Court Opinion

ID: 210648
Source: CourtListenerOpinion
Date Created: 2011-03-13 08:14:55+00
Date Added: 2024-06-11T17:28:02.380595
License: Public Domain

Note: This disposition is nonprecedential.

 United States Court of Appeals for the Federal Circuit

                                      2006-1601

   POLYETHYLENE RETAIL CARRIER BAG COMMITTEE, HILEX POLY CO., LLC,
                   and SUPERBAG CORPORATION,

                                                     Plaintiffs-Appellants,

                                          v.

                                  UNITED STATES,

                                                     Defendant-Appellee,

                                         and

                   HANG LUNG PLASTIC MANUFACTORY, LTD.,

                                                     Defendant-Appellee,

                                         and

                 NANTONG HUASHENG PLASTIC PRODUCTS CO.,

                                                     Defendant-Appellee.

       Stephen A. Jones, King & Spalding LLP, of Washington, DC, argued for plaintiffs-
appellants. With him on the brief was Joseph W. Dorn. Of counsel was Daniel L.
Schneiderman.

       Sameer Yerawadekar, Trial Attorney, Commercial Litigation Branch, Civil
Division, United States Department of Justice, of Washington, DC, argued for
defendant-appellee, United States. With him on the brief were Peter D. Keisler,
Assistant Attorney General, David M. Cohen, Director, and Patricia M. McCarthy,
Assistant Director. Of counsel on the brief were John D. McInerney, Chief Counsel,
Michele D. Lynch, Senior Counsel, and Jennifer I. Johnson, Attorney, United States
Department of Commerce, of Washington, DC. Of counsel was Marisa Beth Goldstein.

       Ronald M. Wisla, Garvey Schubert Barer, LLP, of Washington, DC, for
defendant-appellee, Hang Lung Plastic Manufactory, Ltd. With him on the brief was
William E. Perry, of Seattle, Washington.
      Adams C. Lee, White & Case LLP, of Washington, DC, for defendant appellee,
Nantong Huasheng Plastic Products Co. With him on the brief was Jay C. Campbell.
Of counsel was Joanna Ritcey-Donohue.

Appealed from: United States Court of International Trade

Judge Judith M. Barzilay
                    NOTE: This disposition is nonprecedential.

United States Court of Appeals for the Federal Circuit

                                   2006-1601

  POLYETHYLENE RETAIL CARRIER BAG COMMITTEE, HILEX POLY CO., LLC,
                  and SUPERBAG CORPORATION,

                                             Plaintiffs-Appellants,

                                        v.

                                UNITED STATES,

                                             Defendant-Appellee,

                                       and

                  HANG LUNG PLASTIC MANUFACTORY, LTD.,

                                             Defendant-Appellee,

                                       and

                NANTONG HUASHENG PLASTIC PRODUCTS CO.,

                                             Defendant-Appellee.

                         ___________________________

                          DECIDED: May 4, 2007
                         ___________________________

Before BRYSON, Circuit Judge, CLEVENGER, Senior Circuit Judge, and LINN, Circuit
Judge.
BRYSON, Circuit Judge.

       This appeal concerns an antidumping investigation of polyethylene retail carrier

bags (“PRCBs”) from China.        The appellants, the Polyethylene Retail Carrier Bag

Committee and two of its members (collectively “the PRCB Committee”), sought judicial

review by the Court of International Trade of certain determinations made by the

Department of Commerce in connection with the investigation. Those determinations

resulted in respondents Hang Lung Plastic Manufactory, Ltd., (”Hang Lung”) and

Nantong Huasheng Plastic Products Co. (“Nantong”) not being subject to antidumping

duties on imported PRCBs.        The Court of International Trade upheld Commerce’s

determinations. No. 04-00319. We hold that those determinations were supported by

substantial evidence, and we therefore affirm the trial court’s decision.

       In 2003, Commerce began an investigation into whether PRCBs were being sold

at less than fair value in the United States. Hang Lung and Nantong were among the

companies investigated. After completing the investigation, Commerce determined that

PRCBs were being sold at less than fair value and subsequently issued an antidumping

order. Because Hang Lung and Nantong received de minimis margins as a result of the

investigation, they were excluded from the order. See 19 C.F.R. § 351.204(e).

       The PRCB Committee brought this action to challenge the exclusion of Hang

Lung and Nantong from the antidumping order. The Court of International Trade initially

affirmed all but one of the challenged determinations by Commerce. With respect to the

remaining issue, the court remanded for Commerce to provide a further explanation of

the method it used to value Hang Lung’s consumption of electricity in the production

process. After Commerce issued a response on remand, the Court of International

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Trade affirmed the agency’s determination as to Hang Lung’s electricity usage. The

PRCB Committee then took this appeal.

                                             I

      The PRCB Committee first challenges Commerce’s method of calculating the

value of the electricity consumed by Hang Lung in producing plastic bags exported to

the United States. Because Hang Lung did not report the actual amount of electricity

used in the production of those bags, Commerce acted pursuant to 19 U.S.C. § 1677e

by applying “facts otherwise available” and drawing an inference adverse to Hang Lung

with respect to those facts. In particular, Commerce calculated Hang Lung’s electricity

consumption by allocating the value of the electricity Hang Lung used in the production

of all of its exported bags to the production of those bags exported to the United States.

      The PRCB Committee now argues that Commerce’s verification of Hang Lung’s

data representing the total amount of electricity it used in producing bags was

unsupported by substantial evidence.        The methodology employed in this case,

however, appears to be well within the discretion generally afforded to Commerce in

such matters. See, e.g., Micron Tech., Inc. v. United States, 117 F.3d 1386, 1394-96

(Fed. Cir. 1997); Lasko Metal Prods., Inc. v. United States, 43 F.3d 1442, 1446 (Fed.

Cir. 1994). Hang Lung presented Commerce with worksheets demonstrating how it

attributed electricity usage based on meters in each of its departments. Commerce

verified that the data on the worksheets matched the meter records that Hang Lung kept

in the ordinary course of business.     Although Commerce could not verify electricity

usage on a per-unit basis, it was able to use the collected data to calculate total

electricity usage. The PRCB Committee does not provide any affirmative evidence

2006-1601                                   3
suggesting that the total usage data should be discredited, but instead argues that

Commerce has failed to meet its burden of showing that substantial evidence supports

its determination. In the absence of any reason to question the reliability of the data on

which Commerce relied, we conclude that the calculation of total electricity consumption

is supported by substantial evidence.

       In the alternative, the PRCB Committee argues that Commerce’s constructed

value for Hang Lung’s electricity costs was not adverse to Hang Lung and therefore was

inconsistent with 19 U.S.C. § 1677e. That argument is without merit. As discussed

above, Commerce attributed the total cost of electricity for producing all of Hang Lung’s

exported bags to the production of those bags exported to the United States. Because

the attributed electricity cost was greater than the actual cost of electricity used in the

production of those bags, the attributed cost was clearly “adverse” to Hang Lung. The

PRCB Committee argues that Commerce instead should have adopted the highest

electricity usage rate reported by any respondent in the antidumping investigation, but

that was not required. Commerce has broad discretion in choosing which facts to rely

on in applying an adverse inference. See, e.g., F. Lii De Cecco Di Filippo Fara S.

Martino S.p.A. v. United States, 216 F.3d 1027, 1032 (Fed. Cir. 2000). Moreover, the

application of adverse inferences is not intended to be punitive; rather, Congress

“intended for an adverse facts available rate to be a reasonably accurate estimate of the

respondent’s actual rate, albeit with some built-in increase intended as a deterrent to

non-compliance.” Id. Commerce complied with that standard, and for that reason we

find that Commerce’s calculation of the cost of Hang Lung’s electricity usage is

“adverse” within the meaning of 19 U.S.C. § 1677e.

2006-1601                                   4
                                          II

      The PRCB Committee next argues that Commerce improperly accepted

Nantong’s reported purchase price for polyethylene resin, which is one of the primary

raw materials used to make PRCBs. To value factors of production in non-market

economies, Commerce generally relies on the actual prices paid for materials if the

materials are purchased from a market economy supplier and paid for in a market

economy currency. See 19 C.F.R. § 351.408(c)(1). However, Commerce does not use

actual prices if it finds that those prices are distorted or otherwise not market-

determined. See Antidumping Duties; Countervailing Duties; Final Rule, 62 Fed. Reg.

27296, 27366 (May 19, 1997); see also Shakeproof Assembly Components v. United

States, 268 F.3d 1376, 1382 (Fed. Cir. 2001).     In this case, Commerce accepted

Nantong’s reported purchase price for resin.     There is no dispute that Nantong

purchased its resin from a market economy supplier and paid for the resin in a market

economy currency.    The PRCB Committee argues, however, that the resin prices

reported by Nantong were not actually market-determined prices.

      Among the respondents in the antidumping investigation, Nantong reported

paying the lowest price per kilogram for both high-density and low-density resin. That

difference could not fairly be attributed to bulk purchasing, as Nantong paid less per

kilogram than even those companies that purchased greater amounts of resin. The

prices reported by Nantong were also lower than those reported on commodity

exchanges. Furthermore, Nantong’s resin supplier was also a downstream customer,

and Nantong gave that supplier preferential pricing on its purchases of Nantong’s

products. Based on those facts, the PRCB Committee argues that the prices paid by

2006-1601                                 5
Nantong were not arms-length, market-determined prices, and therefore should not

have been used by Commerce to calculate dumping margins.

       Commerce investigated whether Nantong’s reported prices for resin were market

determined. In response to Commerce’s inquiry, Nantong stated that it was able to

secure low resin prices due to its longstanding relationship with its supplier and because

the contracts were subject to certain minimum purchase requirements. Nantong also

explained that it negotiated the prices in those contracts based on market prices from a

particular market research website. Commerce reviewed the contracts, invoices, and

website data for the period of investigation, as well as earlier and later periods, and

found no discrepancies. Commerce also found that during the period of investigation,

Nantong was phasing out its discounted sales to its supplier and was replacing them

with full-price sales directly to the supplier’s third-party customer (effectively competing

with the supplier for the third-party customer’s business). Based on its investigation,

Commerce concluded that Nantong and its supplier were not affiliated or in collusion,

and that the prices paid by Nantong for resin were market-determined prices. Even

assuming the same evidence might have permitted Commerce to reach the opposite

conclusion, “the possibility of drawing two inconsistent conclusions from the same

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) (quoting Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 619-20 (1966)).

In light of the thoroughness of Commerce’s investigation and the reasonableness of its

methodology, we conclude that Commerce’s determination is supported by substantial

evidence.

2006-1601                                    6
                                             III

       The PRCB Committee next challenges Commerce’s decision to accept

Nantong’s method of reporting its factors of production.            During the period of

investigation, Nantong produced two types of polyethylene bags. Both were made with

a mixture of high-density and low-density resin, but one type of bag had a higher

percentage of high-density resin, while the other had a higher percentage of low-density

resin. Nantong did not report its factors of production on a product-specific basis but

instead used a more generalized methodology: It reported the total consumption of raw

materials and the total production of finished goods for the period of investigation, and it

allocated its resin use for each product based on average ratios. Commerce accepted

that methodology and calculated Nantong’s dumping margins accordingly. The PRCB

Committee argues that by relying on those generalized figures, Commerce did not use

the “best available information,” contrary to 19 U.S.C. § 1677b(c)(1).

       Commerce generally prefers to calculate factors of production on a product-

specific basis, and it preliminarily determined not to rely on Nantong’s reported data.

However, Nantong demonstrated to Commerce that the records it kept in the normal

course of its business reflected the total monthly consumption of raw materials and the

average ratio of resin in the finished products. Commerce concluded that Nantong’s

allocation methodology was reasonable and that it did not prevent Commerce from

calculating an accurate dumping margin.

       The PRCB Committee points out that Nantong had production order slips that

reflected, for individual product lines, specific recipes of polyethylene resin (i.e.,

percentages of high-density and low-density resin). It argues that Commerce should

2006-1601                                    7
have relied on those slips in calculating the quantities of raw materials used in the

production process. However, Nantong advised Commerce that those recipes were

inaccurate and distortive because they did not reflect the presence of recycled scrap in

the finished product.   Commerce observed the mixing process, reviewed Nantong’s

records, and verified from production managers that recycled scrap generally

constituted 10 to 20 percent of the finished product and at times constituted as much as

50 percent. Commerce also verified that the average ratios reported by Nantong were

the same ratios that Nantong reported to Chinese customs officials.       Although the

PRCB Committee contends that the use of those average ratios was improper, it is in

effect asking this court to reweigh Commerce’s determination that the production slips

were less accurate than the generalized calculations. In light of the broad discretion

Commerce enjoys in valuing factors of production, see Nation Ford Chem. Co. v. United

States, 166 F.3d 1373, 1377 (Fed. Cir. 1999), we decline that invitation and hold that

Commerce permissibly accepted Nantong’s valuation methodology.

      The PRCB Committee also criticizes Commerce’s determination on the ground

that Nantong reported using only five raw materials while other respondents reported

using between 15 and 29 raw materials. Nantong explained that discrepancy by noting

that it produced only two types of bags, both lower-end bags, whereas the other

respondents produced a wider range of bags, including higher-end bags that generally

required a greater number of raw inputs than lower-end items.       Commerce verified

Nantong’s factors of production by touring the company’s warehouse and storage room,

viewing the mixing of raw materials and the processing of bags, interviewing various

employees, and auditing the company’s production orders, worksheets, and financial

2006-1601                                  8
statements. The PRCB Committee points to nothing in the record to suggest Nantong

used any material inputs other than the five reported raw materials. We conclude that

Commerce’s determination is supported by substantial evidence.

                                           IV

      Next, the PRCB Committee challenges Commerce’s acceptance of Nantong’s

methodology for allocating its consumption of ink. As in the case of the resin and other

raw materials, Nantong reported that it did not record its ink consumption on a product-

specific basis, but instead allocated it by dividing its total ink consumption during the

period of investigation by its total production of bags during that period. Commerce

verified the accuracy of the total consumption figure by inspecting the inventory slips,

inventory ledgers, warehouse ledgers, and general ledgers for three randomly selected

months, and found no discrepancies. The ledgers also confirmed that Nantong did not

record its ink consumption on a product-specific basis.

      The PRCB Committee argues that Nantong’s allocation methodology was

distortive because it valued ink consumption uniformly across all of Nantong’s bags,

even though different lines of bags varied with regard to image size and number of

colors of ink. Commerce, however, stated that it “reviewed numerous different types of

t-shirt bags during verification and found that the size of the bag and the number of

colors are not necessarily an accurate indicator of ink consumption.” Although that

result may be counter-intuitive, we cannot say, on that basis alone, that Commerce’s

finding is unsupported by substantial evidence.      Moreover, just as in the case of

Nantong’s other factors of production, Commerce’s determination appears to reflect a

reasonable approximation in light of Nantong’s actual record-keeping.

2006-1601                                   9
                                            V

      Finally, the PRCB Committee challenges Commerce’s valuation of cardboard

used by various respondents, including Hang Lung, as inserts in the PRCBs.

Commerce valued that cardboard by looking to Indian import data with respect to similar

products.

      The respondents reported that they used two types of cardboard, treated and

untreated, and that the treated inserts are “higher quality cardboard that can be used for

graphic purposes.” That cardboard, according to the respondents, is classified under

subheading 4810.29.00 of the Harmonized Tariff Schedule.          The PRCB Committee

argued that the treated inserts should have been classified as inserts “not suitable for

printing” and that HTS subheading 4810.39.09 should have been used as the basis for

calculating a surrogate value for the treated cardboard inserts. Commerce concluded

that there was no evidence to support the PRCB Committee’s contention that the

respondents’ representation as to the type of treated cardboard inserts they used was

“illogical,” and it selected the products in HTS subheading 4810.29.00 as the class of

goods to use in calculating the surrogate value for the treated cardboard inserts.

      The PRCB Committee argues that the respondents initially reported using low-

grade cardboard inserts and then later changed their position, without substantiation, to

claim that the inserts were actually of the “suitable for printing” grade. The record does

not support that assertion.    The initial report cited by the PRCB Committee was

submitted by a single respondent, Rally. While that report stated that Rally used low-

grade cardboard as inserts, it did not address the type of cardboard inserts used by

other respondents. The second report cited by the PRCB Committee was submitted by

2006-1601                                  10
several respondents (including Rally), and it stated that some of those respondents

used the higher-grade treated cardboard as inserts while others used the low-grade

untreated cardboard as inserts. Contrary to the PRCB Committee’s suggestion, the

second report does not contradict the first report by indicating that all of the respondents

used the higher-quality treated cardboard as inserts, nor does it reveal any error in

Commerce’s classification of the treated inserts.

       The PRCB Committee also argues that the inserts are used solely for support

and that they serve that purpose regardless of whether they are suitable for printing.

For that reason, the PRCB Committee contends that it can be inferred that the

respondents are wrong in claiming that they used cardboard inserts that are suitable for

printing. The PRCB Committee offers no affirmative proof of misrepresentation, but it

argues that the inference it draws is logical and that the respondents must have simply

“cherry picked” an HTS classification with a lower surrogate value.

       Commerce was not required to accept the Committee’s proposed inference in the

face of the respondents’ representation as to the nature of the materials they used for

their cardboard inserts. As the trial court explained, “Commerce chose one among

several HTS categories to value treated cardboard inserts, and the respondents’

submission supported that choice.” In light of the respondents’ representations as to

the nature of their treated inserts and the absence of any evidence to the contrary, we

hold that Commerce’s determination was supported by substantial evidence.

       Because we reject each of the PRCB Committee’s challenges to Commerce’s

underlying determinations, we affirm the decision of the Court of International Trade.

2006-1601                                   11