Court Opinion

ID: 855205
Source: CourtListenerOpinion
Date Created: 2013-03-14 15:50:11.546589+00
Date Added: 2024-06-11T13:22:33.980622
License: Public Domain

Slip Op. 13- 31

           UNITED STATES COURT OF INTERNATIONAL TRADE

Before: Nicholas Tsoucalas, Senior Judge

GUANGDONG WIREKING HOUSEWARES &    :
HARDWARE CO., LTD.,                :
                                   :
          Plaintiff,               :
                                   :
          and                      :
                                   :
BUREAU OF FAIR TRADE FOR IMPORTS & :
EXPORTS, MINISTRY OF COMMERCE,     :
PEOPLE’S REPUBLIC OF CHINA,        :        Court No.: 09-00422
                                   :
          Plaintiff-Intervenor,    :
                                   :
     v.                            :
                                   :
UNITED STATES,                     :
                                   :
          Defendant,               :
                                   :
          and                      :
                                   :
NASHVILLE WIRE PRODUCTS, et al.,   :
                                   :
          Defendant-Intervenors.   :
                                   :

                        OPINION and ORDER

Held: Plaintiff and plaintiff-intervenor’s motion for judgment on
the agency record is denied because Public Law 112-99 is
constitutional and the Department of Commerce’s determination is
supported by substantial evidence and is otherwise in accord with
the law.

                                            Dated: March 12, 2013

     Curtis, Mallet-Prevost, Colt & Mosle LLP, (William H.
Barringer, Daniel L. Porter, James P. Durling, Matthew P.
McCullough, and Ross Bidlingmaier) for Guangdong Wireking
Housewares & Hardware Co., Ltd., Plaintiff, and for Bureau of Fair
Trade for Imports & Exports, Ministry of Commerce, People’s
Republic of China, Plaintiff-Intervenor.

     Stuart F. Delery, Principal Deputy Assistant Attorney General;
Court No. 09-00422                                                           Page 2

Jeanne E. Davidson, Director, Franklin E. White, Jr., Assistant
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice (Alexander V. Sverdlov); Office of the
Chief Counsel for Import Administration, United States Department
of Commerce, Daniel J. Calhoun, Of Counsel, for the United States,
Defendant.

     Kelley Drye & Warren, LLP, (Kathleen W. Cannon, Paul C.
Rosenthal, Brooke M. Ringel, and David C. Smith) for Nashville Wire
Products, Inc. and SSW Holdings Co., Inc., Defendant-Intervenors.

     TSOUCALAS,       Senior      Judge:    Plaintiff     Guangdong       Wireking

Housewares & Hardware Co., Ltd. (“GWK”) and plaintiff-intervenor

Bureau of Fair Trade for Imports & Exports, Ministry of Commerce,

People’s Republic of China (collectively “Plaintiffs”) challenge

several aspects of the determination by the Department of Commerce

(“Commerce”)    in    Certain     Kitchen   Shelving      and    Racks    from    the

People’s Republic of China: Final Affirmative Countervailing Duty

Determination,       74    Fed.   Reg.   37,012   (July    27,    2009)    (“Final

Determination”).          Plaintiffs also challenge the constitutionality

of a new law amending sections 701 and 777A of the Tariff Act of

1930.1    See Pub. L. No. 112-99, 126 Stat. 265–67 (2012) (the “new

law”).      Commerce        and   defendant-intervenors,         Nashville       Wire

Products, Inc. and SSW Holdings Co., Inc., oppose Plaintiffs’

motion.    For the following reasons, the court finds that the new

law is constitutional and that the Final Determination is supported

by substantial evidence and is otherwise in accord with the law.

     1
       All further citations to the Tariff Act of 1930 are to the
relevant provisions of Title 19 of the U.S. Code, 2006 edition,
unless otherwise specified.
Court No. 09-00422                                                    Page 3

                                  Background

                             I. Procedural History

       On August 26, 2008 Commerce initiated a countervailing duty

(“CVD”) investigation on certain kitchen appliance shelving and

racks (“KASR”) imported from the People’s Republic of China (“PRC”)

during the calendar year of 2007.           See Notice of Initiation of CVD

Investigation: Certain KASR from the PRC, 73 Fed. Reg. 50,304 (Aug.

26, 2008).         Shortly thereafter, Commerce designated GWK as a

“mandatory respondent” for the investigation.               See Certain KASR

From       the   PRC:   Preliminary    Affirmative   CVD   Determination   and

Alignment of Final CVD Determination with Final Antidumping Duty

Determination, 74 Fed. Reg. 683, 683–684 (Jan. 7, 2009) (citing

Memorandum to Stephen J. Claeys, “Respondent Selection Memo” (Sept.

17, 2008), Public Rec. 38)).2

       Commerce also initiated a parallel antidumping duty (“AD”)

investigation covering KASR imported from the PRC between January

1, 2008 and June 30, 2008.            Certain KASR from the PRC: Initiation

of AD Investigation, 73 Fed. Reg. 50,596 (Aug. 27, 2008).3

       2
        Hereinafter all documents in the public record will be
designated “P.R.” without further specification except where
relevant.
       3
       In the AD investigation, Commerce utilized its non-market
economy (“NME”) methodology to calculate a weighted average dumping
margin of 95.99% for GWK. See Certain KASR From the PRC: Final
Determination of Sales at Less Than Fair Value, 74 Fed. Reg.
36,656, 36,661 (July 24, 2009).       Under its NME methodology,
Commerce determines normal value by valuing factors of production
using surrogate data from a market economy “in an attempt to
Court No. 09-00422                                                    Page 4

     On July 27, 2009, Commerce issued the final results of its CVD

investigation.       Final Determination, 74 Fed. Reg. at 37,012.

Commerce made several findings relevant to the instant litigation.

First, Commerce determined that it could impose CVDs on goods from

the PRC despite the PRC’s NME status in the AD investigation.              See

Issues and Decision Memorandum for the Final Determination in the

CVD Investigation of Certain KASR from the PRC at 25–30, C-570-942

(July 20, 2009) (“I&D Memo”).         Commerce also determined that GWK

received a countervailable subsidy through the provision of wire

rod by the government of China (“GOC”) and State-Owned Enterprises

(“SOEs”)   within    the   PRC   at   less    than   adequate   remuneration

(“LTAR”). See id. at 14–16. Commerce determined that market price

for wire rod in the PRC was distorted by the GOC’s substantial

presence in the market and therefore used a “world average price”

as   a   benchmark   against     which   to    measure   the    adequacy   of

remuneration.    Id. at 15.      Commerce assigned GWK a “Net Subsidy

Rate” of 13.30%. See Final Determination, 74 Fed. Reg. at 37,014.

     Plaintiffs allege that Commerce made several errors in the

Final Determination.        Specifically, Plaintiffs argue that (1)

Commerce’s policy of imposing CVDs on goods from NME countries is

contrary to 19 U.S.C. § 1671(a); (2) Commerce’s policy of imposing

CVDs on goods from NME countries is unreasonable even if 19 U.S.C.

construct a hypothetical market value of that product.” Nation
Ford Chem. Co. v. United States, 166 F.3d 1373, 1375 (Fed. Cir.
1999).
Court No. 09-00422                                           Page 5

§ 1671(a) is ambiguous; (3) Commerce erred in finding that certain

of GWK’s wire rod suppliers that are majority-owned by the GOC are

“authorities” under 19 U.S.C. § 1677(5)(B); (4) Commerce erred in

finding that certain of GWK’s wire rod suppliers that are minority-

owned by the GOC are “authorities” under 19 U.S.C. § 1677(5)(B);

(5) Commerce erroneously countervailed GWK’s wire rod purchases

from privately-owned trading companies without first determining

that GWK received a financial contribution; and (6) Commerce

erroneously discarded in-country benchmarks for the price of wire

rod based on the GOC’s presence in the wire rod market.   Pl. & Pl.-

Intervenor’s Br. Supp. Mot. J. Agency R. at 1–4 (“Pls.’ Br.”).

                     II. GPX and the New Law

     Parallel to the instant case, GPX International Tire Corp., an

importer of tires from the PRC, challenged Commerce’s policy of

imposing CVDs on goods from NME countries.   GPX Int’l Tire Corp. v.

United States, 33 CIT __, __, 645 F. Supp. 2d 1231, 1239 (2009).

Prior to 2007, Commerce refrained from imposing CVDs on goods from

NME countries, as it could not identify and measure the effects of

government subsidies in a centralized economy.     See Carbon Steel

Wire Rod from Czechoslovakia: Final Negative CVD Determination, 49

Fed. Reg. 19,370, 19,372–73 (May 7, 1984).     The Court of Appeals

for the Federal Circuit (“CAFC”) upheld this policy as a reasonable

interpretation of CVD law.   See Georgetown Steel Corp. v. United

States, 801 F.2d 1308, 1309 (Fed. Cir. 1986).     However, in 2006,
Court No. 09-00422                                               Page 6

Commerce announced that it was reconsidering the PRC’s status as a

NME country.    See AD Investigation of Certain Lined Paper Products

from the PRC - China’s status as a NME, A-570-901 (Aug. 30, 2006)

(“CLPP from the PRC”).      Although it did not alter China’s NME

status, id. at 82, Commerce subsequently determined that it could

identify and measure the effects of subsidies in the PRC, see CVD

Investigation of Coated Free Sheet Paper from the PRC - Whether the

Analytical Elements of the Georgetown Steel Opinion are Applicable

to China’s Present-Day Economy at 10, C-570-907 (Mar. 29, 2007)

(“CFSP from the PRC”), and therefore began imposing CVDs on goods

from the PRC.     See Coated Free Sheet Paper from the PRC: Final

Affirmative CVD Determination, 72 Fed. Reg. 60,645 (Oct. 25, 2007).

      In 2011, the CAFC found that “in amending and reenacting the

trade laws in 1988 and 1994, Congress adopted the position that

[CVD] law does not apply to NME countries.”        GPX Int’l Tire Corp.

v. United States, 666 F.3d 732, 745 (Fed. Cir. 2011) (“GPX II”).

Therefore, the CAFC concluded that “[CVDs] cannot be applied to

goods from NME countries.”    Id.

     Before the CAFC’s mandate was issued in GPX II, Congress

enacted the new law.    See 126 Stat. at 265–67.    The new law has two

sections.   Id.   Section 1 of the new law directs Commerce to impose

CVDs on goods from NME countries except where Commerce is “unable

to identify and measure subsidies provided by the government of the

[NME] country or a public entity within the territory of the [NME]
Court No. 09-00422                                                            Page 7

country    because   the    economy     of   that   country      is    essentially

comprised of a single entity.”          § 1(a), 126 Stat. at 265.            Section

1 applies to all proceedings initiated by Commerce on or after

November 20, 2006.       § 1(b), 126 Stat. at 265.              Section 2, which

applies only to proceedings initiated following the enactment of

the new law, directs Commerce to “reduce” the AD in all proceedings

involving the concurrent imposition of CVDs and ADs where it can

“reasonably    estimate     the    extent    to   which   the    countervailable

subsidy . . . increased the weighted average dumping margin” for

subject merchandise.       § 2, 126 Stat. at 266.

     Following the passage of the new law, the CAFC requested

additional    briefing     concerning    the impact       of    the    new   law   on

Commerce’s petition for rehearing GPX II. See GPX Int’l Tire Corp.

v. United States, 678 F.3d 1308, 1311 (Fed. Cir. 2012) (“GPX III”).

In assessing the impact of new law, the CAFC concluded that by

enacting section 1 “Congress clearly sought to overrule” the

holding in GPX II.         Id. at 1311.       It also noted that section 2

changed CVD law prospectively, as the former law did not include

protection against potential double-counting of remedies.                     Id. at

1311–12.    The CAFC remanded so that this Court could evaluate the

constitutional    claims     GPX    raised    for   the   first       time   in    its

opposition to the petition for rehearing.             See id. at 1312–13.

     On remand, GPX argued that the new law was a retroactive

change to CVD law which “violate[d] the Ex Post Facto Clause of the
Court No. 09-00422                                                  Page 8

Constitution, as well as due process and equal protection rights of

the Fifth Amendment.”    See GPX Int’l Tire Corp. v. United States,

37 CIT __, __, Slip Op. 13-2 at 8 (Jan. 7, 2013) (“GPX IV”).4         This

Court did not rule on whether the new law retroactively changed CVD

law, id. at __, Slip Op. 13-2 at 14, but found that the new law was

nonetheless   constitutional    even   assuming   that   it   did   make   a

retroactive change.    See id. at __, Slip Op. 13-2 at 14–31.

     During the course of the GPX litigation, parties to the

instant    case   submitted    supplemental   briefs     concerning    the

constitutionality of the new law.      Plaintiffs contend that section

1(b) of new law retroactively changes the CVD statute and violates

the Ex Post Facto Clause, as well as the Fifth Amendment guarantees

of due process and equal protection.       See Pl. & Pl.-Intervenor’s

Supplemental Br. Supp. Mot. J. Agency R. at 1 (“Pls.’ Supplemental

Br.”).    Plaintiffs ask the court to sever section 1(b) of the new

law “to preserve the broader legislation.”        Id. at 38.

                  JURISDICTION and STANDARD OF REVIEW

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

The court will uphold Commerce's final determination in a CVD

     4
        Although GPX IV was decided after the completion of
supplemental briefing in this case, Commerce submitted it as
supplemental authority.      See Def.’s Notice of Supplemental
Authority, Dkt. No. 93 (Jan. 11, 2013). All parties referenced the
decision throughout the oral argument before the court.        See
generally, Oral Argument, Guangdong Wireking Housewares & Hardware
Co. v. United States, Court No. 09-00422 (Ct. Int’l Trade Jan. 16,
2013) (“Oral Arg.”).
Court No. 09-00422                                                       Page 9

investigation 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).

     Constitutional challenges are subject to a de novo review.

NationsBank of Tex., N.A. v. United States, 269 F.3d 1332, 1335

(Fed.   Cir.    2001).       Due   process   claims     concerning     economic

legislation      come    before    the   court   with    a     “presumption   of

constitutionality,” and “the burden is on one complaining of a due

process violation to establish that the legislature has acted in an

arbitrary and irrational way.”           Concrete Pipe & Prods. of Cal.,

Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602,

637 (1993).       With regard to equal protection challenges, where

neither a fundamental right nor suspect class is at issue the

legislation will be upheld “if there is a rational relationship

between the disparity of treatment and some legitimate governmental

purpose.”      Heller v. Doe, 509 U.S. 312, 320 (1993).

                                   DISCUSSION

     Plaintiffs argue that the court should remand the Final

Determination because the new law is unconstitutional and because

several   of    Commerce’s    findings    are    not   based    on   substantial

evidence or are not otherwise in accord with the law.

                          I. Constitutional Issues

                A. Retroactive Application of the New Law

     As a preliminary matter, the parties dispute whether section
Court No. 09-00422                                                          Page 10

1 of the new law retroactively changes CVD law, as it directs

Commerce     to   impose   CVDs   on   goods   from    NME   countries      in   all

proceedings initiated on or after November 20, 2006.                  See § 1, 126

Stat. at 265.        Plaintiffs allege that section 1 retroactively

changes CVD law, which unambiguously prohibited the imposition of

CVDs on goods from NME countries prior to the enactment of the new

law.   Pl. & Pl.-Intervenor’s Reply Br. Concerning Const. Issues at

2–5 (“Pls.’ Supplemental Reply”).          Commerce argues that section 1

does   not   make    a   retroactive    change   to    CVD     law,   but   rather

“clarif[ies]” the law as it was before GPX II.               Def.’s Resp. Pls.’

Supplemental Br. at 6–10 (“Def.’s Supplemental Br.”).                 Even if the

new law is a retroactive change as Plaintiffs contend, the court

need not decide this issue because, for the reasons articulated

below,     Plaintiffs      fail   to   demonstrate      that     section     1   is

unconstitutional.

                           B. Ex Post Facto Clause

       The Ex Post Facto Clause states that “No Bill of Attainder or

ex post facto Law shall be passed.”            U.S. Const. art. I, § 9, cl.

3.   An ex post facto law is a law that “renders an act punishable

in a manner in which it was not punishable when it was committed,”

Fletcher v. Peck, 10 U.S. 87, 138 (1810), or “inflicts a greater

punishment, than the law annexed to the crime, when committed.”

Calder v. Bull, 3 U.S. 386, 390 (1798).               While the Ex Post Facto

Clause does not prohibit all retroactive laws, it “flatly prohibits
Court No. 09-00422                                            Page 11

retroactive application of penal legislation.”       Landgraf v. USI

Film Prods., 511 U.S. 244, 266 (1994).     “Penal legislation” often

refers to criminal laws, but certain non-criminal retroactive laws

are penal in nature and are thus subject to the prohibition of ex

post facto laws.      See, e.g., Burgess v. Salmon, 97 U.S. 381, 384

(1878); Cummings v. Missouri, 71 U.S. 277, 329 (1866).

     To demonstrate that a civil law is penal in nature, the

challenger must show by the “clearest proof” that the law is “so

punitive either in purpose or effect as to negate the State’s

intention to deem it civil.”     Smith v. Doe, 538 U.S. 84, 92 (2003)

(internal citations and brackets omitted).    In determining whether

a law is penal in nature, courts consider a three-prong test:

     A statute imposes a penalty only when: (1) the costs
     imposed are unrelated to the amount of actual harm
     suffered and are related more to the penalized party's
     conduct, (2) the proceeds from infractions are collected
     by the state, rather than paid to the individual harmed,
     and (3) the statute is meant to address a harm to the
     public, as opposed to remedying a harm to an individual.

Huaiyin Foreign Trade Corp. (30) v. United States, 322 F.3d 1369,

1380 (Fed. Cir. 2003) (citing Ingalls Shipbuilding, Inc. v. Dalton,

119 F.3d 972, 978 (Fed. Cir. 1997)).    The party challenging the law

must demonstrate that the law satisfies all three prongs of the

Huaiyin test.   Id.    Plaintiffs fail to meet this burden.

     It is well established that trade duties are remedial, not

punitive. See Chaparral Steel Co. v. United States, 901 F.2d 1097,

1103–04 (Fed. Cir. 1990); Peer Bearing Co. v. United States, 25 CIT
Court No. 09-00422                                                            Page 12

1199, 1221, 182 F. Supp. 2d 1285, 1310 (2001); Badger-Powhatan v.

United States, 9 CIT 213, 216, 608 F. Supp. 653, 656 (1985).                        The

specific purpose of CVD law is to “offset” the harmful effects of

foreign subsidies.       See S. Rep. No. 1221, 92d Cong., 2d Sess. 8

(1972) (cited in Chaparral, 901 F.2d at 1103–04).                      The remedial

purpose is reflected in the language of the CVD statute, which

directs Commerce to calculate a CVD “equal to the amount of the net

countervailable subsidy.”             19 U.S.C. § 1671(a).         In fact, this

Court   found    that   the    CVDs    imposed    under     section    1   were     not

penalties    because    “they       remain    mathematically      linked      to    the

measured harm.”      GPX IV, 37 CIT at __, Slip Op. 13-2 at 17.

     However, Plaintiffs insist that the focus on the mathematical

relationship      between     the   subsidy     and   the   CVD   in    GPX    IV    is

misplaced.      Plaintiffs contend that the court’s focus should be on

the nature of the new law itself, specifically whether it imposes

duties that exceed those Commerce imposed under the previous legal

regime. See Oral Arg. at 18:01.              According to Plaintiffs, the CVDs

imposed under section 1 are disproportionate to the harm caused by

the unfair pricing of goods imported from NME countries because

they are imposed on top of the special NME AD, which was the

“complete and exclusive remedy” for such unfair pricing under the

old legal regime.       Id. at 18:22.          Plaintiffs insist that the new

law is analogous to the retroactive tax increase struck down in

Salmon, 97 U.S. at 384, which also retroactively imposed a greater
Court No. 09-00422                                                      Page 13

liability than the affected party was subject to at the time the

cost was assessed.        See Oral Arg. at 21:00.

       Plaintiffs’ argument is unpersuasive because it misinterprets

the first prong of the Huaiyin test.             Plaintiffs essentially argue

that any         retroactive   increase    in   the costs   assessed    will    be

disproportionate to the harm.             That is simply not the case.         The

test requires the party challenging the statute to demonstrate “the

absence of an association between the costs imposed and the actual

harm done.” Ingalls, 119 F.3d at 978 (citing Huntington v. Atrill,

146 U.S. 657, 676 (1892)).         Here, the imposition of CVDs under the

new law is associated with the harm caused by subsidies.                ADs and

CVDs       are      separate    remedies        that   counteract      different

anticompetitive behaviors.           See 19 U.S.C. §§ 1671, 1673.              The

imposition of one type of duty does not obviate the need for the

other, nor does it address the harm caused by the conduct the other

duty is designed to remedy.               Accordingly, CVDs are the proper

remedy to address the harms caused by foreign subsidies.                 Id. at

1671(a).5

       5
       Plaintiffs also claim that the new law has “tainted” past
ITC determinations because artificially high AD margins make a
finding of injury to the domestic industry more likely.      Pls.’
Supplemental Br. at 18 (citing 19 U.S.C. § 1677(7)(C)(iii)(V)).
Dumping margin, however, is but one of a number of factors the ITC
considers when making an injury determination. See 19 U.S.C. §
1677(7)(C). Moreover, a dumping margin does not in and of itself
demonstrate injury to a domestic industry, but rather identifies
differences in price between a respondent’s home market and the
U.S. market. See 19 U.S.C. § 1677(35)(A).
Court No. 09-00422                                                        Page 14

       Similarly, Plaintiffs fail to demonstrate that section 1

addresses a public rather than a private harm.                Plaintiffs contend

that the imposition of duplicative duties evidences Congress’s

intent to address public harms such as “the need to punish China .

. . and address ‘illegal’ subsidies.”                Pls.’ Supplemental Br. at

20. However, Plaintiffs’ argument overlooks the fact that CVDs are

imposed      only   where   a   domestic    industry    has    been   “materially

injured” or “threatened with material injury” by foreign subsidies.

19 U.S.C. § 1671(a); see GPX IV, 37 CIT at __, Slip Op. 13-2 at 17

(noting that CVD are “collected to primarily counter the individual

harm to particular domestic industries in an attempt to provide

relief from the imports which are causing or threatening material

injury”).      Moreover, in their assessment of legislative intent,

Plaintiffs overlook evidence indicating Congress’s substantial

interest in “leveling the playing field” for domestic industries.

See generally, 158 Cong. Rec. H1166, H1166–73 (Mar. 6, 2012).                   As

section 1 primarily addresses a private harm to individual domestic

industries, the fact that it also addresses certain public harms

does   not    render   it   penal   in     nature.     Because    they   fail   to

demonstrate that the new law is “penal legislation,” Plaintiffs

cannot show that the new law violates the Ex Post Facto Clause.

                                 C. Due Process

       Plaintiffs also argue that the new law violates the due

process guarantees of the Fifth Amendment by retroactively impeding
Court No. 09-00422                                                       Page 15

importers’ vested interests in the “finality and repose” of their

transactions.      See Pls.’ Supplemental Br. at 28–33.          Specifically,

Plaintiffs argue that section 1 levies a “harsh and oppressive”

retroactive tax which violates the prohibition against wholly new

retroactive taxes, exceeds recognized limits on the retroactive

application of tax legislation, and imposes excess duties upon

importers that they reasonably believed they would not be liable

for at the time they entered their goods.                See id. at 30—33.

Alternatively, Plaintiffs argue that even if it is considered

general economic legislation, the new law still violates due

process because section 1 does not achieve a legitimate government

purpose.      See id. at 33–35.     In response, Commerce argues that the

new law does not violate due process because it was enacted in

order   to    correct   an   erroneous   judicial     decision    and    protect

domestic     industries.      See   Def.’s   Supplemental   Br.     at   21–25.

According to Commerce, the new law is general economic legislation

rather than tax legislation, but is nonetheless constitutional as

tax legislation because subjected importers like GWK had notice of

and therefore could reasonably expect potential CVD liability. See

id. at 26—30.

     General      economic    legislation     faces    “a   presumption      of

constitutionality” and is analyzed under a rational basis review.

Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 729

(1984).      “[T]he strong deference accorded legislation in the field
Court No. 09-00422                                                            Page 16

of   national    economic     policy   is    no    less applicable          when    that

legislation is applied retroactively.”                 Id.      Thus, retroactive

economic legislation will be upheld if the retroactive application

“is itself justified by a rational legislative purpose.”                       Id. at

730.    With regard to retroactive tax legislation, courts have

considered      “whether    ‘retroactive     application        is   so     harsh   and

oppressive as to transgress the constitutional limitation.’”

United States v. Carlton, 512 U.S. 26, 30 (1994) (quoting Welch v.

Henry, 305 U.S. 134, 147 (1938)).                 The “harsh and oppressive”

standard, however, “‘does not differ from the prohibition against

arbitrary and irrational legislation’ that applies generally to

enactments in the sphere of economic policy.”                   Id. (quoting R.A.

Gray, 467 U.S. at 733).           Thus, whether the new law is considered

tax legislation or general economic legislation, Plaintiffs must

demonstrate that Congress acted in an irrational and arbitrary

manner.    See id.       In determining whether a retroactive law passes

a    rational    basis    review,   courts     may    consider       “the    reliance

interests of the parties affected, whether the impairment of the

private interest is effected in an area previously subjected to

regulatory      control,    the   equities    of     imposing    the      legislative

burdens, and the inclusion of statutory provisions designed to

limit and moderate the impact of the burdens.”                   Nachman Corp. v.

Pension Benefit Guar. Corp., 592 F.2d 947, 960 (7th Cir. 1979),

aff’d 446 U.S. 359 (1980) (internal citations omitted).
Court No. 09-00422                                                         Page 17

     On the reliance factor, Plaintiffs cite Justice O’Connor’s

concurring   opinion     in      Carlton,    which       states     that   “[t]he

governmental interest in revising the tax laws must at some point

give way to the taxpayer's interest in finality and repose.”                  512

U.S. at 37–38 (O’Connor, J., concurring). According to Plaintiffs,

importers like GWK reasonably relied on the unambiguous prohibition

against the imposition of CVDs on goods from NME countries when

they entered their goods.          Pls.’ Supplemental Br. at 32.             Now,

years later, section 1 retroactively imposes previously illegal

CVDs, upsetting their interest in a rate without such CVDs.                   Id.

Essentially, Plaintiffs argue that GWK’s reliance interests were

upset because GWK and other similarly situated importers would not

have entered goods had they knowledge of the retroactive tax. Id.

     However, Plaintiffs fail to identify a vested interest.                  See

Carlton, 512   U.S.    at   33    (holding   that    a    party’s    detrimental

reliance on a statute prior to retroactive change is insufficient

to demonstrate a due process violation where there is no vested

interest).   GWK and similarly situated importers could not rely on

a specific CVD-free duty assessment at the time of entry.                     See

Norwegian Nitrogen Prods. Co. v. United States, 288 U.S. 294, 318

(1933) (“No one has a legal right to the maintenance of an existing

rate or duty.”).      Moreover, importers who entered goods from NME

countries during the retroactive period of section 1 were on notice

of the PRC’s shifting status and their own potential CVD liability
Court No. 09-00422                                                     Page 18

as early as 2006.    See CLPP from the PRC at 1–4; CFSP from the PRC

at 10.   Additionally, Plaintiffs cannot have relied on the holding

in GPX II to demonstrate their interest in a duty rate exclusive of

CVDs because the CAFC never issued a mandate.                 See GPX III, 678

F.3d at 1312.     As importers subject to section 1 did not have a

vested right in duty assessments that excluded CVDs, Plaintiffs

cannot show that section 1 interfered with such a right.

     With regard to the second Nachman factor, Plaintiffs insist

that the new law “retroactively introduces a wholly new tax” that

violates the prohibition against such taxes recognized by the

Supreme Court in Carlton.        See Pls.’ Supplemental Br. at 30–31.

However, Plaintiffs’ reliance on Carlton is misplaced.               Section 1

is not a “wholly new” tax, it amends the operation of CVD law,

applying it to goods imported from NME countries.                See § 1, 126

Stat. at 265; see also GPX IV, 37 CIT at __, Slip Op. 13-2 at 26

(“Section 1 of the [new law] merely extends or expressly recognizes

the ability of Commerce to impose CVDs in the NME context.”).               In

Carlton, the Supreme Court specifically excluded such legislative

acts from the prohibition of wholly new retroactive taxes, stating

that the   prohibition    “‘is     of   limited   value   in    assessing the

constitutionality of subsequent amendments that bring about certain

changes in operation of the tax laws.’”            Carlton, 512 U.S. at 34

(citing United States v. Hemme, 476 U.S. 558, 568 (1986)).

     Plaintiffs    also   insist    that   the    new   law    “retroactively,
Court No. 09-00422                                                               Page 19

without notice, grant[s] [Commerce] authority where none previously

existed to impose [CVDs].” Pls.’ Supplemental Br. at 25. However,

as   noted    above,        Commerce     announced         in    2006    that    it    was

reconsidering the PRC’s NME status, see CLPP from the PRC at 1–4,

and shortly thereafter determined it could identify subsidies in

the PRC.     See CFSP from the PRC at 10.                 Whether Commerce’s policy

shift was consistent with CVD law at the time does not bear on the

issue of     whether       GWK had     notice      of    potential      CVD   liability.

Therefore,    GWK     was     aware    of   the    regulatory       control     Commerce

intended     to    exert     over   goods    from       NME     countries     before   the

enactment of the new law.

     With regard to the balance of burdens, the court finds that

the need to protect the domestic industry and to correct an

unexpected        judicial    decision      form    a     rational      basis   for    the

retroactive application of section 1.                         The Supreme Court has

recognized         that      correcting      an         erroneous       or    unexpected

interpretation of a statute is a legitimate purpose for enacting

retroactive legislation.            See Carlton, 512 U.S. at 32 (closing an

unexpected loophole in an estate tax statute was a “legitimate

legislative purpose” for a retroactive amendment to that statute);

Gen. Motors Corp. v. Romein, 503 U.S. 181, 191 (1992) (upholding

retroactive legislation that corrected the unexpected results of a

judicial opinion).           Congress’s curative intent is demonstrated by

the language of section 1, which essentially overturns GPX II. See
Court No. 09-00422                                           Page 20

§ 1, 126 Stat. at 265; see also GPX III, 678 F.3d at 1311

(“Congress clearly sought to overrule our decision in [GPX II].”).

The legislative history of the new law also evidences Congress’s

intent to overturn GPX II.       See generally 158 Cong. Rec. at

H1166–73.6

     The retroactive period of section 1, although lengthy, is a

rational means of achieving Congress’s objectives.       The Supreme

Court upheld a retroactive period that stretched back multiple

years where it was necessary to correct the unexpected results of

a judicial decision.   See Romein, 503 U.S. at 191.   Here, a shorter

retroactive period would have resulted in the possible termination

of approximately twenty four CVD orders and investigations, harming

domestic industries. See 158 Cong. Rec. at H1173. Furthermore, as

this Court recognized in GPX IV, it was reasonable for Congress to

“defer[] to Commerce’s expertise in determining when Commerce first

might have been able to identify and measure subsidies in the PRC.”

37 CIT at __, Slip Op. 13-2 at 26.    Accordingly, the court finds

that the new law does not violate the due process guarantees of the

Fifth Amendment.7

     6
       Representative Camp stated that the new law “overturns an
erroneous decision by the [CAFC].”     158 Cong. Rec. at H1167.
Representative Rohrabacher stated that the new law “overturns a
faulty court decision.” Id. at H1168. Representative Critz stated
that “[w]e must take action today and pass [the new law] to
overturn a flawed court ruling.” Id. at H1170.
     7
       Plaintiffs also insist that the new law unduly burdens past
importers without providing any protection to the domestic
industry.   See Pls.’ Supplemental Br. at 33–35.      According to
Court No. 09-00422                                                      Page 21

                           C. Equal Protection

     Finally, Plaintiffs argue that the new law violates the right

to equal protection under the Fifth Amendment by creating an

arbitrary distinction between importers subject to section 1 of the

new law and importers subject to section 2. Pls.’ Supplemental Br.

at 35–37.    The classification at issue arises from the different

effective dates of the new law’s two sections.             Section 1 directs

Commerce    to   impose   CVDs   on   goods   from   NME   countries    in   all

proceedings initiated on or after November 20, 2006, with no

protection from potential double counting of remedies.                 § 1, 126

Stat. at 265.      Section 2, on the other hand, provides protection

against double counting of remedies resulting from the concurrent

imposition of ADs and CVDs, but only for those importers whose

goods are subject to proceedings initiated after the enactment of

the new law.     § 2, 126 Stat. 265–66.       Plaintiffs do not argue that

the classification at issue involves a suspect class.                     Pls.’

Plaintiffs, the domestic industry is adequately protected from the
effects of subsidies by the deposits on CVD orders importers paid
in 2007.    Id. at 34.     As the new law does not provide any
additional protection and merely imposes duplicative duties on past
importers, Plaintiffs insist that it is not supported by a rational
basis. Id. at 34–35.     Plaintiffs add that the refund of those
deposits would not harm the domestic industry because the importers
receiving refunds would still be subject to “substantial” ADs. Id.
at 35.   However, this argument is inconsistent with trade law.
First, ADs and CVDs are separate remedies that address different
anticompetitive behaviors. See 19 U.S.C. §§ 1671, 1673. Second,
Plaintiffs do not cite any authority for the proposition that a
domestic industry is adequately protected by the payment of cash
deposits which will be refunded in the future.
Court No. 09-00422                                                           Page 22

Supplemental Br. at 36.

       “‘[A] classification neither involving fundamental rights nor

proceeding along suspect lines . . . cannot run afoul of the Equal

Protection Clause if there is a rational relationship between the

disparity of treatment and some legitimate governmental purpose.’”

Armour v. City of Indianapolis, 132 S. Ct. 2073, 2080 (2012)

(quoting Heller, 509 U.S. at 319–320).         A court will uphold such a

classification “if there is any reasonably conceivable state of

facts that could provide a rational basis for the classification.”

FCC v. Beach Commc’ns, Inc., 508 U.S. 307, 313 (1993).

       Plaintiffs insist that the new law violates equal protection

because importers whose goods are subject to section 1 receive

“much more harsh treatment” than those whose goods are subject to

section   2.     Pls.’    Supplemental     Reply    at    12.         According      to

Plaintiffs, section 2 provides a legislative fix against double

counting and is thus consistent with Congress’s intent to create a

“level playing     field”      for the   domestic     industry.            See    Pls.’

Supplemental Br. at 37.         Because section 1 does not provide the

same    protection     against     potentially        overlapping          remedies,

Plaintiffs contend that it “patently slanted the playing field

against    exporters     and   importers   subject        to    CVD    orders       and

investigations prior to passage of the [new law].”                 Id.

       Commerce argues that administrative efficiency and finality

justify    the   retroactive     application     of      section      1.         Def.’s
Court No. 09-00422                                                      Page 23

Supplemental Br. at 32–33.         Specifically, Commerce contends that

the retroactive application of section 1 prevented Commerce from

having to reopen “numerous [CVD] investigations and reviews that

were initiated before the implementation of section 2.” Id. at 32.

Additionally, Commerce argues that the retroactive application of

section 2 would entail “tremendously complex undertakings that

almost certainly require factual information and analytical tools

not present on most earlier administrative records.” Id. Commerce

also   notes    that    Congress   did   not    need   to   apply    section   2

retroactively because it was enacted in order to “implement an

adverse WTO decision.”         Id. at 33.      Because statutes enacted to

give   effect   to     WTO   decisions   are   implemented     prospectively,

Commerce concludes that it was reasonable for Congress to decline

to apply section 2 to past CVD investigations unnecessarily.                Id.

       The court finds that Commerce proffers a legitimate rationale

for Congress’s decision to apply section 1 retroactively.                  The

Supreme Court has recognized that administrative efficiency and

finality are legitimate legislative interests.              See Armour, 132 S.

Ct. at 2081.      In Armour, the Supreme Court upheld a law that

provided prospective relief to city residents who owed future

installment payments while denying refunds to those residents who

paid in full because such refunds would require the expenditure of

considerable administrative resources.             Id.      The instant case

involves    similar     legislative      interests,    as    the    retroactive

application of section 2 would require Commerce to recalculate AD
Court No. 09-00422                                           Page 24

margins for numerous completed CVD investigations and orders.8

Moreover, the decision to apply section 2 prospectively only is

consistent with Congress’s obligations when implementing adverse

WTO decisions.   See 19 U.S.C. § 3538.   Accordingly, the court finds

that the new law is supported by a rational basis and therefore

does not violate equal protection rights under the Fifth Amendment.

                          E. Severability

     Because the court finds that section 1 law is constitutional,

it need not reach a decision on the issue of severability.

                       II. CVD Determination

     As the new law is constitutional, the court must now address

the claims Plaintiffs raise in their original brief challenging

certain aspects of the Final Determination, specifically: (1)

whether Commerce erred in treating GWK’s suppliers of wire rod that

were majority-owned by the GOC as “authorities” under 19 U.S.C. §

1677(5)(B); (2) whether Commerce erred in treating GWK’s suppliers

of wire rod that were minority-owned by the GOC as “authorities”

under 19 U.S.C. § 1677(5)(B); (3) whether Commerce erroneously

countervailed wire rod provided to GWK by privately-owned trading

companies; and (4) whether Commerce erroneously discarded in-

     8
       Plaintiffs insist that the burden of recalculating ADs is
insubstantial compared to the administrative burden the city of
Indianapolis faced in Armour. See Pls.’ Supplemental Reply at 13.
However, the relative burden is irrelevant.       As this Court
recognized in GPX IV, “at least some significant effort would be
required to apply [Section 2] methodology to this case and other
completed investigations.” 37 CIT at __, Slip Op. 13-2 at 31.
Court No. 09-00422                                            Page 25

country benchmarks for the price of wire rod.    See Pls.’ Br. at 5.9

         A. “Authority” Status of GWK’s Wire Rod Suppliers

     A subsidy occurs when “an authority provides a financial

contribution . . . to a person and a benefit is thereby conferred.”

19 U.S.C. § 1677(5)(B).       The statute defines “authority” as “a

government of a country or any public entity within the territory

of the country.”    Id.    Commerce treats entities that are owned by

a government as “authorities.”     Countervailing Duties; Final Rule,

63 Fed. Reg. 65,348, 65,402 (Nov. 25, 1998) (“CVD Final Rule”).

However, “where it [is] unclear whether a firm [is] an authority

based on ownership information alone,” Commerce consults five

relevant factors: “(1) government ownership; (2) the government's

presence on the entity's board of directors; (3) the government's

control over the entity's activities; (4) the entity's pursuit of

governmental policies or interests; and (5) whether the entity is

created by statute.”      I&D Memo at 43.

          1. Wire Rod Suppliers Majority-Owned by the GOC

     Commerce determined that the GOC held “a majority ownership

position in certain of the wire rod producers that supply [GWK],”

and thus “treat[ed] these producers as ‘authorities’” during the

investigation.     Id. at 44; see P.R. 193 at 2–3.      Accordingly,

     9
       However, the court will not address arguments Plaintiffs
raise in their original brief concerning Commerce’s interpretation
of CVD law prior to the enactment of the new law because they are
moot   in   light   of   the  court’s   decision   upholding   the
constitutionality of the new law.
Court No. 09-00422                                                 Page 26

Commerce countervailed purchases of wire rod by GWK from these

entities at LTAR.       I&D Memo at 44.

      Plaintiffs argue that this determination was erroneous because

Commerce “simply equated government ‘control’ in the form of an

ownership interest with the existence of a government authority,”

Pls.’ Br. at 38, and therefore ignored record evidence of legal

reforms in China which indicated that entities owned by the GOC do

not exercise government authority.            Id. at 40–43.     Plaintiffs

insist that this conclusion ignored the actual issue: “whether an

entity exercises elements of government authority.”            Id. at 39.

According to Plaintiffs, the five-factor test is the proper means

of addressing this question. Id. In essence, Plaintiffs challenge

Commerce’s interpretation of 19 U.S.C. § 1677(5)(B), alleging that

Commerce unreasonably construed “public entities” to include any

entity that is majority-owned by a government.

     “Public entity” is not defined in statutes or regulations.

Where a statute is silent or ambiguous concerning the meaning of a

term, the court must determine whether Commerce’s interpretation is

“based on a permissible construction of the statute.”          Chevron v.

NRDC, 467 U.S. 837, 843 (1984).        A reviewing court “is obliged to

accept [Commerce’s] position if Congress has not previously spoken

to   the   point   at    issue   and   the   agency's   interpretation   is

reasonable.” United States v. Mead Corp., 533 U.S. 218, 229 (2001)

(citing Chevron, 467 U.S. at 842–45).        The issue here is whether it

was reasonable for Commerce to treat GWK’s wire rod suppliers as
Court No. 09-00422                                                      Page 27

“authorities” within the meaning of 19 U.S.C. § 1677(5)(B) based

solely on the GOC’s majority-ownership interest in those suppliers.

       Commerce explained that majority-ownership of an entity by the

government creates a rebuttable presumption of government control

over that entity.       See I&D Memo at 43.      It does not consult the

five-factor test in this scenario because “a careful examination of

the five factors reveals that when a government is the majority

owner of a firm, factors one through four are largely redundant.”

Id.    The redundancy occurs because “the government would normally

appoint a majority of the members of the firm’s board of directors

who,   in   turn,    would   select   the   firm’s   managers,   giving    the

government control over the entity’s activities.”              Id.     Commerce

notes that a respondent may overcome this presumption if it can

“demonstrate that majority ownership does not result in control of

the firm.”    Id.

        The court finds that Commerce’s interpretation of “public

entity” is reasonable. Because the purpose of CVD law is to offset

the harm to domestic industries caused by foreign subsidies, see S.

Rep. No. 1221, 92d Cong., 2d Sess. 8 (cited in Chaparral, 901 F.2d

at 1103–04), it is reasonable for Commerce to attempt to detect and

counteract     all    forms    of     foreign   subsidies.           Commerce’s

interpretation of “public entities” reflects the realities of

corporate ownership and control and enables it to detect certain

forms of subsidization which are not provided directly by the

government    but    instead   pass   through   private   or   quasi-private
Court No. 09-00422                                            Page 28

channels.   Furthermore, Commerce provides interested parties the

opportunity to present evidence that the entity in question is not

government controlled. See I&D Memo at 43. Accordingly, the court

upholds Commerce’s interpretation of “public entity.”        See Mead

Corp., 533 U.S. at 229.

     Ultimately, the standard for which Plaintiffs advocate is

improper.   Plaintiffs do not cite any instances in which Commerce

evaluated “authority” status by determining whether the entity in

question exercised elements of governmental authority.     Plaintiffs

ignore    Commerce’s   “longstanding   practice   of   treating   most

government-owned corporations as the government itself.” CVD Final

Rule, 63 Fed. Reg. at 65,402.10 Although Plaintiffs correctly point

out that Commerce previously declined to treat entities majority-

owned by a government as authorities, see Issues and Decision

Memorandum for the Final Determination in the CVD Investigation of

Dynamic Random Access Memory Semiconductors from the Republic of

Korea at 17, C-580-851 (June 16, 2003) (“DRAMS Memo”), Plaintiffs

overlook the fact that the DRAMS Memo involved a factually distinct

scenario concerning the temporary government takeover of private

     10
          Commerce has employed this practice in numerous CVD
investigations and determinations.       See Issues and Decision
Memorandum for Final Determination in the CVD Investigation on
Certain Welded Austenitic Stainless Pressure Pipe from the PRC at
16–17, C-570-931 (Jan. 21, 2009); Issues and Decision Memorandum
for the Final Affirmative CVD Determination: Certain New Pneumatic
Off-the-Road Tires from the PRC at 77, C-570-913 (July 7, 2008);
Issues and Decision Memorandum for the Final Determination in the
CVD Investigation of Circular Welded Carbon Quality Steel Pipe from
the PRC at 62–63, C-570-911 (May 29, 2008).
Court No. 09-00422                                               Page 29

banks due to a financial crisis.     See Preliminary Affirmative CVD

Determination: Dynamic Random Access Memory Semiconductors From the

Republic of Korea, 68 Fed. Reg. 16,766, 16,772 (Apr. 7, 2003).

Plaintiffs simply fail to provide sufficient authority to support

their preferred standard for evaluating government control.

     Turning to Commerce’s decision, the court must determine

whether Commerce reasonably concluded that wire rod producers

majority-owned by the GOC were “authorities.”         Plaintiffs argue

that Commerce’s decision was erroneous because it ignored reforms

in the PRC over the past twenty-five years that “effectively

severed any public function from the commercial operations of SOEs

such that SOEs do not exercise elements of governmental authority.”

Pls.’ Br.    at   40.   Plaintiffs   cite several    reforms   directly,

including the 1988 State-Owned Enterprises Law, the 1993 Company

Law, and the establishment of the State-Owned Assets Supervision

and Administration Committee (“SASAC”) in 2003.             Id. at 40–42

(citing P.R. 129 at 3–4 & Ex. 8).             Because reforms in China

demonstrate that GOC ownership of an entity does not result in that

entity    undertaking   public   functions,    Plaintiffs   insist   that

Commerce’s determination was contrary to record evidence.11

     Plaintiffs’ argument must fail.           First, as noted above,

     11
        Plaintiffs also assert that Commerce’s determination was
erroneous because steel pricing in the PRC is set by the market not
by the GOC.     See Pls.’ Br. at 42–43.     However, the relative
commerciality of an act by a government or public entity is not
relevant to the “authority” issue. See Hynix Semiconductor Inc. v.
United States, 30 CIT 288, 309, 425 F. Supp. 2d 1287, 1306 (2006).
Court No. 09-00422                                               Page 30

Plaintiffs’ argument addresses the wrong standard for government

control.     The issue is whether Plaintiffs provided sufficient

evidence to demonstrate that government ownership does not result

in government control.      I&D Memo at 43.       Plaintiffs evidence,

however, indicates that under Chinese law, SOEs are directed not to

perform public functions.       See Pls.’ Br. at 40–42.          Second,

Plaintiffs’ argument fails to address any of Commerce’s specific

findings concerning the GOC-owned entities at issue.          Plaintiffs

provide general information regarding the operation of SOEs in the

Chinese economy, but do not offer evidence that negates any of

Commerce’s   specific   findings.     Finally,   Plaintiffs   appear   to

overstate the level of separation between government ownership and

government control under Chinese law.       As Plaintiffs themselves

admit, the “SASAC is accorded the same rights of any shareholder in

the enterprises in which it invests.”     Pls.’ Br. at 41.    Therefore,

as a majority shareholder in an entity, SASAC would enjoy the

rights belonging to any majority shareholder, including the right

to appoint directors.     Accordingly, Commerce’s determination was

supported by substantial evidence.

           2. Wire Rod Suppliers Minority-Owned by the GOC

     Commerce also determined that certain of GWK’s wire rod

suppliers were “authorities” even though they were minority-owned

by the GOC and therefore countervailed wire rod purchases by GWK

from these suppliers at LTAR.       I&D Memo at 44.   Because Commerce

could not determine whether these suppliers were “authorities” on
Court No. 09-00422                                                   Page 31

the basis of ownership information alone, Commerce consulted the

five-factor test to determine the extent of government control.

See P.R. 193 at 3–10.        Plaintiffs argue that Commerce did not

consider “whether the entities in question were exercising elements

of government authority,” and failed to address evidence concerning

substantial reforms in the PRC and the “lack of any price controls”

in the PRC’s wire rod market.     See Pls.’ Br. at 50.

     Here, Commerce’s determination is supported by substantial

evidence.    Commerce properly performed the five-factor test in

accord with its prior practice.        See I&D Memo at 43.        Plaintiffs

rehash the same flawed arguments they raised concerning wire rod

suppliers that are majority-owned by the GOC.              As noted above,

Plaintiffs advocate for the wrong standard of reviewing “authority”

status.   Moreover, Plaintiffs’ evidence concerning the reforms in

the PRC and the relative commerciality of wire rod prices does not

contradict Commerce’s findings concerning the state-ownership of

individual wire rod suppliers. Plaintiffs fail to demonstrate that

Commerce’s determination was unsupported by substantial evidence.

Therefore,   Commerce’s     decision   to   treat   wire    rod    suppliers

minority-owned by the GOC as “authorities” was proper.

  C. Wire Rod Purchased from Privately-Owned Trading Companies

     Commerce also countervailed wire rod purchases GWK made from

certain   privately-owned    trading   companies.     I&D    Memo    at   45.

Although it did not find that the GOC provided GWK with a financial

contribution directly, Commerce nonetheless found that GWK received
Court No. 09-00422                                                 Page 32

a subsidy because the trading companies received a financial

contribution when they purchased wire rod from the GOC at LTAR,

which enabled GWK to obtain wire rod from those trading companies

at LTAR.     Id.       Plaintiffs argue that Commerce’s decision is

contrary    to   law    because    GWK   never    received   a   financial

contribution.      Pls.’ Br. at 44.   Alternatively, if the court finds

that GWK received a financial contribution, Plaintiffs insist that

Commerce’s decision is still erroneous because Commerce neither

conducted an upstream subsidy investigation nor demonstrated that

the privately-owned trading companies were “authorities.” See id.

at 44–45.

      A countervailable subsidy exists where an (1) “authority

provides a financial contribution . . . to a person” and (2) “a

benefit is thereby conferred.” 19 U.S.C. § 1677(5)(B). Plaintiffs

insist   that    the   financial   contribution    requirement    was   not

satisfied. Pls.’ Br. at 44. A “financial contribution” is defined

as:

           (i) the direct transfer of funds, such as grants,
      loans, and equity infusions, or the potential direct
      transfer of funds or liabilities, such as loan
      guarantees,
           (ii) foregoing or not collecting revenue that is
      otherwise due, such as granting tax credits or deductions
      from taxable income,
           (iii) providing goods or services, other than
      general infrastructure, or
           (iv) purchasing goods.

19 U.S.C. § 1677(5)(D).        The GOC provided the private trading

companies a financial contribution through the provision of wire
Court No. 09-00422                                                           Page 33

rod.    See I&D Memo at 45; 19 U.S.C. § 1677(5)(D)(iii).                   The issue

is whether that financial contribution is sufficient to satisfy the

requirements of 19 U.S.C. § 1677(5)(B) with regards to GWK.

       Plaintiffs argue that 19 U.S.C. § 1677(5)(B) requires Commerce

to “find a financial contribution and a benefit to the respondent

end user” in order to determine the existence of a countervailable

subsidy.     Pls.’ Br. at 44 (emphasis in original).               Plaintiffs rely

on a passage from Delverde, SrL v. United States, in which the CAFC

states that “[i]n order to conclude that a ‘person’ received a

subsidy, Commerce must determine that a government provided that

person with both a ‘financial contribution’ . . . and a ‘benefit.’”

202 F.3d 1360, 1365 (2000); see Pls.’ Br. at 44.                  Because Commerce

did    not   find   that    the   GOC   provided       GWK    with    a    financial

contribution directly, Plaintiffs insist Commerce’s determination

was erroneous.      See Pls.’ Br. at 44.

       However, a close look at the CAFC’s opinion in Delverde

reveals that Plaintiffs’ argument is flawed.                      In Delverde, the

respondent     challenged    Commerce’s       decision       to   impose    CVDs   on

corporate assets it purchased after the provision of the subsidy to

the prior     owner,   arguing that      it    never     received     a    financial

contribution.12     See 202 F.3d at 1362–63.       The CAFC held that in the

case of a sale of corporate assets the meaning of “subsidy” under

       12
        Although Delverde concerned the imposition of CVDs on
corporate assets rather than merchandise, see 202 F.3d at 1362, the
CAFC’s analysis of 19 U.S.C. § 1677(5) is instructive.
Court No. 09-00422                                                        Page 34

19 U.S.C. § 1677(5) did not change.           See id. at 1366.     According to

the CAFC, Commerce still must determine whether “a government

provided both a financial contribution and a benefit to a person,

either directly or indirectly, by one of the acts enumerated,

before charging it with receipt of a subsidy.”                   Id.    Thus, the

respondent     end   user   need   not   directly      receive    the   financial

contribution as Plaintiffs insist.

       Applying the CAFC’s interpretation of 19 U.S.C. § 1677(5) to

the instant case, the court finds that Commerce’s determination was

in accord with the law.       The GOC provided a financial contribution

to private trading companies.        See 19 U.S.C. § 1677(5)(D)(iii).            A

benefit was conferred upon GWK through the provision of wire rod

from    said   trading      companies    at    LTAR.      See     19    U.S.C.   §

1677(5)(E)(iv) (A benefit is conferred “in the case where goods or

services are provided, if such goods or services are provided for

[LTAR].”).      Essentially, Commerce found that GWK received the

benefits of an indirect financial contribution, enabling it to

purchase wire rod below the benchmark price.              As the requirements

of 19 U.S.C. § 1677(5) were satisfied, Commerce was not required to

undergo an upstream subsidies analysis or determine that the

trading companies in question were “authorities.”                  Accordingly,

Commerce’s decision to countervail wire rod purchases from private

trading companies was in accord with the law.

                     D. Benchmark Price for Wire Rod

       When determining a benchmark price for wire rod against which
Court No. 09-00422                                                Page 35

to measure the adequacy of GWK’s remuneration, Commerce selected a

“world average price” instead of using the domestic market price in

the PRC.    I&D Memo at 52.    Commerce bypassed market prices for wire

rod in the PRC because it found that the prices were distorted as

a result of the GOC’s significant presence in the market.          Id. at

51–52.     Specifically, Commerce found that (1) “the GOC has direct

ownership or control of at least 47.97[%] of wire rod production”

in the PRC;13 (2) wire rod imports comprised only 1.53% of the PRC’s

wire rod market; and (3) the GOC implemented export controls on

wire rod including a “10[%] export tariff” and an “export licensing

requirement.”      Id.   at   15.   Plaintiffs   claim   that   Commerce’s

determination is inconsistent with mainstream economic theory and

is unsupported by substantial evidence.      See Pls.’ Br. at 45–49.14

     Commerce prefers to measure adequacy of remuneration “by

comparing the government price to a market-determined price for the

good or service resulting from actual transactions in the country

in question.”    19 C.F.R. § 351.511(a)(2)(i).     However, “[i]f there

is no useable market-determined price with which to make the

     13
       Commerce noted that the GOC’s market share may exceed 47.97%
because “some companies that were classified as [Foreign Investment
Enterprises (“FIEs”)] by the GOC could be majority owned or
controlled by the [GOC].” I&D Memo at 51. According to Commerce,
information provided by the GOC indicates that the GOC treats any
firms with at least 25% foreign invested ownership as FIEs. Id.
     14
        Plaintiffs cite three works which they claim undermine
Commerce’s decision: Dennis W. Carlton & Jeffrey M. Perloff, Modern
Industrial Organization (2d ed. 2004); Clement G. Krouse, Theory of
Industrial Economics (1990); and Stephen Martin, Industrial
Economics: Economic Analysis and Public Policy (2d ed. 1988).
Court No. 09-00422                                                  Page 36

comparison,”    Commerce   measures   adequacy    of     remuneration       “by

comparing the government price to a world market price where it is

reasonable to conclude that such price would be available to

purchasers     in    the   country    in    question.”        Id.      at    §

351.511(a)(2)(ii).     When determining whether the domestic market

price is “useable,” Commerce undertakes the following analysis:

       While we recognize that government involvement in a
       market may have some impact on the price of the good or
       service in that market, such distortion will normally be
       minimal unless the government provider constitutes a
       majority or, in certain circumstances, a substantial
       portion of the market.      Where it is reasonable to
       conclude that actual transaction prices are significantly
       distorted as a result of the government's involvement in
       the market, we will resort to the next alternative in the
       hierarchy.

CVD Final Rule, 63 Fed. Reg. at 65,377.      Thus, the issue is whether

Commerce reasonably determined that wire rod prices were distorted

as a result of the GOC’s substantial involvement in the market.

       According to Plaintiffs, “[e]conomic theory says that when

there are a large number of non-affiliated firms there is little to

no scope for strategic interaction among the firms.”          Pls.’ Br. at

47.    Given the large number of non-affiliated firms in the PRC’s

wire rod market, Plaintiffs contend that “[t]he competitive nature

of the non-affiliated firms means their pricing decisions are

driven by their costs and not by the strategic influence of the

GOC’s alleged control of other firms.” Id. Plaintiffs add that in

a market with a large number of sellers, “‘sellers are likely to

have    at   least   slightly   divergent    notions     about   the    most
Court No. 09-00422                                                         Page 37

advantageous price,’” and it is likely that “‘at least one will be

a   maverick,     pursuing   an     independent    and     aggressive     pricing

policy.’”    Id. at 48 (quoting Frederic M. Scherer & David Ross,

Industrial    Market     Structure    and   Economic       Performance     at    277

(Houghton Mifflin Co. 3d ed. 1990)).                   Accordingly, Plaintiffs

insist that wire rod prices in the PRC “reflect competitive market

principles, not allegedly GOC-controlled SOE prices.”                   Id. at 47.

      Here, Plaintiffs fail to show that Commerce’s determination

was unreasonable or unsupported by substantial evidence.                 Commerce

reasonably concluded, based on information provided by the GOC,

that the GOC had an interest in a substantial, near-majority share

of the wire rod market.       See I&D Memo at 15.          Plaintiffs reliance

on abstract economic theory fails to undermine this evidence.                     At

best,    Plaintiffs’     evidence    indicates     a    theoretical      level   of

competition between wire rod suppliers in the PRC.                 Pls.’ Br. at

47–48.    However, Commerce reasonably determined that the level of

competition amongst these entities was not relevant, concluding

that the GOC’s substantial market share made it a “price leader,

with which private firms are forced to compete.”              I&D Memo at 52.

      Plaintiffs also argue that Commerce’s conclusion that export

controls on       wire   rod contribute     to    market    distortion     is    not

supported    by    substantial      evidence.       Pls.’    Br.   at    48–49.

Specifically, Plaintiffs insist that Commerce “offered no evidence

as to how the referenced measures significantly affected either

pricing or volume of domestic production, exports or imports.” Id.
Court No. 09-00422                                                                Page 38

at 49.   In fact, Plaintiffs suggest that Commerce ignored evidence

of the PRC’s significant importation and exportation of wire rod in

terms of volume, which indicated that the GOC does not distort

market prices.         Id.       Therefore, Plaintiffs insist that it was

erroneous for Commerce to conclude that the GOC’s involvement in

the wire rod market distorted prices.                     Id.

       Plaintiffs’ claims concerning the sufficiency of Commerce’s

evidence are also unavailing.                 Plaintiffs’ argument appears to be

based on the mistaken belief that Commerce must demonstrate with

substantial        evidence      the    specific        distortive      effect    of    each

government     action       on   wire        rod    prices.       Id.        However,    the

regulations only require Commerce to determine whether the GOC

constitutes a substantial portion of the wire rod market, such that

Commerce may reasonably conclude that prices are distorted.                              See

CVD Final Rule, 63 Fed. Reg. at 65,377.                          As described above,

Commerce relied on a number of factors indicating the substantial

influence the GOC held over the wire rod market, including the

GOC’s near-majority market share, the low market share of wire rod

imports, and regulations on the exportation of wire rod.                          See I&D

Memo    at   15,    51–52.        Commerce         reasonably     concluded      that    the

evidence, taken as a whole, demonstrated “the GOC’s predominant

role and contributed to the distortion of the domestic market in

the    PRC   for    wire    rod.”        Id.       at   51.     Therefore,     Commerce’s

determination to abandon the market price for wire rod in the PRC

is    consistent     with     its      own    regulations       and     is   supported    by
Court No. 09-00422                                             Page 39

substantial evidence.   See CVD Final Rule, 63 Fed. Reg. at 65,377.

                              CONCLUSION

     For the foregoing reasons, the court finds that the new law,

Pub. L. No 112-99, is constitutional.       The court also finds that

the Final Determination is supported by substantial evidence and is

otherwise in accord with the law.

                                ORDER

     In accordance with the above, it is hereby

     ORDERED that the determination of Commerce is SUSTAINED; and

it is further

     ORDERED that this action is dismissed.

                                           /s/ NICHOLAS TSOUCALAS
                                             Nicholas Tsoucalas
                                                Senior Judge
Dated:     March 12, 2013
         New York, New York