Court Opinion

ID: 818306
Source: CourtListenerOpinion
Date Created: 2013-02-02 23:35:29.248239+00
Date Added: 2024-06-11T09:54:58.108117
License: Public Domain

Slip Op. 06-191

                 UNITED STATES COURT OF INTERNATIONAL TRADE

____________________________________
                                    :
SINOPEC SICHUAN VINYLON WORKS, :
                                    :
            Plaintiff,              :
                                    :
       v.                           :
                                    :
UNITED STATES,                      :               Before: Judith M. Barzilay, Judge
                                    :               Court No. 03-00791
            Defendant,              :               Public Version
                                    :
       and                          :
                                    :
CELANESE CHEMICALS, LTD.,           :
E.I. DUPONT DE NEMOURS & CO,        :
                                    :
            Defendant-Intervenors.  :
____________________________________:

                                           OPINION

[Final Results of Determination Pursuant to Court Remand affirmed in part and remanded to
Department of Commerce.]

                                                    Dated: December 28, 2006

Garvey Schubert Barer (Ronald M. Wisla), J. Patrick Briscoe, William E. Perry, for Plaintiff
Sinopec Sichuan Vinylon Works.

Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; (Patricia M. McCarthy)
Assistant Director; Stephen C. Tosini, Commercial Litigation Branch, Civil Division, United
States Department of Justice; (David M. Spooner), Assistant Secretary for Import
Administration, United States Department of Commerce, for Defendant.

Wilmer, Cutler, Pickering, Hale & Dorr, LLP (John D. Greenwald), Atman M. Trivedi, Ronald I.
Meltzer, Jack A. Levy, for Defendant-Intervenors Celanese Chemicals, Ltd., & E.I. DuPont de
Nemours & Company.

Williams, Mullen, Clark & Dobins, James R. Cannon, Jr., Dean A. Barclay, for Amicus Solutia,
Inc.
Court No. 03-00791                                                                  Page 2
                                         I. Introduction

       This opinion evaluates remand results from the Department of Commerce (“Commerce”

or “the Agency”) produced in response to this court’s order in Sinopec Sichuan Vinylon Works v.

United States, 30 CIT __, Slip Op. 06-78 (May 25, 2006) (not reported in F. Supp.) (“Sinopec

II”).1 See generally Final Results of Determination Pursuant to Court Remand (“Final Results”).

In Sinopec II, the court remanded this case to Commerce on two issues. First, this court held that

Commerce must reanalyze its treatment of the acetic acid inputs that Plaintiff Sinopec Sichuan

Vinylon Works (“SVW”) purchases from its joint-venture (“JV”). Specifically, it declared that

       Commerce’s narrow focus on the fact that SVW and the JV are legally distinct
       entities deviates from its prior methodology and fails to adequately address a
       central tenet of antidumping margin calculation: Affiliated parties often have the
       potential to manipulate the prices and costs of their transactions with each other – a
       potential not coextensive with the de jure unity or independence of the parties as
       Commerce suggests. . . . Aside from examining the legal connections between
       SVW and its JV, Commerce must examine the possibility of SVW exerting de
       facto control over the JV.

Sinopec II, Slip Op. at 9–10. “If [SVW] exercises such control, . . . Commerce should treat the

JV’s acetic acid as SVW’s self-produced input. However, if the firms do not operate in such an

integrated manner, Commerce may not treat the acetic acid as self-produced by SVW.” Id. at 8

(footnote omitted). Second, the court instructed the Agency to revise its methods for calculating

SVW’s overhead costs by reconciling “its willingness to incorporate a by-product credit for

SVW’s acetic acid recovery into its figures” with an otherwise repeated unwillingness “to adjust

       1
       Familiarity with the procedural history and reasoning of Sinopec I, 29 CIT __, 366 F.
Supp. 2d 1339 (2005), and Sinopec II is presumed.
Court No. 03-00791                                                                 Page 3
its calculations to compensate for SVW and [its surrogate corporation’s] differing levels of

vertical integration.” Id. at 14. The court also held that Commerce should avoid double-

counting any factors in its calculations if reasonably possible. See id. at 16–17.

                             II. Jurisdiction & Standard of Review

       This court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c). The court

“must sustain ‘any determination, finding or conclusion found’ by Commerce unless it is

‘unsupported by substantial evidence on the record, or otherwise not in accordance with the

law.’” Fujitsu Gen. Ltd. v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996) (quoting 19

U.S.C. § 1516a(b)(1)(B)). Substantial evidence consists of “such relevant evidence as a

reasonable mind might accept as adequate to support a conclusion.” Matsushita Elec. Indus. Co.

v. United States, 750 F.2d 927, 933 (Fed. Cir. 1984) (quoting Consol. Edison Co. of N.Y. v.

NLRB, 305 U.S. 197, 229 (1938)) (quotations omitted). “[T]he possibility of drawing two

inconsistent conclusions from the evidence does not prevent an administrative agency’s finding

from being supported by substantial evidence.” Id. (quoting Consolo v. Fed. Mar. Comm’n, 383

U.S. 607, 619–20 (1966)) (quotations omitted). The court therefore “affirms Commerce’s factual

determinations so long as they are reasonable and supported by the record as a whole, even if

there is some evidence that detracts from the agency’s conclusions.” Olympia Indus., Inc. v.

United States, 22 CIT 387, 389, 7 F. Supp. 2d 997, 1000 (1998) (citing Atl. Sugar, Ltd. v. United

States, 744 F.2d 1556, 1563 (Fed. Cir. 1984)). It may not “substitut[e] its judgment for that of

the agency.” Hangzhou Spring Washer Co. v. United States, 29 CIT ___, ___, 387 F. Supp. 2d

1236, 1251 (2005) (citing Koyo Seiko Co. v. United States, 36 F.3d 1565, 1570 (Fed. Cir. 1994)).
Court No. 03-00791                                                                     Page 4
                                           III. Discussion

A. Sinopec Sichuan Vinylon Works’ Acetic Acid Inputs

       1. Commerce’s Position

       In Sinopec II, the court held that Commerce must examine whether SVW exercises de

jure or de facto control over its JV to determine whether to treat SVW’s acetic acid inputs as

self-produced.2 See Sinopec II, Slip Op. at 8–10. If the Agency found the presence of either

method of control, it should treat the acetic acid that SVW purchases from its JV as self-

produced; conversely, if SVW had neither de jure nor de facto control over the JV, Commerce

could not treat the acetic acid as self-produced. See id. at 8.

       On remand, Commerce again determined that SVW and its JV “are not vertically

integrated and, therefore, SVW’s acetic acid purchases do not qualify as self-produced inputs.”

Final Results at 6. In its reevaluation of SVW’s de jure control over its JV, Commerce continues

to find that they are “legally separate . . . entities.” Id. at 9. Since SVW owns [[   ]] of the JV,

while [[   ]] possesses a majority stake in the firm, see id. at 12, SVW’s level of ownership

“merely establishes that the two entities are affiliated, not that SVW exerts legal control over its

JV.” Id. at 9. Likewise, Commerce found that SVW does not exert de facto control over the JV.3

According to the Agency’s findings, SVW’s president, vice presidents, and managers have all

worked for SVW for over a decade, and during that period, they never worked for any company

       2
       The court notes that, contrary to Commerce’s contention in the Final Results, the Agency
must examine both the legal and operational relationships between SVW and its JV to determine
whether SVW possesses legal or operational control over its JV. See Final Results at 9.
       3
         In performing this analysis, Commerce employed the factors set out in subsection (f)(2)
of the collapsing regulation 19 C.F.R. § 351.401(f). It refrained from using the “substantial
retooling analysis” from subsection (f)(1), which this court has ruled inapplicable to evaluating
vertical integration between firms. See Sinopec II, Slip Op. at 9.
Court No. 03-00791                                                                 Page 5
affiliated with SVW, including the JV. See id. at 13. Similarly, “there is no evidence on the

record . . . indicating that managerial employees or board members” of the JV sit on SVW’s

board of directors. Id. Aside from attesting to its minority ownership interest in the JV,

        SVW proffered no additional evidence indicating that it makes any investment,
        employment, production, or distribution decisions with respect to its supplier’s
        acetic acid operations or overall corporate operation. The investigation record
        contains no evidence demonstrating that SVW incurs the operational, maintenance
        and depreciation-related expenses of its supplier’s [the JV’s] acetic acid plant or
        that SVW shares costs and expenses related to its JV’s acetic acid production.
        There are no facts on the record indicating that SVW monitors or directs the raw
        materials consumed by its supplier, that it establishes the production methods
        employed by its supplier, or that SVW requires that its supplier meet particular
        specifications unique to SVW.

Id. at 14 (internal citation omitted).

        Because the JV operates independently of SVW, the Agency decided not to treat the

acetic acid SVW purchases from its JV as self-produced. See id. at 17. Consequently,

Commerce “determined that a surrogate value for acetic acid, rather than the FOPs [factors of

production] for acetic acid, should be employed in calculating the NV [normal value] of the

acetic acid inputs.” Id. at 6.

        2. Plaintiff’s Position4

        SVW contests the Commerce Department’s finding that the firm does not exercise de

facto control over the JV. It claims that the “exclusive focus” of Commerce’s initial

investigation “on the companies’ legal corporate status, rather than the exercise of operational

control,” ensured that “the administrative record lacks relevant information on this issue.”

Comments SVW Second Remand Results 3 (“Pl. Cmts.”). In essence, by relying on the absence

        4
       Defendant-Intervenors Celanese Chemicals, Ltd., and E.I. Dupont de Nemours & Co.
concur with the Agency’s findings. See Comments Def.-Intervenors Final Results
Redetermination Pursuant Ct. Remand 12 (“Def.-Ints. Cmts.”).
Court No. 03-00791                                                            Page 6
of information reflecting SVW’s control over the JV, Commerce has “blamed the victim,”

instead of acknowledging that its initial preoccupation with the de jure relationship between the

firms distorted the information that it gathered when compiling the record. Pl. Cmts. 3. SVW

avers that the Agency should reopen the administrative record to solicit the relevant data. See Pl.

Cmts. 2.

       3. Analysis

       The court finds that Plaintiff’s claim that Commerce should reopen the record to lack

merit. Essentially, Plaintiff contends that Commerce’s determination lacks the substantial

evidentiary support that the law demands. However, upon review of the administrative record,

the court finds that Commerce sought information from SVW that addresses the de facto as well

as de jure relationships between SVW and its JV. Consequently, SVW had ample opportunity to

submit information to the Agency that would demonstrate its de facto control over its JV and so

would bear the burden of ameliorating any claimed deficiency in the record. See, e.g., Response

of Sinopec Sichuan Vinylon Works (SVW) to Second Supplemental Questionnaire, at 2 (Dep’t

Commerce Jan. 13, 2003); Response of Sinopec Sichuan Vinylon Works to Section A of the

Department’s Questionnaire, at 2–3, 6–8 (Dep’t Commerce Nov. 22, 2002); see also NSK, Ltd.

v. United States, 20 CIT 361, 369, 919 F. Supp. 442, 449 (1996) (“[R]espondents have the

burden of creating an adequate record to assist Commerce’s determinations.”) (quotations &

citation omitted). Because SVW has not demonstrated that the record lacks essential evidence,

let alone due to factors beyond its control, the court will not order Commerce to reopen the

record to glean more information about the de facto relationship between Plaintiff and its JV.

Furthermore, in its examination of whether SVW exerts de facto or de jure control over the JV,
Court No. 03-00791                                                              Page 7
the Agency has complied with the requirements of 19 U.S.C. § 1677(4)(B) 5 and 19 C.F.R.

§ 351.102(b).6 See also 19 U.S.C. § 1677(33); 19 C.F.R. § 351.401(f)(2). Therefore,

Commerce’s evaluation of Plaintiff’s acetic acid inputs is supported by substantial evidence and

in accordance with law, and therefore is affirmed.

B. Sinopec Sichuan Vinylon Works’ Overhead Costs

       1. Commerce’s Position

       The court’s remand instructions to Commerce in Sinopec II directed the Agency to “either

adhere to its customary practice of using the surrogate producer’s data without adjustment, or [to]

reopen the record to obtain data reasonably necessary to adjust [the surrogate firm’s] overhead so

that it accounts for differences between its manufacturing processes and those of SVW.” Sinopec

II, Slip Op. at 17. In addition, the court held that Commerce must “adopt a calculation method

that avoids double-counting insofar as it is reasonably avoidable.” Id. In its reanalysis of SVW’s

overhead costs, Commerce claims to have opted for the former choice and used the surrogate’s

data without adjustment because that method “yields the most accurate calculation of NV.”

Final Results at 19; see id. 17–20. Specifically,

       5
         “[A] party shall be considered to directly or indirectly control another party if the party is
legally or operationally in a position to exercise restraint or direction over the other party.” 19
U.S.C. § 1677(4)(B).
       6
        In relevant part, the regulation states that:
       In determining whether control over another person exists . . . , the Secretary will
       consider the following factors, among others: corporate or family groupings;
       franchise or joint venture agreements; debt financing; and close supplier
       relationships. The Secretary will not find that control exists on the basis of these
       factors unless the relationship has the potential to impact decisions concerning the
       production, pricing, or cost of the subject merchandise or foreign like product.
19 C.F.R. § 351.102(b).
Court No. 03-00791                                                                  Page 8
      the Department reanalyzed its treatment of SVW’s acetic acid inputs and has
      determined that the surrogate value of the purchased acetic acid contains the
      overhead, SG&A and profit related to the production and sale of acetic acid.
      Therefore, [it] found that applying the financial ratios of [the surrogate], which
      produces acetic acid, to the acetic acid surrogate value may have added additional
      costs.

Id. at 21–22. As a result, Commerce did not apply any financial ratios to the purchase value of

acetic acid. See id. at 22. “Thus, while the Department is adhering to its customary practice of

using the surrogate producer’s data without adjustment, it has modified how these data are

applied to the FOPs of PVA [polyvinyl acetate].” Id.

       2. Defendant-Intervenors’ Position7

       Defendant-Intervenors aver that Commerce unlawfully adjusted the application of

surrogate ratios to SVW’s costs. When the Agency failed to apply ratios for factory overhead,

SG&A expenses, and profit to the surrogate values for SVW’s acetic acid purchases to “avoid[]

‘possible double counting,’” Defendant-Intervenors assert that the Agency in reality

1) “[a]ssumed an element of double counting that . . . does not exist;” 2) “[a]rbitrarily skewed its

antidumping margin calculation by failing to apply any amount of factory overhead, SG&A and

profit to the most significant component of SVW’s direct costs;” and 3) “[d]eparted from its

long-established practice of applying surrogate financial ratios for factory overhead, SG&A and

profits to respondents’ appropriate cost base of . . . materials, energy and labor (“MLE”), . . .

manufacture, and . . . production.” Def.-Ints. Cmts. 2. According to Defendant-Intervenors,

       7
         Apart from a single issue, Plaintiff’s objections to Commerce’s overhead cost
calculations mirror those of Defendant-Intervenors. The unique issue that Plaintiff challenges –
that in calculating a by-product offset with respect to Plaintiff’s reduced acetic acid production,
the Agency deducted the value of the by-product from manufacturing costs after, rather than
before, application of the financial ratios – has already been affirmed by the court. Compare Pl.
Cmts. 4–9, with Sinopec II, Slip Op. at 11 n.11; Sinopec I, 366 F. Supp. 2d at 1351.
Court No. 03-00791                                                            Page 9
Commerce’s excision of supposed double counting embedded in the surrogate’s financial ratios

when calculating SVW’s acetic acid purchasing overheads is at best “speculative.” Def.-Ints.

Cmts. 3; see Def.-Ints. Cmts. 5–6. Similarly, “[w]hether a company that purchases an input

[SVW] carries higher or lower amounts for MLE or overheads, or a higher or lower ratio of

overheads to MLE, than a company that self-produces the same input [the surrogate] is

unknowable.” Def.-Ints. Cmts. 3. Furthermore, even if double counting did occur, Defendant-

Intervernors calculate that Commerce grossly over-estimated the relevant figures. See Def.-Ints.

Cmts. 4. Finally, they note that the Agency provided no explanation for these double counting

revisions aside from acknowledging “‘the Court’s concern.’” Def.-Ints. Cmts. 4 (quoting Final

Results at 19).

       3. Analysis

       A reading of the Final Results reveals that Commerce misconstrued the court’s ruling in

Sinopec II and interpreted the court’s concerns about double counting the overhead, SG&A, and

profit stemming from the surrogate’s acetic acid production as a finding that the Agency had in

fact done so. However, as Defendant-Intervenors point out, the court merely noted that

Commerce “seems to have double counted” the data. Compare Final Results at 19 n.9, 22, with

Sinopec II, Slip Op. at 16–17 (emphasis added). The court did not conclude that double counting

indeed did occur and, if so, to what degree.8

       In addition, Commerce’s reasoning for its calculation revisions does not constitute the

“reasoned decisionmaking, . . . including . . . a reasoned explanation supported by a stated

connection between the facts found and the choice made” that the law requires. China Steel

       8
        If Commerce felt unclear about the meaning of the remand order concerning double
counting, it should have sought clarification from the court.
Court No. 03-00791                                                              Page 10
Corp. v. United States, 27 CIT 715, 734, 264 F. Supp. 2d 1339, 1359 (2003) (second ellipses in

original) (quotations & citation omitted); see, e.g., Final Results at 19 n.9 (“[T]he Department

respectfully notes that any minor differences between SVW and [the JV] merely act to equalize

their respective integration levels . . . . Nevertheless, the Department has followed the Court’s

direction and revised its application of the surrogate overhead ratio to eliminate any possible

double-counting.”), 21–22, 33; see Burlington Truck Lines, Inc. v. United States, 371 U.S. 156,

167–68 (1962); cf. Rhodia, Inc. v. United States, 26 CIT 1107, 1111, 240 F. Supp. 2d 1247, 1251

(2002). The court thus remands the calculation of SVW’s overhead costs for adjustments that

comport with Commerce’s estimation of double counting, if any, that may have occurred.

Additionally, Commerce is to provide the court with a well-reasoned explanation for its final

decision.

                                        IV. Conclusion

       For the reasons stated above, the Department of Commerce’s evaluation of Plaintiff’s

acetic acid inputs is affirmed, and the court remands the calculation of Plaintiff’s overhead costs

for revision not inconsistent with this opinion. Commerce shall have until February 27, 2007 to

submit to this court its revised remand results, whereupon Plaintiff and Defendant-Intervenors

will have until March 13, 2007 to submit their responses. Defendant will thereupon have until

April 19, 2007 to submit its response to the parties’ comments.

       December 28, 2006                                      /s/ Judith M. Barzilay
Dated:______________________                                  _____________________
       New York, NY                                           Judge