Court Opinion

ID: 817475
Source: CourtListenerOpinion
Date Created: 2013-02-01 01:52:04.338356+00
Date Added: 2024-06-11T09:00:44.960019
License: Public Domain

Slip Op. 08-71

           UNITED STATES COURT OF INTERNATIONAL TRADE

Before: Nicholas Tsoucalas, Senior Judge
________________________________________
LAIZHOU AUTO BRAKE EQUIPMENT COMPANY;    :
LONGKOU HAIMENG MACHINERY CO., LTD.;     :
LAIZHOU LUQI MACHINERY CO., LTD.;        :
LAIZHOU HONGDA AUTO REPLACEMENT          :
PARTS CO., LTD.;                         :
HONGFA MACHINERY (DALIAN) CO.; and       :
QINGDAO GREN (GROUP) CO.                 :
                                         :
          Plaintiffs,                    :
                                         : Court No.:   06-00430
          and                            :
                                         :
LONGKOU TLC MACHINERY CO., LTD.          :
                                         :
          Plaintiff-Intervenor,          :
                                         :
          v.                             :
                                         :
UNITED STATES OF AMERICA,                :
                                         :
          Defendant,                     :
                                         :
          and                            :
                                         :
COALITION FOR THE PRESERVATION OF        :
AMERICAN BRAKE DRUM AND ROTOR            :
AFTERMARKET MANUFACTURERS                :
                                         :
          Defendant-Intervenor.          :
________________________________________:

                                             June 26, 2008

Held:   The  United   States  Department   of  Commerce’s     Final
Determination sustained in part, remanded in part.

Trade Pacific PLLC, (Robert G. Gosselink) for Laizhou Auto Brake
Equipment Company; Longkou Haimeng Machinery Co., Ltd.; Laizhou
Luqi Machinery Co., Ltd.; Laizhou Hongda Auto Replacement Parts
Co., Ltd.; Hongfa Machinery (Dalian) Co.; and Qingdao Gren (Group)
Co.; Plaintiffs.
Court No. 06-00430                                           Page 2

Gregory G. Katsas, Acting Assistant Attorney General, Commercial
Litigation Branch, Civil Division, United States Department of
Justice, Jeanne Davidson, Director, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Patricia M.
McCarthy, Assistant Director, Commercial Litigation Branch, Civil
Division, United States Department of Justice (Courtney Sheehan);
Of Counsel: Melanie A. Frank, Office of Chief Counsel, Department
of Commerce, for the United States, Defendant.

Porter, Wright, Morris & Arthur, LLP, (Leslie Alan Glick) for The
Coalition for the Preservation of American Brake Drum and Rotor
Aftermarket Manufacturers, Defendant-Intervenor.

                                 OPINION

     TSOUCALAS, Senior Judge: This matter is before the Court on a

motion   for   judgment   upon   the   agency   record   brought   by   the

Plaintiffs pursuant to USCIT Rule 56.2.1

     Plaintiffs challenge numerous aspects of the U.S. Department

of Commerce’s final determination with respect to the eighth

antidumping administrative review of the antidumping order in Brake

Rotors From the People’s Republic of China: Final Results and

Partial Rescission of the 2004/2005 Administrative Review and

Notice of Rescission of 2004/2005 New Shipper Review (“Final

Determination”), 71 Fed. Reg. 66304 (Nov. 14, 2006).          Plaintiffs

contend certain aspects of Commerce’s determination is contrary to

law, constitutes an abuse of discretion and is not supported by

substantial evidence on the record. See Revised Mem. of P. & A. in

     1
      Plaintiff-Intervenor Longkou TLC Machinery Co., Ltd. filed
a notice of dismissal on July 18, 2007 and is not a party to this
case.
Court No. 06-00430                                                       Page 3

Supp. of Pls.’ Mot. for J. upon the Agency R. (“Pls.’ Br.”).2                      For

the    reasons       set    forth    below,   the   Court     sustains    the     Final

Determination in part, and remands it in part.

                                       BACKGROUND

       Laizhou       Auto    Brake   Equipment      Company   (“LABEC”);    Longkou

Haimeng Machinery Co., Ltd. (“Haimeng”); Laizhou Luqi Machinery

Co., Ltd. (“Luqi”); Laizhou Hongda Auto Replacement Parts Co., Ltd.

(“Hongda”); Hongfa Machinery (Dalian) Co. (“Hongfa”); and Qingdao

Gren       (Group)   Co.    (“Gren”)    (collectively       “Plaintiffs”)   contest

aspects of the U.S. Department of Commerce’s Final Determination.

Plaintiffs are producers and exporters of the subject merchandise

covered by the antidumping duty order on brake rotors from the

People’s Republic of China.

       On April 1, 2005, Commerce published a notice of opportunity

to request an administrative review of the antidumping duty order

of brake rotors from China for the period April 1, 2004 through

March 31, 2005 (“the period of review” or “POR”).                 See Antidumping

or Countervailing Duty Order, Finding, or Suspended Investigation;

Opportunity to Request Administrative Review, 70 Fed. Reg. 16799.

On May 27, 2005, Commerce initiated the eighth administrative

review of brake rotors from China for twenty-seven individually

       2
      Unless otherwise noted, reference to all documents herein
shall refer to the public version of those documents.
Court No. 06-00430                                                    Page 4

named      firms.     See    Notice    of    Initiation   of    Antidumping        and

Countervailing        Duty    Administrative        Reviews    and   Request       for

Revocation in Part (“Initiation Notice”), 70 Fed. Reg. 30694.

      On June 7, 2005, Commerce issued a letter to all firms named

in the Initiation Notice indicating that “[d]ue to the large number

of   requests       for   administrative      review    and    the   Department’s

experience regarding the resulting administrative burden to review

each company for which a request has been made, the Department is

considering to exercise its authority to select respondents by

sampling,”     and    requiring       that   each   company    subject      to   this

administrative review submit certain business information.                   Letter

to   All    Interested      Parties,    Public   Record   (“PR”)     Doc.    No.    5.

Plaintiffs’ responded to Commerce’s request on June 24, 2005.3 See

Letters from Law Firm of Trade Pacific, Confidential Record (“CR”)

Doc. Nos. 5, 7, 8, 10 and 12; Pls.’ Br. at 4.             On October 14, 2005,

Commerce instructed interested parties that it had decided to use

a probability-proportional-to-size (“PPS”) sampling methodology to

limit the number of respondents in the review (“Sample Proposal

Letter”).4     See Sample Proposal Letter, PR Doc. No. 91.                  Commerce

indicated in the Sample Proposal Letter that it intended to include

      3
       Commerce sent another letter on September 15, 2005
requesting additional information to which Plaintiffs responded
on September 19, 2005. Pls.’ Br. at 5.
      4
       Commerce stated that it intended to individually review
four respondents. See Sample Proposal Letter.
Court No. 06-00430                                               Page 5

in the calculation of the sample rate any respondent margins based

on facts available, including adverse fact available, zero and de

minimis rates.

       After receiving comments on its proposed sampling method from

several of the Plaintiffs, Commerce announced in a letter dated

November 10, 2005 (“Sample Decision Letter”), that it decided to

apply the PPS methodology previously described in its Sample

Proposal Letter.5        See Sample Decision Letter, PR Doc. No. 98.

Commerce noted that it would individually review five companies,

adding     that   “if   a     respondent   selected   for   review    fails   to

participate in the review, the Department will not choose another

respondent in its place.” On November 16, 2005, Commerce conducted

its sampling and chose the five companies to be individually

examined.6    See Released Letter to Interested Parties, PR Doc. No.

100.

       Ultimately,      the     administrative   review     covered    sixteen

       5
       Plaintiffs LABEC, Haimeng, Hongda, Hongfa and Luqi
submitted comments on October 24, 2005, among other things,
contesting the inclusion in the sample rate of any respondent
margins that were based on facts available. See Repondents
Comments re Sampling Methodology Letter, PR Doc. No. 96.; Pls.’
Br. at 7.
       6
       Among the five companies chosen were Plaintiffs Hongfa
and Haimeng. Plaintiffs LABEC, Luqi, Hongda and Gren were not
among the sampled group. The three companies chosen for the
sampled group who are not a party to this case are Qingdao Meita
Automotive Industry Co., Ltd.; Yantai Winhere Auto-Part
Manufacturing Co., Ltd.; and Xiangfen Hengtai Brake Systems Co.,
Ltd. See Preliminary Results at 26737; Complaint at 3.
Court No. 06-00430                                              Page 6

participating firms, including all of the Plaintiffs.            See Brake

Rotors From the People’s Republic of China: Preliminary Results and

Partial Rescission of the 2004/2005 Administrative Review and

Preliminary Notice of Intent to Rescind of 2004/2005 New Shipper

Review (“Preliminary Results”), 71 Fed. Reg. 26736 (May 8, 2006).7

In the Preliminary Results, Commerce assigned an adverse facts

available rate of 43.32% to mandatory respondent Hengtai Brake

Systems Co., Ltd. (“Hengtai”), based on Hengtai’s failure to

provide   Commerce   with   accurate   and   complete   data.     Commerce

included that 43.32% adverse facts rate in the calculation of the

sample antidumping duty rate (the “sample rate”) for the non-

sampled respondents (including Plaintiffs LABEC, Hongda, Luqi and

Gren).    In its Final Determination Commerce confirmed the adverse

facts available rate was warranted as to Hengtai and again included

that 43.32% adverse facts rate in the calculation of the group

sample rate assigned to the non-sampled respondents. See 71 Fed.

Reg. 66304.

     Plaintiffs seek judgment on the agency record under USCIT Rule

56.2 with respect to six issues.       Three issues involve Commerce’s

valuation of certain factors of production (i.e., pig iron, steel

     7
       Of the twenty-seven firms named in the Initiation Notice,
only eighteen had shipments of subject merchandise into the U.S.
during the POR, and two of those were participating in an on-
going new shipper review. The resulting administrative review,
therefore, covered sixteen firms, including all the Plaintiffs.
See Preliminary Results, 71 Fed. Reg. at 26737.
Court No. 06-00430                                      Page 7

scrap, and labor wage rate), and three issues involve certain

decisions Commerce undertook with regard to the calculation and

application of a sample antidumping rate.

                           JURISDICTION

     The Court has jurisdiction over this matter pursuant to 19

U.S.C. § 1516a(a)(2) and 28 U.S.C. § 1581(c).

                        STANDARD OF REVIEW

     In reviewing Commerce’s antidumping duty determination, the

Court will uphold such determination unless it is “unsupported by

substantial evidence on the record, or otherwise not in accordance

with law.”   19 U.S.C. § 1516a(b)(1)(B)(i) (2000).      Substantial

evidence is “more than a mere scintilla.     It means 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) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229

(1938)).   Substantial evidence “is something less than the weight

of the evidence, and the possibility of drawing two inconsistent

conclusions from the evidence does not prevent an administrative

agency's finding from being supported by substantial evidence.”

Consolo v. Federal Maritime Comm'n, 383 U.S. 607, 620 (1966)

(citations omitted).
Court No. 06-00430                                           Page 8

                                DISCUSSION

I.   Analysis of Surrogate Value Issues

     In    an   antidumping   investigation,   Commerce   must   determine

whether the subject merchandise is being, or is likely to be, sold

at less than fair value in the United States by comparing the

export price with the normal value of the merchandise. See 19

U.S.C. § 1677b(a). In cases involving exports from a nonmarket

economy (“NME”), Commerce must determine normal value “on the basis

of the value of the factors of production utilized in producing the

merchandise.”8 19 U.S.C. § 1677b(c)(1).

     According to the statute, Commerce must value factors of

production “based on the best available information regarding the

values of such factors in a market economy country or countries

considered to be appropriate.”        19 U.S.C. § 1677b(c)(1).        The

statute does not define “best available information.”

     In this review Commerce calculated normal value by multiplying

     8
         The relevant portion of 19 U.S.C. § 1677b(c)is set forth
below:
(c) Nonmarket economy countries
(1) In general
If- (A) the subject merchandise is exported from a nonmarket
economy country, and
(B) the administering authority finds that available information
does not permit the normal value of the subject merchandise to be
determined under subsection (a) of this section,
the administering authority shall determine the normal value of
the subject merchandise on the basis of the value of the factors
of production utilized in producing the merchandise.
Court No. 06-00430                                                 Page 9

the reported per unit factor quantities by publicly available

Indian surrogate values.      See Def.’s Resp. in Opp’n to Pls.’ Mot.

for J. upon the Agency R. (“Commerce Br.”) at 28. Commerce notes

that it considered the “quality, specificity, and contemporaneity

of the data.”    Id.

      Plaintiffs contest Commerce’s Final Determination with respect

to three factors of production: (i) pig iron,              (ii) steel scrap,

and (iii) labor wage rate.

      A.   Selection of Import Data to Value Pig Iron

      In order to value pig iron, Commerce used publicly available

import statistics obtained from the World Trade Atlas (“WTA”)

relating to India.        Commerce selected Harmonized Tariff System

(“HTS”) subheading 7201.10.00 for this product, which covers non-

alloy pig iron containing less than 0.5% phosphorus.                   See Issues

and Decision Memorandum for the Final Results in the 2004/2005

Administrative Review and New Shipper Review of Brake Rotors from

the   People’s   Republic    of     China   (the    “Issues      and     Decision

Memorandum”) at 23.

      Plaintiffs argue that Commerce’s valuation is unsupported by

substantial evidence and contrary to law. Specifically, Plaintiffs

contend that Commerce should have used the publicly-available

information   that     Plaintiffs   submitted      from   four   Indian     steel

producers for valuation, which in total purchased and consumed
Court No. 06-00430                                                      Page 10

681,675.70 metric tons of pig iron during the POR.                    See Pls.’ Br.

at   24.   Plaintiffs     note   that    during    the    POR        India   imported

approximately     6,860   metric   tons    of     pig    iron    under       this    HTS

subheading.9    Id. at 24.

      Additionally, Plaintiffs point to prior decisions of the Court

to argue that (i) in order for Commerce to use import data “there

must be reason to believe that the industry in question would use

imported inputs,” Dorbest Ltd. v. United States, 462 F. Supp. 2d

1262, 1278 (2006), and (ii) Commerce may use import statistics as

the basis for a surrogate value only “after concluding that they

{the import statistics} are based on commercially and statistically

significant quantities,” Polyethylene Retail Carrier Bag Committee

v. United States, 29 CIT 1418, 1444 (2005) (alteration in original)

(citing Shanghai Foreign Trade Enter. Co. v. United States, 318 F.

Supp. 2d 1339, 1352-53 (2004)).          See Pls.’ Br. at 26.

      In defense of its position, Commerce explains that it used the

WTA data because it was “contemporaneous with the period of review

and . . . specific to the inputs used in the production of subject

merchandise.” Commerce Br. at 30-31.              Commerce further explains

that it did not use the alternative surrogate value data proposed

by   Plaintiffs   because    “it   was    not   specific        to    the    types    of

      9
        Plaintiffs point out that the amount encompassed in
their alternative data is about 100 times the quantity imported
into India during the same period. See Pls.’ Br. at 24.
Court No. 06-00430                                                Page 11

materials used by the Chinese producers in the review.”10             Id. at

31.   Commerce adds that the raw material values reported for one of

the Indian companies related to “inter plant transfers,” which

raises     questions   as   to   whether   these   sales   were   arms-length

transactions.    Id. at 32.      Lastly, Commerce notes that the WTA data

“represent a broader, overall more representative data source”

because it was collected from imports into all of India, as opposed

to collected from a few select companies. Id.

      In examining the record and considering the arguments the

Court finds that Commerce’s determination, that the WTA data

constituted the best available information for valuing pig iron,

was reasonable and based on substantial evidence on the record. In

the process, Commerce determined that a relatively smaller amount

of data that was representative (in both contemporaneity and

specificity to the raw material at issue) was preferable in this

case to a larger amount of data whose representativeness was

dubious.     Plaintiffs’ arguments supporting their alternative data

as a better valuator of pig iron fall in one of two categories: (i)

the amount of steel imported into India is objectively low and

therefore likely to be commercially insignificant; and (ii) the

Indian companies data is of a much larger sample size and therefore

      10
        Commerce noted that two of the Indian companies did not
specify the types of pig iron consumed in the production of their
merchandise. Commerce Br. at 32.
Court No. 06-00430                                           Page 12

is better.    As Commerce has demonstrated, both contentions are

flawed.

     Commerce answers Plaintiffs’ argument that the volume of

import trade is too small to be significant by noting correctly

that “a smaller volume of trade may still be commercially or

statistically   significant   if    it   includes   values    that     are

representative of the product in question.” Commerce Br. at 33.

Here, Commerce has sufficiently detailed the representativeness of

the WTA data set.      Additionally, in its Issues and Decision

Memorandum,   Commerce notes that the volume of non-alloy pig iron

imported into India “significantly exceeds the volume of pig iron

consumed by several of the respondents.”     See Issues and Decision

Memorandum at 25.

     As to the alternative data set pertaining to the Indian

companies, Commerce adequately detailed the numerous reasons why

that data was not preferable.      Commerce explained, for instance,

that a few of the Indian companies did not specify the types of pig

iron consumed in the production process and therefore Commerce

could not be confident that the data from the Indian companies is

specific to the type of pig iron consumed in the production of the

subject merchandise here.11   Commerce Br. at 32.

     11
        Plaintiffs contention that “it is not clear . . . that
the ‘pig iron’ being imported into India under HTS 7201.10.00 is
similar to the pig iron consumed by the mandatory respondents,”
                                                        (continued...)
Court No. 06-00430                                          Page 13

       Lastly, Plaintiffs’ reliance on Dorbest for the proposition

that in order for Commerce to use import data “there must be reason

to believe that the industry in question would use imported inputs”

is misplaced, as the quoted language is taken out of context.

Dorbest,        462 F. Supp. 2d at 1278. Commerce need only show why

domestic data is not reliable, or less reliable than the import

data, which it has done here.12

       It is clear that a larger data set, in and of itself, is not

necessarily better in valuing factors of production than a smaller

one.        As is the case here, representativeness and reliability are

two important factors that distinguish one data set from another.

The representativeness and reliability of the WTA data set is

discussed above, and the record here shows that as a data set it

was contemporaneous with the period of review, specific to the

inputs used in the production process, and was broadly collected

       11
      (...continued)
is not convincing. Reply Mem. in Supp. of Mot. for J. upon the
Agency R. (“Pls.’ Reply Br.”) (confidential version) at 20. The
facts Plaintiffs cite, without anything more, do not weaken
Commerce’s determination as to the representativeness of the
data. See id. at 20-21.
       12
       Dorbest states that “[i]f it is unlikely that the domestic
industry would use imported inputs, and there is domestic data
available, then Commerce’s choice of import data to value factor
inputs may not be reasonable.” 462 F. Supp. 2d at 1279. Contrary
to Plaintiffs’ contention, there is no prerequisite that Commerce
establish in all cases that the industry in question would use
imported inputs. Commerce has established here that the domestic
data, although available, is less reliable than the WTA import
data, and therefore it is not the best available information.
Court No. 06-00430                                             Page 14

from imports into all of India as opposed to from a few companies.

Plaintiffs’ proposed data set, in contrast, was collected from a

handful of companies and was found lacking in specificity to the

inputs used in the production process.

     The Court must therefore conclude that the WTA import data is,

whatever    its   failings,   the   best   available    information      for

calculating this factor of production.      For all the reasons above,

the Court is satisfied that Commerce’s determination here is

reasonable and based on substantial evidence on the record.

     B.    Valuation of Steel Scrap

     Commerce valued the industrial metal scrap that Plaintiffs

purchased and consumed in the production of brake rotors using HTS

classification 7204.10.00, which covers “cast iron scrap.”13             See

Issues and Decision Memorandum at 28. Commerce explains that it

used the cast iron scrap category because the foreign producers

indicated in their submissions that they consumed “steel scrap,

including   scrapped   and    rejected   rotors,   as   well   as   casting

strands/handles (extrusions from the actual rotor that are removed)

and filings from the lathing process.”       Commerce Br. at 33 citing

Plaintiffs Haimeng and Hongfa’s Questionnaire Responses, CR Doc.

     13
        Commerce notes that this was an option suggested by
certain of the Plaintiffs as an alternative to the “other ferrous
scrap” classification they sought during the administrative
proceedings. Commerce Br. at 33.
Court No. 06-00430                                                  Page 15

Nos. 63, 64. Commerce further explains that because “the scrap was

comprised of casting strands and handles, as well as scrapped and

rejected rotors (which in this case are made from gray cast iron),”

it selected the HTS classification corresponding to cast iron

scrap. Commerce Br. at 33. Commerce concludes that “because these

are cast iron brake rotors the most relevant steel scrap to value

for this factor of production would be cast iron steel scrap.”                Id.

at 34.

     Lastly, Commerce argues that “the basket category proposed by

plaintiffs would not include cast iron scrap - the predominant

scrap used in the production of these cast iron rotors.” Id. at 35.

     Plaintiffs        argue   that      Commerce     should     have   used HTS

classification 7204.49.00, which covers “other ferrous scrap” to

value the steel scrap purchased by Plaintiffs. Pls.’ Br. at 32.

Plaintiffs argue that the “other ferrous scrap” category is more

specific to the factor of production being valued and “is of better

quality because it covers a larger volume of imports.”                  Id.

     The    crux      of   Plaintiffs’    argument     is   that   Commerce   is

incorrectly “focusing on the production process rather than on the

specific factor to be valued.” Pls.’ Reply Br. at 13. Plaintiffs

admit    that   the    brake   rotor     production    process     includes   the

reintroduction of scrapped and rejected rotors but contend that

“the issue is not what types of scrap generally are used in the

production process [but] [r]ather . . . what type of scrap did the
Court No. 06-00430                                        Page 16

respondents report in the factor field ‘STLSCRAP,’ which Commerce

needs to value in the calculation of normal value.” Id. Plaintiffs

state that there is no such thing as “cast iron steel scrap” and

argue that this “misunderstanding exposes the irrationality of

Commerce’s conclusion that an iron scrap price would ever be a

preferred surrogate price for valuing steel scrap.” Id. at 15.

     Plaintiffs, by way of support, point to the fact that Commerce

itself states in its brief that invoices obtained during the

verification process indicated that the input was “steel scrap.”14

See id. at 16; Commerce Br. at 35. Furthermore, Plaintiffs contend

that Commerce’s statement that cast iron scrap is the predominant

scrap used in the production process is “patently false.”       Pls.’

Reply Br. at 16, n.3.

     Finally, in Plaintiffs’ Reply Brief they contend that in the

two subsequent administrative reviews of brake rotors from China

(i.e., the final results of the ninth review and the preliminary

results of the tenth review), Commerce has valued the steel scrap

under subheading 7204.49.00 (“other ferrous scrap”) of the HTS, as

Plaintiffs argue should have been done in this review.15      See id.

     14
        Commerce notes that invoices obtained during its
verification process “indicated that the input was ‘steel scrap’
and did not indicate the exact type of scrap.” Commerce Br. at
35.
     15
       See Brake Rotors From the People’s Republic of China:
Final Results of Antidumping Duty Administrative and New Shipper
                                                        (continued...)
Court No. 06-00430                                     Page 17

at 16-17.

     In reviewing the record and arguments of both sides, the Court

finds that Commerce failed to adequately explain its decision to

value the steel scrap at issue here, if it is in fact “steel”

scrap, under HTS classification 7204.10.00. The parties here agree

generally on the type of scrap Plaintiffs use in the production

process (i.e., some combination of cast iron scrap (from casting

strands, handles and rejected rotors) and steel scrap).   It is not

clear, however, in what proportion each is used, nor if both should

even be considered in this factor of production valuation of what

both parties refer to as “steel” scrap.   Commerce does not address

Plaintiffs’ argument that the scrap composed of scrapped and

rejected rotors is not properly accounted for here, nor does it

support with evidence its statement that cast iron scrap is the

predominant scrap used in the production process.

     The Court therefore remands back to Commerce to specifically

address and adequately explain (i) whether the rejected rotors,

casting strands/handles, etc., reintroduced into the production

process should be properly accounted for in this specific factor of

     15
      (...continued)
Reviews and Partial Rescission of the 2005/2006 Administrative
Review (the “Ninth Review”), 72 Fed. Reg. 42386 (August 2, 2007);
Brake Rotors From the People’s Republic of China: Preliminary
Results of the 2006/2007 Administrative and New Shipper Reviews
and Partial Rescission of the 2006/2007 Administrative Review
(the “Tenth Review”), 73 Fed. Reg. 6700 (February 5, 2008).
Court No. 06-00430                                     Page 18

production analysis; (ii) the composition of the predominant scrap

used in the production process; (iii) Plaintiffs’ argument that

Commerce should be solely focusing on the type of scrap the

respondents reported in the factor field “STLSCRAP”;      and (iv)

whether it has in fact reassessed its position in subsequent

reviews as to the proper HTS classification of the scrap at issue

here.

     C.   Calculation of Labor Rate

     When constructing the “normal value” of products from NMEs

under 19 U.S.C. § 1677b(c), Commerce is required to value the

“hours of labor required” as a factor of production.    Commerce’s

regulations provide that when valuing labor rates for NMEs it will

     use regression-based wage rates reflective of the
     observed relationship between wages and national income
     in market economy countries. [Commerce] will calculate
     the wage rate to be applied in nonmarket economy
     proceedings each year. The calculation will be based on
     current data, and will be made available to the public.

19 C.F.R. § 351.408(c)(3).   Consistent with this statute Commerce

publishes a single set of labor wage rates that are applicable to

all NMEs during the period. See Commerce Br. at 36.

     In order to better understand the issue and arguments involved

here an abbreviated timeline of the relevant events is necessary:

•    May 23, 2005: Commerce initiated the underlying administrative
Court No. 06-00430                                                   Page 19

     review in this case;

•    June 30, 2005: Unrelated to the administrative review here,

     Commerce sought comments on its regression-based methodology

     for   calculating       NME   wage   rates   (See    Expected    Non-Market

     Economy Wages: Request for Comment on Calculation Methodology,

     70 Fed. Reg. 37761);

•    May 8, 2006: Commerce published the Preliminary Results,

     applying to the margin calculation for the mandatory sampled

     respondents a surrogate PRC wage rate of $0.97 per hour;

•    October       19,    2006:    Commerce    published     its     antidumping

     methodologies announcement. See Antidumping Methodologies:

     Market Economy Inputs, Expected Non-Market Economy Wages, Duty

     Drawback;      and    Request    for     Comments,    (the     “Antidumping

     Methodologies Announcement and Requests for Comments”) 71 Fed.

     Reg. 61716;

•    November 14, 2006: Commerce published the Final Determination

     continuing to apply a surrogate PRC wage rate of $0.97 per

     hour; and

•    February 2, 2007: finalized rates that took into account the

     new methodology were released. Commerce Br. at 37, n.6.

     Plaintiffs argue that Commerce knowingly used a surrogate

hourly rate that did not represent the best available information

at   the   time,    adding    that    when     Commerce    issued    its   Final
Court No. 06-00430                                               Page 20

Determination it “already had settled on significant revisions” to

its methodology.         Pls.’ Br. at 38.       Plaintiffs contend that

Commerce’s Antidumping Methodologies Announcement and Requests for

Comments,    published    approximately   one   month   before    the   Final

Determination in this case, “announced significant, overarching,

and final changes in its NME labor rate calculation methodology.”

Id. at 39.

     In support of its determination Commerce argues that in this

case it applied the labor wage rate that was published and in

effect at the time of the Final Determination and that this rate

was therefore the best available information at the time.16                See

Commerce Br. at 36.       Specifically, in this review Commerce relied

on the 2003 wage rate data because “such rates were the most

current data available as of November 2005.”             Id. at 38.        In

response to Plaintiffs’ arguments, Commerce notes that the new

methodology and rates were not final and effective until February

2007 (i.e., after the Final Determination), and thus Commerce

reasonably decided to apply the new rate prospectively.17            See id.

     16
        Commerce noted that the labor rate here was determined
based on a methodology that had been in existence for nearly ten
years. See Antidumping Duties; Countervailing Duties, 62 Fed.
Reg. 27296, 27367 (May 19, 1997).
     17
       Specifically, Commerce noted that the revised methodology
was never applied to the 2003 data because the new methodology
was finalized in 2007 (i.e., subsequent to its Final
Determination) when Commerce revised the calculations utilizing
                                                        (continued...)
Court No. 06-00430                                                       Page 21

at 36-37.     Additionally, Commerce stresses that the notice and

comment    period    did       not   end   with   the    Change   in     Methodology

Announcement but that an additional request for comments was

published on January 9, 2007. See id. at 37, n.6.

      The Court finds that Commerce’s decision to use the labor wage

rate that was published and in effect at the time of the Final

Determination was based on the best available information. As

Commerce points out, the new methodology was not finalized at the

time of the Final Determination and therefore Commerce’s decision

to refrain from applying that methodology until it was finalized

was   reasonable.         It    is   not   dispositive    here    that    Commerce’s

methodology was being revised because of improvements that Commerce

was planning to enact in the future. The revision process included

a period of requesting comments on the new methodology, and until

that comment period was complete, and the resulting comments

assessed,   the     new    methodology       cannot     necessarily      be   said   to

constitute the best available information.                 Therefore, Plaintiffs

may not presume that the Antidumping Methodologies Announcement and

Requests for Comments necessitated an application of the non-

finalized new rate and methodology in this case.

      At the time the new methodology is finalized and effective it

becomes the best available information, but until that point,

      17
      (...continued)
the 2004 wage rate data. See Commerce Br. at 38.
Court No. 06-00430                                           Page 22

Commerce must be granted some discretion to assess the advantages

and disadvantages of applying a work-in-progress methodology in

place of an existing one which is in the process of improvement.

      The Court does not address Plaintiffs’ argument regarding the

Dorbest Limited v. United States, 462 F. Supp. 2d 1262 (Oct. 31,

2006) and Wuhan Bee Healthy Co., Ltd. and Presstek Inc. v.        United

States, 31 CIT __ (July 20, 2007) decisions, nor the specific facts

and arguments involved in those opinions.       See Pls.’ Reply Br. at

22-23.   Under the narrow facts and circumstances in this case, the

Court is satisfied that Commerce’s determination to apply the labor

wage rate that was published and in effect at the time of the Final

Determination   was   based   on   the   best   available   information.

II.   Analysis of Sampling Approach Issues

      In determining weighted average dumping margins Commerce needs

to determine the individual weighted average dumping margin for

each known exporter and producer of the subject merchandise.           See

19 U.S.C. § 1677f-1(c)(1).     If it is not practicable to make an

individual weighted average dumping margin determination “because

of the large number of exporters or producers involved in the

investigation or review,” Commerce may limit its examination to a

reasonable number of exporters or producers by conducting “a sample

of exporters, producers, or types of products that is statistically

valid based on the information available to the administering
Court No. 06-00430                                          Page 23

authority at the time of selection.” 19 U.S.C. § 1677f-1(c)(2).

     A.   Inclusion in the Sample Rate of Respondent Margins based
          on Adverse Facts Available

     In arriving at the sample rate for non-selected respondents

Commerce included the adverse facts available rate of 43.32% it

assigned to mandatory respondent Hengtai, due to Hengtai’s failure

to provide Commerce with accurate and complete data.       In assigning

this rate to Hengtai, Commerce exercised its authority under

section 776(b) of the Tariff Act, which provides that:

           [i]f the administering authority . . . finds
           that an interested party has failed to
           cooperate by not acting to the best of its
           ability   to   comply  with   a   request  for
           information . . . the administering authority
           . . . in reaching the applicable determination
           under this subtitle, may use an inference that
           is adverse to the interests of that party in
           selecting from among the facts otherwise
           available.

     19   U.S.C.   §   1677e(b).   In   addition,   the   Statement   of

Administrative Action accompanying the Uruguay Round Agreements Act

(“SAA”) states that “[w]here a party has not cooperated, Commerce

. . . may employ adverse inferences about the missing information

to ensure that the party does not obtain a more favorable result by

failing to cooperate than if it had cooperated fully.” H.R. REP . NO .

103-316 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4199.

     Plaintiffs argue that since Commerce made no finding that
Court No. 06-00430                                             Page 24

LABEC, Hongda, Luqi, and Gren (i.e., the four Plaintiffs not

selected   for   the   sampled    group)    were   uncooperative   in     this

proceeding, the antidumping statute does not permit Commerce to

assign these companies a sample rate based in whole or in part on

adverse facts available.18       See Pls.’ Br. at 13-14.

     Commerce notes that it calculated the sample rate in this case

by “weight-averaging the individual rates of all five of the

mandatory respondents, including two de minimis rates, one rate

based on ‘adverse facts available’ and two additional calculated

rates.” Commerce Br. at 22-23.         Additionally, Commerce stresses

that it is not applying adverse facts available to the voluntary

respondents, but instead it is “applying a statistically valid

sample rate that is representative of producers as a whole.”              Id.

at 23.    The Court agrees.

     Computing    a    statistically       valid   sample   rate   that    is

representative of the population as a whole may include the margins

determined for all selected respondents, even if that sample rate

happens to be composed in part on a respondent’s rate which is

based on adverse facts available.       Accordingly, assigning a sample

     18
        The result was a weighted-average sample rate of 8.9%.
This sample rate was based in part on the 43.32% adverse fact
available rate that Commerce assigned to uncooperative mandatory
respondent Hengtai. Commerce, in accordance with § 1677f-
1(c)(2)(A), applied this weighted-average rate to all non-
selected voluntary respondents. See Commerce Br. at 23; Pls.’ Br.
at 11; Final Determination.
Court No. 06-00430                                                     Page 25

rate to a group which was calculated including an adverse facts

available rate is not an application of adverse facts available as

to that group, and is in accordance with Commerce’s statutory

authority to sample.19

     It is important to note that Commerce is not cherry picking

here,        nor   is   there   anything    arbitrary   about   the    way   it   is

constructing this sample. As stated above, the overall sample rate

was based on a weighted-average which happened to include two de

minimis rates along with the rate based on adverse facts available.

This Court therefore need not address Plaintiffs’ contention that

Commerce’s         approach     “punishes    fully   cooperative      parties     by

assigning them a rate unfairly inflated by the non-cooperation of

[another] party,” as this is more a moral argument than a legal

one. Pls.’ Br. at 12-13.           A sample rate by its nature cannot meet

the precision of an individualized rate as to any given party.

Therefore,         companies    that   would    otherwise   have      received    an

individualized rate lower than the sample rate will in a sense be

        19
       Commerce notes that 19 U.S.C. § 1677f-1(c)(2) directs it
to obtain a “statistically valid” sample while § 1677e(b)
authorizes the use of “adverse inferences” where a respondent is
non-cooperative. Commerce argues that its determination here
“reads these two provisions consistently rather than in conflict,
is reasonable, and should be sustained by the Court,” and cites
to the deference standard under Chevron U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837 (1984) and its
progeny. Commerce Br. at 25. As the Court agrees with Commerce’s
alternate argument supra, that this is not a case of applying
adverse facts as contemplated under 19 U.S.C. § 1677e(b), this
argument need not be addressed.
Court No. 06-00430                                       Page 26

punished while those that would otherwise have received a higher

rate will benefit.20   This element is an inherent and accepted part

of any sample.

     Lastly, Plaintiffs state that there is a distinction between

determining a statistically valid dumping rate and selecting from

a statistically valid pool of respondents.   See Pls.’ Reply Br. at

5; 19 U.S.C. § 1677f-1(c)(2).     Plaintiffs argue that Commerce’s

statutory obligation is to the latter, and conclude, therefore,

that “Commerce’s action [including an adverse facts available rate

to calculate the sample rate] rests on its false assumption that

the law requires a ‘statistically valid’ dumping rate to result

from the ‘statistically valid’ pool of respondents.”21   Pls.’ Reply

Br. at 5.   While Plaintiffs initial distinction is an accurate

statement in and of itself, the conclusion they draw from it is

erroneous. Suffice it to say that the point of requiring selection

from a statistically valid pool of respondents is to arrive at a

statistically valid dumping rate.

     20
        It is important to note that Plaintiffs’ “punishment”
argument would apply to any rate factored into the sample rate
that would be higher than its own individualized rates.
     21
        Plaintiffs contend that “[t]he law does not require that
the sample rate be the most statistically valid rate available.”
Pls.’ Reply Br. at 5 (emphasis added). The implication appears
to be that Commerce may throw out any rates based on adverse
facts and still calculate a statistically valid group rate,
albeit not the most statistically valid group rate.
Court No. 06-00430                                             Page 27

     B. Not Allowing for Voluntary Respondents

     As   stated   above,   if   it   is   not   practicable   to   make   an

individual weighted average dumping margin determination, Commerce

may limit its review to “a sample of exporters, producers, or types

of products that is statistically valid based on the information

available to the administering authority at the time of selection.”

19 U.S.C. §   1677f-1(c)(2). However, Congress provided that where

Commerce limits its examinations to a sample it

           shall establish an . . . individual weighted
           average dumping margin for any exporter or
           producer not initially selected for individual
           examination . . . who submits to the
           administering   authority    the   information
           requested from exporters or producers selected
           for examination, if - (2) the number of
           exporters or producers who have submitted such
           information is not so large that individual
           examination of such exporters or producers
           would be unduly burdensome and inhibit the
           timely completion of the investigation.

19 U.S.C. § 1677m(a) (emphasis added); Pls.’ Br. at 16.

     Plaintiffs argue that “[b]y formally announcing in advance

that it would not accept any voluntary respondents,” Commerce

violated the intent and language of the statute.         Pls.’ Br. at 17.

Plaintiffs stress that Commerce decided not to allow voluntary

respondents even before the ultimate number of respondents was

known. See id.       This decision, Plaintiffs contend, “rendered

nugatory the law’s Section 782(a) voluntary respondent provision,

and illegally truncated a two-step ‘sample respondents/consider

voluntary respondents’ process into a one-step decision.”            Id.
Court No. 06-00430                                                          Page 28

      Plaintiffs       point    to    the    fact    that     Commerce      calculated

individual company-specific rates for twelve companies in the 2001-

2002 review, twelve companies in the 2002-2003 review, and fourteen

companies in the 2003-2004 review. See id. at 16.                      These previous

reviews, Plaintiffs contend, demonstrate that “the five respondents

individually examined by Commerce in the underlying proceeding were

far from ‘particularly high,’” and therefore Commerce should have

“endeavored     to    calculate       individual      rates     for    as    many   more

companies as possible.” Id.

      Commerce defends its determination by stressing that “the

agency itself is the only entity with the ability to assess its

administrative capacity and resources.”                     Commerce Br. at 13.

Additionally, Commerce notes that “[t]he fact that in prior reviews

of   the   brake     rotors    antidumping      order,    Commerce      was      able   to

individually       investigate       every   company     that    sought      a   review,

including all of the plaintiffs, has no bearing on plaintiffs’

present challenge.” Id. at 14.

      As   to      Plaintiffs’       argument       objecting     to    the      advance

announcement to not accept any voluntary respondents, Commerce

counters by contending that if it “selects the maximum number of

companies that it can feasibly review, there is no requirement or

reason that [it] should refrain from giving notice of this fact to

parties.” Id. at 17.

      The Court finds that Commerce’s determination to limit review
Court No. 06-00430                                                   Page 29

in advance to five of the sixteen companies was in this case within

the bounds of its statutory authority.

       Since it is not disputed that Commerce has the statutory

authority to sample, the two questions in need of answering are

(i) whether Commerce is authorized to make an advanced assessment

of the anticipated resources that it can devote to a given review

and announce any constraints accordingly (here, limiting individual

reviews to the five mandatory sampled respondents); and (ii)

whether in this case Commerce reasonably selected the maximum

number of companies that it can feasibly review.

       The   Court   agrees    with   Commerce     that   it   is    within    its

authority    to   make   an   advanced   assessment       of   the   anticipated

resources that it can devote to a given administrative review and,

having made such an assessment, may announce any administrative

limitations.      The United States Court of Appeals for the Federal

Circuit has recognized that “agencies with statutory enforcement

responsibilities enjoy broad discretion in allocating investigative

enforcement resources.” Torrington v. United States, 68 F.3d 1347,

1351   (citing    Heckler     v.   Chaney,   470   U.S.   821,      831   (1985)).

Commerce, like any organization seeking efficient operations, plans

for the proper management of its time and resources.                 There is no

statutory requirement for Commerce to apply a pro forma bifurcated

approach as Plaintiffs contend.

       As to the second question, the Court finds that Commerce’s
Court No. 06-00430                                     Page 30

determination to limit review in this case to five companies is

reasonable.   The record does not show, and Plaintiffs did not

demonstrate, that Commerce could have conducted more individual

examinations without undue burden and without inhibiting the timely

completion of the investigation.   It is not enough to merely point

to past reviews which included more companies, as administrative

capacity and resources may change from year to year.

     C. Sample Rate as Applied to Plaintiffs Not Supported or
        Representative

     Commerce calculated the sample rate in this review by “weight-

averaging the individual rates of all the selected respondents,

chosen through a statistically valid, random sampling exercise, and

applied that weighted-average rate to the non-selected voluntary

respondents,” including Plaintiffs. Commerce Br. at 19.

     Plaintiffs argue that the Final Determination rate assigned to

LABEC, Hongda, Luqi and Gren was contrary to law because the record

evidence demonstrates that the rate assigned through the sample is

not representative of the companies’ actual level of dumping.    See

Pls.’ Br. at 20.     Plaintiffs contend that Commerce “should have

used the U.S. sales and [factors of production] data and/or the

quantity and value data submitted by each of the companies as the

best available information to calculate company-specific margins.”

Id. at 19. Plaintiffs add that Commerce “ignored this information,

and examined the sales and [factors of production] data only of
Court No. 06-00430                                             Page 31

those companies selected through Commerce’s sampling exercise.”

Id. at 20.

     Plaintiffs also point to § 1677m(e) of the statute which

states that Commerce “shall not decline to consider information

that is submitted by an interested party . . . but does not meet

all the applicable requirements established by the administering

authority” if certain criteria is met. Id. at 19-20.

     Plaintiffs’ argument, accurately restated by Commerce, is that

“although [Plaintiffs] were not selected for the review, Commerce

should   have   nevertheless   relied    upon   [Plaintiffs’   respective]

company-specific submissions for purposes of calculating their

antidumping margins.”        Commerce Br. at 19.       Commerce correctly

points out that Plaintiffs argument is contrary to § 1677m of the

statute which, as discussed supra, allows Commerce the authority to

decline individual reviews when conducting such reviews would be

unduly   burdensome   and    inhibit    the   timely   completion    of   the

investigation.    See § 1677m(a)(2).

     In response to Plaintiffs’ § 1677m(e) argument, Commerce

correctly counters that this provision of the statute does not

apply, as “Commerce did not reject plaintiffs’ submission for

failure to meet applicable requirements; rather, it determined not

to   conduct    individual   reviews    (including     calculation   of   an

individual antidumping rate) as a result of lack of administrative

resources.” Commerce Br. at 20.         Additionally, Commerce stresses
Court No. 06-00430                                                        Page 32

that “[t]he mere submission of an initial questionnaire response

normally will not provide a basis for determining an antidumping

rate” and that “[i]n many cases, there are multiple additional

submissions and verification of data.” Commerce Br. at 21-22.

      The Court finds that Commerce’s determination to apply the

weighted-average         sample      rate   to     the   non-selected       voluntary

respondents, including Plaintiffs, was reasonable and in accordance

with Commerce’s statutory authority.                Since it is reasonable for

Commerce to select the maximum number of companies that it can

feasibly review based on administrative resources available (which

can be a number less than the total number of companies seeking

review), then it must be understood that companies not selected for

review will not have individual rates applied.

      Conducting an administrative review, as Commerce points out,

is   not   as   simple    as   Plaintiffs        would   suggest    and    additional

submissions and/or verification can be required.                   See Commerce Br.

at   21-22.      The   Court      agrees    with    Commerce’s     assessment      that

“Plaintiffs’ approach would create an untenable result that negates

Commerce’s      authority      and     ability     to    internally       manage    its

administrative resources.” Id. at 22.                     As Commerce correctly

states it, Plaintiffs would have this Court impose a standard under

which Commerce would be required to either: (i) conduct a review

for every respondent that claims to have submitted complete sales

and production data, regardless of the agency’s decision to limit
Court No. 06-00430                                     Page 33

the number of producers examined; or (ii) rely upon potentially

incomplete and unverified questionnaire responses for determining

all voluntary respondent rates. See id. This standard is contrary

to the statute.

                            CONCLUSION

     In accordance with the foregoing, the Court affirms Commerce’s

determination in part and remands in part.

                                  /s/ Nicholas Tsoucalas     ___
                                      NICHOLAS TSOUCALAS
                                         SENIOR JUDGE

Dated:    June 26, 2008
          New York, New York