C OURT N O . 02-00282 : U NITED S TATES , : : : D EFENDANT , :

: AND : : PPG I NDUSTRIES , I

NC ., S AFELI TE G LASS : C ORPORATI ON , AND V IRAC ON /C URVL ITE , A : SUBSIDIARY OF A POGEE E NTERPRIS ES , I NC ., : : D EF .-I NTERVENO RS . : ____________________________________: [Commerce’s Final Determination on windshields from the P.R.C., sustained in part and remande d in part] Decided: December 18, 2003 Grunfeld, Desideri

o, Lebowitz

, Silverm an &

Klestadt, LLP

( Bruce M. Mitchell

, Jeffrey S. Grimson , and Mark E. Pardo ), for plaintiffs Fuy ao Glass Industry

Group Co., Ltd., and Greenville Glass Industries, I nc.C ONSOL . C OURT N O . 02-00282 P AGE 2

Garvey, Schubert &

Barer ( Willia m E. Perry

and John C. Kalitka ), for plaintiffs Shenzhen Benxun Automotive Glass Co., Ltd., and TCG I nternational, Inc. Pepper H amilton, LLP

( Gregory C. Dorris ), for pl aintiffs

Changc hun Pilking

ton Safet y Glass Co., Ltd., Guilin Pilkin gton Saf ety Glass Co., Ltd., and Wuhan Yaohua Pi lkington

Safety Glass Co., Ltd. White & Case ( William J. Clinton and Adams C. Lee ), for plaintiff Xinyi Automotive Glass (Shenzhen) Co., Ltd. Peter D. Keisler , Assistant Attorney Gene ral, Civil Division, United States Department of Justice; David M. Cohen , Director, Commercial Litiga tion Branch, Civil Division, United States Department of Justice ( Stephen C. Tosini ), for de fendant United Sta

tes. Stewart &

Stewart ( Terence P. Stewart

, Eric P. Salonen , and Sarah V. St ewart ), for defendant-intervenors PPG I ndustries, Inc., Safelite Glass Corpora tion, and Viracon/Curvlite, a subsidiary of Apog ee Enterprises, Inc

.

O PINI ON AND O RDER E ATON , Judge : This matter is before the court, in this consolidated action, on motions for judgment upon the agency record filed by

plaintiffs Fuyao Glass Industry Group Co., Ltd., and Greenville Glass Industries, I nc. (collectively , “Fuya

o”), Xinyi Automotive Glass (Shenzen) Co., Ltd. (“Xiny

i”), Changchun Pilkington Safety Glass Co., Ltd., Guilin Pilkington Safety Glass Co., Ltd., and Wuhan Yaohua Pilkington Safety Glass Co., Ltd. (collectively , “the Changchun Plaintiffs”), and defendant-intervenors PPG I ndustries, Inc., Safelite Glass Corpora tion, and Viracon /Curvlite, a subsidia

ry of Apog ee Enter

prises, I nc. (col lectivel

y, “PPG”). B y th eir motions the parties contest certain aspects of the United States Depar tment of Commerce’s (“Commerce”) final determination conce rning the antidumping duty order covering automotiveC ONSOL . C OURT N O . 02-00282 P AGE 3

1 All plaintiffs, as well as defendant-intervenors PPG, have filed memora nda in support of their motions for judgment upon the agency record. See Fuyao’ s Mem. Supp. . Mo t. J. Agency R. (“Fuya

o Mem.”); Xinyi’s Mem. Supp. Mot. J. Agency R. (“Xinyi Mem.”); Changchun’s Mem. Supp. Mot. J. Agency R. (“Changchun Mem.”); and PPG’s Mem. Supp. Mot. J. Agency R. (“PPG Mem.”) . The Government filed a consolidated response to all (“G ov’t Brief”).

2 For information regarding the float glass production process, see http://ajzonca.tripod.com/glassprocess.html (last visited Dec. 16, 2003). replacement glass windshields (“Windshields”) from the People’s Republic of China (“PRC”). 1 See Certain Automotive Replacement Glass Windshields From The P.R.C., 67 Fed. Reg. 6482 (ITA Feb. 12, 2002)

(final determination) (“Final Determination”), amended by Certain Automotive Replacement Glass Windshields from the P.R.C., 67 Fed. Reg. 11,670 (I TA Mar. 15, 2002) (“Am. Final Determination”). The cour t has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c) (2000) and 19 U.S.C. § 1516a(a)(2)(B) (iii) (2000). For the following reasons this matte r is rema nded to Com

merce w ith instructions to co nduct fur ther pro ceeding s in conformity with this opinion. 2

S TAN DARD OF R EVIEW The court “shall hold unlawful any determination, finding, or conclusion found . . . to be unsupported by substantial evidenc e on the record, or otherwise not in accor dance with law. . . .” 19 U.S.C. § 1 516a(b) (1)(B) (i); Huaiyin Foreign Trade Corp. (30) v. United States , 322 F.3d 1369, 1374 (Fed. Cir. 2003) (quoting 19 U.S.C. § 1516a(b)(1)(B )(i) (2000)). “Substantial evidenc e is ‘such releva

nt eviden ce as a r easonab le mind mig

ht acce pt as ade quate to s

upport a conclusion.’” Huaiyin, 322 F. 3d at 1 374 (q uoti ng Consol. Edison Co. v. NLRB , 305 U.S. 197, 229 (1938 )). The e

xistence o f substan

tial evide nce is de termined “by consider ing the r ecord a s aC ONSOL . C OURT N O . 02-00282 P AGE 4

whole, including evidence that supports as well as evidenc e that ‘fairly detracts from the substantiality of the evidence .’” Id. (citi ng Atl. Sugar, Ltd. v. United States , 744 F.2d 1556, 1562 (Fed. Cir. 1984)). “I

n reviewing the Department’s construction of a statute it administers, [the court defers] to the agency ’s reasonable interpretation of the antidumping statutes if not contra ry to an unambiguous legislative intent as expressed in the words of the statute.” Id. at 1374–75 (citi ng Timex V.I., Inc. v. United States , 157 F.3d 879, 881–82 (Fed. Cir. 1998)); see also Pesquera Mares Australes Ltda. v. United States , 266 F .3d 13 72, 13 82 (F ed. Ci r. 20 01) ( “[W]e conclude . . . that statutory inter pretations articulated by

Commerce during its antidumping proceedings are entitled to judicial defe rence under Chevron .”) (ci ting Chevron U.S.A. Inc. v. Natural Re

s. Def. Cou ncil , Inc. , 467 U.S. 837 (1984)). Furthermore, “[a]s long as the ag ency’s methodology a

nd procedures are reasona ble means of effectuating the statutory purpose, and there is substantial evidence in the record supporting the agency ’s conclusions, the court will not impose its own views as to the sufficiency of the agency ’s investigation or question the agency ’s methodology.” Ceramica Regiomontana, S.A. v. United States , 10 CIT 399, 404 –05, 636 F. Supp. 961, 966 (1986), aff’d 810 F. 2d 113 7 (Fed. Cir. 1987) (citi ng Chevron , 467 U.S. at 843; Abbott v. Donovan , 6 CIT 92, 97, 570 F. Supp. 41, 46–47 (1983)).

B ACKGROUND Commerce

initiated its investi gation o f the Windsh ields fro m the PRC in Ma rch 2001 , in response to a petition filed by PPG. See Certain Automotive Replacement Glass Windshields From the P.R.C., 66 F ed. Reg . 48,233 ( ITA S ept. 19, 2 001) (pr elim. dete rmination ) (“Pre lim. Determination”). The period of investigation for the subject merchandise was July 1, 2000,C ONSOL . C OURT N O . 02-00282 P AGE 5

3 A “nonmarket economy ” country is def

ined as “any

foreign country

that the administering authority de termines does not operate on market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of the mercha ndise.” 1 9 U.S.C. § 16 77(18)( A). “Any determination tha

t a fore ign cou

ntry is a nonmarket economy

country shall rema

in in effect until revoked by the administering authority .” 19 U.S.C. § 1677(18)(C)(i).

4 In valuing fac

tors of production for merchandise exported from an NME country , when appropriate, Commerce is directed to use “the best available information regarding the values of such factors in a market economy country or c ountries considered to be appropriate by the admin istering authority .” 19 U.S. C. § 1677b( c)(1). To the exte nt possible , Commerc e is directed to select market economy countries that (1) are at a level of ec onomic development compara ble to tha t of the NM

E country ; and (2) are sig nifican t produce rs of com parable merchandise. 19 U.S.C. § 1677b(c)(4). See Prelim. Determination, 66 Fed. Reg. at 48,238. through December 31, 2000. See Final Determination, 67 Fed. Reg. at 6483. As in pre vious in ve st ig at io ns , C om me rc e t re at ed th e P RC as a n on ma rk et ec on om y (“ NM E” ) c ou nt ry. 3 See id

. In inv estiga

ting impo rts from N

ME countr

ies, Comme

rce is dir ected, u nder ce rtain circumst ances, t o value th e facto rs of pro duction ba sed on sur rogate data fr om an appr

opriate market e conomy

country or countr ies. 4 See 19 U.S.C. § 1677b(c)(1). For PRC cases, Commerce has ofte n select ed I ndia as th e surrog ate coun try of compa rable e conomic d

evelopme nt if it is a significant producer of compara ble merchandise. See Prelim. Determination, 66 Fed. Reg. at 48,238. I n this cas e, Commer

ce sele cted I

ndia as th e surrog ate coun try for the PRC

because Commerce found it to be a significant producer of Windshields. See id.

On April 1 7, 2001, th e United S tates I nternat ional Tra de Commissio

n (“I TC”) issue d its affirmative preliminary

determination that there existed a reasonable indication that an industry in the United States was materially injure d by reason of imports of the subject merchandise from the PRC. See Automotive Replacement Glass Windshields From China, 66 Fed. Reg. 20,682C ONSOL . C OURT N O . 02-00282 P AGE 6

5 Those pr

oducers were F uya

o; Xiny i; the Chan

gchun Pl aintiffs ; Benxun; Dongguan Kongwa

n Automobile Glass; Guandong Lunjiao Autoglass Co.; Jieyang Jiantong Automobile

Glass Co., Ltd.; Shangha i Yanfen g Automo tive Trim C o.; Shang hai Fu Hu

a Glass Co., Ltd.; Tianjin Riban Glass Co., Ltd.; L uoyang Float Glass Group Import & Export Corp.; Hebei Tong Yong Glass I ndustry Limited Co.; Yantai Yanhua Glass Products Co., Ltd.; and Hangzh ou Saf

ety Glass Co., Ltd. Co mmerc e also ident ified for th e Emba ssy of the PRC a large number of other potential producers/exporters designate d in PPG’s petition for which Commerce did not have addresses, and notified the PRC government that it was responsible for ensuring that volume and value information for those companies was provided to Commerce

. See Prelim. Determination, 66 Fed. Reg. at 48,233.

6 Fuyao a

nd Xinyi were se lected by Commerc e for full investigation. While the Changc hun Plainti ffs coop erated by t imely filing r esponses to Commerc e’s ques tionnaire s, Commerce did not conduct a full investigation of these companies. All other produc ers received the PRC-wide rate (the “PRC-wide entity ”).

7 The Changchun Plain tiffs’ f inal antid umping du

ty ma rgins a re base d on the fi

nal antidumping duty marg

ins, as amended, of mandatory respondents Fuy

ao and Xinyi, both of which ar e challe nging Commerce ’s Final

Determi nation an d Amende d Final D etermina tion in this action. See 19 U.S.C. § 1673d(c)(5). Should Fuya o and/or Xinyi be succ essful in reducing their respective antidumping duty margins, the Changchun Plaintiffs seek to have their respective antidumping duty marg

ins recalculated accordingly

. See Changchun Mem. at 3. (IT C Apr. 24, 2001) (pr

elim. dete rmination ). Commer

ce then s ent antid

umping qu

estionna ires to a number of known producers of the subject merc handise, 5 responses to which were timely filed. Because these producers w ere numerous, Commerce selected Fuy ao and Xinyi as manda

tory responde nts, 6 as they wer

e the two largest cooperative exporters, a ccounting for the majority of all exports of Windshields from the PRC during the period of investigation. 7

Commerce published the preliminary results of its investigation on September 19, 2001. It determined that certa

in Windshields from the PRC were being, or were likely to be, sold in the United States at less than fair value. Rely ing on information submitted by Fuy ao, Xinyi, and the Changchun Plaintiffs, Commerce found that each company demonstrated an absence ofC ONSOL . C OURT N O . 02-00282 P AGE 7

8 In an NME situation, it is Commerce’s policy to assign all exporters of the subject mercha ndise a si ngle an tidumping

duty rate, un less an e xporter c an demons trate tha t it is sufficiently independe

nt of government control so as to be entitled to a separate rate. Commerce’s test for whether a company is eligible for a separate rate focuses on control over investment, pricing, and the output decision-making process a t the individual firm. See Prelim. Determination, 66 Fed. Reg. at 48,235. For a complete discussion of the de jure and de facto factors Commerce considers in such determinations, see Cer tain Cut-to-Length Carbon Steel Plate from Ukraine, 62 Fed. Reg. 61,754, 61,758–59 (I TA Nov. 19, 1997) (final determination).

9 This rate is considered de minimi s . A weig

hted-av erage

dumping r

ate is de minimis if Commerce determines that it is less than 2% ad valorem

. See 19 U.S.C. § 1673b(b)(3).

10 The Changchun Plaintiffs submitted responses to Commerce’s questionnaire seeking volume and value of U.S. sales information, but were not selected to be investigated. Thus, they were

assigned the “all others” antidumping duty margin based on the margins calculated for those producers/exporters that wer e selected for investigation. See Prelim. Determination, 66 Fed. Reg. at 48,241. Those exporters who fa iled to respond to Commerce’s init ial qu estio nnair e were as signed the P RC-wi de margi n in ac cordan ce wit h Com merce’ s lon gstanding practice. See Sigma Corp. v. United States , 117 F.3d 1401, 1411 (Fed. Cir. 1997). gover nment con

trol, both in law and

in fact. 8 See Prelim. Determination, 66 Fed. Reg. at 48,236. Therefore, Commerce gr

anted separate antidumping duty deposit rates to each company and issued an antidumpin

g duty order pu rsuant to which Fu ya o and Xiny

i receiv ed compa

ny- specific antidumping duty marg

ins of 9.79% and .05%, 9 respectively

. See id. at 48,242. The Changchun Plaintiff s were e ach assi gned a

n “all oth ers” an

tidumping

duty margin 10 equal to the weighted averag e of all the calcu

lated mar gins (in this case , Fuy

ao’s mar gin of 9. 79% and Xiny

i’s margin of .05%), excluding any

zero or de minimi

s margins (Xiny

i’s margin of .05%). Id . at 48,24 2; see also Serampore Indus. Pvt. Ltd. v. United States , 12 CIT 825, 826, 696 F. Supp. 665, 667 (1988) (“Commerce indicates [that] it is a long standing practice to exclude firms that rec eive zero or de minimis margins.”). Thus, the Changchun Plaintiffs’ antidumping duty marg in was 9.79%, i.e., the same as Fuy ao’s ant idumping duty margin , since Xiny

i’s de minimi

s margin was excludedC ONSOL . C OURT N O . 02-00282 P AGE 8

from the weighted averag e. Id.

On September 21, 2001, Fuy ao and PPG timely filed alleg ations that Commerce had made ministerial errors in its Preliminary D etermination. See Automotive Replace ment Glas s From the P.R.C., 66 Fed. Reg. 53,776, 53,776 (I TA Oct. 24, 2001) (am. prelim. determination). After reviewing the alleg ations, Commerce corrected several ministerial er rors and reduced Fuyao’ s margin to 3.04%. See id. at 53,778.

In November 2001, Commerce conducted sales and factors of production ver ifications for Fuyao a nd Xinyi. See Final Determination, 67 Fed. Reg. at 6483–84. B ased on its findings at verification and its analy sis of comments received, Commerce made adjustments to the methodology used to c alculate the final antidumping duty margins for Fuy

ao and Xinyi and ma

de changes to the surrogate

country values. See id. at 6484. Final antidumping duty margins were calcula ted as fo llows: 9.67 % for Fu ya o; 3.70% f

or Xiny i; 8.22% f or the Cha

ngchun Plaintiff s; and 124.50% for the PRC-wide entity. See id.

On February

14, 2002, Fuyao, X

inyi, and PPG timely

filed allegations that Commerce made ministerial errors in its Final Determination. See Am. Final Determination, 67 Fed. Reg. at 11,670. After reviewing the alleg ations, Commerce revised the final determination of the antidumping duty marg

ins for Fuya

o, Xinyi, and the Chang chun Plaintiffs as follows: Fuya o, 11.80%; Xinyi, 3.71%; and the Chang chun Plaintiffs, 9.84%. See id. at 11,673. The antidumping duty marg

in for the PRC-wide entity remaine d unchanged at 124.50%. See id.C ONSOL . C OURT N O . 02-00282 P AGE 9

In this actio n, Fuyao, X inyi, and the Ch angchu n Pla inti ffs, as well a s PPG , chal lenge certain aspects of Commer

ce’s Ame nded Final Deter

mination r

egard ing the a ntidumping

duty margins assigned to Fuy

ao and Xinyi. I

n particular, Fuy

ao challenges six aspects of Commerce’s Final De terminat ion; Xiny i joins Fuy

ao on the f

irst thre e: (1) wh ether Com merce e rred in disregarding Fuy

ao’s and Xinyi’s ma

rket economy pur

chases of float glass; (2) whether Commerce’s treatment of water as a dire ct material resulted in double counting; and (3) whether Commerce’s exclusion of the cost of “stores and spare parts” in its ca lculation of the factory overhead ratio resulted in double counting. Fuy ao alone further challenge s 1) whether Commerce

erred i n excluding

the “St. G obain” f

inancia l data fr om its calc

ulation of the surr ogate profit ra tio; 2) whe

ther Comme

rce impr operly excluded St . Gobain’ s “purchase of tr aded g oods” from its calculation of the selling, genera l, and administrative expenses (“SG&A”) ratio; and 3) whether Commerce

incorre ctly

rejecte d Fuy

ao’s ac tual mark

et price s paid for

ocean f reight in favor of a surrogate va

lue. For its part, PPG challenges Commerce’s methodolog y for calculating ocean freig

ht, its selection of a surrogate value for e lectricity, and its methodolog y for calcula ting SG& A, factory

overhea d (“FOH ”), and p

rofit.C ONSOL . C OURT N O . 02-00282 P AGE 10

11 Xiny

i also dispu

tes Commer

ce’s de terminat ion with re gard to

this issue. Becau se Xinyi’s arg

uments are substantially the same as Fuya o’s, they are

not addressed separately

in the court’s analy sis. D IS CUSS ION I. Commerc e’s Dete rmination W

ith Regard

to Marke t Economy

Purchase

s of Float Gl

ass 11 A. Commerc e’s Dec ision to Av oid Subsidi

zed Price s First, Fuya

o challenges Commerce’s finding tha t substantial evidence on the record provided Commerce with a reason to believe or suspect that pric es paid by Fuy ao for the factor of producti on “floa

t glass” from the market e conomy countrie s of Kore a, Thaila nd, and I ndonesia may have be en distorted by broadly available subsidies in those countries. See Prelim. Determination, 66 Fed. Reg. at 48,238. Fuy ao argues that the legislative history Commerce relied u pon in disr

egard ing Fuy ao’s flo at glas s purcha ses is not a pplicabl e to mark

et econo my purchases. See Fuyao Me m. at 10–11.

Fuy ao beg ins by

stating that “the re is no di spute tha

t [Fuy ao] made ‘ market e conomy purchas es’ of f

loat gla ss. That is

to say , Fuy

ao purchased flo at glas s from sup pliers loc ated in market economy

countries . . . and paid for these purchases in a mar ket economy c

urrency .” Fuyao Mem. at 7. F uyao furt her st ates t hat “[ i]t i s also undi sput ed tha t Com merce h as a lo ngstanding policy in NME c ases of using such market economy purchases to value a respondent’s inputs in lieu of resorting to a surrogate value.” Id. (citing 19 C.F.R. § 351.408(c)(1) (2000)). Fuyao a rgues that [d]espite th

is recog nized distin

ction bet ween the use of sur

rogate values and actual market economy prices, Commerce disregarded Fuyao’ s market economy purchases of float glass by claiming thatC ONSOL . C OURT N O . 02-00282 P AGE 11

12 Title 19 U. S.C. § 1677b (c)(4)states: The administering authority , in valuing factors of production under paragraph (1) [i.e., with respect to surr ogate values], shall utilize, to the exten

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

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

country, and (B) significant producers of c omparable merchandise. the price of these purchases may have been distorted by

subsidies. As authority for this decision, Commerce stated that “[t]he legislative history a

nd recent Department determinations support the principal [sic] that we should disregard prices we have r eason to believe or suspect are distorted by subsidies.” Id . at 9 (bracketing in original) (c iting Issues and Dec ision Mem. for the Final Results of Antidumping Investigation of Automotive Replac ement Glass Windshields From the P.R.C., Conf. R. Doc. 119 at 10, reprinted in 67 Fed Reg. 6482 (“I ssues and Decision Mem.”).

With respect to its decision to disregard prices that it believes or suspects to be distorted by s ubsidies, Commerce

states: In the underly

ing investigation, Commerce was guided by Congress’s instruction in the legislative history of the Omnibus Trade a nd Competit

iveness A ct of 1988 , to avoid u sing pri ces in valuing factors that Commerce has rea son to believe or suspect may be distorted by

subsidies. Gov’t Brief at 22.

The legislative history

relied upon by Commerce concerns the use of surrogate values for factors of production in NME cases, pursuant to 19 U.S.C. § 1677b(c)(4). 12 The legislativeC ONSOL . C OURT N O . 02-00282 P AGE 12

19 U.S.C. § 1677b(c)(4)(A)-(B). history states in r

elevant part: The factors [of pr

oduction f

or the me rchandi se subject to investig ation] woul d be value d from the best ava ilable ev idence i n a market economy

country (or coun tries) th at is at a c omparab le level of economic

development as the

country subject to investig ation and

is a sign ificant producer

of the co mparabl e merchandise. . . . In valuing such factors, Commerc e shall av oid using any prices which it has reason to believe or suspect may be dumped or subsidized prices

. Omnibus Trade and Competitiveness Act of 1988, Conference Report to Ac company H.R.3, H.R. Rep. No. 576, 100th Cong., 2nd Sess., at 590–91 (1988) (“Conf. Rep.”) (emphasis added)

.

Fuyao c ontends that Congress’s directive to Commerce to avoid using pric es believed or suspected to be dumped or subsidized applies to surrogate prices only . Thus, Fuyao a rgues, since the values at issue here are based on mar ket economy purc

hases, and “market economy purchases are not used pursuant to the surrogate value methodology,”

these market economy

purchases are not limited by the Conference Report’s counsel relating to surrogate values. Fuya

o Mem. at 13. Fuy ao state s: In sum, the legislative history that Commerce relied upon discusses guidelines for the selection of surrog ate values. These criteria were never intended to restrict Commerce’s use of ac tual market economy purc

hase prices, which the courts have repe atedly stated provide a far more accura te calculation of normal value. Id

.

On this point, Commerce claims thatC ONSOL . C OURT N O . 02-00282 P AGE 13 [c]ontrary to [Fuy

ao’s] argument, a distinction between a market economy purc

hase price and a surroga

te price to value factors in a NME case

does not le ad to a fi

nding tha t Congre ss’s instr

uction to avoid subs idized pric es is not a pplicabl e to the ma

rket ec onomy purchas e values

. Gov’t Brief at 23.

Fuyao f urther relies on Lasko Met al Produc ts, Inc. v

. United S tates, 43 F.3d 1442 (Fed. Cir. 1994), and Timken Co. v. United States , 26 CIT __, 201 F. Supp. 2d 1316 (2002), for the proposition that sur

rogate value pr ovisions of

19 U.S.C. § 1 677b(c) (4) are not applic able to purchas es from ma

rket ec onomy

supplier s. It a

rgues: [In Lasko ], the appe llate cou rt found t hat Commer

ce could use some surr ogate v alues pursuant to th e nonmar ket econ omy methodology [describe d in Section 19 U.S.C. § 1677b(c)(4) (selected based on the criteria discussed in the statute a nd the legislative history) ] and use some market economy purchases pursuant to the “normal” market economy provision for calculating constructed value. This court decision confirms that market economy purc

hases are not

gover ned by the restr ictions ap plicable to surrogate value selections, which means that they should not be disregarded even if there

is reason to believe suspect that they may be subsidized. [In Timken, ] Timken claimed in part that Commerce was required [by 1 9 U.S.C. § 16 77b(c)( 4)] to use su

rroga te value s if possibl e and “[n]owhere in its

final determinat

ion does [Com

merce] explain that it was not ‘possible’ to use Indian or other surr ogate values according to the expressed statutory requirements. . . . This Court rejected Timken’s argument, stating that it “disagrees with Timken that Commerce is required to value [factors of production] pursuant to § 1677[b](c)(4) prior to resorting to a PRC trading company ’s import prices pa id to a mar

ket-ec onomy

supplier to value material costs for . . . inputs.” Fuyao Me

m. at 12–13 (internal citations omitted) (emphasis in original).C ONSOL . C OURT N O . 02-00282 P AGE 14

Fuyao’ s reliance on Lasko and Timken is misplaced. Although both the Lasko and Timken courts sta

te that the surrog ate value provisi ons of 19 U .S.C. § 1677 b(c)(4 ) do not ap ply to purchases from market economy suppliers, this does not, in turn, mean that Congress’s instructio ns regarding those g uidelines (i.e., that Commerce “shall avoid using any prices which it has reason to believe or suspect may be dumped or subsidized prices,” Conf. Rep. at 590) cannot be used by

Commerce when constructing its methodology with respect to market economy purchas es. I

ndeed, Commerce i s fully justified in rely ing on tho se instruc

tions to

es ta bl is h t he re as on ab le ne ss of it s m et ho do lo gy i n a n N ME si tu at io n. “[ T] he go al s o f a cc ur ac y, fairness, and predictability should apply whether a

country’s ec onomy is market or nonmarke t oriented.” Tianjin Mach. Imp. & Ex p. Corp. v. United States , 16 CIT 931, 941, 806 F. Supp. 1008, 1018 (1992). These goals would also be pertinent whene ver market values are involved. As the Court explained in China National Machinery Imp. & E xp. Corp. v. United States , 27 CIT __, __, 264 F. Supp. 2d 1229, 1237–38 (2003),

[i]t is true . . . that the “reason to believe or suspect” standard articulated in the House Report explicitly re fers only to a se lection among su rroga te price s, as oppo sed to a choice be tween su rroga te and mark et value s. . . . How ever, if Commerce

had “re ason to believe or suspec t” that [the

subject ma

rket ec onomy

purchas es] were su bsidized, Commerce may employ surrog ate values wher

e it determines that they a

re the best information under the statute. Id . (empha sis omitted

); see also Peer Bearing Co. v. United States , 27 CIT __, __, slip op. 03- 160 at 13 (

Dec. 12, 2003) (“ [W]hen Commer ce has r eason to b elieve or suspec t that a marketeconomy supplier’s pr

ices are subsidized, Commerce may reject market prices paid to the supplier in favor of surrogate price s for its calculation of [normal value].”).C ONSOL . C OURT N O . 02-00282 P AGE 15

Further more, this Court and

the Court o f Appea

ls for the Feder al Circui t have re peatedl y upheld Commerce’s broad discretion in valuing factors of production. See Lasko , 43 F.3d at 1446; see also Sigma , 117 F.3d at 1405 (“Commerce . . . has broad authority to interpret the antidumping statute . . . .”). In valuing such factors, “the critical question is whether the methodology used by

Commerce is based on the best available information and establishes antidumping duty marg

ins as accurately

as possible.” Shakeproof Assembly Components, Div. of Ill. Tool Works, Inc. v. United States , 268 F.3d 1376, 1382 (Fed. Cir. 2001). Moreover, “the statute grants to Commerce broad discretion to determine the ‘ best available information’ in a reasonable manner on a case- by-case basis.” Timken, 26 CIT at __, 201 F. Supp. 2d at 1321 (citing Lasko , 43 F.3d at 1446 (noting that the statute “simply does not say—any

where—that the factors of production must be ascertained in a sing le fashion.”). Because “Cong ress has explicitly left a gap f

or the agency

to fill, there is an express delegation of authority to the ag ency to elucidate a specific provision of the statute by regulation. Such legislative reg ulations are given controlling weight unless they are arbitrary , capricious, or manifestly contrary to the statute.” Chevron , 467 U.S. at 843–44. Finally, it is settled that “statutory interpretations articulated by Commerc e during its antidumping proceedings a re entitled to judicial deference under Chevron .” Pesquera Mares , 266 F.3d at 1382; see also Chevron , 467 U.S. at 843 (“[I]f the statute is silent or a

mbiguous with resp ect to the

specific issue, the question f

or the co urt is whether the agency ’s answer is based on a permissible construction of the statute.”). I n light of Commerce’s broad discretion in selecting values f or factors of production, its statutory directive to deter mine antid

umping du

ty ma rgins a s accur

ately as possibl e, and the

defere nce that its statutory interpreta

tions are to be afforded under Pesquera Mares , the court finds thatC ONSOL . C OURT N O . 02-00282 P AGE 16

13 “Normally, to construct [normal value] for the final product, Commerce uses actual market prices which an NME produce r pays for the input from a market economy country since actual prices are the best appr oximation of the input’s value.” China Nat’l Mach ., 264 F. Supp. 2d at 1232 (citing 19 C.F.R. § 351.408(c)(1)). Commerce’s decision to avoid subsidized prices is reasonable and, acc ordingly, de fers to it. China National Machinery is agai n instruc tive: [G]iven that the overarching purpose of the antidumping and countervailing duty

law is to counteract dumping and subsidies, the court cannot conclude that Congress would condone the use of any value wh ere the

re is “re ason to be lieve or suspect” that it re flects dumping or subsidies. . . . [I]f Commerce had “rea son to believe or suspect” that the [market purchases plaintiff made in this case] were su bsidized, Commerce may employ surrog ate values wher

e it determines that they a

re the best information under the statute. China Nat’l Mach. , 264 F. Supp. 2d at 1238.

B. Commerc e’s Reli

ance on th e “Reasonto Believ e or Suspect” Standar

d Fuyao f urther argues that, even if the statute a llows Commerce to avoid subsidized values, Commerce’s determination to reject certa in purchases of float glass was improper because substantial evidence does not support its conclusion that there was r eason to believe or suspect Fuya

o’s purchases were, in fact, subsidized. 13 Fuyao Me m. at 14. Substantial evidence is relevant evidence that “a reasona ble mind might accept as adequate to support a conc lusion.” Consol. Edison Co. , 305 U.S. at 229. It is “something less than the weig ht of the evidence, and the possibility of drawing two inc onsistent conclusions from the evidence does not prevent an administrative agency ’s finding from being supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n , 383 U.S. 607, 620 (1966).C ONSOL . C OURT N O . 02-00282 P AGE 17

14 In de

veloping its methodo logy

for sele cting va

lues for factor s of produ

ction in NME situat

ions, Comme

rce app ears to h ave esta

blished a higher standar d than wou

ld neces sarily be required. “The legislative history and recent Department determinations support the principal [sic] that we

should disr

egard prices w e have r

eason to b elieve or suspec t aredistorted by subsidies .” I ssues and

Decision Mem. at 10

(emphas is added) . When rea ching it s finding s with respec t to subsidiza

tion, Comme

rce sta ted that the eviden

ce suppo rts the conclusion: (1) that “ it is reaso nable to i

nfer tha t all export s to all cou

ntries aresubsidized,” Id . at 11, and (2) that there is “particular and objective evidence to support a r eason to believe or suspect that prices of the in pu ts fr om th at co un tr y are subsidized.” Id . The legislative history relied upon to establish the reasonableness of its methodology , however, instructs Commerce to avoid prices “which it has reason t o believe or suspec t may . . . be subsidized.” Conf. Rep. at 590 (emphasis added.) Commerce

appare ntly has conc luded it should be he ld to this hig her stan dard, an d there i s nothing t o indicat e that this decision is unrea sonable. That bein g the ca se, the c ourt’s a

naly sis wi ll be in ac co rd an ce wi th th e s ta nd ar d e vi de nt in Co mm er ce ’s se le ct ed me th od ol og y. In its Final Determination, Commerce c oncluded that “this particular and objective evidenc e (that a

ll exporter

s from the se countr

ies can b enefit f

rom these broadly availab le subsidies ) support s a reas on to belie ve or susp ect that p

rices of the inputs

purchas ed from these countries are subsidized.” 14 Issues and Decision Mem. at 12.

Commerce’s use of the “reason to believe or suspe ct” standard is based on the legislative history for 19 U.S.C. § 1677b(c)( 4): “Commerce “shall avoid using any prices which it has reason to believe or suspect may be dumped or subsidized prices.” Conf. Rep. at 590. Regarding interpre tation of t he “rea son to beli eve or su spect” s tandard , this Court has said: In a ttempting to define a similar phrase, “reasonable g

rounds to believe or suspect,” which appears in 19 U.S.C. § 1677b(b)(1) (1999), this Court observed that “in order for reasonable suspicion to exist there must be ‘a particularized and objective basis for suspecting’ the existence of certain proscribe d behavior, taking into account the totality of the cir cumstances, the whole picture.” Therefore, the “reason to believe or suspect” standard at issue here must be predicated on particular, specific, and obje ctive evidence. China Nat’l Mach ., 264 F. Supp. 2d at 1239 (internal citations omitted).C ONSOL . C OURT N O . 02-00282 P AGE 18

Thus, “merging the two standards [the “re ason to believe or suspect” standard used by Commerce

with this Cou

rt’s “sub stantial e

vidence ” standa

rd of re view] . . . the court w

ill accord ingly affirm Commerce’ s actions if, give n the enti re rec ord as a w

hole, the re is subs tantial, specific, and objective evidence which c ould reasonably be interpreted to support a suspicion that the prices [Fuya

o] paid to its market economy supplier wer e distorted.” Id . at 1240. “[T]his court may not re

weigh the evidence or substitute its own judgment for that of the agency . . . . [T]he age ncy is presume d to have c onsidere d all of the evidenc e in the r

ecord, a nd the bur

den is on the plaintiff to prove otherwise.” Id . (internal citations omitted).

Commerce relies on evidence placed on the r ecord by PPG to support its conclusion that there is “reason to believe or suspect” that pric es from Korea, Thailand, and I ndonesia were subsidized. The evidence concerning Kore a includes various countervailing duty determinations stemming from subsidy prog rams in Korea; an excerpt from the U.S. Trade Repre sentative’s 2001 National Trade Estimate Report on Foreign Tr ade Barriers (“NTE Repor t”) concerning Korea’s export subsidy pra ctices; excerpts from the World Trade Organization (“WTO”) Trade Policy Review for Kor

ea; and PPG’s analy sis of the foregoing evidence , purporting to show that prices for float glass imported into the PRC from Korea “ar e likely” subsidized. See Petitioner s’ Fact Submission Accompany ing Petitioners’ Factors Data, Conf. R. Doc. 92.

For Tha iland, Comm erce c ites the f orego ing doc

umentation (albei

t with res pect to Thailand , not Kore a), as w ell as ne ws artic les conc erning

a projected over supply

of glas s in Thailand and tariff increases by Thailand’s trading partners; a copy of an antidumpingC ONSOL . C OURT N O . 02-00282 P AGE 19

15 The tapered roller bearing s proceedings were appe aled in China National Machine ry Import &

Export Cor

p. v. Unit ed States , 27 CIT __, __, 264 F. Supp. 2d 1229, 1237–38 (2003). investigation in New Zealand conc erning float glass from Thailand; re ports downloaded from the Thailand Board of I

nvestment (“BOI” ) Web site concerning incentives that are pr ovided to BOI Promoted Companies; a

report r eferr ing to exis ting pre ferent

ial tax arr angeme nts for g lass makers; and WTO documents showing that South Africa and Australia maintain antidumping duties on imports of float glass from Thailand.

For I ndonesia , the evid

ence of subsidies includes four non- industry

specific countervailable export subsidies; an excerpt from the NTE Report for I ndonesia; excerpts from the 1998 WTO Trade Policy Review for dealing with Indone sian export subsidy practices; and notifications by Thailand of duties in place for float glass from I

ndonesia.

In the I ssues and Decision Memorandum, Commerce stated: We found that, where the facts developed in U.S. or third-country CVD findin

gs inclu de subsidi es that a

ppear to be used g eneral ly ( in particular, broadly

available, non-industry spe cific export subsidies ), it is re asonable to infer t hat all exports to all ma

rkets from the investigated country are subsidized. As we argued [previous ly] in

the [taper

ed rolle r beari ngs] proc eeding s, 15 these prior CVD

finding s may

provide t he basis f or the De partmen t to also cons ider tha

t it has par

ticular a nd object ive evide nce to support a reason to believe or suspect that prices of the inputs from that country ar

e subsidized. Issues and Decision Mem. at 11. Thus, Commerce insists that the record evidence supports two finding s: (1) tha

t all export s from Kor

ea, Tha iland, an d Ind onesia a re subsid ized, and (2) that inC ONSOL . C OURT N O . 02-00282 P AGE 20

16 In its

Final De terminat ion, Commer

ce esta blished a higher standar d (i.e., t hat it should disr

egard prices it has rea son to beli eve or su spect aredistorted by subsidies) than that contemplated in the legislative history (that Commerce should disregard prices that may be subsidized). See supra n.14. I n its brief , Commerc e appea

rs to rec ognize th

is, arg uing tha t it “is not, in fa ct, dete rmining from this e

vidence that the prices are subsidized as it would in a counter vailing duty investig ation, but

rather that the information indicat es that the

prices may be subsidized.” Gov’t Brief at 32 (emphasis added). However, the Government may not now abandon the standard it adopted in the Final Determination for a lesser one. particular, all exports of float glass from these countries ar e subsidized. 16 Apparently, Commerc e believes that either finding supports its decision to resort to the use of surrog ate values.

The court is not convinced that the various determinations and reports cited by Commerce support either conclusion. First, none of the more than 80 counterva iling duty determinations cited by Commerce

concer ning Kor ean subsi dies invol

ved floa t glass, the produ

ct at issue in this case, nor for that matter did any of the countervailing duty determinations involve glass of any kind. Petitioners’ Factors Data, Conf. R. Doc. 92, Ex. 1. See, e.g. , Luoyang Bearing Factory v. United States , 27 CI T __, __, 25 9 F. Supp. 2d 1357, 13 64 (2003)(emphas is in orig inal) (remanding on the grounds that, inter alia , “the various countervailing duty determinations relied upon by Commerce do not include the hot-rolled bearing quality steel bar, the steel product at issue in thi s case.” ). The WTO report f or Kore a indica

tes only that “Kor

ea has a ggre ssively promoted exports tho

ugh a va riety of policy tools,” bu

t does not i

ndicate which exporters be

nefit from such tools. Id . Ex. 2. Simila rly , the NTE R

eport dis cusses se

veral e xport loan a

nd credi t programs, but does not indicate which sectors, produce rs, or products are eligible for such a id. Id . Ex. 3. This evidence, therefore, supports neither Commerce’s c onclusion that all Korean exports are subsidized, nor its conclusion that float glass exports in particular are subsidized.C ONSOL . C OURT N O . 02-00282 P AGE 21

In like manner, none of the mor e than 170 countervailing duty determinations cited by Commerce for Thailand concern any kind of glass. Petitioners’ Factors Data, Conf. R. Doc. 92, Ex. 5. As to the other documentation for Thailand, the NTE Report indicates only that “Thaila nd’s prog rams to sup

port trad e in cer tain manu factur

ed produ cts . . . ma

y c onstitute export subsidies.” Id. Ex. 6. Likewise, the WTO report for Thailand lists several f inancing schemes for exporters, but does not provide information as to restrictions on or qualifications for receiving such assistance. Id . Ex. 7. The antidumping duty investigation in New Zealand concludes that “some of the goods under investig ation from Indonesia are being dumped, but the volume of dumped imports from Indonesia is neg ligible.” Id . Ex. 9. As to the Thailand BOI incentiv es, they

are ava ilable for sever

al “prio rity

areas” such as a gricul ture and public util ities, as well a s for “ta

rgete d industrie s.” Howe ver, non e of the t

arget ed industr ies listed appear to include the manufacture of float gla ss. Id . Ex. 14.

Finally , a repor t entitled , “Thaila

nd: Constru

ction Plan s for $120 ,000,000 Glass Plant, Siam Cemen

t Group (T

hailand) ” states t

hat “existi

ng pre ferent

ial tax arr angeme nts for g lass makers a re such t hat they must export 5 0% of the ir production output and, as a result[,] the

re is a product shortage.” Id . Ex. 15. The report is dated 199 5. The pe

riod of r eview fo r this investig ation, how ever, is July 1 , 2000, thr

ough De cember

31, 2000, a

nd there is nothing

to indicate that these

tax arran gement s were st

ill in plac e at the ti

me of this i

nvestig ation. As w

ith Korea, this evidence supports neither of Commerce’ s conclusions.

As to Indonesia, one of the counte rvailing duty de

terminations cited by CommerceC ONSOL . C OURT N O . 02-00282 P AGE 22

concerns extruded rubber thread, and all of the othe rs concern apparel and textiles (lugg age, handbags, gloves, and the like). Not one of the determinations concerns float glass. Moreove r, most of the final determinations indicate that the investigation was terminated, or that the subsidy program at issue was not used by the producer under investigation. Id . Ex. 24. The NTE Report for Indonesia indicates that the e xport subsidies for “special exporters” (a term which is not defined) lapsed in 1999. Id. Ex. 25. Finally, the WTO report for I ndonesia, which reviews exports subsidies and other promotion policies in that country, was complete d in 1999, one year before the period of review for this investig ation. Id . Ex. 17. Therefore, for I ndonesia, too, the evidence supports neither of Commerce’s finding s.

In a ccorda nce with t he standa rds esta blished by

its methodo logy , Commerc e “must demonstrate particular, specific, and objective e vidence to uphold its reason to believe or suspect that the prices [the plaintiff] paid the supplier for the inputs were subsidized.” China Nat’l Mach. , 264 F. Supp. 2d at 1243. Here, none of the record e vidence for Korea, Thailand, or Indo nesia ind

icates w hether t he subsidy

progra ms cited by

Commerce

are ava ilable to a ll exporters, or to float glass producers in particular, in the supplier c ountries. For example, evidence placed on the record by PPG regarding a Thai subsidy indicates that “each company must apply to the Board of Investment for a Certifica te of Promotion (license), which specifies goods to be produ ced, pro duction a

nd export r

equirem ents, and

benefit s allowed . These license(s) are grante d at the discretion of the Board. . . . ” Id . Ex. 5. A similar Indonesian subsidy is also disc

retiona ry : “To whom

and at wh at intere st rates s uch [work

ing cap ital export

] credits are granted is at the discre tion of the lending institution.” Id . Ex. 24 (cit ing Cer tainC ONSOL . C OURT N O . 02-00282 P AGE 23

Textile Mill Prods. and Apparel From Indonesia, 49 Fe d. Reg. 49,672, 49,674 (ITA D ec. 21, 1984) (pr elim. dete rmination )). More over, muc

h of the e vidence is outdate d or simply inapplicable to the float glass industry (e.g., over 200 countervailing duty determinations for Korea a nd Thaila nd conce rning pr oducts oth er than f

loat gla ss). This c ase is simi lar to China National Ma chinery , in which the cour t noted tha

t Commerc e failed

to provide

informat ion as to whether the subsid

y pr ogram is offer ed acro ss the boa

rd to all [pr

oducers ] in the cou

ntry , to those of a certain size, to thos e which ma

nufactu re a ce rtain product or set of products, to those in a specific geog raphical area or so on . . . [or as to] who could benefit from the program or whether the companies may choose not to participate (for example, because the program comes w ith certain obligations). China Nat’l Mach. , 264 F. Supp. 2d at 1241 (ordering Commerce, upon rema nd, to review and augment the administrative record and to e xplain its determinations).

The legislative history , which Commerce relies upon as a basis for the rea sonableness of its methodology, indicates that Cong ress “[did] not intend for Commerce to conduct a formal investigation to ensure that such prices are not dumped or subsidized, but rather intend[ed] that Commerce base its decision on information generally available to it at that time.” Conf. Rep. at 590–91. Nonetheless, using the standard Commerce has established, it must “point to particular and spec ific evid

ence” f rom which

it would be

reasona ble to infe

r that sub sidies we

re avai lable to the floa

t glass in dustry in Korea , Thailan

d, and I ndonesia , and that

“partic ular and specific evidence” supports a reason to believe or suspe ct that the float glass purchased by Fuyao w as subsidized. Luoyang Be

aring Fac tory , 259 F. Supp. 2d at 1364. Thus, on remand, CommerceC ONSOL . C OURT N O . 02-00282 P AGE 24

17 The de minimi

s doctrine is applicable to all countervailing duty cases. See Carlisle Tire & Rubber Co. v. United States , 1 CIT 352, 354, 517 F. Supp. 704, 706 (1981). A weight ed-ave rage a ntidumping

duty margin is de minimi

s if Commerc e deter

mines that

it is less than 2% ad valorem

. See 19 U.S.C. § 1673b(b)(3). Because “a de minimi s benefit is, by definition, of no significance whatever,” Carlisle Tire & Rubber , 1 CIT at 354, 517 F. Supp. at 706, companies with de minimi s dumping margins are considered to ha ve a dumping margin of zero. shall revisit this issue and, if it continues to find that (1) all exports from Korea, Thailand, and Indonesia are subsidized, or (2) tha t, in particular, exports of float glass from these countries are subsidized, it must provide specific and objective evidence to support these findings. Submission of such evidence “is consistent with the remedial, not punitive, purpose of the antidumping duty laws.” China Nat’l Mach. , 264 F. Supp. 2d at 1242.

In addition, in reaching

its findings Commerce must take into account Fuy ao’s claim that “every non-specific export subsidy prog ram cited by [PPG] was found by Commerce either to be not in use or to confer only a de minimi

s benefit.” 17 See Fuyao Me m. at 6. Fuyao f

urther states that “[a]lthough Commerce did not dispute [Fuyao’s] findings,” id ., regarding the de minimi s nature of the subsidy pr

ograms, it nonetheless determined that there was r eason to believe or suspect that Fuya

o’s purchase prices from Korea, T hailand and Indonesia we re subsidized. For its part, C ommerce

maintains

that “the level of subsidizati on in a CVDfinding on a cer tain product and certain exporters, whether de minimis or not, is irrelevant.” Gov’ t Brief at 36 (citing Issue s and Dec ision Mem. a t 12). While

Commerce

may adopt any

reasona ble metho dology

to effect the purposes of the statute, it must articulate its reasons for the choices it makes. On remand, Commerce

shall full y a nd comple

tely explain why

it would be

reasona ble to re sort to surrogate values, rather than a ctual amounts paid, where any subsidization—even de minimi sC ONSOL . C OURT N O . 02-00282 P AGE 25

18 “The legislative history and recent Department determinations support the principal [sic] that we should disregard prices we have re ason to believe or suspect are distorted by subsidies .” Issues and Decision Mem. at 10 (e mphasis added). subsidization—is present. In particular, Commerce shall explain how, if a subsidy is found to be de minimi s , that subsidy would nevertheless r ise to the level of a distortion 18 in price s that woul d justify Commerce’s dec ision to depart from actual input prices. See China Nat’l Mach ., 264 F. Supp. 2d at 1241.

C. Commerce’s Determinations With Regard to W ater as a Direct Input and “Stores and Spare

Parts” 1. Water as a Direct Input Base d on it s obse

rvat ions d uring the v erif icat ion pr oces s, Com

merc e determi

ned t hat “ [i]t is clear from the production process for windshields that water usage is significant and vital for cleaning the windshields prior to the ‘sandwiching’ of PVB [polyviny l butyrl] in between the two panes of glass.” I ssues and Decision Mem. at 59. Citing past determinations in which it had assigned a separate surrog ate value for water where its use was significant, Commerce assigned separate surrogate value s for Fuya o’s and Xinyi’s wa

ter usage. Id. ; see also Sebacic Acid From the P.R.C., 65 Fed. R

eg. 49, 537 (I TA Aug. 14, 2000)(final r esults); see also Freshwater Crawfish Tail Meat from the P.R.C., 66 Fed. Reg. 20,634 (I TA Apr. 24, 2001) (final results) and accompany

ing Issues and De cision Mem. at Comment 7 (valuing water as a factor of production because it is used in large quantities and for more than incidental purposes).

Fuyao a rgues that Commerce’s decision to value water as a separate factor of produc tion,C ONSOL . C OURT N O . 02-00282 P AGE 26

19 No party disputes the use of St. Gobain as a source of surrogate va lues. rather than as part of factory overhead, was in error, since the fina ncial statement of the Indian company Commerce

chose as the surrogate, Saint-Gobain Sekurit (“ St. Gobain”), 19 “must include water in its factory

overhea d. . . . The

re is no r ecord e vidence to support

a finding that the St. Gobain f inancia l stateme nt does not

include a cost for water. T herefore, it is on

ly r easonab le to accept that water was not separa ted out from St. Gobain’s overhead costs.” Fuy ao Mem. at 30–31. Fuyao a

rgues that [t]o avoid dou

ble count ing, whe n water i s alrea

dy i ncluded i n factory overhead, the Department has a long -standing practice of either 1) not adding a separate va lue for water, or 2) excluding water c osts from f

actory overhea d. . . . [T]he r

ecord in this case indicate s that the S aint Goba in annual report in cludes w ater in it s factory overhead costs. Commerce has failed to provide a reasona ble explanation of w

here it b elieves

the St. Gob ain financial [statement] includes water costs if they are not part of factory overhead. Id . at 31–32.

Commerce responds that there was no potential to double-count water , because it “valued the overhead using only

the line-items ‘depreciation’, ‘stores and spares c onsumed’, and ‘repairs and maintenance’ from St. Gobain’s annual report. None of these line items would include the input water.” Gov’t Brief at 47 (internal c itation omitted). Commerce explained:

“Depreciation” is defined as “the a ccounting process of allocating the cost of tangible assets to expense in a sy stematic and rational manner t o those pe

riods expe cted to be

nefit fr om the use

of these assets.” Also, Commerce has explained in other cases that the “stores and spare parts consumed” line-item in an I ndian financial statement generally

includes indirect materials, and not direct materia ls. And “r

epairs” are def ined as “ expenditur

es made t oC ONSOL . C OURT N O . 02-00282 P AGE 27

20 The line item “stores and spare parts” constitutes over one- quarter (26%) of total factory overhead. maintain plant assets in operating condition. . . . Replacement of mino r part s, lu bricat ing and adjus ting o f equi pment , repai ntin g, and cleaning are examples of maintenanc e charges that occur regularly and are treated as ordinary operating expenses. Id . (internal citations omitted).

Although the court finds it reasonable that water would not be inc luded under “depreciation” or “repairs” as defined, the same cannot be said for the line item “store s and spare parts.” Commerce argues that the “ stores and spare parts” line item “gene rally includes indirect materials, and not direct materials,” and that, since wate r is a direct material, it would not be included under thi s line item . Gov’t B rief at 4 7. This re asoning , howeve r, does no t constitut

e substantial evidence that water is not already included in factory

overhead. First, the amount allocated to “stores and spare parts” is sufficie ntly large to accommodate a significant input such as water. 20 Second, only

“stores and spar e parts” could ar guably include w ater, sin

ce it is improbab le that wa

ter would be includ ed under “depre ciation”

or “rep airs” a s those line items have been defined.

In constructing norma

l value, “Commerce must capture all of the costs of production no matter how characterized.” Yantai Oriental Juice Co. v. United States , 27 CIT __, __, slip op. 03-150 a t 14 (Nov. 20, 2003) . Since F uya o is corr ect that t here is n o evidenc e that the

St. Gobain financial statement did not capture water as part of fa ctory over

head, Commerce is directed, on remand, to demonstrate that its decision to value water as a sepa rate factor of production, ratherC ONSOL . C OURT N O . 02-00282 P AGE 28

21 Xiny

i also dispu

tes Commer

ce’s de terminat ion with re gard to

this issue. Becau se Xinyi’s arg

uments are substantially the same as Fuya o’s, they are

not addressed separately

in the court’s analy sis. than a s part of fact ory overhe ad, do es not resul t in i mperm issi ble do uble c ount ing.

2. “Stores and

Spare Par

ts” 21 Next, Fuyao objects to Commerce ’s inclusion of “stores and spare parts” in factory overhead. Fuy

ao argues that, since the St. Gobain financial stateme nt’s line item “Cost of Materia ls Consumed

” accou nted only for the two main ra

w materi als, floa

t glass a nd PVB, “ it is obvious from the St. Gobain financial statements that other raw materials [such as mirror buttons, a ntenna wires, na

ils, and sc rews] ar e include d in ‘store s and spar e parts. ’” Fuy

ao Mem. at 40–41. Fuy

ao arg ues: When calculating the factory overhead ratio, the Department divided Saint Gobain’s overhead costs (Depreciation + Stores a nd Spare Pa rts + Repa

irs and Ma

intenanc e) by

Total Mat

erial Cos ts (Materials + Energy

+ Labor). . . . Howe

ver, . . . the overhead costs inc luded othe

r raw ma terials w hile the c ost of mate

rials only included the cots [sic] for PVB and float glass. According ly, the Department divided an inflated total overhead cost (inclusive of other raw materials) by

an understated

total cost of mater ials (exclusive

of the oth er raw material s), resu lting in a n artific ially higher factory

overhead ratio. Id . at 41 (emphasis in original).

In the I ssues and Decision Memorandum, Commerce stated that “[w]hile [Fuy ao] does demonstrat e that the di rect material costs in d irect materi als only includes float glass an d PVB, there is no evidence on the record that these othe r direct materials are included under store s andC ONSOL . C OURT N O . 02-00282 P AGE 29

spare parts.” Issue s and Decision Mem. at 55. Here aga in, Commerce argues that overhead represents the indirect manufacturing costs that a company inc urs, and that “the ‘stores and spare parts consumed’ line item on a financial statement is included as a miscellaneous pa rt of overhead, and genera

lly includes indirect materia ls, and not direct materials consumed in the production process.” Gov’t Brief at 65 (inter nal citation omitted). Thus, Commerce argues that the additional materials used to make the Windshields could not be included in “stores and spare parts,” since that line item contains only indirect materials, not direct materials such as the additional materials at issue here.

In support of its argument, F uyao cites seve

ral cases in which Commerce determined that raw mate rials, no t include d in direct materia ls, were part of f actory overhea d. In Certain Preserved Mushrooms from the P.R.C., 63 Fed. Reg. 72,255, 72,265 (Dec. 31, 1998) (final determination), Commerce concluded that since the raw materials used in the production of canned mushrooms, such as salt, water, chlorine, and asc orbic acid, were not included under “raw materials” along with the two main raw materials (mushroom growing c osts and cans), “we are including the valuation of all factors other than mushrooms and containers in factory overhead.” Id . Commerce has cited Mushrooms from the P.R.C. for this reasoning in other

cases a s well: [I]n Mushrooms from the PRC, we found that the factory overhead ratio calculated using the surroga te’s financial statement appeared to include the costs for several raw materials included in the category “consumables.” Because these ma terials were already included as part of factory overhead, in that case the Department did not value these materials separately, thereby avoiding doublecounting.C ONSOL . C OURT N O . 02-00282 P AGE 30

Solid Agricultural Grade Ammonium Nitrate from Ukraine, 66 F ed. Reg. 38,632 (July 25, 2001) (final determination) (Issue s and Decision Mem. at Comment 6).

With respect to the St. Gobain financial statement, Fuy ao argues that because the additiona l materia ls are no t include d under “ raw mate rials” a long with float g lass and PV

B film, the only rational place

for these materials to be included is within factory overhead, under the line item stores and spare parts. See Fuyao Me m. at 40–41. As with its arguments with respect to water as a dire ct input supra , Commerce argues that the stores and spar e parts line item on a financi al statem ent “ge

nerally includes indirect

materia ls, and not

direct ma terials c onsumed in the production process.” Gov’t Brief at 65 (c iting Indus. Nitrocellulose From the P.R.C., 62 Fed. Reg. 65,667, 65,671–72 (ITA D ec. 15, 1997) (final results) (emphasis added)). Thus, Commerc e argues that it was reasonable for it to conclude that the “stores and spare parts consumed” line item included only indirect mater ials, “consistent with its normal practice.” Gov’t Brief at 65. Having thus conc luded, Com

merce a rgues t hat its dec ision to inc lude “stores and s pare pa rts” in its calculation of factory

overhead was also reasonable. Id . at 67.

By this arg

ument, Commerce acknowledges that the additional mater ials used in the production of the Windshields are in fact direct materials. The rec ord supports the finding that only float gla ss and PVB film—and none of the additional direct materials, such as mirror buttons, antenna wires, nails, or screws—are included unde r “raw materials.” I

t is therefore

reasona ble to con clude tha t the addi tional ra w materi al expense s are inc luded els ewhere in the St. Gobain f inancia l stateme nt.C ONSOL . C OURT N O . 02-00282 P AGE 31

22 The profit ratio is determined by dividing profit by cost of pr oduction or manufacture (“COP”). The value for profit is arrived at by

multiplying the profit ratio by the sum of the cost of manufacture and SG&A expenses. See Titanium Sponge From the Russian Federation, 64 Fed. Reg. 1599, 1601 (I TA Jan. 11, 1999) (final results). Here, Commerce has simply failed to demonstrate that the St. Gobain financial statement did not capture all of the factors of production; i.e., that these financ ials did not, in fact, represent the entire cost of producing the product and that ther efore they must be added in. It is not sufficient for Commerce to conclude, without more, that since the stores a nd spare parts line item gener ally includes indirec t materia

ls, it may not also include the additional direct materials at issue here. This is particularly the case given Commerce’s history of inconsistent application of this reasoning. Accordingly , Commerce is instructed, upon remand, to provide an explanation as to where these additional materials are valued in St. Gobain’s fina ncial statement, if they a

re not part of s tores an

d spare p arts.

D. Commerce’s Determination With Regard to the St. Gobain Profit Figures Title 19 U.S.C. § 1677b(c)(1) directs Commerce to “determine the norma l value of the subject merchandise on the basis of the value of the fa ctors of production . . . to which shall be added an amount for genera l expenses and profit plus the cost of containers, coverings, and other expenses.” Id . To calc

ulate the profit ra tio 22 in this case, Commerce included only positive profit figures, disregarding any neg ative profit figures. Thus, Commerce disreg arded the financi al data f

rom the I ndian sur rogate , St. Gobai

n, since t hat compa

ny had a neg ative pr

ofit, and instead used the financial data from another sur rogate, Asahi I

ndia Safety Glass, L

td. (“Asahi”).C ONSOL . C OURT N O . 02-00282 P AGE 32

23 The SAA is “an authoritative expression by the United States concerning the interpretation and application of the Uruguay Round Agreements and this Act in any judicial procee ding in w

hich a que stion aris es conce rning su ch inter pretation or appli cation.” 19 U.S.C. § 3512(d) (2000).

24 When calculating CV for imported merchandise, whe re actual data is available, 19 U.S.C. § 1677b(e)(2)(A) directs Commerce to use:

(1) the cost of materials and fabrication or other processing of any kind employed in producing the merchandise, during a period which wou

ld ordina rily permit the

producti on of the m erchan dise in the ordinary c ourse of business; [or] (2) the a ctual amo unts incur red and r ealized b y th e specif

ic exporter or producer being examined in the investigation or r eview for selli ng, ge neral, a nd adminis trative e

xpenses, a

nd for pr ofits, in connec tion with th e production and sa le of a f oreign like prod uct, in th e ordi nary cours e of tr ade, fo r cons umpt ion i n the f oreign country . . . . 19 U.S.C. § 1677b(e)(2)(A). In doing so, Commerce re lied upon language contained in the Statement of Administrative Action, accompany ing the Uruguay

Round Agreements Act, H.R. Rep. No. 103- 826(I), at 839–40 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4175 (“SAA”). 23 The SAA states: “Unlike current practice, under se ction 1677b(e)(2)(A) [relating to calcula ting constructed value], in most cases Commerce would use profitable sales as the basis for ca lculating profit for purposes of constructed value.” Id . at 840.

Fuy ao objects to Commer

ce’s re liance on language fr om the SAA on the gr

ounds that

it applies o nly

to the new

provision s under th e URAA for calcu lating c onstruct

ed value (“CV”)in market e conomy

cases, a nd that this

methodolo gy

is “solely . . . the ‘prefer

red’ CV profit methodology c odified under 19 U.S.C. § 1677b(e)(2)(A).” 24 Fuyao Me m. at 27. Because ChinaC ONSOL . C OURT N O . 02-00282 P AGE 33

is an NME c ountry , howeve r, Fuy ao arg ues that Co mmerce’ s methodol ogy in the insta

nt case i s “completely irr

elevant to this proceeding since the profit ratio is not being calculated using [Fuyao’s] own home market sa les,” but rather the sales of the I ndian surrogate(s). Id

.

Because the statute refers only to “an amount” for profit and is silent with respect to how it should be calculated, the court will review Commerce’s interpre tation for reasonableness. See, e.g. , Rhodia, Inc. v. United States , 26 CI T __, __, 24 0 F. Supp. 2d 1247, 12 52 (2002)(“Bec ause the statut e is ambig

uous, we r

eview Com

merce’ s interpr

etation to determine whethe

r it is reasonable.”).

This Court has noted t

hat “Comme

rce has been excl

uding zer o profits i n market economy cases since 1997 . . . and slowly began to apply

this methodology to nonmarket e conomies.” Rhodia , 27 CIT at __, 240 F. Supp. 2d at 1253. The court in Rhodia explained:

In ma king [a] pr

ofit calc ulation, the SAA allows Commerc e to “ignore sales that it disregards a s a basis for normal value, such as those disregarded because the y are ma de at below-cost prices.” As the SAA expl ains, “in

most case s Commerc e would us e profita ble sales as the basis for calculating profit for pur poses of constructed value.” Further more, “s ales at a

loss are consiste ntly rejecte d, both as a basi s for nor

mal value (19 U.S.C. § 1677b(b )) and a s a basis for constructed value. (19 U.S.C. § 1677b(e)).” Id . at 1254 (internal citations omitted).

In Certain Fresh Cut Flowe rs From Ecuador, 64 Fed. Reg . 18,878 (ITA Apr. 16, 1999) (prelim. results) (“Flowers From Ecua dor”), Commerce disregarde d the financial statements ofC ONSOL . C OURT N O . 02-00282 P AGE 34

producers that incurred losses in order to derive a n “element of profit” as contemplated by the SAA. This determination—that the SAA clearly contemplates that normal value includes an element o f profit—

was appl ied aga

in in Silicomangan ese fro m Brazil, 62 Fed. R eg. 37, 869 (July 15, 1997) (final results). There, Commerce stated that “[t]he presumption that normal value includes an element of profit is so strong that the post-URAA statute directs us to use one abovecost home market sale as the basis for normal value, even if hundreds of other sales have belowcost prices.” Id . at 37,877.

In Steel Concrete Reinforc ing Bars From the P.R.C., 66 Fed. Reg. 33,522 (ITA June 22, 2001) (final determination), Commerce explained that it found it appropriate to extend the practic e of exclu

ding loss es in the c alculati on of prof it for mar ket econ omy produce rs to nonmarket economy

producers. In the I ssues and Decision Memorandum accompany ing that determination, Commerce stated:

Although in some past cases we have aver aged in a loss as zero profit, we believe a better approac h is found in [Flowers From Ecuador], which disregards financial stateme nts showing a loss for purposes of calculating the profit component of construc ted value under Section 773(e)(2) of the Act in market ec onomy cases. The same principles applied in Flowers From Ecuador are reaso nably applied in a nonmarket economy case. Issues and Decision Mem. at Comment 8 (emphasis adde d).

Based on the foregoing , the court finds reasonable Commerce’s interpre tation of the term “profit” to include only positive amounts. The c ourt agrees with the reasoning in Rhodia , that sales mad e below c ost may

be disre garde d when ca

lculating profit:C ONSOL . C OURT N O . 02-00282 P AGE 35

25 Title 19 U.S.C. § 1677b(e)(2) states that the constructed value of imported merchandise shall be an amount equal to the sum of:

(A) the a ctual amo unts incur red and r ealized b y th e specif

ic exporter or producer being examined in the investigation or r eview for selli ng, ge neral, a nd adminis trative e

xpenses, a

nd for pr ofits, in connec tion with th e production and sa le of a f oreign like prod uct, in th e ordi nary cours e of tr ade, fo r cons umpt ion i n the f oreign country, or (B) [i]f a ctual da ta are not availa

ble with r espect t o the amou

nts described in subparagraph (A ), then [the CV of imported merchand ise shall include amounts e qual to]— (i) the actual amounts incurred and realized by the specific exporter or producer being e xamined in the Because negative losses a re often rejected and ignor ed for normal value, based on the clear expression of legislative intent conta ined within the SAA, Commerce’s decision to exclude them from the profit ratio is a reasonable extension of this policy

. Rhodia , 240 F. Su

pp. 2d at 1 254; see also Pesquera Mares , 266 F.3d at 1382 (“[S]tatutory interpre tations ar ticulate d by

Commerce

during i ts antidump ing proc eeding s are en titled to judicial deference under

Chevron .”); Chevron , 467 U.S. a t 844 (“[A] c ourt may

not substitu

te its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency .”).

Having conclude d that Comme

rce wa s reasonable in including only positive p rofits in i

ts calculations, the court turns to Fuy ao’s next two claims. Noting that “Commerce believes that the calculation of profit ratios in NME cases should be guided by the principles established under the CV profit provisions,” Fuya o advances two alternative arg uments based on the language of 19 U.S.C. § 1677b(e)(2)(B). 25 Fuyao Me m. at 28. Fuyao f

irst argues that the third alternativeC ONSOL . C OURT N O . 02-00282 P AGE 36

investigation or review for selling, g eneral, and administr ative expe

nses, and for prof its, in connection with the production and sale, for consumpti on in the f

oreign country , of merc handise that is in the same general categ ory of products as the subject merchandise, (ii) the w eighte d avera

ge of th e actua

l amounts incurred and realized by

exporters or producers that are subject to the investigation or review (other than the exporter or producer described in clause ( i)) for selling, general, and administrative expenses, and for profits, in connection with the production and sale of a foreig n like pro duct, in th e ordina ry course of trade, for consumption in the foreign country , or (iii ) the am ount s incu rred an d reali zed fo r sell ing, general, and administrative expenses, and for profits, based on any

other reasonable method, except that the amount allowed for profit may not exceed the amount normally r ealized by exporters or producers (other than the exporter or producer described in clause (i)) in connection with the sale, for consumption in the foreign country , of merchandise that is in the same general c ategory of products as the subject merchandise . . . . 19 U.S.C. § 1677b(e)(2)(A)–(B). method fo r deter

mining th e CV, foun

d in 19 U.S.C . § 1677b( e)(2)( B)(iii) , which pe

rmits Commerce to calculate CV profit “based on any other reasonable method,” does not require that profit be calculated only

on sales “in the ordinary

course of trade.” Fuy

ao Mem. at 28. Fuy

ao states: This [ordinary course of trade] criterion is specified for the second alternative CV profit method, but it is not required of the first or third alternative methods. Thus, this [third] provision does not support Co mmerce’ s decisio n to disre gard th e St. Goba in’s prof it figure on the assumption that the sales are outside the ordinar y course of trade.C ONSOL . C OURT N O . 02-00282 P AGE 37

Id

.

Fuyao is cor

rect that Commerce is not statutorily re quired to use only sales made in the ordinary c ourse of trade in its calculations. Because the court has determined that Commerce’s decision to disregard negative pr ofit amounts was a reasonable interpretation of the lang uage of the statute in light of the language of the SAA, however, it necessarily follows that Fuyao’ s argument must fail.

Fuy ao next ar gues tha t under th is third al ternativ e method f

or calc ulating the CV pro fit, the amount of such profit “may not exceed the amount normally re alized” by other produc ers and exporter s. Fuy

ao Mem. a

t 28 (citin g 19 U.S. C. § 1677b( e)(2)( B)(iii) ). Thus, F

uya o reason s that because the Asahi profit was the highest prof it amount of any I

ndian company on the r

ecord, as Commerce acknowledges, “the use of the Asahi profit figure alone would be in direc t violation of the statute’s guidelines.” Id

.

As previously noted, the cour t defers to Commerce’s reasonable interpre tation of the term “profit” as used in 19 U.S.C. § 1677b(e)(2)(A). The c ourt is not convinced, however, that in develo ping its me

thodolog y Co mmerce t

ook fully into consi deratio n the dire ction in 19 U.S.C. § 1677b(e)(2)(B)(iii), that the constructed va lue of imported merchandise shall be a sum equal to the amounts incurred and realized for selling, general, and administrative expenses, and f or profits, based on any other r

easonable method, except that the amount allowed for profit may not exceed the amount normally realized by exporte rs or produc ers (other than the exporter or producerC ONSOL . C OURT N O . 02-00282 P AGE 38

26 SG&A are the gener al expenses related to the cost of manufacturing. Magnesium Corp. of Am. v. United States , 20 CIT 1092, 11 04, 938 F. S upp. 885, 8 98 (1996). S G&A includes labor, materials, factory overhead, and energy

costs. See FMC Corp. v. United States , 27 CIT __, __, slip. op. 03-15 at 4 (Feb. 11, 2003). The SG&A ratio is multiplied by the cost of manufacture in order to obtain the amount of SG&A expenses. See Titanium Sponge From the

described in clause (i)) in connection with the sale, for consumption in the foreign country , of merchandise that is in the same general categ ory of products as the subject merchandise . . . . 19 U.S.C. § 1677b(e)(2)(B)(iii) (emphasis added).

On remand, Commerce shall fully explain how its chosen methodology complies with the statute. In particular, Commerce shall explain why, given that the Asa hi profit amount was the highest profit amount of any Indian company

on the record, the use of the Asahi profit fig ure alone complies with

the statut e’s prov isions.

E. Commerc e’s Dete rmination W

ith Regard

to the “Purc

hase of Trad

ed Goods” i

n the Deno minator for

the SG& A Ratio 1. Fuyao “Traded goods” are pr

oducts that are purchased and then resold by a company. See Timken Co. v. United States , 23 CIT __, __, 59 F. Supp. 2d 1371, 1379 (1999). Here , Commerce calculated Fuy

ao’s normal value by totaling the sums of COM [cost of manufac ture], overhead, profit and packing, and SG&A. I n calculating SG&A, Commerce included, inter alia , manufacturing, administrative, and selling expenses l ess ener

gy and labor costs. B ecause

the rec ord of thi s review lacked adequate information re garding whether the tra ded goods purchased by

St. Gobain affected the cost of manufacture , Commerce properly

excluded St. Gobain’s “purchase of traded goods” from the SG&A ratio. 26C ONSOL . C OURT N O . 02-00282 P AGE 39

Russian Federation, 64 Fed. Reg. at 1601. Gov’t Brief at 67 (internal citations omitted).

At the administrative level, Fuy ao acknowledged that the costs associate d with the purchas e of thes e goods

should not b e include d in the de nominator

for the f actory overhea d ratio because “the pur chase of traded g oods is not r

elevant to St. Goba

in’s production operations.” Fuyao Me

m. at 33 (emphasis in original). However, Fuy ao reasoned that the purchase and

resale of trade d goods g enerat

es selling and administrative expenses that have already been included in the numerat or of the SG&A ca

lculation . There fore, Co mmerce would overstate the SG&A ratio if it failed to include the cost of ac quiring these traded goods as part of the SG& A denominator. Id . (empha sis added

). With res

pect to th ese expen ses, Fuy ao state s: [U]sing selling and administrative expenses that the record indicates include expenses for the purchase and re sale of traded goods as part of the SG&A ratio numera tor without including the acquisition cost of these same traded goods in the denominator plainly distorts the resulting SG&A ratio. Id . at 34.

For its part, Commerce maintains that [a]lthough [Fuyao] seemingly acknowledges Commerce’s above

cited conclusion [that St. Gobain’s financial statements do not provide evidence as to the location of expenses associated with the purchase of traded goods], [Fuy ao] repeatedly

argues that “record evidence supports the conclusion” that costs associated with the purchase of tr aded goods are part of St. Goba in’s report ed SG&A amount. . . . However, Commerce cannot find, nor has [Fuy ao] specifically pointed to[,] any such “record evidence.”C ONSOL . C OURT N O . 02-00282 P AGE 40

Gov’t Brief at 68.

Fuyao disputes Commerc e’s conclusion that there is no evidence that the selling a nd administ rative exp enses associ ated with “p urchase of trad ed goods” are incl uded in the S G&A expenses l isted in the

St. Gobain

financi al statement. Fuy ao state s: Nowhere does Commerce allege that the purchase and resale of traded g oods does not

incur se lling an

d administr

ative co sts. Thus, Commerce implicitly acknowledg es that the selling and administrative expenses related to the purchase and resale of traded goods mu st be inclu

ded in the financi al statement somewher e . Since there is no indication that these other selling and administrative expenses have been separately reported in the financi al statem ent ( e.g ., a separate line item described as “administrative expenses for traded goods”), re cord evidence supports the conclusion that expenses related to the purchase and resale of traded goods are part of the company’s report ed SG&A amount. Fuyao Me

m. at 34 (emphasis in original).

This Court has consis tently rejecte d determ

inations b y Co mmerce t

hat inclu de the co sts related to the purchase and resale of traded goods in the denominator of the SG&A ra tio when Commerce could not show how expenses related to these goods aff ected production of the subject merchandise. See, e.g. , Rhodia , 185 F. Su pp. 2d at 1 357 (gr

anting C ommerce ’s reque st for a voluntary

remand to remove expenses related to traded g oods from the denominator for the calcula tion of the

overhea d ratio); see also Timken , 23 CIT at __, 59 F. Supp. 2d at 1379 (reman ding to Co mmerce t

o exclude p

urchase s of trad

ed good s from SG&

A, since it “faile d to demonstr ate how these alr

eady manufac tured g oods cons titute a ma terial c ost incur

red inC ONSOL . C OURT N O . 02-00282 P AGE 41

27 The two I

ndian pro ducers w ere St. G obain and Asahi. Th e forme

r’s fina ncials were used to calculate SG&A and F OH; the latter’s were used to calculate pr ofit. manufacturing t

he subjec t mercha ndise.”) ; Luoyang Bearing Factory v. United States , 26 CIT __, __, 240 F. Supp. 2d 1268, 1305 (remanding to Commerce to “exclude ‘consumption of trade d goods’ from Commerce’s overhead, SG & A and profit rate calculations and to recalc ulate the dumping margins accordingly . . . .”). In like manner, a ny amount of selling a

nd administrative costs related to such goods should be excluded from the ratio’s numera tor.

Here, b oth Commer

ce and F uya o acknow ledge t hat ther e is insuff icient ev idence t o determine where

expenses a ssociate d with the p urchase of trade d goods a

re acc ounted for in St. Gobain’s financial statement. See Fuyao Me m. at 34; Gov’t Brief at 67. On remand, Commerce shall correct the calculation of the SG&A ra tio by either (1) e liminating expenses relating to the purchase of traded goods from the nume rator, (2) including costs relating to the purc hase of traded goods in the denominator, or (3) developing some other reasonable method for taking traded goods into account.

2. PPG PPG complains that Commerce’s calculations of the SG&A, FOH, and pr ofit values were flawed by using

ratios derived from the actual costs found in the financial stateme nts of two Indian producers 27 and applied “to the values assigned to the Chinese responde nts’ Factors of Production (FOP) . . . .” PPG Mem. at 4. PPG’s argument is essentially one of apples and orang es. That i s, PPG insists that the v alues mus t be distor ted if the y pu rport to a ccurat elyC ONSOL . C OURT N O . 02-00282 P AGE 42

represent the values for SG&A, F OH, and profit since they are calculated using ratios derive d from the Indian produce

rs’ actual experience that were applied to F OP values for float glass and PVB developed by

Commerce. In order to c orrect this distortion [i]n the underlying investigation, [PPG] had proposed a methodolo gy

that would

have pe rmitted [Com

merce] to calcula te values for overhead, SG&A[,] and profit by allocating the Indian produce r’s over head and SG&A e xpenses to t he consu mption of it s two key raw mate rials – fl oat gla ss and PVB . This approach w ould have pro duced fi

xed, quanti

ty- based ra tes for F OH and SG&

A in terms of dollars per square meter of float glass and PVB consumed. [Commerce ] could hav e then ap plied thos e rates

to the Chine se producers’ con sumptio n of float glas s and PVB. Id . at 39 –40. C ommer ce decl ined t o adop t thi s appr oach re asoni ng:

Petitioners’ proposed methodology would only factor in the r aw material usage of float gla ss and PVB. While the Department recognizes that these two inputs constitute the majority of the raw materials consumed to manufacture [W]indshields, other direct inputs cannot be ignored. Direct inputs other than float g lass and PVB are almost alway s included in [W]indshields (ink, mirror buttons, etc). The Department finds it is better to calculate ratios ba se d o n a ll di re ct co st s, as op po se d t o P et it io ne rs ’ m et ho do lo gy, which takes i nto account only quantities of float glass and PVB. Issues and Decision Mem. at 38–39

Having failed to convince Commerce to adopt its proposed methodolog y in the underly ing inve stigation, PPG, for the first time, prop oses anot

her appr oach: [PPG does] not contest the use of the Indian producer’s annua l report as the starting point to derive values for F OH, SG&A and profit, o r even us ing rat

ios. What Pla

intiffs c ontest is [Commerce ’s] failur

e to adjus t the rati os to acc ount for c ertain identifiable differences [which it claims it has identified, between the actual experience of the I ndian producers and the values for the factors of production developed by Commerce]. Considering theC ONSOL . C OURT N O . 02-00282 P AGE 43 FOP value s selecte d by

[Commerce ], a more r

eprese ntative r atio that still would have reflected the I ndian producer’s actual FOH and SG&A experience, as mandated by the statute . . . [Under PPG’s new proposal] the numerator for the ratio, which comes from the [St. Gobain] annual report, continues to reflect the actual FOH and SG&A experience of the surr ogate Indian pr

oducer during t he perio d covere d by

the report. The de

nominator

is adjus ted to accoun t for i denti fiabl e diff erences in mat erial s, ene rgy and labor in the val ues sele cted by

[Commerce ] for the Ch

inese FOP. PPG Mem. at 37–38.

PPG believes that it is entitled to present this methodology to the court, without having advanced it to Commerce at the administrative level because Commerce, in rejecting its proposed methodology in the unde

rlying investig ation, did not adequately a ddress its distortion argument. PPG Mem. at 42 (“While [Commerce] provided an explanation for why it did not use the methodology propose d by Plaintiffs, nowhere doe s [Commerce] address the underlying issue of the distortions caused by using cost-based ratios for FOH, SG&A and pr ofit, even though the question was plainly raised by Plaintiffs.”) (emphasis in original).

The situation here is similar to Timken Co. v. United States , 25 CIT __, __, 166 F. Supp. 2d 608, 625 (2001), w

here the Court said : “Commerce attempted to capture in its rate calculation the surrogate comp any’s experience in i ncurring overhea d and SG&A expenses,” and created a reasona ble internally consistent ra tio that does not violate the boundaries set by 19 U.S.C. § 1677b(c) (1994). The fact that one of the actual para meters is likely to be highe r while the other one is likely to be lowe r than the corresponding data derived from the records of [the subject produc er] means that neither Commerce’s methodology shall be deprived of this Court’sC ONSOL . C OURT N O . 02-00282 P AGE 44 defere nce, nor does it constitute sufficien t ground s for the

Court to uphold Timken’s suggestion as a more palatable a lternative. Id. (citing Am. Spring

Wire Corp. v. United States , 8 CIT 20, 22, 590 F. Supp. 1273, 1276 (1984)) ; Am. Spring

Wire , 8 CIT

at 22, 590

F. Supp. a

t 1276 (“T

he court may not substitu

te its judgment for that of the [agency ] when the choice is ‘between two fairly conflicting views, even though the court would justif iably have mad

e a diff erent choice ha

d the matte

r been be fore it de

novo . . . .’” (internal citations omitted)).

While having some attraction for its apparent consistency , PPG’s argument must fail. First, while complaining of Commerce’s methodology , PPG has failed to demonstrate that applying the

ratios to the Indian producer’ s actual costs will provide a more accurate picture than applying the

ratio to the FOPs found by Commerc e. This is particularly r elevant because the goal is to establish the costs for each individual Chinese company . The FOPs established by Commerce are designed to be surrog ates for these costs. Thus, it is difficult to see how PPG’s applying the

ratios to St. Gobain’s and Asahi’s actual costs would be a more acc urate reflection of these values. In addition, by failing to offer their methodology to Commerce at the administrative level, PPG cannot raise it for the first time here. “The exhaustion doctrine requires a party

to presents its claims to the relevant administrative agency for the agency ’s consideration before raising these c laims to the Court.” Fabrique de Fer de Charleroi S.A. v. United States , 25 C IT __, __ , 155 F . Sup p. 2d 8 01, 80 5 (200 1) (ci ting Unemployment Comp. Comm’n of Alaska v. Aragon , 329 U.S. 1 43, 155 (1 946)); Unemployment Comp. Comm’n of Alaska , 329 U.S. at 155 (“A reviewing court usurps the ag ency’s f unction when it sets aside theC ONSOL . C OURT N O . 02-00282 P AGE 45

ad mi ni st ra ti ve de te rm in at io n u po n a gr ou nd no t t he re to fo re pr es en te d a nd de pr iv es th e [ ag en cy] of an opportunity to consider the matter, make its ruling, and state the reasons for its action.”).

As in Timken , PPG has simply not demonstrated that its proposed resolution is any more

accura te than th e usual me

thod used b

y Co mmerce. That bein

g the ca se, the c ourt def

ers to Co mm er ce ’s se le ct io n o f m et ho do lo gy.

F. Commerce’s Determination With Regard to Oc ean Freight Averages Fuyao use d both NME and market economy freight carriers to ship its Windshields to the United States. In order to allow Commerce to use the cost of the market economy freight carriers even when Fuy

ao used NME carriers, Fuy ao calculated a weighted-a verage freig

ht cost to each U.S. delivery destination using only those market economy

shipments that approximated the NME carrier shipments by region, state, city , or zip code. See Fuyao Me m. at 35.

Comm erce, h owever , deci ded to use th ese wei ghted- average p rices only when the av erage market economy

price exactly matche d the zip code of the NME shipment destination. Where the zip codes did not match, Commerce used a surrogate value for shipments to that area. See Issues and Decision Mem. at 45.

Fuyao a rgues that Commerce should apply the freight rates Fuy

ao paid to market economy shippers to all of F uyao’s NME shippers, regardless of destination. See Fuyao Me m. at 37. Fuyao a

rgues that under Shakeproof , the act ual pric e paid for any

input is the

best ava ilableC ONSOL . C OURT N O . 02-00282 P AGE 46

information to value that factor of production. See Shakeproof , 268 F.3d at 1382 (“Where we can determine that a [non-market economy ] producer’s input prices are market determined,

accurac y, fairnes s, and predi ctabi lity are en hanced by using t hose p rices .”) (ci ting Lasko , 43 F.3d at 1446). Fuya

o further argues that in Peer Bearing Co. v. United States, 25 CIT __, 182 F. Supp. 2d 1285 (2001), the court determined that Commerce acted re asonably in “utilizing actual prices p aid in mar

ket econ omy curren cies to ma

rket ec onomy

supplier s to value

the entir e FOP” and that Commerce “has applied this practice consistently in recent ye ars.” Id. at 1314, 1312.

Commerce has broad authority to interpret the antidumping statute. Sigma, 117 F.3d at 1405. “The critical question is whether the methodology used by Commerce . . . e stablishes antidumping duty marg

ins as accurately

as possible.” Shakeproof , 268 F.3d at 1382. Here, Commerce chose not to use Fuy ao’s market economy

freight costs to value NME carrier shipments because those shipments to non-matching zip codes did not reflect the distance involved in the shipment. Because distance affec ts the cost of freight, Commerce determined that using freight purchases that we re not based on distance would result in inaccurate va lues for the freight costs. See Gov’t Br ief at 40 (“The f act that d istance affec ts the cos t of frei ght is al so evidenced by

actual freight providers’ rate schedules which are set by distance and weight.”) (citing FOP Valuation Mem. for Final Deter mination, Pub. R. Doc. 282).

Fuyao r elies on past Commerce determinations to support its argument that Commerce utilizes market economy car rier rates for all ocean fre ight shipments. See, e.g. , Heavy F orged Hand Tools From the P.R.C., 67 Fed. Reg. 57,789, 57,792 (I TA Sept. 12, 2002) (final results);C ONSOL . C OURT N O . 02-00282 P AGE 47

28 Rather, F

uya o argues that [i]n no other

case ha s the Dep artment r equired that the su

rroga te ocean freight match “exactly ” the NME destination. On the contr ary, the s urrogat e ocean freigh t rate s are av erages o r rough appro xim ates b ecause the De partm ent gen erall y uses an av erage surrogate rate for the Ea st Coast and the West Coast. If the Department is concerned about an exact match in terms of destination , specificity and c ontemporaneity, [Fuy ao’s] significant market- economy

shipment r

ates ar e unques tionably

far supe rior in all respe cts than the surrog ate used by t he Depa rtment. Fuyao Me

m. at 39 (emphasis in original). see also Tapered Roller Bearing s and Parts Thereof, Finished and Unfinished, From the P.R.C., 66 Fed. Reg. 35,937, 35,940 (I TA July 10, 2001) (prelim. results) (“[W]hen some or all of a specific company ’s ocean freight was provided dire ctly by market economy

companies . . . we used the reported market economy ocean freight values for a ll U.S. sales made by that company.”) . The cases Fuy ao cites, however, do not address the issue of valuing NME carrier destinati ons with dif

ferent market c arrier

destinati on rates

. 28 For example, record evidence indicates that price variances occur w hen shipping from a port to different zip codes within a state. See FOP Valuation Mem. for Final Determination, Conf. Rec. Doc. 121. The refore, Commerce’s decision to value carrier shipments by destination-specific values was reasonable, given that ocean freig

ht costs are influenced by distance. See, e.g. , Shakepr oof Assem bly Components, Div. of Ill. Tool Works, Inc. v. United States , 23 CIT __, __, 59 F. Supp. 2d 1354, 1358 (1999) (“Whether Commerce’s use of imported price s to value an entire factor of production is reasonable is inextricably linked to whe ther the methodology

promotes accuracy .”) (internal citation omitted).C ONSOL . C OURT N O . 02-00282 P AGE 48

29 PPG notes that St. Gobain, Asahi, and a third producer, Atul Glass Industrie s Ltd., accounted for nearly

70% of the total Indian auto g lass market. PPG Mem. at 27. For its part, PPG does not challenge Commerce’s dec ision to use surrogate values for NME ocea

n freig ht. Rather , PPG arg

ues that Co mmerce u sed the w rong sh ipping r ate in its calcula tions with r

espect t o Fuy ao. Spec ifically

, PPG conte

nds that in stead of

using the Maersk Sealand ocean freight rate s that were contemporaneous with the period of investiga tion, Commerce erred by

using a rate from a 1997 Fede ral Maritime Commission report. See PPG Mem. at 8.

However, the values urged by PPG appear to have been tainted by the inclusion of charges for “PRC Arbitraries.” See Petitioner s’ Surrog ate Data , Pub. R. Doc . 332, Ex. 19. These “PRC Arbitr

aries” appear to be non- market sh

ippers wh o transport carg o for a portion of th e trip from Fuzhao, China to the United States. See id . As such, a part of each ra te quoted by M aersk Sealand r eprese nts shippin

g perf ormed by a non-ma rket pro vider at

non-mar ket rate s. As a result, Co mmerce had sound r eason for prefe

rring t he Fede ral Mari time Commiss ion rate s to those proposed by PPG. See Nation Ford Chem. Co. v. United States , 21 CIT 1371, 13 74, 985 F. Supp. 133, 135 (1997) (Commerce should “avoid surrogate value s tainted by nonmarket forces.”).

G. Commerc e’s Dete rmination W

ith Regard

to the Surr

ogate Valu e of Elec tricity PPG argu es that Com

merce s hould hav e used, a s a surro gate va lue, the a verag e elect

ricity rate from the financials of three produc ers 29 of Wi nd sh ie ld s, ra th er th an th e a ggr eg at e c ou nt ry-C ONSOL . C OURT N O . 02-00282 P AGE 49

wide rate that Commerce alternatively employed. PPG claims that use of these r ates “that are more spe cific to t

he industr y in the surr ogate c ountry

actually producin g the sub ject mer chandise will yield more acc

urate dumping margins than will country -wide aggreg ate rates that reflect usage by a range of industries, most of which are c ompletely unrelated to the subje ct mercha ndise.” PP G Mem. at 2 7. As an in itial matte

r PPG make s no showin

g tendin g to sug gest that elec tric rat es are s omehow industry

-specif ic in I ndia. I n addition , as PPG con

cedes, i t is normal practice for Commerce to use the country -wide electricity

rate as a surrogate. See PPG Mem. at 25 (“[Commerce] has typically used country-w

ide values to value energy inputs such as electri city in NME ca ses . . . .” ). PPG cla ims, howev er, that

the situat ion here is similar t

o that in Certain Pr

eserve d Mushroom s from the P.R.C., 65 F ed. Reg . 66,703 ( ITA N ov. 7, 2000 ) (preli m. results of first new shipper review and first antidumping duty administrative review), where Commerce used the average rate of electricity

costs of mushroom producers. In the Pre liminary Results Valuation Memorandum, Commerce said:

We have selected the averag e rate of the above-named mushroom producers rather than the Agg regate Methodology

rate because the former rate is specific to the industry producing the subject merchandise and more contemporaneous to the POR than the Aggrega te Methodology r

ate, which relies on data from 1995 through 1997. Based on our knowledg e of the Indian prese rved mushroom industry through our c onduct of the concurrent antidumping proceeding on preser ved mushrooms from India, we have determined that there are 12 known pr oducers of preserved mushrooms in India. The four companies for which we calculated an electricity

rate thus account for a substantial segment of the industry . Furthe

r, prese rved mush

rooms pro duction oc curs in on ly a few areas in I

ndia. This situation differs from that in other recent cases in which the Aggre gate Methodology was applied, where the size and location of the I

ndian indu stry

was not kn

own to the

same extent.C ONSOL . C OURT N O . 02-00282 P AGE 50

Prelim. Results Valuation Mem., Pub R. Doc. 259 at 8 (emphasis added).

Commerce , howeve

r, disting uished the

situation here fr

om that in Certain Preserved Mushrooms. “The Department established a practice of using a simple average of c ountry-wide Indian state electricity

rates as a surrogate value for Chinese electricity

rates unless a party

has shown that a company c an be located only in a specific state . . . .” Tapered Roller B earings and Parts Thereof, Finished and Unfinished, From the P.R.C., 63 Fed. Reg . 63,842, 63,856 (ITA Nov. 17, 1998) (final results) (“Tapered Roller B earings”) (citing Mang anese Metal From the P.R.C., 63 Fed. Reg. 12,440, 12,446 (ITA Ma r. 13, 1998) (final results); Polyviny l Alcohol From the P.R.C., 61 Fed. Reg. 14,057, 14,062 (I TA Mar. 29, 1996) (final determination); Sulfanilic Acid Fr om the P.R.C. , 62 Fed. Reg. 25, 917, 25,91 9 (IT A May 12, 1997)(prelim. results); and Chrome-Plated Lug Nuts From the P.R.C., 63 Fed. Reg. 31,719, 31,722 (I TA June 10, 1998) (prelim. results). In Tape red Roller Bearings, Commerce note d: Electric ity p

rices a re subje ct to a num

ber of in fluence s specif

ic to the loca tion of the

plant. The se includ

e: local market c onditions, state intervention, methods of transmission, distribution of power generation and privatization. Simply put, there are more variables to consider and weigh than the location of the industry because of the nature of the electricity industry in India. Thus, it is fair and reasonable to use a simple averag e for large industries in all I ndian states as a surrogate value for electricity r

ates. 63 Fed. Reg. at 63,856–57.

The court agrees that PPG has failed to show a c ompelling reason for Commerce to have deviated from its usual practice of using the country -wide electricity

rate. This is particularly theC ONSOL . C OURT N O . 02-00282 P AGE 51

case be cause, u

nlike Cer tain Pres erved Mu shrooms, t here is no evidenc e that I

ndian flo at glas s producers are concentrate d in one geographical ar ea. Thus, because Commerce used its usual methodolo gy , and bec ause the re is no e vidence to sugg est that th e experie nce of th e Indian gla ss producers was somehow unique with respect to electr icity, or that their actual costs should be preferred over the country -wide cost, Commerce’s decision is sustained.

C ONCLUS ION On remand, Commerce shall revisit the evidence cited for its various findings and satisfy its obligations with specific reference to the evide nce it claims supports its conclusions and adequate explanations of its findings based on this evidence. The I TC shall also address the record evidence which “fa irly detracts” from the weight of the evidence supporting the ITC’s determination. Remand resu lts are du e within ni

nety day s of the da

te of this o

pinion, co mments are due thirt y days thereaft er, and repli es to s uch co mment s elev en days fro m thei r fili ng.

/s/ Richard K. Eaton Richa rd K. E aton, Judge Dated: December 18, 2003 New York, New YorkERRATA

Fuyao Glass Industry Group Co., Ltd., et al. v. United States , Slip Op. 03-169, Consol. Court No. 02-00282, dated December 18, 2003. Page 23: In line 13, replace “ 264 F. Supp. 2d at 1240” with “264 F. Supp. 2d at 1240–41”. Page 28 : In line 13, replace “ included other” with “included the other”. Page 33: In line 11, replace “ 27 CIT” with “26 CI T”. Page 35: In line 5, replace “ Rhodia , 240 F. Supp. 2d at 1254” with “ Rhodia , 26 CIT at __, 240 F. Supp. 2d at 1254”. Page 40: In line 21, replace “ Rhodia , 185 F. Supp. 2d at 1357" with “ Rhodia, Inc. v. United States , 25 CIT __, __, 185 F. Supp. 2d 1343, 1357 (2001)”. Page 42 : In line 7, replace “ to” with “over”. Page 49: In line 20, replace “ mushroom” with “mushrooms”. Page 51 : In line 9, repl ace “T he I TC” with “ Commerce ”. I n line 10, r

eplace “the I TC’s” with “Commerce’s”.

December 22, 2003