Court Opinion

ID: 9388315
Source: CourtListenerOpinion
Date Created: 2023-04-20 16:02:31.588171+00
Date Added: 2024-06-11T17:18:19.782676
License: Public Domain

Slip Op. 23-56

                 UNITED STATES COURT OF INTERNATIONAL TRADE

  SUZANO S.A., (FORMERLY KNOWN AS
  SUZANO PAPEL E CELULOSE S.A.),

                      Plaintiff,

           v.
                                                          Before: Gary S. Katzmann, Judge
  UNITED STATES,                                          Court No. 21-00069
                      Defendant,

           and

  DOMTAR CORPORATION,

                      Defendant-Intervenor.

                                   OPINION AND ORDER

[The court sustains in part and remands in part the Department of Commerce’s Remand Results.]

                                                                         Dated: April 20, 2023

Craig A. Lewis, Nicholas W. Laneville, and Cayla D. Ebert, Hogan Lovells US LLP, of
Washington, D.C., for Plaintiff Suzano S.A.

Antonia R. Soares, Senior Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, D.C., for Defendant United States. With her on the brief
were Brian M. Boynton, Principal Deputy Assistant Attorney General, Patricia M. McCarthy,
Director, Tara K. Hogan, Assistant Director. Of counsel on the brief was Benjamin Juvelier,
Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department
of Commerce, of Washington, D.C.

Daniel L. Schneiderman, and Stephen J. Orava, King & Spalding, LLP, of Washington, D.C., for
Defendant-Intervenor Domtar Corporation.

       Katzmann, Judge: The court is asked to revisit a challenge to Commerce’s calculation of

cost of production. Plaintiff Suzano S.A (formerly known as Suzano Papel e Celulose S.A.)

(“Suzano”), brought this action against Defendant United States (“the Government”) to challenge
Court No. 21-00069                                                                           Page 2

the Department of Commerce’s (“Commerce”) final determination in the 2018–2019

administrative review of the antidumping duty order on uncoated paper from Brazil. See Certain

Uncoated Paper From Brazil: Final Results of Antidumping Duty Administrative Review; 2018–

2019, 86 Fed. Reg. 7,254 (Dep’t Com. Jan. 27, 2021) (“Final Results”). Suzano argued that

Commerce erred by failing to exclude certain of its derivative trading expenses from the cost of

production calculation as both (1) investment-related and (2) extraordinary. The court remanded,

concluding that Commerce’s decision to include the expenses in Suzano’s cost of production was

unsupported by substantial evidence on both counts. Suzano S.A. v. United States, 46 CIT __, __,

589 F. Supp. 3d 1225, 1228 (2022) (“Suzano I”).

        On remand, Commerce continues to determine that the derivative trading expenses should

be included in the cost of production, as the expenses were neither investment-related nor

extraordinary. See Final Results of Redetermination Pursuant to Ct. Remand, Nov. 14, 2022, ECF

No. 60-1 (“Remand Results”). Suzano challenges the Remand Results on the basis that (1) record

evidence clearly demonstrates a tie between the derivative losses with the acquisition of Fibria, an

“investment-related” activity; and (2) the record evidence shows that the derivate losses are

extraordinary expenses. Pl.’s Cmts. in Opp. to U.S. Dep’t of Com.’s Final Results of Redeter.

Pursuant to Ct. Remand, Dec. 14, 2022, ECF No. 62 (“Pl.’s Br.”). The Government requests the

court sustain the remand results, Def.’s Reply in Supp. of Dep’t of Com.’s Remand Redeter., Jan.

13, 2023, ECF No. 64 (“Def.’s Br.”), as does Defendant-Intervenor Domtar Corporation

(“Domtar”), Def.-Inter.’s Resp. in Supp. of Com.’s Remand Redeter., Jan 10, 2023, ECF No. 63

(“Def.-Inter.’s Br.”).

        For the reasons set forth below, the court concludes that Commerce’s determinations on

investment-related costs are supported by substantial evidence and further is in accordance with
Court No. 21-00069                                                                            Page 3

law and the court’s remand instructions.       The court concludes, however, that Commerce’s

determination on extraordinary expenses is unsupported by substantial evidence. The court

therefore sustains the Remand Results in part and remands in part for further explanation.

                                         BACKGROUND

       The court described in detail the factual and legal background of this case in Suzano I.

Only the details relevant to the current disposition are provided below.

       I.      Statutory Framework and Agency Practice

       In calculating a product’s normal value, Commerce may choose to disregard sales made at

less than the cost of production (“COP”). 19 U.S.C. § 1677b(a)(1)(B)(i). COP is equal to the sum

of (1) the cost of “materials and . . . fabrication or other processing,” (2) “selling, general, and

administrative expenses,” and (3) “the cost of all containers and coverings” required for sale and

shipment. 19 U.S.C. § 1677b(b)(3)(A)–(C). Costs, including COP, are normally calculated based

on records kept in accordance with the generally accepted accounting principles of the exporting

country. 19 U.S.C. § 1677b(f)(1)(A). Commerce “shall consider all available evidence on the

proper allocation of costs, including that which is made available by the exporter or producer on a

timely basis, if such allocations have been historically used by the exporter or producer . . . .” Id.

(emphasis added).

       In administering the statute, Commerce has generally excluded both “investment-related”

and “extraordinary” expenses from COP. AG der Dillinger Hüttenwerke v. United States, 45 CIT

__, __, 532 F. Supp. 3d 1338, 1344 (2021) (noting Commerce’s “practice [is] to exclude

investment-related gains and losses from the calculation of the cost of production because it

considers them a separate profit-making activity unrelated to a company’s normal operations”);

see also Hornos Electricos de Venez. v. United States, 27 CIT 1522, 1534, 285 F. Supp. 2d 1353,
Court No. 21-00069                                                                            Page 4

1365 (2003) (“To be considered an ‘extraordinary’ event giving rise to extraordinary treatment . .

. the event must be unusual in nature and infrequent in occurrence.”) (quoting Floral Trade Council

v. United States, 16 CIT 1014, 1016 (1992)).

       Legislative history indicates that the purpose of enacting 19 U.S.C. § 1677b(f) was to

“harmonize[] the methods of calculating cost for purposes of examining sales below cost and

determining constructed value.” Uruguay Round Agreements Act, Statement of Administrative

Action, H.R. Doc. No. 103-316, at 840 (1994), as reprinted in 1994 U.S.C.C.A.N. 4040, 4171

(“SAA”). 1 Thus, the statute intends that:

       Costs shall be allocated using a method that reasonably reflects and accurately
       captures all of the actual costs incurred in producing and selling the product under
       investigation or review. In determining whether to accept the cost allocation
       methods proposed by a specific producer, Commerce will consider the production
       cost information available to the producer and whether such information could
       reasonably be used to compute a representative measure of the materials, labor and
       other costs, including financing costs, incurred to produce the subject merchandise,
       or the foreign like product. Commerce also will consider whether the producer
       historically used its submitted cost allocation methods to compute the cost of the
       subject merchandise prior to the investigation or review and in the normal course
       of its business operation.

Id. at 4172 (emphasis added).

       II.     Procedural History

       On February 24, 2021, Suzano initiated this appeal to contest Commerce’s Final Results.

Summons, ECF No. 1; Compl., Mar. 2, 2021, ECF No. 9. The central issue was whether

Commerce’s categorization of certain of Suzano’s expenses as financial costs was supported by

substantial evidence. Suzano I, 589 F. Supp. 3d at 1228. Following briefing and oral argument,

1
  The SAA “shall be regarded as an authoritative expression by the United States concerning the
interpretation and application of the Uruguay Round Agreements and this Act in any judicial
proceeding in which a question arises concerning such interpretation or application.” 19 U.S.C. §
3512(d).
Court No. 21-00069                                                                         Page 5

the court remanded on August 16, 2022, for further explanation by Commerce regarding its

inclusion of Suzano’s derivative expenses in the COP calculation. See generally id.

       On remand, Commerce released its draft results continuing to find that the expenses were

neither investment-related nor extraordinary. See Draft Results of Redeter. Pursuant to Ct.

Remand (Dep’t Com. Oct. 13, 2022), P.R.R. 1 (“Draft Remand Results”). 2 After receiving written

comments from the parties, Commerce issued the Remand Results reiterating its reasoning that the

expenses were neither investment-related nor extraordinary, and thus that the expenses would be

included in the COP. Remand Results at 17. The matter is now before the court as the parties

have filed their comments to the Remand Results. USCIT R. 56.2(h).

                     JURISDICTION AND STANDARD OF REVIEW

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

sustains Commerce’s determinations, findings, and conclusions on remand unless they are

unsupported by substantial evidence, or otherwise not in accordance with law. SeAH Steel VINA

Corp. v. United States, 950 F.3d 833, 840 (Fed. Cir. 2020); 19 U.S.C. § 1516a(b)(1)(B).

Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to

support a conclusion.” Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951); Consol.

Edison Co. v. NLRB, 305 U.S. 197, 229 (1938). In conducting its review, the court’s function is

not to reweigh the evidence but rather to ascertain whether Commerce’s determinations are

supported by substantial evidence on the record. Matsushita Elec. Indus. Co. v. United States, 750

2
 Documents on the agency record are referred to by the number provided in the U.S. Department
of Commerce’s administrative record index filed with the Court, see J.A., Apr. 12, 2021, ECF No.
20. Confidential documents are referred to with the rubric “C.R.” followed by the relevant number;
public documents and public versions of confidential documents are referred to with the rubric
“P.R.” followed by the relevant number. Documents on the public agency record on remand, filed
with the Court on November 17, 2022, ECF No. 61, are referred to by the rubric “P.R.R.” No
confidential agency record has been filed following remand.
Court No. 21-00069                                                                            Page 6

F.2d 927, 936 (Fed. Cir. 1984); see also DAK Ams. LLC v. United States, 45 CIT __, __, 517 F.

Supp. 3d 1349, 1362 (2021).

                                          DISCUSSION

       Suzano challenges Commerce’s continued treatment of the derivative expenses as neither

investment-related nor extraordinary. Pl.’s Br. at 6–18. As noted, Suzano again raises two issues:

(I) whether Commerce concluded by substantial evidence that the derivative expenses were not

investment-related; and (II) whether Commerce concluded by substantial evidence that the

derivative expenses were not “extraordinary.” See id. Upon review, the court sustains the Remand

Results in part and remands in part.

       I.         The Court Sustains Commerce’s Determination That the Derivative Losses Were
                  Not Investment Costs.

       In its original opinion, the court concluded that “Commerce failed to adequately consider

Suzano’s unaudited quarterly reports,” and thus its determination that the derivative losses were

not investment-related “is unsupported by substantial evidence.” Suzano I, 589 F. Supp. 3d at

1234. Specifically, the court pointed to the portion of the quarterly reports separating the expenses

related to the Fibria acquisition, including derivative losses. Id. In response to the court’s remand

instructions, Commerce addressed the evidence and has offered a detailed explanation as to why

the derivative losses are properly treated as operating expenses under Brazilian GAAP, and also

points to other record evidence that the derivatives transactions were exclusively for hedging

purposes in general cash flow management. Remand Results at 19–21; see also Draft Remand

Results at 7–9.

       The question raised by Suzano is ultimately one of fact, i.e., whether the losses incurred by

Suzano through the derivatives trading is treated as an investment cost. Commerce has now

addressed the record evidence that the court identified in the original opinion with an explanation,
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see Remand Results at 19–21, and additionally offers contrary evidence in the quarterly reports

describing the policy of Suzano as “carr[ying] out derivatives transactions exclusively for hedging

purposes,” id. at 19 (emphasis added); see also Letter from Steptoe & Johnson LLP to Sec’y

Commerce, re: Antidumping Duty Investigation of Certain Uncoated Paper from Brazil: Suzano’s

Resp. to Questionnaire for Section D at D-31, D-38–39, & Exs. D-19, D-19a at 10 (Aug. 21,

2019),P.R. 79–80 (“Initial Section D Resp.”). Commerce explains that the losses from derivatives

trading is incurred as part of its hedging activities, rather than for the purposes of a specific

investment activity. Remand Results at 20.

       The record thus presents conflicting evidence on the treatment of the derivative losses, with

a portion of the quarterly reports supporting the view that the losses were connected to the

investment activity, and another portion of the quarterly reports and the Financial Statements

supporting the opposite conclusion. Under such circumstances, the court gives deference to

Commerce as the expert factfinder in determining the representativeness of the evidence and

resolving the factual question. See Nippon Steel Corp. v. United States, 458 F.3d 1345, 1358 (Fed.

Cir. 2006). “[E]ven if it is possible to draw two inconsistent conclusions from evidence in the

record, such a possibility does not prevent [Commerce’s] determination from being supported by

substantial evidence.” Id. (first alteration in original) (internal quotation marks omitted) (quoting

Am. Silicon Techs. v. United States, 261 F.3d 1371, 1376 (Fed. Cir. 2001)); see also SeAH Steel

VINA, 950 F.3d at 843 (citing Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966)).

       Suzano argues that the existence of the policy merely suggests that derivatives may be used

for hedging purposes. Pl.’s Br. at 6. Notwithstanding the fact that this argument is in tension with

the use of the phrase “exclusively for hedging purposes,” Initial Section D Resp. Ex. D-19a at 10

(emphasis added), entertaining this inquiry would require the court to re-weigh the evidence or
Court No. 21-00069                                                                         Page 8

draw a separate inference from the record. The court thus declines to disturb Commerce’s findings,

especially “[w]hen the totality of the evidence does not illuminate a black-and-white answer to a

dispute.” Nippon Steel Corp., 458 F.3d at 1359. This deference is appropriate considering that

the court “‘has consistently upheld Commerce’s reliance on a firm’s expenses as recorded in the

firm’s financial statements, as long as those statements were prepared in accordance with the home

country’s GAAP and does not significantly distort the firm’s actual costs,’ with the burden of

proving distortion falling on the company.” Solvay Solexis S.p.A. v. United States, 33 CIT 687,

690, 628 F. Supp. 2d 1375, 1379 (2009) (quoting Cinsa, S.A. de C.V. v. United States, 21 CIT

341, 345, 966 F. Supp. 1230, 1235 (1997)), dismissed on consent motion, 375 F. App’x 3 (Fed.

Cir. 2009). In short, the court upholds Commerce’s further explanation of its conclusion that the

derivative losses were not investment costs as based on substantial evidence and otherwise in

accordance with law.

       II.     The Court Remands Commerce’s Determination That the Derivative Losses
               Were Not Extraordinary.

       In examining the Final Results, the court concluded that Commerce had not supported its

inclusion of the derivative losses in the COP by such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion. Suzano I, 589 F. Supp. 3d at 1236. The court explained

that “Commerce’s determination of whether certain costs must be excluded as extraordinary

remains subject to its statutory obligation to employ ‘a method that reasonably reflects and

accurately captures all of the actual costs incurred in producing and selling the product under

investigation or review.’” Id. (emphasis added) (quoting Am. Silicon Techns., 261 F.3d at 1377).

       The court finds that Commerce has again neglected to support its conclusion by “such

relevant evidence as a reasonable mind might accept as adequate.” Universal Camera, 340 U.S.

at 477. Commerce has failed to provide adequate explanation as to whether its conclusions on the
Court No. 21-00069                                                                            Page 9

derivative losses are based on a method that reasonably reflects and accurately captures all of the

actual costs.

       In its Remand Results, Commerce first explains that the definition of extraordinary relates

not to the amount of gain or loss, but rather the underlying event which caused the gain or loss.

Remand Results at 10. Commerce then asserts that Suzano’s acquisition of Fibria was simply an

expansion of normal operations. Id. at 21–23. Commerce further states that the derivative losses

in question relate to Suzano’s hedging activities and the financial derivatives (assets) used by

Suzano as part of those activities and not to the acquisition of Fibria. Id. at 23. Finally, Commerce

submits that because the statute does not quantify reasonableness, the determination of a

reasonable and appropriate method is left to the discretion of Commerce. Id. at 24.

       Commerce’s reasoning is flawed with several inconsistencies. Commerce cites to Floral

Trade Council of Davis, Cal. v. United States, 16 CIT 1014, 1014 (1992), aff’d, 74 F.3d 1200 (Fed.

Cir. 1996), for its main proposition that the “underlying event” is what defines the extraordinary

nature of the event. Remand Results at 10 & n.53, 24 & n.96. A close reading of the case, however,

reveals no such formulation used by the Floral Trade court. In fact, Floral Trade concerned the

adjustment of production expenses due to collapse of a water table and a viral attack. 16 CIT at

1014. The holding in Floral Trade was that the agency is “allowed to prefer substance over form”

in not blindly following the financial statement’s treatment of the costs, but rather considering the

existence of extraordinary events such as virus attacks that led to the incurring of such costs. Id.

at 1017. This holding is in tension with Commerce’s approach in the instant case, where it

continues to rely on the classifications in the financial statement and the quarterly reports, see

Remand Results at 7, without considering the “underlying event” of a major acquisition that may
Court No. 21-00069                                                                         Page 10

have triggered the costs, see id. at 21–24. Based on this record, the Floral Trade case does not

lend support to Commerce’s reasoning on this point.

       Commerce further points to some of its previous practice in trying to justify its approach.

“[I]f Commerce has a routine practice for addressing like situations, it must either apply that

practice or provide a reasonable explanation as to why it departs therefrom.” Save Domestic Oil,

Inc. v. United States, 357 F.3d 1278, 1283–84 (Fed. Cir. 2004). “Thus, the question becomes: (1)

whether Commerce has a standard practice . . . and, (2) if so, whether Commerce reasonably

departed therefrom.” Id. at 1284.

       Turning to the first question, Commerce has not demonstrated a standard practice of

treating the costs in question. Commerce insists that the decision in Final Results of Antidumping

Duty Administrative Review of Chlorinated Isocyanates from Spain, 74 Fed. Reg. 50,774 (Dep’t

Com., Oct. 1, 2009), and accompanying Issues and Dec. Mem. (Sept. 24, 2009) (“Chlorinated

Isocyanates from Spain IDM”) is distinguishable from the current case. See Remand Results at

22. Yet Commerce also relies on the same for the key proposition that “costs related to mergers,

un-mergers, and restructuring of a company’s operations are not unusual in nature.” Remand

Results at 9 & n.49. Aside from the inherent tension in arguing that a case is distinguishable and

also arguing that it is applicable, the Chlorinated Isocyanates from Spain IDM does not contain

the word “merger” or “un-merger” in its text. Rather, the Chlorinated Isocyanates from Spain

IDM only mentions restructuring costs, and Commerce’s reasoning is based on the characteristics

of restructuring as a streamlining of existing operations:

       Restructuring costs are commonly incurred by companies in the production and
       manufacturing sector as they try to streamline operations and reduce operating
       costs. Companies evaluate their overall operations and change them accordingly
       to meet the changing needs of the general organization. Thus, similar to impairment
       losses, restructuring costs are period costs that relate to the general operations of
       the company, rather than to the production of a specific product.
Court No. 21-00069                                                                                Page 11

Chlorinated Isocyanates from Spain IDM at 7. It is unclear, however, whether the same logic

applies to expansion of operations, as Commerce now argues, or in cases of mergers and

acquisitions involving significant changes to the general organization.

         Commerce and the Government equates its practice on restructuring costs with all costs

arising from mergers, without further explanation. Commerce cites to Final Determination of

Sales at Less Than Fair Value: Certain Softwood Lumber Products from Canada, 67 Fed. Reg.

15,539 (Dep’t Com. Apr. 2, 2002) and accompanying Issues and Dec. Mem. (Mar. 21, 2002)

(“Softwood Lumber from Canada 2002 IDM”) at Cmt 16, to support its proposition that costs

related to mergers are not included. Remand Results at 9 & n.49. While the Softwood Lumber

from Canada 2002 IDM did discuss costs related to mergers, the costs in question were

“redemption of stock options” resulting from a merger. Softwood Lumber from Canada 2002 IDM

at Cmt 16.

         Thus, the key question Commerce should address is whether the costs in question relate to

the operations of the company. Not all costs arising from a merger necessarily relate to operations.

As explained in Final Results of the Antidumping Duty Administrative Review of Certain

Softwood Lumber Products From Canada, 70 Fed. Reg. 73, 437 (Dep’t Com. Dec. 12, 2005) and

accompanying Issues and Dec. Mem. (Dec. 5, 2005) (“Softwood Lumber from Canada 2005

IDM”):

         Fundamentally, however, we do not believe that these transactions should be treated
         identically by the Department just because they all arise from [respondent]’s
         acquisitions of new businesses. Rather, the Department considers the nature of
         every income and expense item separately regardless of the event that caused it.
         Closure expenses are costs incurred to take facilities permanently out of production
         and, as stated in our position above, because the closed facility is no longer involved
         in production, the closure costs should not be assigned to the cost of manufacturing
         of products which are still produced. Integration and restructuring expenses, on the
         other hand, are not related to the disposition of assets or closing of the facilities, but
         are costs incurred in the normal course of business to incorporate the newly
Court No. 21-00069                                                                         Page 12

       acquired businesses into the company and to streamline the company’s continuing
       operations. Thus, integration and restructuring expenses are costs related to the
       company’s general operations and, as such, should be included in the cost of
       production.

Softwood Lumber from Canada 2005 IDM at 29–30 (emphasis added). A close reading of this

excerpt suggests that unlike the Government’s argument, Commerce’s practice is not to adopt a

simple rule that all expenses related to the merger of two companies, or to the acquisition of a new

business, are included in general and administrative (“G&A”) costs. Cf. Def.’s Br. at 26. Rather,

the practice Commerce adopted in Softwood Lumber from Canada 2005 recognizes that different

costs may be related to the acquisition of a new business, such as closure expenses and expenses

related to integration and restructuring. It then analyzes the impact of the costs on the actual

operations of the company to determine whether the costs should be included in the COP.

Furthermore, Commerce notes in Softwood Lumber from Canada 2005 that it “ha[s] changed [its

previous] practice and excluded the gains and losses associated with plant closures and sales.”

Softwood Lumber from Canada 2005 IDM at 35.

       Likewise, Commerce falls short in its reference to Granular Polytetrafluoroethylene Resin

from India: Final Determination of Sales at Less Than Fair Value and Final Affirmative

Determination of Critical Circumstances, 87 Fed. Reg. 3,722 (Dep’t Com. Jan. 25, 2022), and

accompanying IDM (Jan. 18, 2022) (“Resin from India IDM”) at Cmt 5. Commerce cites this case

in a footnote to support its position that Commerce has an established practice of including costs

related to a merger in the COP. See Remand Results at 23 & n.94. The Government further quotes

a portion of the Resin from India IDM stating that “restructuring costs incurred as a result of a

merger and classified as extraordinary expenses in a respondent’s financial statements are

includable in a respondent’s G&A expense rate calculation.” Def.’s Br. at 19–20 (internal

quotation marks omitted and emphasis added). As seen in the quote, the Resin from India IDM
Court No. 21-00069                                                                           Page 13

only establishes that “restructuring costs” related to mergers and demergers are routinely included

in G&A expenses. Resin from India IDM at Cmt. 5.

       Thus, despite Commerce’s citations of its previous decisions, the court has not been shown

that there is an established practice treating all costs resulting from a merger as G&A expenses. If

such a practice exists, that practice would only extend to “restructuring costs as a result of a

merger,” not to any cost or expense related to a merger, such as derivative trading expenses.

Restructuring costs have specific meaning in accounting and reporting practices, as explained

supra p. 10–11 (discussing Chlorinated Isocyanates from Spain IDM). While severance pay may

be considered as a restructuring cost, see Final Results of the Eighth Administrative Review of the

Antidumping Duty Order on Certain Pasta From Italy and Determination to Revoke in Part, 70

Fed. Reg. 71,464 (Dep’t of Com. Nov. 29, 2005) and accompanying IDM (Nov. 29, 2005) (“Pasta

from Italy IDM”) at Cmt. 11, nothing in the record suggests that financial costs from derivative

trading and hedging in anticipation of an acquisition falls in the category of restructuring costs.

Indeed, Commerce itself distinguishes “gains or losses associated with the sale of an entire plant

or facility in the general and administrative expense rate calculation,” i.e., restructuring gains or

losses from non-routine sales, from “costs associated with acquiring a company or a new

production facility.” Remand Results at 22.

       In short, the various previous decisions cited by Commerce do not lend support to its

position that it is following established practice to include all costs related to merger transactions

in the G&A expense ratio calculation, nor to the notion that placement on the financial statements

is dispositive. Rather, Commerce’s stated practice is that:

       [N]o matter how a particular item of income or expense is recorded on the
       company’s financial statement, or how significant it is, the Department considers
       the nature of the item in determining whether it should be included or excluded
       from the costs. . . . Therefore, we believe that the placement of an income or
Court No. 21-00069                                                                           Page 14

       expense item on the financial statements should not be the determining factor of
       whether the amount should be included or excluded from the reported cost.

Softwood Lumber from Canada 2005 IDM at 39. This is in line with Commerce’s obligation to

adopt methodology that “accurately captures” the costs, Am. Silicon Techns., 261 F.3d at 1378

(quoting SAA, H.R. Doc. 103-316, at 834–35), and will “reasonably be used to compute a

representative measure of the materials, labor and other costs, including financing costs, incurred

to produce the subject merchandise,” SAA, H.R. Doc. 103-316, at 873.

       Having found no standard Commerce practice on point, the court need not reach the second

prong articulated in Save Domestic Oil. See 357 F.3d at 1284. The inquiry on the remainder of

Commerce’s reasoning reverts to the standard question of whether Commerce has supported its

conclusion by “such relevant evidence as a reasonable mind might accept as adequate.” Universal

Camera, 340 U.S. at 477.

       Commerce stated that the amount of gain or loss is not relevant in determining

extraordinary expenses, and that because the statute does not quantify reasonableness, it has

discretion to determine the methods in calculating costs. Remand Results at 24. Commerce indeed

has discretion, but that discretion must be exercised in a reasonable manner. 3 While numerical

3
 An opinion of the court is instructive in approaching the issue of discretion. See Daewoo Elecs.
Co. v. United States, 13 CIT 253, 712 F. Supp. 931 (1989), rev’d on other grounds by Daewoo
Elecs. Co. v. Int’l Union of Elec. Elec., Tech., Salaried & Mach. Workers, AFL-CIO, 6 F.3d 1511
(Fed. Cir. 1993). In Daewoo, the issue was whether marketing and advertising expenses, if made
in an unusual, one-time manner regarding a recent acquisition, may be excluded from the
calculation of foreign market value as start-up costs. Commerce in that case refused to consider
the acquisition-related expenses because the costs related to a “going concern,” i.e., its operations,
and further focused on the fact that marketing and advertising costs were “ordinary.” 13 CIT at
261, 712 F. Supp. at 941. The Daewoo court found that under these circumstances, Commerce
had abused its discretion when “Commerce acknowledge[d] the extraordinary amount of these
expenses, which indicates that they were not made in the normal course of trade” and nevertheless
“ignored the unusual acquisition-related nature and the size of this expense focusing instead on the
classification of the type of the expense.” 13 CIT at 261–62, 712 F. Supp. at 941–42. While
Court No. 21-00069                                                                         Page 15

value may not be dispositive, Commerce regularly considers the nature and impact of the

transaction to determine whether such transactions are routine and thus part of the general

operations as stated in the Softwood Lumber from Canada 2005 IDM. It offered that:

        For example, the sale of an entire production facility, sale of a business unit, and
        sale of a business division, are considered non-routine. These sales differ from the
        sale of a piece of equipment, even large pieces of equipment. These non-routine
        sales encompass many pieces of production equipment, the buildings, land and
        fixtures. These are transactions that change the organization and structure of the
        company and its operations.

Softwood Lumber from Canada 2005 IDM at 95 n. 141 (emphasis added). An acquisition such as

the acquisition of Fibria may also change the organization and structure of the company and its

operations, and as argued by Suzano, has the nature of a “a unique, once-in-a-corporate lifetime

event where Suzano acquired a larger company with a different scope and nature of operations.”

Pl.’s Br. at 17.

        Commerce determined, without citing to agency practice or court precedent, or any

accounting principles supporting its position, that all costs arising from a merger are for the

purpose of “expand[ing] normal business operations” and thus not extraordinary. Remand Results

at 8, 23. Considering the various tensions and conflicting positions in the Remand Results as

discussed hereto, the court finds that the record does not contain “such relevant evidence as a

reasonable mind might accept as adequate.” Universal Camera, 340 U.S. at 477. Commerce

should further explain why such transactions of such a nature are still routine as an “expansion” of

Daewoo concerns the interpretation of other provisions under 19 U.S.C. § 1677b(b), it is
nevertheless helpful in interpreting subsection 1677b(f), which is intended to expound upon
1677b(b) and 1677b(e). See 19 U.S.C. § 1677b(f). Further, considering that the legislative intent
in enacting 19 U.S.C. § 1677b(f) was to “harmonize[] the methods of calculating cost for purposes
of examining sales below cost and determining constructed value,” Dillinger France S.A. v. United
States, 981 F.3d 1318, 1322 (Fed Cir. 2020) (quoting SAA, H.R. Rep. No. 103-315, at 826), the
statute requires a consistent approach offering predictable outcomes in the calculation of costs.
Court No. 21-00069                                                                         Page 16

its operations and not extraordinary items.

        In light of the above, Commerce’s determination that the derivative losses were not

extraordinary must be remanded for further explanation and review.

                                               CONCLUSION

        For the reasons stated, the court sustains the Remand Results in part and remands in part

for further explanation. It is hereby

        ORDERED that Commerce’s finding that Suzano’s derivative expenses were not

extraordinary for the purposes of cost of production calculation is remanded to Commerce for

further explanation, and if appropriate, reconsideration of the costs analysis pursuant to 19 U.S.C.

§ 1677b(f)(1)(A); and it is further

        ORDERED that Commerce shall file with this court and provide to the parties its remand

results within 90 days of the date of this order; and it is further

        ORDERED that the deadlines provided by USCIT Rule 56.2(h) shall govern thereafter.

SO ORDERED.

                                                                      /s/   Gary S. Katzmann
                                                                             Judge
 Dated: April 20, 2023
        New York, New York