Court Opinion

ID: 9839854
Source: CourtListenerOpinion
Date Created: 2023-09-14 16:01:59.171901+00
Date Added: 2024-06-11T09:42:02.846877
License: Public Domain

Slip Op. No. 23-132
              UNITED STATES COURT OF INTERNATIONAL TRADE

SHANGHAI TAINAI BEARING CO.,
LTD. AND C&U AMERICAS, LLC,

      Plaintiffs,

and

PRECISION COMPONENTS, INC.,
XINCHANG NEWSUN
XINTIANLONG PRECISION                           Before: Stephen Alexander Vaden,
BEARING MANUFACTURING CO.,                                      Judge
LTD, and HEBEI XINTAI BEARING
FORGING CO., LTD,                               Consol. Court No. 1:22-cv-00038

      Consolidated Plaintiffs,

v.

UNITED STATES,

      Defendant.

                                     OPINION

[Granting in part and denying in part Plaintiffs’ Motion for Judgment on the
Agency Record.]
                                                        Dated: September 14, 2023

David Craven, Craven Trade Law LLC, of Chicago, IL, for Plaintiffs and
Consolidated Plaintiffs.

L. Misha Preheim, Assistant Director, and Kelly Geddes, Trial Attorney,
Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of
Washington, DC, for Defendant United States. With them on the brief were Brian
Consol. Court No. 1:22-00038                                                 Page 2

M. Boynton, Principal Deputy Assistant Attorney General; Patricia M. McCarthy,
Director, Commercial Litigation Branch; Claudia Burke, Assistant Director,
Commercial Litigation Branch; and Jesus N. Saenz, Of Counsel, U.S. Department of
Commerce, Office of the Chief Counsel for Trade Enforcement & Compliance.

      Vaden, Judge:      Plaintiffs Shanghai Tainai Bearing Co., Ltd. and C&U

Americas, LLC filed suit objecting to Commerce’s resolution of the thirty-third

administrative review of the antidumping order on tapered roller bearings from

China. Joined by several Consolidated Plaintiffs, Shanghai Tainai brings multiple

claims of error against Commerce’s final determination.        They find moderate

success.   Commerce failed to consider the necessary factors established by the

Federal Circuit before applying a partial adverse inference to Shanghai Tainai to

punish it for the non-compliance of its suppliers in the underlying investigation.

Commerce also failed to justify its decision to deduct certain surcharges Shanghai

Tainai included as extra profit on top of the Section 301 duties when calculating the

U.S. price. Plaintiffs’ winning streak stops there, however, as the Court rejects

their remaining claims, including the claim that the Section 301 duties themselves

should have been deducted from the U.S. price.       Consequently, the Motions for

Judgment on the Agency Record shall be GRANTED IN PART AND DENIED IN

PART.

                                   BACKGROUND

      Shanghai Tainai is a Chinese manufacturer of tapered roller bearings

(TRBs), a type of precision bearing that facilitates the rotational movement of an
Consol. Court No. 1:22-00038                                                     Page 3

axle. 1 Tapered roller bearings are made out of four basic components:            rollers,

cages, cups, and cones. Rollers are small steel cylinders that are held together in a

circular housing called a cage. The caged rollers are inserted between two steel

rings, allowing them to move. The inner ring is called the cone, and the outer ring

is called the cup. The antidumping order on tapered roller bearings from China (the

Order) has been in place since June 15, 1987, and covers

             . . . tapered roller bearings and parts thereof, finished and
             unfinished, from China; flange, take up cartridge, and
             hanger units incorporating tapered roller bearings; and
             tapered roller housings (except pillow blocks) incorporating
             tapered rollers, with or without spindles, whether or not
             for automotive use.

Decision Memorandum for the Final Results of the 2019-2020 Administrative Review

of the Antidumping Duty Order on Tapered Roller Bearings and Parts Thereof,

Finished and Unfinished, from the People’s Republic of China (Decision Memo) at 2–

3 (Jan. 4, 2022), J.A. 1,004–05, ECF No. 43.            Shanghai Tainai’s Motion for

Judgment on the Agency Record challenges the final results of the thirty-third

administrative review of the Order, which covers imports of tapered roller bearings

from China during the period of June 1, 2019 through May 31, 2020 (the Period of

Review). See Initiation of Antidumping and Countervailing Duty Administrative

Reviews, 85 Fed. Reg. 47,731 (Dep’t of Com. Aug. 6, 2020).

1 Shanghai Tainai has brought its Motion together with another entity, C&U Americas
LLC. In earlier proceedings before this Court, Shanghai Tainai failed to explain the
relationship between itself and C&U Americas. See Shanghai Tainai Bearing Co., Ltd. v.
United States, 582 F. Supp. 3d 1299, 1308 (CIT 2022) (referring to the “recurring mystery”
of the relationship between Shanghai Tainai and C&U Americas and noting that Plaintiffs’
counsel declined the Court’s request to shed light on it.). The Court therefore refers
generally to Plaintiffs as Shanghai Tainai.
Consol. Court No. 1:22-00038                                              Page 4

                   I.     The Disputed Administrative Review

      On August 6, 2020, Commerce initiated the present administrative review of

the Order. See id. Commerce selected Shanghai Tainai as the sole mandatory

respondent because it was the largest exporter of tapered roller bearings from

China during the Period of Review. See Tapered Roller Bearings and Parts Thereof,

Finished and Unfinished, from the People’s Republic of China, 86 Fed. Reg. 36,099

(Dep’t of Com. July 8, 2021) and accompanying Preliminary Decision Memorandum

at 3, J.A. at 13,073, ECF No. 43. Commerce received questionnaire responses from

Shanghai Tainai and subsequently published its Preliminary Results on July 8,

2021. See 86 Fed. Reg. 36,099 (Dep’t of Com. July 8, 2021).

      In its Preliminary Results, Commerce took issue with a number of Shanghai

Tainai’s questionnaire responses. Commerce noted that Shanghai Tainai had not

provided “bills of materials” from its suppliers that could substantiate Shanghai

Tainai’s reported “factors of production.” Preliminary Decision Memorandum at 15,

J.A. at 13,085, ECF No. 43. 19 U.S.C. § 1677b(c)(1)(B) requires that Commerce

determine the normal value of subject merchandise from non-market economies

such as China “on the basis of the value of the factors of production utilized in

producing the merchandise” and that such value “be based on the best available

information regarding the values of such factors in a market economy country . . .

considered to be appropriate by [Commerce].” Commerce therefore requires that

Chinese respondents such as Shanghai Tainai provide factors of production data

that describe the inputs used to manufacture the merchandise as well as the price
Consol. Court No. 1:22-00038                                                       Page 5

of each input in a surrogate market-economy country. 2 See Response to Section D of

the Department’s Initial Questionnaire by Shanghai Tainai Bearing Co., Ltd

(Section D Questionnaire Response) at D-1, J.A. at 81,156, ECF No. 44. In the

current review, Shanghai Tainai reported the following inputs as factors of

production: chrome steel, cold-rolled steel, turned cups and cones, rollers, cages,

and anti-rust oil. Id. at D-15, J.A. at 81,170. Commerce chose Romania as the

surrogate country to value these inputs. 3 However, when Commerce requested that

Shanghai Tainai substantiate its reported factors of production by submitting bills

of materials from its input suppliers, Shanghai Tainai responded that its affiliated

suppliers “do not maintain production slips” and that it “‘had no way of knowing the

direct input bills of materials for the unaffiliated suppliers.’” Preliminary Decision

Memorandum at 15, J.A. at 13,085 (quoting Response to the Department’s A, C and

D Supplemental Questionnaire by Shanghai Tainai Bearing Co., Ltd. at 27, J.A. at

82,201, ECF No. 44). Commerce further noted that Shanghai Tainai did not report

all the necessary factors of production data for its products. For example, it omitted

a factor of production value for “rollers” despite a product description indicating

that rollers should be included as a cost. Id. at 15–16, J.A. at 13,085–86.

       For its Preliminary Results, Commerce used Shanghai Tainai’s reported

factors of production as “facts available,” averaged this data to assign a value to

missing fields, calculated an estimated dumping margin of 36.75 percent, and

2 Shanghai Tainai also included the labor and energy costs of its affiliate suppliers in its

factors of production database. Section D Questionnaire Response at D-15, J.A. at 81,170,
ECF No. 44.
3 Shanghai Tainai does not challenge the selection of Romania. Oral Arg. Tr. 41:11–12,

ECF No. 52 (Mr. Craven: “We do not object to the use of Romania.”).
Consol. Court No. 1:22-00038                                                  Page 6

issued additional supplemental questionnaires to both Shanghai Tainai and its

unaffiliated suppliers that sought to substantiate the factors of production data.

Id.; 86 Fed. Reg. at 36,100.       The unaffiliated suppliers did not respond to

Commerce’s supplemental questionnaires sent directly to them. See Decision Memo

at 7, J.A. at 1,009, ECF No. 43.     Shanghai Tainai maintained that, despite its

requests, its suppliers remained unable to provide the factors of production data.

See Response to the Department’s Second Supplemental Questionnaire by Shanghai

Tainai Bearing Co., Ltd. (Second Supplemental Questionnaire Response) at 6, J.A.

at 84,320, ECF No. 44. Shanghai Tainai attached letters it had sent to suppliers

requesting bills of materials for inputs it had purchased. Id. at Ex. SSD-2, J.A. at

84,406–16. Shanghai Tainai also attached a single response email from a supplier,

who declined to provide the information.      Id. at J.A. 84,415.   Shanghai Tainai

claimed that, because it was not affiliated with these suppliers, “Tainai has no

power to compel their assistance.” Id. at J.A. 84,320.

      Along with its response to the Second Supplemental Questionnaire, Shanghai

Tainai submitted a case brief that challenged numerous other aspects of

Commerce’s Preliminary Results.       See Administrative Case Brief of Shanghai

Tainai Bearing Co., Ltd., Sept. 10, 2021 (Shanghai Tainai Case Brief), J.A. at

84,449, ECF No. 44. Shanghai Tainai first objected to Commerce’s use of financial

statements from Timken Romania SA, a bearings manufacturer, as the basis for

calculating the surrogate values of Shanghai Tainai’s factors of production. Id. at 2,

J.A. at 84,450.     It claimed that Timken Romania’s complex manufacturing
Consol. Court No. 1:22-00038                                                 Page 7

operations and use of related-party transactions made it an inappropriate

comparator and that Commerce should have instead used the financial data of

alternative surrogate value candidates URB Rulmenti Suceava or Compa S.A.

Sibiu. Id. at 4–5, J.A. at 84,452–53. Shanghai Tainai next objected to what it

termed “double counting” in the valuation of rollers, a factor of production in its

tapered roller bearings.   Id. at 7, J.A. at 84,455.   It argued that, although it

purchased finished rollers, Commerce refused to value them using the purchase

price. Instead, Commerce used a surrogate value that “included the cost for the

materials as well as the cost of the processing to convert the materials into rollers

and the profit for the producer of the rollers.” Id. Shanghai Tainai also claimed

that Commerce’s dumping margin defied “commercial and economic reality,” citing

to Baoding Mantong Fine Chemistry Co., Ltd. v. United States, 113 F. Supp. 3d 1332

(CIT 2015) for the proposition that such margins must be discarded. Id. at 11, J.A.

at 84,459.    Plaintiff asserted that its significant operating profit would be

impossible if it were dumping at the margin Commerce calculated in the

Preliminary Results. Id.

      Shanghai Tainai further alleged that Commerce improperly deducted Section

301 duties from the U.S. price of its tapered roller bearings, resulting in a higher

dumping margin. Id. at 8, J.A. at 84,456. It argued that, although 19 U.S.C. §

1677a(c)(2)(A) requires the deduction of “United States import duties,” the statute

should be interpreted to refer to ordinary customs duties and not those duties

imposed under Section 301, which are temporary “special” duties and therefore
Consol. Court No. 1:22-00038                                                     Page 8

properly included in the U.S. price. Id. at 9, J.A. at 84,457. Shanghai Tainai also

claimed that Commerce improperly capped the U.S. price by deducting customer

payments denominated as “additional revenue for 301” from the price, even where

Shanghai Tainai charged amounts that exceeded the amount of Section 301 duties.

Id. at 10, J.A. at 84,458.     This tended to increase Shanghai Tainai’s dumping

margin by reducing the U.S. price. Finally, Shanghai Tainai faulted Commerce for

declining to grant a “by-product offset” for scrap metal that it sold, which further

increased its dumping margin. Id. at 10–11, J.A. at 84,458–59.

      On January 10, 2022, Commerce published its Final Results and

accompanying Decision Memo.         See Tapered Roller Bearings and Parts Thereof,

Finished and Unfinished, From the People’s Republic of China: Final Results and

Partial Recission of Review; 2019-2020 (Final Results), 87 Fed. Reg. 1,120 (Dep’t

Com. Jan. 10, 2022); Decision Memo, J.A. at 1,003, ECF No. 43. It decided to apply

partial facts available with an adverse inference to fill the gaps in Shanghai

Tainai’s missing factors of production data. See Decision Memo at 7, J.A. at 1,009,

ECF No. 43. When an interested party fails to act to the best of its ability to comply

with a request for information from Commerce, Commerce may use an inference

adverse to that party in selecting the information that will fill the gap in the record.

See 19 U.S.C. § 1677e(b). Here, Commerce did not find that Shanghai Tainai had

failed to cooperate to the best of its ability. Instead, it based its decision to apply an

adverse inference on the lack of cooperation from Shanghai Tainai’s suppliers. See

Decision Memo at 8, J.A. at 1,010, ECF No. 43 (“[W]e find that Tainai has
Consol. Court No. 1:22-00038                                                      Page 9

cooperated with Commerce’s requests for information, but its missing [factors of

production] information from unaffiliated suppliers necessitates the use of partial

AFA[.]” 4). To do this, Commerce relied on Mueller Comercial De Mexico, S. de R.L.

De C.V. v. United States, 753 F.3d 1227 (Fed. Cir. 2014). See id. at 12–13, J.A. at

1,014–15. In Mueller, the Federal Circuit affirmed Commerce’s practice of using

facts available with an adverse inference to calculate a respondent’s dumping

margin in situations where the respondent cooperated but the respondent’s supplier

did not. See Mueller, 753 F.3d at 1233. The Court described this practice as resting

on policy considerations; namely, that doing so may cause the respondent to induce

a supplier’s compliance by refusing to do business with the supplier unless it

cooperates with Commerce’s requests for information. This may deter the supplier’s

non-cooperation. See id.

       Commerce found that Shanghai Tainai “could potentially induce compliance

on the part of its unaffiliated suppliers.” Decision Memo at 13, J.A. at 1,015, ECF

No. 43. It wrote:

       Based on Tainai’s large volume of entries during the POR 5 and the
       quantity of TRBs that it purchased from suppliers, it is reasonable to
       conclude that Tainai is an important customer to its Chinese TRB
       suppliers, which means that Tainai is in a position to exercise its
       leverage over its TRB suppliers to induce them to cooperate. Thus, we
       find that it is reasonable to conclude that Tainai has some business
       mechanism to induce its suppliers to cooperate. Furthermore, Tainai
       may choose not to do business with these suppliers in the future due to
       their lack of cooperation and instead select suppliers . . . that [are]
       willing to commit to participation in an [antidumping] review. By
       applying AFA with respect to the missing data, Commerce is relying on

4 Adverse facts available, i.e., the acronym-happy trade bar’s way of saying Commerce drew

an adverse inference when choosing among the facts available for selection.
5 Period of review
Consol. Court No. 1:22-00038                                                  Page 10

      the statutory means that it has available to induce the cooperation of
      these parties so that Commerce has the information necessary to
      calculate accurate dumping margins.

Id. at 13–14, J.A. at 1,015–16. Commerce therefore applied partial facts available

with an adverse inference for the missing factors of production data. It summarized

the methodology it used to do so:

      Here, the missing data are the inputs for [turned cups and cones,
      rollers, or cages] that are then assembled by Tainai into finished TRBs.
      Accordingly, as partial AFA, we are applying the highest [factors of
      production] usage rate reported by Tainai’s affiliated suppliers for
      turned cups and cones, tapered rollers, and cages within each product
      type sourced solely from the unaffiliated suppliers for each associated
      CONNUM. 6

Id. at 13, J.A. at 1,015. Commerce emphasized that (1) it “calibrated the remedy so

that only purchases from uncooperative producers impact Tainai’s weighted-

average dumping margin,” and (2) its methodology “uses Tainai’s submitted [factors

of production] data in determining the normal value of each CONNUM[.]” Id. It

concluded that this manner of applying adverse facts available was “consistent with

the overriding purpose of the Act of fairness and accuracy” as well as “the purpose

of applying AFA, which is to deter non-cooperation without being punitive.” Id.

This methodology yielded a dumping margin of 538.79 percent. Final Results, 87

Fed. Reg. at 1,121.     By way of comparison, the China-wide entity rate that

6 “CONNUM” is an acronym for “control number” and denotes a distinct tapered roller
bearing product. To ensure that Commerce is comparing like products in the home and
U.S. markets, it asks respondents to sort merchandise according to key differentiating
categories — in this review, by product description, outer diameter, inner diameter, and
weight. For example, cup-50-25-0.30 would be a distinct product, or CONNUM, with a
“cup” design, an outer diameter of 50, an inner diameter of 25, and a weight of 0.30
kilograms. See Request For Information at Section C, J.A. at 1,448–49, ECF No. 43.
Consol. Court No. 1:22-00038                                              Page 11

Commerce assigned to companies that did not request a separate rate was 92.84

percent. Id.

         Commerce’s Final Results also rejected the other arguments Shanghai Tainai

made in its case brief. Commerce first found that it was appropriate to use Timken

Romania’s financial statements to value Shanghai Tainai’s factors of production

because neither alternative entity met regulatory criteria: Rulmenti operated at a

loss, and Compa S.A. Sibiu did not produce comparable merchandise.        Decision

Memo at 18, J.A. at 1,020, ECF No. 43. In contrast, Timken Romania’s financial

statements were usable because (1) Timken Romania produced tapered roller

bearings and (2) its financial statements were accompanied by an auditor’s report

that identified no irregularities. Id. at 19, J.A. at 1,021.

         Commerce next denied that it double counted the value of Shanghai Tainai’s

purchases of finished rollers by using a surrogate value rather than the purchase

price.    Id. at 20, J.A. at 1,022.     Commerce explained that Shanghai Tainai

purchased these rollers from non-market economy suppliers, and 19 U.S.C. §

1677b(c)(1) combined with 19 C.F.R. § 351.408 require Commerce to apply surrogate

values to all such factors of production. Id. at 21, J.A. at 1,023. Commerce also

rejected Shanghai Tainai’s argument that its dumping margin defied commercial

and economic reality. Id. at 28, J.A. at 1,030. Commerce explained that “[t]he fact

that the [factor of production] consumption rates we are using as partial AFA are

the highest such rates does not per se make them unrealistic or unreasonable. The

[factor of production] consumption rates are Tainai’s own rates and, therefore,
Consol. Court No. 1:22-00038                                                 Page 12

commercial, and nothing on the record indicates they are aberrational.”            Id.

Commerce denied the precedential authority of Baoding Mantong and pointed out

that, in Nan Ya Plastics Corp. Ltd. v. United States, 810 F.3d 1333 (Fed. Cir. 2016),

the Federal Circuit held that Commerce’s determination is accurate “‘if it is correct

as a mathematical and factual matter,’” and reflects commercial reality if “‘it is

consistent with the method provided in the statute.’”       Id. at 29, J.A. at 1,031

(quoting Nan Ya Plastics, 810 F.3d at 1344).       Therefore, Commerce “‘need not

examine the economic or commercial reality of the parties, specifically, or of the

industry more generally, in some broader sense.’” Id.

      Commerce next disagreed that Section 301 duties were improperly deducted

from U.S. price and cited to prior decisions that treated these duties as “U.S. import

duties,” which are required by statute to be deducted. Id. at 22, J.A. at 1,024.

Commerce also continued to find that amounts Shanghai Tainai charged customers

to offset the Section 301 duties must be capped at the actual amount of the Section

301 duties and that additional amounts could not be included in the U.S. price of

the merchandise. Id. at 22–23, J.A. at 1,024–25. Commerce concluded by finding

that it correctly denied Shanghai Tainai’s claim for a by-product offset because

Plaintiff had failed to provide production records that could substantiate the

amount of scrap generated from the production of subject merchandise during the

period of review. Id. at 26, J.A. at 1,028.

      After receiving the Final Results, which contained a far larger dumping

margin than Commerce had found in the Preliminary Results, Shanghai Tainai
Consol. Court No. 1:22-00038                                                  Page 13

submitted a ministerial error allegation.      See Ministerial Error Allegations of

Shanghai Tainai Bearing Co., Ltd. (Ministerial Error Allegations), J.A. at 84,881,

ECF No. 44. Shanghai Tainai’s allegation focused on Commerce’s methodology for

choosing partial facts available and alleged that it did not properly implement its

decision to “rel[y] on Tainai’s highest reported usage rate for each of the [factors of

production] on a product-specific rate for each control number[.]” Id. at 3, J.A. at

84,883.   Rather than select the factor of production on a product-specific basis,

Commerce allegedly selected the factor of production on a more general component-

level basis, leading to distortions.   For example, Shanghai Tainai alleged that

Commerce took factors of production usage rates from much heavier, more

expensive bearings and applied them to lighter, cheaper bearings that shared

nothing in common besides being “the same general type of component” but which

“are simply not the same product.” Id. at 4–5, J.A. at 84,884–85. Shanghai Tainai

further alleged that the absence of factors of production data for the production of

finished inputs — such as turned cups and cones, rollers, and cages — was

“ultimately irrelevant” because Shanghai Tainai purchased these inputs in a

finished state and knew their usage rates. Id. at 6–7, J.A. at 84,886–87.

      On February 10, 2022, Commerce published its response to Shanghai

Tainai’s ministerial error allegations. See 2019–2020 Antidumping Administrative

Review of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,

from the People’s Republic of China: Allegation of Ministerial Errors in the Final

Results (Ministerial Error Response), J.A. at 13,467, ECF No. 43.           Commerce
Consol. Court No. 1:22-00038                                                 Page 14

rejected both of Shanghai Tainai’s allegations, describing them as falling outside of

19 CFR § 351.224(f)’s definition of a ministerial error as “an error in addition,

subtraction, or other arithmetic function, clerical error resulting from inaccurate

copying, duplication, or the like, and any other similar type of unintentional error.”

Id. at 3–5, J.A. at 13,469–71. Commerce wrote, “While we were less than exact in

our phrasing, the language in our memoranda and programing indicates our

intention to apply the AFA on a product description basis as that product was

reported in the CONNUM.” Id. It described its manner of selecting facts otherwise

available with an adverse inference and applying surrogate values to finished

inputs as reflecting intentional methodological choices rather than an unintentional

error. Id.

                             II.    The Present Dispute

      On February 24, 2022, Shanghai Tainai filed its Complaint alleging that

Commerce’s Final Results were unsupported by substantial evidence and arbitrary

and capricious. See Complaint, ECF No. 7. In its Motion for Judgment on the

Agency Record, (Pls.’ Br.), Shanghai Tainai claimed the same defects that it had

alleged during the administrative process: (1) Commerce improperly applied facts

available with an adverse inference to a cooperative entity; (2) the facts that

Commerce selected were unreasonable and distortive; (3) the dumping margin that

Commerce calculated defied commercial and economic reality; (4) Commerce erred

in selecting the financial statements of Timken Romania as the source for the

surrogate values of Shanghai Tainai’s factors of production; (5) Commerce
Consol. Court No. 1:22-00038                                               Page 15

improperly valued finished inputs purchased by Shanghai Tainai using surrogate

values; (6) Commerce improperly deducted Section 301 duties from the U.S. price of

the subject merchandise; (7) Commerce improperly capped amounts that Shanghai

Tainai charged its customers and denominated as “additional revenue for 301”; and

(8) Commerce should have granted Shanghai Tainai a by-product offset. Pls.’ Br. at

13, 23, 24, 31, 35, 42, 44, 46, 52, ECF No. 32.

      Shanghai Tainai’s Motion was accompanied by a separate Motion from

Chinese entities that were not selected for individual review but received the same

rate as Shanghai Tainai. See Consolidated Plaintiffs’ Motion for Judgment on the

Agency Record, ECF No. 34; see also 19 U.S.C. § 1673d(c)(5)(A) (providing that the

all-others rate shall be an average of the dumping margin assigned to entities

selected for individual     review).     These    Consolidated Plaintiffs (Precision

Components, Inc., Xinchang Newsun Xintianlong Precision Bearing Manufacturing

Co., Ltd. and Hebei Xintai Bearing Forging Co., Ltd.) moved for judgment on the

agency record with an accompanying brief whose sole claim was that any new rate

resulting from a remand of Commerce’s Final Results should also be applied to the

Consolidated Plaintiffs. See Consolidated Plaintiffs’ Motion for Judgment on the

Agency Record at 10, ECF No. 34.

      The Government then filed its Response to Plaintiffs’ Motion for Judgment on

the Agency Record (Def.’s Br.), ECF No. 37, rejecting Shanghai Tainai’s arguments.

See Def.’s Br., ECF No. 37. The Government described its decision to apply facts

available with an adverse inference as reasonable. Id. at 9. 19 U.S.C. § 1677e(b)(1)
Consol. Court No. 1:22-00038                                                  Page 16

provides for the application of facts available with an adverse inference whenever

an “interested party” has failed to cooperate to the best of its ability with a request

for information.    The Government pointed to Commerce’s determination that

Shanghai Tainai’s unaffiliated suppliers were interested parties in their own right

because they were “producers of subject merchandise.” Id. at 10 (citing the scope of

the Order as including “TRBs and parts thereof, finished and unfinished.”).

Because Commerce had issued questionnaires seeking factors of production data

from both Shanghai Tainai and its unaffiliated suppliers, the suppliers’ failure to

respond meant that “the statute permitted Commerce to ‘use an inference that is

adverse to the interests of that party in selecting from among the facts otherwise

available,’ or, fill the gap in the data with information that may result in a higher

dumping margin in order to induce future cooperation with Commerce’s requests.”

Id. at 11 (quoting 19 U.S.C. § 1677e(b)(1)(A)). The Government also argued that

Shanghai Tainai’s efforts to collect this data from its suppliers were lacking, noting

that Shanghai Tainai only sought the information after the Preliminary Results

and could only demonstrate a single round of correspondence with its suppliers. Id.

at 15. The Government noted that Shanghai Tainai had previously participated in

a 2012–13 new shipper review under the Order; therefore, it and its suppliers knew,

or should have known, that “[t]his is fundamental data that any producer or

importer should be prepared to provide.” Id. at 13 (emphasis in original).

      The Government also rejected Shanghai Tainai’s other claims. It described

Commerce’s choice of facts available to fill the gaps in the record as reasonable
Consol. Court No. 1:22-00038                                                Page 17

because Commerce used “reported costs for similar inputs from Tainai’s affiliated

producers,” did so only for “components that were 100% provided by unaffiliated

parties,” and determined that choosing facts with an adverse inference was

“necessary to induce future cooperation from Tainai’s unaffiliated suppliers.” Id. at

18.   The Government denied that Commerce’s determination needed to reflect

“commercial reality” as an independent standard, citing Federal Circuit precedent.

Id. at 23. The Government next argued that the claims originating in Shanghai

Tainai’s ministerial error allegations — namely, that Commerce used factors of

production data from highly dissimilar products and that missing factors of

production data for finished inputs it purchased were irrelevant — were not

ministerial errors and were adequately addressed by Commerce’s Ministerial Error

Response. Id. at 25–27. The Government then claimed that Commerce reasonably

determined that Timken Romania’s financial statements were the best available

information for calculating surrogate value, pointing to Commerce’s statutory

discretion to make such a determination and to various defects in alternative

financial statements that rendered them unusable. Id. at 30–31. Regarding the

deductibility of Section 301 duties, the Government cited Commerce’s consistent

practice of deducting them from U.S. price as “U.S. import duties” and argued that

Commerce reasonably capped amounts that Shanghai Tainai charged customers

and denominated as “additional revenue for 301” by limiting such amounts to the

actual amount of the Section 301 duties. Id. at 34, 36. Finally, the Government

described Commerce’s denial of Shanghai Tainai’s request for a by-product offset as
Consol. Court No. 1:22-00038                                                Page 18

a reasonable response to Shanghai Tainai’s failure to provide evidence of the

amount of scrap it produced during the period of review. Id. at 38–39.

      On March 23, 2023, the Court held oral argument. See Oral Arg. Tr., ECF

No. 52. There, the Court ordered supplemental briefing on Shanghai Tainai’s two

claims related to Section 301 duties. First, the Court asked the parties to consider

the deductibility of Section 301 duties from U.S. price in light of the Federal

Circuit’s decision in Borusan Mannesmann Boru Sanayi ve Ticaret A.S. v. United

States, 63 F.4th 25 (Fed. Cir. 2023), which upheld this Court’s decision that Section

232 duties are deductible as “U.S. import duties.”      Second, the Court ordered

supplemental briefing on the question of Commerce’s capping of amounts charged to

customers invoiced as “additional revenue for 301” after Plaintiff clarified the

nature of these charges at oral argument. See Oral Arg. Tr. 40:13–18, ECF No. 52;

see also Defendant’s Response to the Court’s March 23, 2023 Order (Def.’s Supp.

Br.), ECF No. 53; Plaintiffs’ Response to the Court’s March 23, 2023 Order (Pls.’

Supp. Br.), ECF No. 54.     With the record now complete, the Court decides the

parties’ claims.

                   JURISDICTION AND STANDARD OF REVIEW

      The Court has jurisdiction over Plaintiffs’ challenge to the Final Results

under 19 U.S.C. § 1516a(a)(2)(B)(i) and 28 U.S.C. § 1581(c), which grant the Court

authority to review actions contesting final determinations in antidumping reviews.

The Court must sustain Commerce’s “determinations, findings, or conclusions”

unless they are “unsupported by substantial evidence on the record, or otherwise
Consol. Court No. 1:22-00038                                                Page 19

not in accordance with the law.”       19 U.S.C. § 1516a(b)(1)(B)(i).    If they are

unsupported by substantial evidence or not in accordance with the law, the Court

must “hold unlawful any determination, finding, or conclusion found.” Id. “[T]he

question is not whether the Court would have reached the same decision on the

same record[;] rather, it is whether the administrative record as a whole permits

Commerce’s conclusion.” See New American Keg v. United States, No. 20-00008,

2021 WL 1206153, at *6 (CIT Mar. 23, 2021).         Furthermore, “the possibility of

drawing two inconsistent conclusions from the evidence does not prevent an

administrative agency’s finding from being supported by substantial evidence.”

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

      Reviewing agency determinations, findings, or conclusions for substantial

evidence, the Court assesses whether the agency action is reasonable given the

record as a whole. Nippon Steel Corp. v. United States, 458 F.3d 1345, 1350–51

(Fed. Cir. 2006); see also Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951)

(“The substantiality of evidence must take into account whatever in the record

fairly detracts from its weight.”). The Federal Circuit has described “substantial

evidence” as “such relevant evidence as a reasonable mind might accept as adequate

to support a conclusion.” DuPont Teijin Films USA v. United States, 407 F.3d 1211,

1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229

(1938)).
Consol. Court No. 1:22-00038                                               Page 20

                                    DISCUSSION

                                    I. Summary

       Commerce may apply facts otherwise available with an adverse inference

against a cooperating respondent on the theory that doing so will incentivize the

respondent’s non-cooperative suppliers to provide information sought during an

antidumping review. However, when it does so, Commerce must satisfy specific

requirements that the Federal Circuit has identified — namely, Commerce must

make a case-specific determination that the respondent can influence its suppliers’

decision to cooperate, and Commerce must take into account the predominant

interest in accuracy and explain any deterrence-based rationale that is used against

the cooperating party. The Court finds that Commerce failed to meet this standard

and remands Commerce’s Final Results for additional explanation consistent with

those requirements. In doing so, the Court does not accept Shanghai Tainai’s claim

that Commerce calculated a dumping margin that had no basis in commercial

reality.   The Court also rejects Plaintiffs’ argument that Commerce improperly

selected the financial statements of Timken Romania when calculating surrogate

values. That entity’s information was the best available to Commerce.

       The Court agrees with Shanghai Tainai that Commerce did not sufficiently

explain its decision to cap price increases that Shanghai Tainai masked by invoicing

its customers for Section 301 duty payments.         The Court takes issue with

Commerce’s attribution of these amounts to the sale of services, rather than

merchandise, and additionally rejects its unacceptably narrow interpretation of the
Consol. Court No. 1:22-00038                                              Page 21

regulation defining price adjustments. However, Commerce was correct to deduct

the actual Section 301 duty payments from U.S. price, as doing otherwise would

ignore the clear textual command in the presidential order enacting the duties that

they must be in addition to existing duties.      Finally, Commerce’s rejection of

Shanghai Tainai’s request for a by-product offset was proper because Plaintiff

conceded that it failed to record the quantity of by-product it produced during the

period of review.

            II. Application of Partial Facts Available with an Adverse
                                    Inference

      When foreign merchandise is sold in the United States at less than its fair

value — thereby injuring a domestic industry — the law allows Commerce to

impose antidumping duties on the merchandise.         Antidumping duties equal the

amount by which the foreign market value, known as the “normal value,” of the

merchandise exceeds the U.S. price of the merchandise.        19 U.S.C. § 1677b(a).

When Commerce is missing data necessary to calculate the normal value of

merchandise subject to an antidumping investigation, the antidumping statute

provides a two-part process to fill the gap. See 19 U.S.C. § 1677e(a). The statute

enables Commerce to use “facts otherwise available” in place of the missing

information if:

      (1) Necessary information is not available on the record, or

      (2) An interested party or any other person —

          (A) Withholds information that has been requested by [Commerce],
Consol. Court No. 1:22-00038                                                 Page 22

         (B) Fails to provide such information by the deadlines for submission of

             the information or in the form and manner requested, . . .

         (C) Significantly impedes a proceeding under this subtitle, or

         (D) Provides such information but the information cannot be verified[.]

Separately, 19 U.S.C. § 1677e(b) permits those facts otherwise available to be

chosen with an adverse inference if “an interested party has failed to cooperate by

not acting to the best of its ability to comply with a request for information from

[Commerce].” Although § 1677e(a) and § 1677e(b) are often collapsed into “adverse

facts available” or “AFA,” the two statutory processes require distinct analyses

rather than the single analysis implied by the term “AFA.” Commerce first must

determine that it is missing necessary information; and, if it wishes to fill the

resulting gap with facts that reflect an adverse inference against an interested

party, Commerce must secondarily determine that the party has failed to cooperate

by not acting to the best of its ability. See Zhejiang DunAn Hetian Metal Co. v.

United States, 652 F.3d 1333, 1346 (Fed. Cir. 2011).

      Here, Commerce chose an unorthodox path to justify its application of facts

otherwise available with an adverse inference to Shanghai Tainai.          After first

determining in its Preliminary Results that Shanghai Tainai had failed to provide

bills of materials for its factors of production, Commerce notified Shanghai Tainai of

the deficiency and used Shanghai Tainai’s reported factors of production

information as facts otherwise available — without an adverse inference — to fill

the gap in the record.    See Decision Memo at 10, J.A. at 1,012, ECF No. 43.
Consol. Court No. 1:22-00038                                                    Page 23

Commerce then sent a supplemental questionnaire to both Shanghai Tainai and its

unaffiliated suppliers, seeking the missing information. Shanghai Tainai reported

to Commerce its fruitless attempts to elicit the information from its suppliers;

meanwhile, the suppliers ignored Commerce’s questionnaire. See id. at 6–7, J.A. at

1,008–09; see also Second Supplemental Questionnaire Response at Ex. SSD-2, J.A.

at 84,406–16, ECF No. 44. Commerce therefore concluded in its Final Results that,

although “Tainai has been cooperative throughout this review . . . its suppliers have

not.” Decision Memo at 7, J.A. at 1,009, ECF No. 43. Commerce’s ultimate decision

to apply facts otherwise available with an adverse inference against Shanghai

Tainai’s missing factors of production data was therefore not grounded in Plaintiff’s

failure to “act to the best of its ability to comply with a request for information,” as §

1677e(b) would seem to require. Rather, it was based on the suppliers’ failure to

cooperate. Commerce found that “Tainai’s unaffiliated TRB component suppliers

are interested parties within the meaning of [19 U.S.C. § 1677(9)] because they are

producers of subject merchandise (i.e., all TRBs and parts thereof, finished and

unfinished, from China are subject merchandise) and they failed to cooperate by not

providing their [factors of production] data, either through Tainai or directly to

Commerce.”     Id. at 12, J.A. at 1,014.       Commerce therefore determined that,

“consistent with [§ 1677e(b)], which states that Commerce may apply AFA when an

interested party has failed to cooperate by not acting to the best of its ability in

responding to Commerce’s requests for information, we find the use of partial AFA

with respect to the uncooperative producers to be appropriate.” Id.
Consol. Court No. 1:22-00038                                                  Page 24

      The legal standard that Commerce must meet in order to apply facts

available with an adverse inference against a respondent on the basis of its

suppliers’ non-compliance is explained in Mueller Comercial De Mexico, S. de R.L.

De C.V. v. United States, 753 F.3d 1227 (Fed. Cir. 2014). In the administrative

proceeding underlying that case, respondent Mueller’s supplier, Ternium, failed to

report production cost data on a product-specific basis because it claimed such data

was not “readily available.” Id. at 1230. The Federal Circuit found that “[i]n this

case, Mueller is a cooperating party, while Ternium is not.” Id. at 1232. Commerce

nonetheless calculated Mueller’s dumping margin using an adverse inference

because it “found that Mueller could and should have induced Ternium’s

cooperation by refusing to do business with Ternium, and Ternium would not be

sufficiently deterred if Mueller were unaffected by Ternium’s non-cooperation[.]”

Id. at 1233.   The Federal Circuit concluded that “Commerce may rely on such

policies as part of a margin determination for a cooperating party like Mueller, as

long as the application of those policies is reasonable on the particular facts and the

predominant interest in accuracy is properly taken into account as well.”           Id.

(emphasis added).

      The Federal Circuit explained that this doctrine requires more than a mere

deterrence rationale. It cited F.lli De Cecco Di Filippo Fara S. Martino S.p.A. v.

United States, 216 F.3d 1027, 1032 (Fed. Cir. 2000) for the proposition that, for non-

cooperating parties, § 1677e(b) must be applied to arrive at “a reasonably accurate

estimate of the respondent’s actual rate, albeit with some built-in increase intended
Consol. Court No. 1:22-00038                                                  Page 25

as a deterrent to noncompliance.” Mueller, 753 F.3d at 1234. This was “[a]ll the

more so for a cooperating party, for which the equities would suggest greater

emphasis on accuracy in the overall mix.” Id. Indeed, “Commerce cannot confine

itself to a deterrence rationale and also must carry out a case-specific analysis of the

applicability of deterrence and similar policies.”    Id.   In cases of supplier non-

cooperation, Commerce must carefully consider whether the cooperating respondent

has a mechanism to force the non-cooperating supplier’s cooperation.           “[I]f the

cooperating entity has no control over the non-cooperating suppliers, a resulting

adverse inference is potentially unfair to the cooperating party.”        Id. at 1235.

Therefore, “Commerce must take into account that Mueller itself was a cooperating

party and that Commerce’s inducement/evasion approach to Mueller’s rate

calculation could discourage Mueller’s own cooperation.” Id. at 1236.

      In sum, if Commerce has either (1) failed to consider evidence that

reasonably detracts from the conclusion that Shanghai Tainai had sufficient control

over its suppliers to force their cooperation by declining to do business with them;

or (2) failed to properly take into account the predominant interest in accuracy —

for instance, by failing to carry out a case-specific analysis of its deterrence

rationale or failing to take into account whether a cooperating party will be

discouraged from future cooperation — then Commerce lacks substantial evidence

to apply facts available with an adverse inference against a cooperating party on

the basis of supplier non-cooperation.      Here, Commerce failed to meet either

standard.
Consol. Court No. 1:22-00038                                                Page 26

      “The concept of ‘control,’ as discussed in Mueller, does not require actual

control. Instead, it requires Commerce to consider record evidence concerning the

practical ability of a respondent to induce the supplier’s cooperation.” Venus Wire

Industries Pvt. Ltd. v. United States, 471 F. Supp. 3d 1289, 1309 (CIT 2020).

Commerce did not conduct such an analysis here.         Its discussion of Shanghai

Tainai’s ability to induce its suppliers’ cooperation consisted of the following

paragraph:

      While Tainai argues that it could not persuade its suppliers to
      cooperate with Commerce’s requests for information, the record
      evidence supports our finding that Tainai could potentially induce
      compliance on the part of its unaffiliated suppliers. Commerce chose
      Tainai as a mandatory respondent in this review because it accounted
      for the largest volume of entries of subject merchandise during the
      POR. Based on Tainai’s large volume of entries during the POR and
      the quantity of TRBs that it purchased from suppliers, it is reasonable
      to conclude that Tainai is an important customer to its Chinese TRB
      suppliers, which means that Tainai is in a position to exercise its
      leverage over its TRB suppliers to induce them to cooperate. Thus, we
      find that it is reasonable to conclude that Tainai has some business
      mechanism to induce its suppliers to cooperate. Furthermore, Taiani
      may choose not to do business with these suppliers in the future due to
      their lack of cooperation and instead select suppliers . . . willing to
      commit to participation in an AD review. By applying AFA with
      respect to the missing data, Commerce is relying on the statutory
      means that it has available to induce the cooperation of these parties
      so that Commerce has the information necessary to calculate accurate
      dumping margins.

Decision Memo at 13–14, J.A. at 1,015–16, ECF No. 43 (emphasis added). Although

it is true that Shanghai Tainai purchased a large quantity of tapered roller bearing

parts from its suppliers as a collective group, Commerce’s analysis ignored the other

side of the equation — whether such quantity was significant as to each supplier.

Shanghai Tainai cited record evidence that “Tainai had multiple suppliers, all of
Consol. Court No. 1:22-00038                                                    Page 27

which only supplied a small portion of Tainai’s needs . . . . Simply put, Tainai was

not a significant enough customer of any of these entities to assert any market

power over these entities.” Pls.’ Br. at 21, ECF No. 32 (citing to Shanghai Tainai’s

Response to Section D of the Department’s Initial Questionnaire at Ex. D-7, J.A. at

81,310–12, ECF No. 44, providing a diversified supplier chart and recording the

percentage of total input quantity purchased from each supplier).               Whether

Shanghai Tainai’s claim was true as a factual matter was not established because

Commerce failed to consider the question. See Oral Arg. Tr. 15:13–16, ECF No. 52

(The Court: “[Commerce] seems to speak in terms of generalities of what may be

true in a large number of cases and not to the specific supplier scenario that

[Shanghai Tainai] put data in the record to support.”). Such one-sided analysis is

barred by the requirements that Commerce’s determinations be supported by

substantial evidence and that the evidence be “case specific.” See Universal Camera

Corp., 340 U.S. at 488 (“The substantiality of evidence must take into account

whatever in the record fairly detracts from its weight.”); Mueller, 753 F.3d at 1234

(“Commerce cannot confine itself to a deterrence rationale and also must carry out a

case-specific analysis of the applicability of deterrence and similar policies.”).

      The Government’s arguments to the contrary miss the mark.                 Its brief

depends heavily on the idea that Shanghai Tainai failed to use its best efforts to

cooperate with Commerce’s requests for data because it waited until after the

publication of the Preliminary Results to seek what it should have known was

necessary data and then only asked its suppliers once for the information. See
Consol. Court No. 1:22-00038                                                    Page 28

Def.’s Br. at 15, ECF No. 37; see also id. at 12 (“Substantial evidence supports

Commerce’s finding that Tainai and its unaffiliated suppliers failed to cooperate by

not acting to the best of their ability in providing a complete and accurate response

to requests for production information”); id. at 16 (“Commerce’s determination that

Tainai failed to act to the best of its ability is supported by substantial evidence[.]”).

Commerce, however, made no such determination.              It concluded precisely the

opposite, writing “we find that Tainai has cooperated with Commerce’s requests for

information[.]” Decision Memo at 8, J.A. at 1,010, ECF No. 43. The Government’s

arguments otherwise are not merely post hoc rationalizations; they are directly

contradicted by Commerce’s Final Results. See Burlington Truck Lines v. United

States, 371 U.S. 156, 168 (1962) (“The courts may not accept appellate counsel’s post

hoc rationalizations for agency action[.]”). And when the Government did address

Shanghai Tainai’s arguments concerning the diversity of its supplier network, it did

so by merely restating Commerce’s finding that Shanghai Tainai accounted for the

largest volume of entries of subject merchandise during the period of review and

purchased a large quantity of tapered roller bearings from its suppliers. See Def.’s

Br. at 19, ECF No. 37. That ignored Plaintiff’s argument and data suggesting that

it was not a large enough customer of any one supplier to induce compliance with

Commerce’s information requests. See Pls.’ Br. at 21, ECF No. 32.

      Commerce’s determination to apply facts available with an adverse inference

was also deficient for a second, independent reason: It failed to properly take into

account the predominant interest in accuracy.          See Mueller, 753 F.3d at 1233
Consol. Court No. 1:22-00038                                                  Page 29

(“Commerce may rely on such policies as part of a margin determination for a

cooperating party like Mueller, as long as the application of those policies is

reasonable on the particular facts and the predominant interest in accuracy is

properly taken into account as well.”) (emphasis added). It is true that, under the

antidumping statute, Commerce has discretion to choose among facts available in

order to draw an adverse inference. See 19 U.S.C. § 1677e(b)(2) (providing that an

adverse inference may rely on any information placed on the record). However,

“Commerce’s discretion in these matters . . . is not unbounded” — especially for a

cooperating party. De Cecco, 216 F.3d at 1032. The Federal Circuit has recognized

that Commerce must appropriately balance the competing goals of accuracy and

deterrence when it selects facts otherwise available with an adverse inference.

Although adverse facts are chosen in order to deter non-cooperation, “We find no

support in our caselaw or the statute’s plain text for the proposition that deterrence,

rather than fairness or accuracy, is the overriding purpose of the antidumping

statute when calculating a rate for a cooperating party.” Changzhou Wujin Fine

Chemical Factory Co., Ltd. v. United States, 701 F.3d 1367, 1378 (Fed. Cir. 2012);

see also Mueller, 753 F.3d at 1234 (Adverse inferences must be applied to arrive at

“‘a reasonably accurate estimate of the respondent’s actual rate, albeit with some

built-in increase intended as a deterrent to noncompliance,’” but for a cooperating

party “the equities would suggest greater emphasis on accuracy in the overall mix.”)

(quoting De Cecco, 216 F.3d at 1032).       And, as the Government acknowledges,

Commerce must support its selection of facts otherwise available with a reasonable
Consol. Court No. 1:22-00038                                                  Page 30

explanation.   See Oral Arg. Tr. 10:12–23, ECF No. 52 (The Court:               “[T]he

Government would agree that however broad the discretion Commerce may have to

pick among the facts available when drawing an adverse [inference], if there is a

limit of some sort, that limit would at least be . . . Commerce needs to have an

adequate explanation for its methodology about why it picked a particular fact . . . .

Would that be fair?” Ms. Westercamp: “That’s correct, Your Honor.”).

      Despite assigning Shanghai Tainai an eye-popping dumping margin of 538.79

percent, Commerce asserts that it carefully calibrated its choice of facts available to

prioritize accuracy rather than deterrence. See, e.g., Decision Memo at 13, J.A. at

1,015, ECF No. 43 (“[T]he manner in which we have applied partial AFA in this

review is consistent with the Court’s decision in Mueller (i.e., consistent with the

overriding purpose of the Act of fairness and accuracy) and the purpose of applying

AFA, which is to deter non-cooperation without being punitive.”). The Government

catalogued what it presented as reasonable concessions that Commerce made when

calculating Shanghai Tainai’s dumping margin, arguing that “Commerce did not

apply ‘total’ AFA, but rather took Tainai’s efforts into account in reaching its

determination, limiting its application of adverse facts available to only the missing

information where Tainai’s unaffiliated suppliers provided 100 percent of the

factors of production for chrome steel, rollers, and turned cups and cones.” Def.’s

Br. at 13, ECF No. 37. Commerce “use[d] Tainai’s own data” and substituted “the

highest factor of production usage rate reported by Tainai’s affiliated suppliers” for

these inputs, which “has the effect of ‘calibrating the remedy so that only purchases
Consol. Court No. 1:22-00038                                               Page 31

from uncooperative producers impact Tainai’s weighted-average dumping margin.’”

Id. at 17–18 (quoting Decision Memo at 13, J.A. at 1,105, ECF No. 43).

      It is hard to see how Commerce’s methodology could have effectively “[taken]

Tainai’s efforts into account” or “calibrat[ed] the remedy.” Id. The dumping margin

that Commerce calculated — 538.79 percent — wildly exceeded both the margin

calculated in the Preliminary Results (36.75 percent) and the China-wide rate

assigned to entities that did not participate in the investigation at all (92.84

percent).   Despite Commerce’s finding that Shanghai Tainai was a cooperative

entity, the margin it calculated could hardly have been more punitive had Shanghai

Tainai refused to participate. Commerce did not discuss how assigning such a high

rate to a cooperating party could potentially disincentivize cooperation despite

Mueller’s requirement that “Commerce must take into account that [the respondent

is] a cooperating party and that Commerce’s inducement/evasion approach to [the

respondent’s] rate calculation could discourage [the respondent’s] own cooperation.”

Mueller, 753 F.3d at 1236. The dumping rate at issue in Mueller — 48.33 percent —

is likewise dwarfed by the margin at issue here. Commerce’s recitation of the ways

in which it could have calculated an even higher margin does not satisfy its duty to

explain the margin it did calculate.

      Shanghai Tainai alleged in detail how Commerce’s methodological choices

resulted in such a high dumping margin.        Commerce selected facts otherwise

available by “applying the highest [factors of production] usage rate reported by

Tainai’s affiliated suppliers for turned cups and cones, tapered rollers, and cages
Consol. Court No. 1:22-00038                                               Page 32

within each product type sourced solely from the unaffiliated suppliers for each

associated CONNUM.” Decision Memo at 13, J.A. at 1,015, ECF No. 43. But rather

than select the usage rates “within each product type,” Commerce selected them

within a more general “component” category. Pls.’ Br. at 26, ECF No. 32. Shanghai

Tainai produces tapered roller bearings in three different component categories —

assembly, cup, or cone — and each category can vary widely in weight and

diameter. See Revised U.S. Sales Database, J.A. at 83,545, ECF No. 44. In order to

sort Shanghai Tainai’s bearings into distinct products, or CONNUMs, Commerce

asked Shanghai Tainai to provide the product description (that is, the component

type), the outer diameter, the inner diameter, and the product weight of each

bearing. See Request for Information at Section C, J.A. at 1,448–49, ECF No. 43.

By not selecting usage rates within the same “product type,” surrogate values were

calculated for bearings using data that came from different bearings that were up to

five times heavier and nearly twice as large in diameter. See Pls.’ Br. at 28, ECF

No. 32. For example, a bearing with a total weight of less than one kilogram was

calculated to use many times its total weight in turned cups and rollers — inputs

that would not weigh more than the bearing into which they are incorporated. Cf.

Revised U.S. Sales Database, J.A. at 83,545, ECF No. 44 (reporting tapered roller

bearing CONNUMs as sold in the U.S.); Margin Calculation, Calculated Inputs,

J.A. at 84,730–40, ECF No. 44 (calculating uniform input usage rates for tapered

roller bearings of differing weights). This had the effect of greatly increasing the

surrogate value of Shanghai Tainai’s bearings. Rather than take into account the
Consol. Court No. 1:22-00038                                                      Page 33

other dimensions that Commerce used to sort bearings into distinct products or

CONNUMs — inner diameter, outer diameter, and weight — Commerce looked only

to the component category, “arbitrarily selecting a value without any consideration

as to the enumerated factors identified by the Department as important in dividing,

categorizing and analyzing the bearings.” Pls.’ Br. at 27, ECF. No. 32.

       Commerce never explained how this methodological choice reflected “the

overriding purpose of the Act of fairness and accuracy.” Decision Memo at 13, J.A.

at 1,015, ECF No. 43. Instead, it pointed to other, unrelated methodological choices;

declared that these reflected Commerce’s concern with accuracy; and failed to

engage with the implications of its key choice to apply factors of production usage

rates at the component level without taking diameter or weight into account. See

id. When Shanghai Tainai challenged Commerce’s choice in its ministerial error

allegation, 7 Commerce responded that:

       While we were less than exact in our phrasing, the language in our
       memoranda and programing indicates our intention to apply the AFA
       on a product description 8 basis as that product was reported in the
       CONNUM. Thus, while Tainai and PCI may have preferred that we
       use a different methodology to apply partial AFA to certain of Tainai’s
       [factors of production], we intentionally made the methodological
       choice to apply the highest [factor of production] usage rate for turned
       cups and cones, rollers, and cages to each CONNUM based on the
       product type using the descriptions Tainai provided . . . . Accordingly

7 Because Commerce used facts otherwise available with an adverse inference for the first

time in its Final Results, Shanghai Tainai did not have an earlier opportunity to challenge
Commerce’s methodology.
8 “Product description” is one of four fields that Commerce used to create CONNUMs, each

of which is a distinct tapered roller bearing product. The other fields were inner diameter,
outer diameter, and weight. Shanghai Tainai used the “product description” field to
capture the component type: assembly, cup, or cone. See Pls.’ Br. at 27, ECF No. 32; see
also Request For Information at Section C, J.A. at 1,448–49, ECF No. 43.
Consol. Court No. 1:22-00038                                                 Page 34

        we find this allegation does not qualify as a ministerial error pursuant
        to 19 CFR 351.224(f).

Ministerial Error Response at 3, J.A. at 13,469, ECF No. 43. The Government’s

brief merely cited this rationale and concluded that “Commerce fully considered the

physical characteristics of the reported CONNUMs.” Def.’s Br. at 27, ECF No. 37.

But simply resting on Commerce’s discretion to do what it did fails to satisfy the

requirement to “carry out a case-specific analysis of the applicability of deterrence

and similar policies” when dealing with a cooperating respondent. Mueller, 753

F.3d at 1234.      In such situations, Commerce must carefully explain how its

methodological choices — certainly including those that result in a 538.79 percent

dumping margin — prioritize accuracy over deterrence. See id. at 1234. Because

Commerce did not do so, it failed to ensure that “the predominant interest in

accuracy is properly taken into account,” as the Federal Circuit requires. Id. at

1233.

        In making this finding, the Court does not accept Shanghai Tainai’s separate

argument that Commerce’s dumping margin “is inherently excessive and must be

discarded” because the margin “def[ies] commercial and economic reality.” Pls.’ Br.

at 31, 34, ECF No. 32. Although Baoding Mantong Fine Chemistry Co., Ltd. v.

United States, 113 F. Supp. 3d at 1338, found that the “assignment of so prohibitive

a dumping margin as 453.79% as a remedial measure is difficult to comprehend

from a commercial or economic standpoint,” the Federal Circuit later clarified that

there is no independent “commercial and economic reality” test.          See Nan Ya

Plastics, 810 F.3d at 1344 (holding that “[w]hen Congress directs the agency to
Consol. Court No. 1:22-00038                                                Page 35

measure pricing behavior and otherwise execute its duties in a particular manner,

Commerce need not examine the economic or commercial reality of the parties

specifically, or of the industry more generally, in some broader sense,” and that

Commerce’s determination “reflects ‘commercial reality’ if it is consistent with the

method provided in the statute, thus in accordance with the law.”).

      Nor does the Court decide Shanghai Tainai’s claim that, because it purchased

finished inputs, surrogate values for the materials used in these inputs were not

needed so that there were no gaps in the record to fill. See Pls.’ Br. at 23–24, ECF

No. 32 (“Simply put, since it was a roller, or a turned cup or cone or a cage, and

since the surrogate value data valued the roller, turned cup or cone or cage, the

amount of raw material consumed, the labor and energy expended and the like

which went into the roller was irrelevant. Such values were already included in the

finished components.”). The Court does not wish to tie the agency’s hands given the

breadth of the remand necessary to cure Commerce’s errors. Should Commerce

decide to base its calculations on the finished inputs rather than the materials used

to make those inputs, it remains free to do so.

      The Federal Circuit permits Commerce to draw an adverse inference against

a cooperating party for the actions of its non-cooperative suppliers based on case-

specific facts and analyses. Commerce’s decision to invoke generalities to draw such

an inference against Shanghai Tainai fails to meet this burden. Commerce also

fails to discuss the incentives created by its decision to assess such a high dumping

margin on a party the agency found to be cooperative. On remand, Commerce must
Consol. Court No. 1:22-00038                                                Page 36

first consider the record evidence regarding the control that Shanghai Tainai could

have exerted over its diversified suppliers and recognize that a deterrence rationale

applied against a cooperating party that lacks the ability to control its suppliers

may be unfair to that party. Commerce must then explain how its methodological

choices — specifically those that tended to increase Shanghai Tainai’s dumping

margin — comported with its duty to prioritize accuracy over deterrence when

dealing with a cooperating respondent. In doing so, Commerce must be attuned to

the risk that calculating a dumping margin for a cooperating respondent that is

significantly higher than the all-others rate given to non-participating entities

“could discourage [the respondent’s] own cooperation.” Mueller, 753 F.3d at 1236.

If Commerce finds that it lacks substantial evidence to conclude that Shanghai

Tainai was in a position to induce cooperation from its suppliers or that its

methodology of selecting facts otherwise available with an adverse inference did not

sufficiently prioritize accuracy over deterrence, Commerce should take new action

to bring its Final Results into conformity with the Federal Circuit’s mandates.

                        III. Selection of Surrogate Values

      When Commerce investigates an antidumping respondent that is based in a

non-market economy country such as China, Commerce must value the subject

merchandise using information taken from a market economy country. 19 U.S.C. §

1677b(c). Commerce does this by valuing the factors of production used to create

the subject merchandise — such as raw materials, labor, and utilities — based on

their value in a market economy country that is (1) at a comparable level of
Consol. Court No. 1:22-00038                                              Page 37

development to the non-market economy country and (2) a significant producer of

comparable merchandise.     Id. § 1677b(c)(4).   Commerce must select the “best

available information” to value the factors of production.      Id. § 1677b(c)(1).

However, Commerce has “broad discretion” to select the market economy

information that it uses to calculate surrogate values for a non-market economy

respondent. Zhejiang DunAn Hetian Metal, 652 F.3d at 1341.

      Here, Commerce determined that Brazil, Malaysia, Mexico, Romania, Russia,

and Turkey were economically comparable to China and were significant producers

of comparable merchandise during the period of review. See Preliminary Decision

Memo at 6–7, J.A. at 13,076–77, ECF No. 43. Because the parties only placed

complete surrogate value information for Romania on the record and because no

party argued in favor of selecting a different country, Commerce did not consider

surrogate value data from any country other than Romania. Id. at 7, J.A. at 13,077;

see also Oral Arg. Tr. 41:11–12, ECF No. 52 (Mr. Craven: “We do not object to the

use of Romania.”).   The Romanian surrogate value information on the record

consisted of the financial statements of three Romanian entities: Compa S.A. Sibiu

(Compa), URB Rulmenti Suceava (Rulmenti), and Timken Romania. Commerce

determined that Timken Romania’s financial statements were the best available

information for calculating surrogate values because the company is “a producer of

comparable merchandise, [the financial statements] are contemporaneous with the

POR, demonstrate profitability, are publicly available, are free of known

countervailed subsidies, and generally satisfy Commerce’s criteria for selecting
Consol. Court No. 1:22-00038                                                 Page 38

surrogate companies.”    Decision Memo at 19–20, J.A. at 1,021–22, ECF No. 43.

Commerce determined that Compa’s financial statements were not suitable for use

in deriving surrogate values “because [Compa] is not a producer of comparable

merchandise.” Instead, it “manufactures valves, windscreen wiper components, and

components for turbochargers and injections systems, none of which are comparable

to TRBs.” Id. at 18, J.A. at 1,020. Commerce also determined that Rulmenti’s

financial statements were not usable because “[i]t is Commerce’s practice to only

consider companies that are profitable for calculation of surrogate financial rations”

and “[d]uring the POR, Rulmenti operated at a loss.” Id.

      Shanghai Tainai challenges Commerce’s decision to rely on Timken

Romania’s financial statements and exclude those of Compa and Rulmenti. See Pls.’

Br. at 35, ECF No. 32. Shanghai Tainai cites Commerce’s “preference for multiple

financial statements,” alleges that Compa produces comparable merchandise to

Shanghai Tainai because Compa “engages in the precision grinding and finishing of

metal components and assembles them into finished goods,” and claims that

Rulmenti’s lack of profit is “a defect which can be readily remedied by setting the

profit to zero.” Id. at 37–38. Conversely, Shanghai Tainai argues that Timken

Romania’s financial statement “is badly distorted by a significant number of

affiliated party transactions and its active participation as a member of the Timken

Group.” Plaintiff “submits that these distortions are so significant as to require the

non-use of this financial statement.” Id. at 38. In particular, Shanghai Tainai

takes issue with the fact that the Timken Group is “a large group of inter-related
Consol. Court No. 1:22-00038                                                  Page 39

bearing producers including U.S. producers with an incentive to exclude, or

otherwise limit, international competitors such as Tainai from the U.S. market” and

conducts operations that “are significantly more complex than the operations

undertaken by Tainai.”     Id. at 39–40.    Shanghai Tainai notes that the Timken

Group “was an active participant in the review on behalf of the domestic industry.”

Id. at 38. In the alternative, Shanghai Tainai argues that Commerce should have

at least averaged the three financial statements together to “help avoid the

distortion that results from the use of a single financial statement.” Id. at 42.

      The Government rebuts Shanghai Tainai’s claims by first referencing

Commerce’s determination that the record contained only one usable financial

statement — that of Timken Romania — so that Commerce’s preference for using

multiple financial statements was not applicable here. Def.’s Br. at 33, ECF No. 37.

The Government next argues that the distortions alleged by Shanghai Tainai did

not render Timken’s financial statement unusable.         Although Timken Romania

belongs to the Timken Group, which participated in the underlying administrative

review of the order on the side of the domestic industry, the Government cited to

Commerce’s explanation that “it has previously used surrogate financial statements

of entities that are affiliated with the petitioners and such a status does not

disqualify a given financial statement from consideration.”        Id. (citing Decision

Memo at 19, J.A. at 13,405, ECF No. 43). Further, the Timken Group’s status as a

large group of inter-related bearing producers that conducts complex operations

should not be disqualifying given that Commerce found that Shanghai Tainai was
Consol. Court No. 1:22-00038                                               Page 40

itself part of “a multinational group of inter-related bearing producers.” Id. at 34

(citing Decision Memo at 19, J.A. at 13,405, ECF No. 43). The Government thus

concludes that record evidence supported Commerce’s determination that Timken

Romania’s financial statements constituted the best available information for

calculating surrogate values. Id.

      The Government is correct. Because Shanghai Tainai did not object to the

selection of Romania as the surrogate country, Commerce had a limited universe of

financial statements to choose from in calculating surrogate values. Each financial

statement was flawed. In the ensuing “ugly dog contest,” Commerce was forced to

rank these flaws and come to a reasonable determination regarding which financial

statement was “the least bad one.” Oral Arg. Tr. 42:15, 43:8, ECF No. 52. At oral

argument, the Court registered its concern that Timken Romania’s parent “is a

competitor of [Shanghai Tainai]” and was “the instigator” of the challenged

administrative review.   Id. at 42:23–24.   However, Timken Romania’s financial

statements were “accompanied by an auditor’s report that identifies no

irregularities in Timken Romania’s reporting.” Decision Memo at 19, J.A. at 1,021,

ECF No. 43. The Court therefore declines to find that it was unreasonable for

Commerce to reject the financial statements of companies that did not manufacture

bearings or turn a profit — flaws that are worse than those of Timken Romania.

Shanghai Tainai tellingly noted that ranking these flaws amounts to “a weighing

question.” Oral Arg. Tr. 44:15, ECF No. 52. Yet, this Court may not reweigh the

evidence and substitute its judgment for Commerce’s. See Matsushita Elec., 750
Consol. Court No. 1:22-00038                                                  Page 41

F.2d at 936. Rather, the Court may only review the record to ascertain “whether a

reasonable mind could conclude that Commerce chose the best available

information.” Jiaxing Bro. Fastener Co. v. United States, 822 F.3d 1289, 1300–01

(Fed. Cir. 2016). The parties bear the burden of building the record from which

Commerce makes its decision. See Qingdao Sea-Line Trading Co., Ltd. v. United

States, 766 F.3d 1378, 1386 (Fed. Cir. 2014) (“The burden of creating an adequate

record lies with the interested parties and not with Commerce.”) (citing QVD Food

Co., Ltd. v. United States, 658 F.3d 1318, 1324 (Fed. Cir. 2011)). Given the limited

options the parties placed on the record, the Court declines to second-guess

Commerce’s determination.

                               IV. Section 301 Duties

               A. Deduction of Section 301 Duties from U.S. Price

      In calculating Shanghai Tainai’s dumping margin, Commerce deducted

Section 301 duty payments from the U.S. price of the subject merchandise. Decision

Memo at 22, J.A. at 1,024, ECF No. 43. This increased Shanghai Tainai’s dumping

margin by reducing the U.S. price. Under 19 U.S.C. § 1677a(c)(2)(A), “[U.S. price]

shall be reduced by the amount, if any, included in such price, attributable to any . .

. United States import duties, which are incident to bringing the subject

merchandise from the original place of shipment in the exporting country to the

place of delivery in the United States.” This helps ensure an “apples [to] apples”

comparison between merchandise sold in the home market and the U.S. market by
Consol. Court No. 1:22-00038                                              Page 42

deducting costs associated with transporting merchandise to the United States.

Smith-Corona Group v. United States, 713 F.2d 1568, 1578 (Fed. Cir. 1983).

      However, not all duties are deductible as “United States import duties.” For

instance, antidumping duties are considered “special duties” distinct from “United

States import duties” and are not deducted from U.S. price because doing so would

create a circularity problem in which the imposition of antidumping duties would

itself result in increased antidumping duties. See Power Steel Co., Ltd. v. United

States, No. 20-03771, 2021 WL 6098309 at *3 (CIT Dec. 23, 2021). Shanghai Tainai

argues that this same treatment should be extended to Section 301 duties, which

are imposed when the United States Trade Representative determines that the

actions of a foreign government are unreasonable or discriminatory and burden or

restrict U.S. commerce. See 19 U.S.C. § 2411(b)(1). Although Shanghai Tainai did

not cite any authority for its argument, it believes these duties are akin to

antidumping duties because they are imposed “in response to a specific conditions”

[sic] and are removed when that condition is resolved. Pls.’ Br. at 45–46, ECF No.

32. By contrast, deductible “U.S. import duties” should be interpreted to include

only “ordinary customs duties” that “are not contingent on external events, but

rather are ordinary duties at bound rates and cannot be ‘avoided’ by taking actions

to comply with demands for action.” Id. at 46. The Government rejects Shanghai

Tainai’s argument. It first cites Wheatland Tube Co. v. United States, 495 F.3d

1355, 1362 (Fed. Cir. 2007) for the proposition that “[n]ormal customs duties . . .

have no termination provision and are permanent unless modified by Congress.”
Consol. Court No. 1:22-00038                                                Page 43

Def.’s Br. at 35, ECF No. 37.    The Government then notes that Commerce has

determined that Section 301 duties “are normal customs duties as they have been

imposed without a termination date” and that Commerce’s consistent practice is to

deduct them as U.S. import duties. Id.

      On March 15, 2023, the Federal Circuit decided Borusan Mannesmann Boru

Sanayi ve Ticaret A.S. v. United States, 63 F.4th 25 (Fed. Cir. 2023). There, the

Federal Circuit held that certain duties imposed under Section 232, a separate

statute that provides for duties to remedy national security threats, were deductible

from U.S. price as “United States import duties.” See 19 U.S.C. § 1677a(c)(2)(A).

The Federal Circuit reasoned that Presidential Proclamation 9705, which enacted

the Section 232 duties at issue, “makes clear that the duty newly being imposed was

to add to, and not partly or wholly offset, the antidumping duties that would be due

without the new duty.”      Borusan, 63 F.4th at 34.     The Federal Circuit cited

language in Proclamation 9705 declaring that the duties are to be imposed “in

addition to any other duties” and that “[a]ll anti-dumping, countervailing, or other

duties and charges applicable to such goods shall continue to be imposed.”

Proclamation 9705 Adjusting Imports of Steel into the United States, clause 2, 83

Fed. Reg. 11,625, 11,627, 11,629 (Mar. 15, 2018). The Federal Circuit concluded

from this language that:

      [W]hen applied to an article covered by antidumping duties, the
      Proclamation 9705 and antidumping duties must together result in a
      full imposition of both duties . . . . i.e., by subtraction of the
      Proclamation 9705 duty from the U.S. price if the Proclamation 9705
      duty is built into it. Otherwise, the Proclamation 9705 duty would be
      offset substantially or completely by a reduction in the antidumping
Consol. Court No. 1:22-00038                                                Page 44

      duty itself (through an increase in the U.S. price and therefore a
      decrease in the dumping margin), defeating the evident ‘in addition to’
      prescription of Proclamation 9705.

Borusan, 63 F.4th at 35. Declining to deduct the Section 232 duties imposed by

Proclamation 9705 would have the effect of increasing the U.S. price of Borusan’s

merchandise and thereby reduce its dumping margin and antidumping liability,

vitiating Proclamation 9705’s requirement that its duties add to, rather than

subtract from, any antidumping duties owed on subject merchandise. The Federal

Circuit therefore upheld Commerce’s decision to deduct these Section 232 duties

from U.S. price by treating them as “United States import duties.”

      The parties did not reference Borusan in their briefing. This Court ordered

supplemental briefing on the applicability of Borusan and the Court of

International Trade decision it upheld, see Borusan Mannesmann Boru Sanayi ve

Ticaret A.S. v. United States, 494 F. Supp. 3d 1365 (CIT 2021), to the deductibility

of Section 301 duties. See Def.’s Supp. Br., ECF No. 53; Pls.’ Supp. Br., ECF No. 54.

The Government described Commerce’s determination that Section 301 duties are

deductible “United States import duties” as consistent with the Federal Circuit’s

reasoning in Borusan. Specifically, the Government invoked the language of the

legal instrument that proposed the Section 301 duties. See Notice of Determination

and Request for Public Comment Concerning Proposed Determination of Action

Pursuant to Section 301:       China’s Acts, Policies, and Practices Related to

Technology    Transfer,   Intellectual   Property,   and   Innovation    (Notice   of

Determination Pursuant to Section 301), 83 Fed. Reg. 14,906 (U.S. Trade Rep. Apr.
Consol. Court No. 1:22-00038                                                  Page 45

6, 2018). Like Proclamation 9705, the Notice of Determination provided that “the

proposed action is an additional duty of 25 percent on a list of products of Chinese

origin identified in the Annex to this Notice.” Notice of Determination Pursuant to

Section 301, 83 Fed. Reg. at 14,907 (emphasis added). To illustrate, the Notice

explained that, “if a good of Chinese origin is currently subject to a zero ad valorem

rate of duty, the product would be subject to a 25 percent ad valorem rate of duty; if

a good of Chinese origin were currently subject to a 10 percent ad valorem rate of

duty, the product would be subject to a 35 percent ad valorem rate of duty, and so

on.” Id. The Government argues that this language “clearly implies that Section

301 duties are intended to be imposed in addition to other duties.” Def.’s Supp. Br.

at 8, ECF No. 53.

      The Notice of Determination Pursuant to Section 301 did not, by itself, enact

the Section 301 duties. The instrument that did, the Notice of Action Pursuant to

Section 301, 83 Fed. Reg. 40,823 (U.S. Trade Rep. Aug. 16, 2018), also refers to the

Section 301 duty as an “additional duty.” Id. at 40,824. Indeed, the Notice of Action

contains even stronger language than the Notice of Determination, providing that

“[p]roducts of China that are provided for in new HTSUS heading 9903.88.02, as

established by Annex A of this notice . . . will be subject to an additional ad valorem

duty of 25 percent. The rates of duty applicable to products of China that are

provided for in new HTSUS heading 9903.88.2 apply in addition to all other

applicable duties, fees, exactions, and charges.” Id. at 40,824 (emphasis added).

This language tracks that of Proclamation 9705, which “directed that the [Section
Consol. Court No. 1:22-00038                                                  Page 46

232 duty] was to be imposed ‘in addition to any other duties, fees, exactions, and

charges applicable to such imported steel articles.’”      Borusan, 63 F.4th at 29

(quoting Proclamation 9705, 83 Fed. Reg. at 11,627). Under Borusan, Commerce’s

decision to treat Section 301 duties as deductible “United States import duties” is

correct.

      Shanghai Tainai fails to engage with the order’s language and instead argues

that Section 301 duties are different in kind from Section 232 duties because the

latter “are put in place to protect the National Security and have no end point”

whereas the former “are subject to termination after 4 years absent an affirmative

determination to extend such duties.” Pls.’ Supp. Br. at 7, ECF No. 54. Shanghai

Tainai argues for applying a set of factors from Wheatland Tube Co. v. United

States, 495 F.3d 1355 (Fed. Cir. 2007), which found that yet another class of duties,

Section 201 “safeguard” duties, were non-deductible special duties akin to

antidumping duties. The Wheatland Tube factors are (1) whether the duties are

remedial duties that provide relief from the adverse effects of imports; (2) whether

the duties are imposed as a result of a finding of injury or threat to a U.S. industry;

and (3) whether the duties provide only temporary relief. Id. at 1362. Shanghai

Tainai asserts that Section 301 duties pass the Wheatland Tube test for non-

deductibility because the duties “were imposed in order to provide relief from unfair

competition in the form of the theft of intellectual property,” “were the result of an

express finding of threat to the U.S. as a result of the conduct in question,” and

“provide only temporary relief.” Pls.’ Supp. Br. at 8, ECF No. 54.
Consol. Court No. 1:22-00038                                                  Page 47

      However, Borusan instructs that it is the text of the legal order levying duties

that is paramount; and it is unnecessary for a reviewing court to apply the

Wheatland Tube factors where that text has spoken clearly. See Borusan, 63 F.4th

at 36 (“We do not decide whether [the holding] could soundly rest on distinctions

between § 232 and the § 201 regime more generally, and the distinction between

‘normal’ and ‘special’ duties . . . . That approach presents challenges that we may

avoid. The Commerce decision sufficiently rests on the proclamation-specific basis

set forth above.”). If the legal instrument enacting statutory duties provides that

such duties are intended to be additional to existing duties, then it is reasonable for

Commerce to treat them as “United States import duties” and deduct them from the

U.S. price when calculating dumping margins.        This principle, as elucidated in

Borusan, extends beyond Section 232 duties and applies to other statutory duties.

See id. at 33 (“If a statute merely authorizes a governmental officer or body to

impose a duty, as § 232 authorizes the President to do, it is the particular exercise

of the authority that determines — based on the character of that exercise —

whether the prescribed duty comes within [United States import duties].”). Here,

“the particular exercise of the authority” to enact the Section 301 duties at issue

intended for these duties to be additional to antidumping duties.          The Court

therefore affirms Commerce’s determination.

    B. Capping of Amounts Denominated as “Additional Revenue for 301”

      In its brief, Shanghai Tainai claims that Commerce wrongly limited

“payments denominated as ‘additional revenue for 301’ to the amount of Section 301
Consol. Court No. 1:22-00038                                                    Page 48

duties paid on the goods.” Pls.’ Br. at 46, ECF No. 32. The nature of this claim was

initially unclear to both the Court and the Government. See Oral Arg. Tr. 31:6–16,

ECF No. 52.      At oral argument, Shanghai Tainai clarified what it believed

happened:

      MR. CRAVEN: [T]he price reported in the sales database consisted of
      two elements. There was the selling price on the invoice to the
      customer, and there was a second line on the invoice that was
      denominated as 301 duties for certain customers. We have requested
      that the price include both the price paid for the good and the price
      charged to the client for the increase in price for the 301 duties. For
      certain clients Tainai simply raised the price on the invoice. For other
      clients, to justify the price increase, they denominated them as 301
      duties.

      The Commerce Department determined that they would only allow us
      to raise the price on the 301 duties to the extent that we had paid 301
      duties and that any difference between those two was not allowed to be
      added to the U.S. price. So if, for example, the 301 duties were 95
      cents and on the line item called 301 duties Tainai reported a dollar,
      the Commerce Department reduced the dollar to 95 cents.

Id. at 33:14–34:5. Here, Shanghai Tainai was direct — it saw an opportunity to

mask a price increase by invoicing the increase as part of the Section 301 duty

payment. It did so by billing customers for more than the actual amount of the

Section 301 duties.    Id.   That tended to increase the U.S. price of the subject

merchandise; but Commerce reduced these overcharges by capping them at the

actual amount of the Section 301 duties, reducing the U.S. price and thereby

increasing Shanghai Tainai’s dumping margin. 9

9 At oral argument, the Court asked Shanghai Tainai’s counsel to clarify how its challenge

to Commerce’s capping of Section 301 duty charges was distinct from its challenge to
Commerce’s deduction of Section 301 duties. Shanghai Tainai’s counsel responded that its
capping claim “has nothing to do” with deduction but rather “is a question simply of what
Consol. Court No. 1:22-00038                                                        Page 49

       Commerce justified its decision by invoking its general practice “not to

attribute revenue from related expenses to the price of subject merchandise because

that uncapped amount represents profit on the sale of services, not profit on the sale

of the merchandise.” Decision Memo at 24, J.A. at 1,026, ECF No. 43. Commerce

analogized these revenues to revenue that respondents receive from providing U.S.

freight, citing to a past determination in which Commerce found “that it would be

inappropriate to increase the gross unit price for subject merchandise because of

profits earned on the provision or sale of freight; such profits should be attributable

to the sale of the freight service, not to the subject merchandise.” Id. at 24–25, J.A.

at 1,026–27. Commerce also claimed that it was limited by 19 C.F.R. § 351.501(c),

which directs Commerce to calculate U.S. price “net of price adjustments . . . that

are reasonably attributable to the subject merchandise[.]” Price adjustments are

defined as “a change in the price charged for subject merchandise . . . such as a

discount, rebate, or other adjustment, including, under certain circumstances, a

change that is made after the time of sale, that is reflected in the purchaser’s net

outlay.”   19 C.F.R. § 351.102(b)(38).       Commerce “note[d] that U.S. import duty

revenues are not included in the list provided at 19 CFR 351.102(b)(38).” Decision

Memo at 25, J.A. at 1,027, ECF No. 43. Commerce therefore concluded that it

would “continue to cap additional tariff revenue by the amount of Section 301 duties

applicable to each sale.” Id.

the client paid to Tainai for the goods . . . [the amounts] were collected long after the duty
was paid and it was collected for the goods.” Oral Arg. Tr. 36:4–15, ECF No. 52.
Consol. Court No. 1:22-00038                                                Page 50

      The Court struggles to see the reason in Commerce’s determination that the

additional amounts Shanghai Tainai charged its customers in excess of Section 301

duties were “profit[s] on the sale of services, not profit[s] on the sale of the

merchandise.”   Id. at 24, J.A. at 1,026.   Costs to the customer associated with

Section 301 duties were invoiced as part of the cost of the merchandise, and

Commerce did not explain what “service” Shanghai Tainai provided its customers

by passing along the padded cost of the Section 301 duties to them. At any rate, it

is unclear why these amounts were attributable to the sale of services when

“uncapped,” but could become part of U.S. price up to the amount of the Section 301

duties, as Shanghai Tainai pointed out. See Pls.’ Supp. Br. at 9, ECF No. 54 (“The

United States does not dispute that this additional revenue should be part of the

price paid or payable, but rather only disputes that portion of the revenue which

exceeds the amount of the 301 duty reported as paid on the entry.”).

      The Court further finds Commerce’s textual analysis unreasonable.           19

C.F.R. § 351.401(c) directs Commerce to calculate U.S. price “net of price

adjustments,” and “price adjustment” is defined as “a change in the price charged

for subject merchandise . . . such as a discount, rebate, or other adjustment,

including, under certain circumstances, a change that is made after the time of sale,

that is reflected in the purchaser’s net outlay.”      19 C.F.R. § 351.102(b)(38).

Commerce claims that the amounts at issue do not meet this definition of a “price

adjustment” because “U.S. import duty revenues are not included in the list

provided at 19 CFR 351.102(b)(38).” Decision Memo at 25, J.A. at 1,027, ECF No.
Consol. Court No. 1:22-00038                                                   Page 51

43; see also Oral Arg. Tr. 38:22–23, ECF No. 52 (counsel for the Government

arguing that the charges are not price adjustments “because, again, these aren’t

rebates.   These aren’t deductions.    This is a 301 duty.”).     However, that list is

bookended by the terms “such as” and “or other adjustment.”            See 19 C.F.R. §

351.102(b)(38). These terms clarify that the regulation’s list of price adjustments is

not exhaustive, and a change in price need not be enumerated in order to qualify as

a “price adjustment” within the meaning of § 351.401(c). See Vazquez-Claudio v.

Shinseki, 713 F.3d 112, 115 (Fed. Cir. 2013) (“[T]he list . . . is preceded by ‘such as,’

and is therefore non-exhaustive.”); Alta Wind I Owner Lessor C v. United States,

897 F.3d 1365, 1373 (Fed. Cir. 2018) (list of contracts that ended with “or other

similar agreements” was “non-exhaustive”).         Commerce’s interpretation of the

regulation is at odds with its plain text. On remand, Commerce must explain why

the amounts at issue constitute profits on the sale of services rather than profits on

the sale of merchandise and must consider whether there is any basis to exclude

such amounts from the “price adjustments” described by § 351.401(c) and §

351.102(b)(38).

                                 V. By-Product Offset

      Commerce’s established practice is to “grant an offset to normal value, for

sales of by-products generated during the production of subject merchandise, if the

respondent can demonstrate that the by-product is either resold or has commercial

value and re-enters the respondent’s production process.” Arch Chemicals, Inc. v.

United States, 33 CIT 954, 956 (2009). The burden is on the respondent to provide
Consol. Court No. 1:22-00038                                                 Page 52

Commerce with sufficient information to support its claim of a by-product offset. Id.

A respondent does not meet this burden if it fails to “document the quantity of scrap

produced during the period of review” and merely “equate[s] total scrap sold during

the period of review with total scrap produced during the period of review.”

American Tubular Products, LLC v. United States, 847 F.3d 1354, 1361 (Fed. Cir.

2017). Here, Shanghai Tainai concedes that “the quantity of scrap produced is not

directly recorded” but attempts to argue that “the quantity of scrap produced is the

same as the quantity of scrap sold.” Pls.’ Br. at 52, ECF No. 32. Because that

argument is insufficient, Commerce’s decision to deny Shanghai Tainai a by-product

offset must be upheld.

                                      CONCLUSION

      Shanghai Tainai brings a litany of challenges to Commerce’s thirty-third

administrative review of the antidumping order on tapered roller bearings from

China. These challenges are of varying quality; accordingly, some have found the

mark and others have fallen short.      Shanghai Tainai is correct that Commerce

failed to adequately explain both its use of facts otherwise available with an adverse

inference against a cooperating respondent and its capping of price increases that

were invoiced as Section 301 duty payments.         However, this Court finds that

Shanghai Tainai’s other complaints — that Commerce’s dumping margin defied

commercial reality, relied on defective surrogate entity financial statements,

wrongly deducted Section 301 duties from U.S. price, and failed to include a by-

product offset — are without merit.
Consol. Court No. 1:22-00038                                               Page 53

         The Court therefore GRANTS IN PART and DENIES IN PART Shanghai

Tainai's Motion for Judgment on the Agency Record and REMANDS Commerce's

Final Results for additional explanation consistent with this opinion.   Commerce

shall file its Remand Redetermination with the Court within 120 days of today's

date.    Defendant shall supplement the administrative record with all documents

considered by Commerce in reaching its decision in the Remand Redetermination.

Plaintiffs shall have t_h irty days from the filing of the Remand Redetermination to

submit comments to the Court; and Defendant shall have thirty days from the date

of Plaintiffs' filing of comments to submit a reply. Any revisions Commerce makes

to the dumping margin assigned to Shanghai Tainai will be extended to the

Consolidated Plaintiffs.

         SO ORDERED.

                                             Stephen Alexander Vaden, Judge

Dated:   Jyfdr:, /   2n3
         New York, New York