Court Opinion

ID: 818360
Source: CourtListenerOpinion
Date Created: 2013-02-02 23:36:06.714902+00
Date Added: 2024-06-11T09:02:44.607517
License: Public Domain

Slip Op. 06–137

            UNITED STATES COURT OF INTERNATIONAL TRADE
______________________________
                               :
JINFU TRADING CO., LTD.,       :
                               :
                Plaintiff,     : Before: Richard K. Eaton, Judge
                               :
                               :
          v.                   :
                               : Court No. 04-00597
                               : Public Version
UNITED STATES,                 :
                               :
                Defendant.     :
______________________________:

                         OPINION AND ORDER

[United States Department of Commerce’s final results rescinding
plaintiff’s new shipper review remanded]

                                            Dated: September 7, 2006

     Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, LLP
(Bruce M. Mitchell and Adam M. Dambrov), for plaintiff.

     Peter D. Keisler, Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice; Jeanne E. Davidson, Deputy
Director, International Trade Section, Commercial Litigation
Branch, Civil Division, United States Department of Justice
(David S. Silverbrand), for defendant.

     Eaton, Judge:   This matter1 is before the court on plaintiff

Jinfu Trading Co., Ltd.’s (“plaintiff” or “Jinfu PRC”) Rule 56.2

motion for judgment upon the agency record challenging the

     1
          The Sioux Honey Association and the American Honey
Producers Association were granted leave to intervene as of right
in this action. See Order of 1/4/05.
Court No. 04-00597                                       Page    2

findings in the United States Department of Commerce’s

(“Commerce” or “the Department”) final results and final

rescission of plaintiff’s new shipper review (“NSR”) for entries

of honey from the People’s Republic of China (“PRC” or “China”).

See Honey From the PRC, 69 Fed. Reg. 64,029 (ITA Nov. 3, 2004)

(final results) (“Final Results”).   By its motion, plaintiff

contests the Department’s conclusion that neither Yousheng

Trading (U.S.A.) Co., Ltd. (“Yousheng USA”)2 nor its successor

Jinfu Trading (U.S.A.) Co., Ltd. (“Jinfu USA”) were affiliated

with Jinfu PRC within the meaning of 19 U.S.C. § 1677(33)(F) or

(G) (2000) on November 2, 2002, the date of the sale claimed as

the basis for the NSR.3   Commerce insists that because the record

does not support the conclusion that on November 2, 2002,

plaintiff’s CEO owned or controlled either Yousheng USA or Jinfu

USA, Jinfu PRC’s sale of honey to Yousheng USA constituted the

     2
          While plaintiff’s motion and the Final Results address
the affiliation between Jinfu PRC and Jinfu USA, the record does
not contain any evidence that a company named Jinfu USA existed
as of November 2, 2002, the date of the claimed new shipper sale.
What the record does indicate, however, is that Yousheng USA, the
predecessor to Jinfu USA, did exist on November 2, 2002, and
indeed was the entity involved in the subject sale. Therefore,
the court’s review will refer to the alleged affiliated company,
where appropriate, as Yousheng USA.
     3
          The statute provides, in pertinent part, that the
following persons are deemed “affiliated”: “(F) Two or more
persons directly or indirectly controlling, controlled by, or
under common control with, any person”; “(G) Any person who
controls any other person and such other person.” 19 U.S.C. §
1677(33).
Court No. 04-00597                                        Page      3

first sale of the merchandise to an unaffiliated U.S. customer.

As a result, Commerce found that the information contained in

plaintiff’s request for a new shipper review was incomplete.        See

Final Results, 69 Fed. Reg. at 64,029–30.    Thus, Commerce

maintains that it was justified in rescinding the new shipper

proceedings.   Jurisdiction lies with 28 U.S.C. § 1581(c) (2000)

and 19 U.S.C. § 1516a(a)(2)(B)(iii).     For the following reasons,

the Department’s Final Results are remanded.

                            BACKGROUND

     Plaintiff is an exporter of honey from the PRC.     See Br.

Supp. Pl.’s R. 56.2 Mot. J. Ag. R. (“Pl.’s Br.”) at 7; see also

Def.’s Opp’n Pl.’s Mot. J. Ag. R. (“Def.’s Opp’n”) at 3.      Its

alleged affiliate, Yousheng USA (whose name was later changed to

Jinfu Trading (U.S.A.) Co., Ltd.)4 is a domestic corporation,

formed by Mr. A5 in October of 2002 to import baby strollers from

the PRC.   See Def.’s Opp’n at 4.   Because the standards imposed

     4
          On November 8, 2002, Yousheng USA filed an amendment
with the State of Washington to change its name to Jinfu Trading
(U.S.A.) Co., Ltd. See Def.’s Opp’n at 4.
     5
          For purposes of confidentiality, [[              ]],
the resident officer of Jinfu USA, the successor to Yousheng USA,
will be referred to as “Mr. A”. It is unclear who actually owned
Yousheng USA when it was formed, Mr. A or [[                ]],
who will be referred to as “Mr. D”. Mr. A incorporated Yousheng
USA, but Mr. D was listed as the sole shareholder on the
instrument purporting to transfer ownership of the company. See
Pl.’s Conf. App. 10; see also Pl.’s Br. 10.
Court No. 04-00597                                          Page    4

on entries of baby strollers made their importation difficult,

the plan was abandoned.   See Pl.’s Br. at 9.    As a result, Mr. A

was left to find another use for the company.     Coincidentally,

Jinfu PRC’s chairman and CEO, CEO B,6 was seeking to establish a

U.S. company to import honey from the PRC.      See id. at 10.

Having learned of CEO B’s intentions, Mr. A suggested that CEO B

use Yousheng USA to import his merchandise.      See id.   Thereafter,

certain activities took place with the apparent purpose of: (1)

transferring ownership of Yousheng USA to CEO B; and (2) changing

the corporate name of Yousheng USA to Jinfu Trading (U.S.A.) Co.,

Ltd. (“Jinfu USA”).   See Pl.’s Conf. App. 10.

     On June 30, 2003, in accordance with 19 U.S.C. §

1675(a)(2)(B),7 plaintiff filed a request with Commerce that it

     6
          For purposes of confidentiality, [[              ]],
the chairman and CEO of Jinfu PRC, will be referred to as “CEO
B”. Neither party disputes that as chairman and CEO, CEO B
controlled Jinfu PRC.
     7
          Pursuant to the statute:

          If the administering authority receives a
          request from an exporter or producer of the
          subject merchandise establishing that——

               (I) such exporter or producer did
               not export the merchandise that was
               the subject of an antidumping duty
               . . . order to the United States
               . . . during the period of
               investigation, and

                                                       (continued...)
Court No. 04-00597                                            Page     5

initiate an NSR for the period beginning on December 1, 2002 and

ending May 31, 2003.8     See Pl.’s Br. at 7.   As part of the

request, plaintiff made the certifications and supplied the

documentation required by 19 C.F.R. § 351.214(b) (2005).9        See

     7
         (...continued)
                  (II) such exporter or producer is
                  not affiliated (within the meaning
                  of section 1677(33) of this title)
                  with any exporter or producer who
                  exported the merchandise to the
                  United States . . . during that
                  period,

             the administering authority shall conduct a
             review under this subsection to establish an
             individual weighted average dumping margin
             . . . .

19 U.S.C. § 1675(a)(2)(B).
     8
          This Court has described a “new shipper review” as a
proceeding where “Commerce is essentially conducting a new
antidumping review that is specific to a particular producer [or
exporter].” Tianjin Tiancheng Pharm. Co., Ltd. v. United States,
29 CIT __, __, 366 F. Supp. 2d 1246, 1249 (2005).
     9
          The regulation states, in pertinent part, that a
request for a new shipper review must contain the following:

         (ii)(A)   The certification [that the person requesting
                   the review did not export subject merchandise
                   to the United States during the period of
                   investigation]; and

             (B)   A certification from the person that
                   produced or supplied the subject
                   merchandise to the person requesting the
                   review that that producer or supplier
                   did not export the subject merchandise
                   to the United States . . . during the
                   period of investigation;

                                                       (continued...)
Court No. 04-00597                                           Page   6

Pl.’s Br. at 7.    Among other things, plaintiff certified that on

November 2, 2002, it sold honey to what it stated was its

American affiliate, Jinfu USA.10    Plaintiff further provided

     9
      (...continued)
     (iii)(A) A certification that, since the investigation
               was initiated, such exporter or producer has
               never been affiliated with any exporter or
               producer who exported the subject merchandise
               to the United States . . . during the period
               of investigation, including those not
               individually examined during the
               investigation;

          (B)     In an antidumping proceeding involving
                  imports from a nonmarket economy
                  country, a certification that the export
                  activities of such exporter or producer
                  are not controlled by the central
                  government;

     (iv) Documentation establishing:

          (A)     The date on which subject merchandise of
                  the exporter or producer making the
                  request was first entered, or withdrawn
                  from warehouse, for consumption, or, if
                  the exporter or producer cannot
                  establish the date of first entry, the
                  date on which the exporter or producer
                  first shipped the subject merchandise
                  for export to the United States;

          (B)     The volume of that and subsequent
                  shipments; and

          (C)     The date of the first sale to an
                  unaffiliated customer in the United
                  States . . . .

19 C.F.R. § 351.214(b)(2)(ii)-(iv).
     10
          Although Yousheng USA did not file the necessary
documents to have its name changed to “Jinfu USA” until November
                                                   (continued...)
Court No. 04-00597                                        Page       7

instruments documenting that on December 17, 2002, its affiliate

resold the honey purchased from Jinfu PRC to an unaffiliated U.S.

customer, Customer C.11    See Pl.’s Conf. App. 1 at Ex. 3.    Jinfu

PRC claimed that this sale constituted “[t]he date of the first

sale to an unaffiliated customer in the United States.”       19

C.F.R. § 351.214(b)(iv)(C); see also Pl.’s Conf. App. 1 at 3

(“Exhibit 3 . . . contains a copy of the commercial invoice for

the first sale to an unaffiliated customer in the United States,

which shows the date of this first sale to an unaffiliated

customer.”) (emphasis omitted).    Based on plaintiff’s

certifications, the Department granted plaintiff’s request and

initiated the NSR for the period beginning on December 1, 2002

and ending May 31, 2003.    See Honey From the PRC, 68 Fed. Reg.

47,537 (ITA Aug. 11, 2003).

     Commerce then issued its antidumping questionnaire, to which

plaintiff responded on September 16, 2003.     See Pl.’s Br. at 8;

see also Pl.’s Conf. App. 4.    In its response, plaintiff stated

that a company called Jinfu USA was its affiliate because CEO B

owned that company.   See Pl.’s Br. at 8.    Plaintiff’s response

     10
      (...continued)
8, 2002, “Jinfu USA” was listed on the invoice as the purchaser
of the honey from Jinfu PRC. See Pl.’s Conf. App. 1, Ex. 3.
     11
          For purposes of confidentiality, [[                      ]],
the “unaffiliated U.S. customer,” will be referred to as
“Customer C.”
Court No. 04-00597                                        Page    8

further included an invoice as evidence that November 2, 2002 was

the date of the first sale between Jinfu PRC and Jinfu USA.      See

Def.’s Opp’n at 4.   However, the response also contained evidence

indicating that ownership of Yousheng USA, the predecessor of

Jinfu USA, did not pass to CEO B until October 25, 2003, nearly

one year after the date of the claimed affiliated sale.     See id.

     This discrepancy between the date of the claimed affiliated

sale of the honey and the transfer of company ownership caused

the Department to conclude that more information relating to the

issue of affiliation was needed; thus, it issued a supplemental

questionnaire.   See Pl.’s Br. at 9; see also Def.’s Opp’n at 4.

In its supplemental response, plaintiff stated that: (1) Jinfu

USA was legally incorporated in the State of Washington on

October 4, 2002; (2) that Yousheng USA’s name was lawfully

changed to Jinfu USA on November 12, 2002; (3) that the October

25, 2003 execution date contained on the certificate purporting

to transfer 10,000 shares of Yousheng USA to CEO B was a clerical

error and the date should have been October 25, 2002; and (4)

that ownership of Yousheng USA passed to CEO B by the transfer of

10,000 shares of Yousheng USA stock.   See Def.’s Opp’n at 4.12

     12
          Plaintiff submitted several corporate documents to
support the affiliation claim articulated in its supplemental
response. First, plaintiff relied on the November 12, 2002
“Certificate of Existence/Authorization” as support for its claim
                                                   (continued...)
Court No. 04-00597                                        Page     9

     The Department then carried out verification of Jinfu PRC’s

questionnaire responses at both its China and U.S. facilities.

See Pl.’s Br. at 12.   At the China site, Commerce interviewed

Jinfu PRC officials and reviewed corporate documents, while in

the United States, the Department spoke with Mr. A about the

relationship between Yousheng USA and Jinfu PRC.     See Pl.’s Br.

at 12–13; see also Def.’s Opp’n at 5.

     Upon reviewing the data contained in plaintiff’s

questionnaire responses, Commerce published its preliminary

results rescinding Jinfu PRC’s NSR.     See Honey From the PRC, 69

Fed. Reg. 31,348, 31,349 (preliminary results) (ITA June 3, 2004)

(“Preliminary Results”).    In the Preliminary Results, Commerce

found that Jinfu USA was not affiliated with Jinfu PRC on

November 2, 2002.    As a result, Commerce deemed plaintiff’s

request for an NSR incomplete because it did not properly

describe the first unaffiliated sale of the merchandise.    This

     12
      (...continued)
that Jinfu USA existed as of October 4, 2002. Next, plaintiff
pointed to the “Certificate of Transfer of Shares” that purported
to transfer 10,000 shares of either Yousheng USA or Jinfu USA to
CEO B on October 25, 2002. Then, plaintiff referenced Jinfu
USA’s November 18, 2002 “Master Application” for a business
license, which it claimed demonstrated that the two companies
were affiliated. Plaintiff further contended that the March 24,
2003 “Amended Articles of Incorporation” for Jinfu USA
specifically stated that CEO B was the sole owner of Jinfu USA.
Finally, plaintiff argued that Jinfu USA’s 2002 tax return, dated
June 13, 2003, indicated that Jinfu USA was wholly owned by CEO
B. See generally Pl.’s Conf. App. 10, 11.
Court No. 04-00597                                          Page     10

conclusion was based primarily on the Department’s finding that

no company named Jinfu USA existed until November 12, 2002,

thereby rendering impossible any claim that plaintiff was

affiliated with that company on November 2, 2002.       See Def.’s

Opp’n at 6.   In addition, Commerce found that the October 25,

2003 date on the Certificate of Transfer of Shares precluded a

finding that CEO B owned either Yousheng USA or Jinfu USA on

November 2, 2002.    See id.    The reasons behind Commerce’s

conclusions were expanded upon in a memorandum that was released

to Jinfu PRC approximately one week prior to the publication of

the Preliminary Results.    See generally Honey From the PRC:

Analysis of the Relationship and Treatment of Sale between Jinfu

Trading Co., Ltd., and Jinfu Trading (USA), Inc. (ITA May 26,

2004).

     Following the publication of the Preliminary Results,

Commerce notified plaintiff that it would accept comments

regarding its findings.13      See Def.’s Opp’n at 7.   Jinfu PRC took

advantage of this opportunity by submitting a case brief

claiming: (1) that Jinfu USA was an existing corporate entity in

     13
          In addition to its substantive challenges, plaintiff
seeks a remand of the Final Results because, in its view,
Commerce failed to afford it an adequate opportunity to explain
the inconsistencies that provided the basis for the Preliminary
Results. See Pl.’s Br. at 31–38. Because of the court’s remand
instructions, it is unnecessary to now decide plaintiff’s
ancillary claim.
Court No. 04-00597                                        Page    11

the State of Washington on November 2, 2002; and (2) that the

date of the Certificate of Transfer of Shares was a clerical

error and that the actual date ownership of Yousheng USA

transferred to CEO B was October 25, 2002.    See Pl.’s Case Brief

in Honey from the PRC: NSR for 12/10/02–5/31/03-(Inv. No. A-570-

863) (July 7, 2004) at 6.    Ultimately, Commerce affirmed in the

Final Results its preliminary finding that the two companies were

not affiliated and, thus, rescinded plaintiff’s NSR.     See Final

Results, 69 Fed. Reg. at 64,029–30.   Plaintiff challenges the

Final Results.

                        STANDARD OF REVIEW

     When reviewing a final new shipper review determination by

Commerce, the court “shall hold unlawful any determination,

finding, or conclusion found . . . to be unsupported by

substantial evidence on the record or otherwise not in accordance

with law.”   19 U.S.C. § 1516a(b)(1)(B)(I); see also Hebei New

Donghua Amino Acid Co., Ltd. v. United States, 29 CIT __, __, 374

F. Supp. 2d 1333, 1337 (2005).   “Substantial evidence is ‘such

relevant evidence as a reasonable mind might accept as adequate

to support a conclusion.’”    Huaiyin Foreign Trade Corp. (30) v.

United States, 322 F.3d 1369, 1374 (Fed. Cir. 2003) (quoting

Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)).     The

existence of substantial evidence is determined “by considering
Court No. 04-00597                                       Page     12

the record as a whole, including evidence that supports as well

as evidence that ‘fairly detracts from the substantiality of the

evidence.’”    Id. (quoting Atl. Sugar, Ltd. v. United States, 744

F.2d 1556, 1562 (Fed. Cir. 1984)).   In addition, “‘a reviewing

court is not barred from setting aside a[n] [agency] decision

when it cannot conscientiously find that the evidence supporting

that decision is substantial, when viewed in the light that the

record in its entirety furnishes, including the body of evidence

opposed to the [agency’s] view.’”    Nippon Steel Corp. v. United

States, __ F.3d __, __ (Fed. Cir. 2006) (internal quotation marks

and citation omitted); see also id. (“It will be the duty of the

courts to determine in the final analysis and in the exercise of

their independent judgment, whether on the whole record the

evidence in a given instance is sufficiently substantial to

support a finding, conclusion, or other agency action as a matter

of law.”).    Finally, the possibility of drawing two opposite, yet

equally justified conclusions from the record will not prevent

the agency’s determination from being supported by substantial

evidence.    Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966).

                             DISCUSSION

 I.   Affiliation Between Jinfu PRC and Yousheng USA

      A.    Relevant Law

      In its affiliation analysis, Commerce must examine the
Court No. 04-00597                                        Page     13

subject relationship in accordance with 19 U.S.C. § 1677(33).14

This section contains two subsections that provide general

descriptions of affiliated persons.    See 19 U.S.C. §§

1677(33)(F), (G).    The first general provision, § 1677(33)(F),

     14
          According to the statute:

          The following persons shall be considered
          “affiliated” or “affiliated persons”:

               (A) Members of a family, including
               brothers and sisters (whether by
               the whole or half blood), spouse,
               ancestors, and lineal descendants.

               (B) Any officer or director of an
               organization and such organization.

               (C) Partners.

               (D) Employer and employee.

               (E) Any person directly or
               indirectly owning, controlling, or
               holding with power to vote, 5
               percent or more of the outstanding
               voting stock or shares of any such
               organization and such organization.

               (F) Two or more persons directly or
               indirectly controlling, controlled
               by, or under common control with,
               any person.

               (G) Any person who controls any
               other person and such other person.

          For purposes of this paragraph, a person
          shall be considered to control another person
          if the person is legally or operationally in
          a position to exercise restraint or direction
          over the other person.

19 U.S.C. § 1677(33).
Court No. 04-00597                                        Page   14

states that “[t]wo or more persons directly or indirectly

controlling, controlled by, or under common control with, any

person,” are affiliated.    19 U.S.C. § 1677(33)(F).   Similarly, §

1677(33)(G) instructs that affiliation is had between “[a]ny

person who controls any other person and such other person.”     19

U.S.C. § 1677(33)(G).   At the conclusion of § 1677(33), Congress

inserted an additional paragraph stating even more particularly

that, “[f]or purposes of [§ 1677(33)], a person shall be

considered to control another person if the person is legally or

operationally in a position to exercise restraint or direction

over the other person.”    19 U.S.C. § 1677(33).   Thus, these

provisions of the statute direct Commerce to center its

affiliation analysis on the question of control, i.e., whether

one party is in a position to “exercise restraint or direction”

over another.

     Commerce is also guided by the regulations to § 1677(33),

which provide:

     In determining whether control over another person
     exists, within the meaning of [19 U.S.C. § 1677(33)],
     the Secretary will consider the following factors,
     among others: corporate or family groupings; franchise
     or joint venture agreements; debt financing; and close
     supplier relationships. The Secretary will not find
     that control exists on the basis of these factors
     unless the relationship has the potential to impact
     decisions concerning the production, pricing, or cost
     of the subject merchandise or foreign like product.
     The Secretary will consider the temporal aspect of a
     relationship in determining whether control exists;
Court No. 04-00597                                        Page   15

     normally, temporary circumstances will not suffice as
     evidence of control.

19 C.F.R. § 351.102(b).

     This Court has interpreted the statutory and regulatory

language as requiring Commerce to find affiliation where the

party alleging affiliation has demonstrated that “[t]wo or more

entities . . . share various control relationships whereby one

entity is legally or operationally in a position to exercise

restraint or direction over the other and that such relationship

provides one entity the significant potential for the

manipulation of price or production of the other.”     Hontex

Enters., Inc. v. United States, 29 CIT __, __, 387 F. Supp. 2d

1353, 1358 (2005) (internal quotation marks omitted).    In

addition, this Court has further held that a finding of control

does not require a showing of actual control, but rather proof

that one party has the potential to exercise control over the

other is sufficient.   See China Steel Corp. v. United States, 28

CIT __, __, 306 F. Supp. 2d 1291, 1299 (2004) (“‘The

[affiliation] statute focuses on the capacity to control, rather

than on the actual exercise of control.’”) (quoting Ta Chen

Stainless Steel Pipe, Ltd. v. United States, 23 CIT 804, 813

(1999) (not reported in the Federal Supplement)).
Court No. 04-00597                                            Page   16

     Therefore, the court must determine whether Commerce

reasonably concluded that the evidence failed to demonstrate that

on November 2, 2002, CEO B had, at a minimum, the potential to

exercise control over the pricing decisions of Yousheng USA.

     B.   Evidence of Affiliation: Ownership Interest

     Jinfu PRC initially claims that because CEO B was the owner

of Jinfu USA, the entities were affiliated on November 2, 2002.

Plaintiff raises several arguments to demonstrate that Commerce

failed to consider the “compelling” record evidence supporting

this claim.     See Pl.’s Br. at 20.   Its arguments relate

principally to the Department’s conclusion that plaintiff’s

proffered evidence failed to support its assertions that Jinfu

USA existed on November 2, 2002, and that CEO B owned or

controlled the company on that date.      See id.

     Plaintiff’s primary contention in response to Commerce’s

determination that Jinfu USA did not exist on November 2, 2002,

is that Commerce erred by not giving due credit to the

Certificate of Existence/Authorization (“Certificate of

Existence”) issued to Jinfu USA by the State of Washington.          See

id. at 20–21.    As plaintiff states, “on November 12, 2002, the

State of Washington issued a [Certificate of Existence] to a

company named ‘Jinfu Trading (USA) Inc.’ expressly stating that
Court No. 04-00597                                        Page      17

the original ‘Certificate of Incorporation’ was issued to this

company by the State of Washington on October 4, 2002.”      Id.

Plaintiff understands this document to indicate that, as of

October 4, 2002, Jinfu USA existed as a corporate entity.        See

id.   Thus, plaintiff argues that had Commerce accorded an

appropriate level of credit to this document, it would have been

compelled to conclude that Jinfu USA existed at the time of the

first sale.

      Plaintiff next contends that the Department erred in finding

that CEO B did not have any ownership interest in either Yousheng

USA or Jinfu USA at the time of the claimed new shipper sale

because the Certificate of Transfer of Shares was dated October

25, 2003, almost one year after the date of the new shipper sale.

See Pl.’s Br. at 23.   Plaintiff bases it argument on its

understanding of the law of contracts, which it contends does not

require an agreement to be either reduced to writing or signed in

order to become effective.   See id. (“The contract needn’t be in

writing; if it is in writing, it needn’t be signed, provided

there’s other evidence of acceptance, for example . . . by

performance.”) (internal citation and quotation marks omitted).

In addition to relying on general contract principles, plaintiff

analogizes its situation to that presented in Washington State

securities law, which plaintiff states “expressly provides that a
Court No. 04-00597                                          Page   18

signed, written contract is not required to enforce an agreement

to sell securities.”   Id. at 24 (citing Wash. Rev. Code § 62A.8-

113).   In other words, plaintiff claims that regardless of the

date on the Certificate of Transfer of Shares, actual ownership

of Yousheng USA transferred to CEO B on October 25, 2002.

     As additional support for its claim that CEO B owned Jinfu

USA on November 2, 2002, plaintiff points to several corporate

documents including the November 18, 2002 Master Application for

Jinfu USA’s business license, Jinfu USA’s March 24, 2003 Amended

Articles of Incorporation, and Jinfu USA’s 2002 tax return, dated

June 13, 2003.   See generally id. at 20.   According to plaintiff,

although these documents are dated after the date of the claimed

new shipper sale, each one indicates that CEO B was the sole

owner of Jinfu USA on November 2, 2002.     See, e.g., id. at 21

(“[b]oth the original and amended tax returns expressly stated

that [CEO B] was the 100 percent owner of Jinfu-USA.”).

     Next, plaintiff argues that Commerce failed to consider the

data gathered at verification from CEO B and Mr. A.    In

plaintiff’s view, the information adduced through Commerce’s

interviews of both CEO B and Mr. A established that the formation

date of Jinfu USA was October 4, 2002, and that CEO B owned that

company on the date of the claimed new shipper sale.     Id.    Put
Court No. 04-00597                                       Page     19

another way, plaintiff contends that the data marshaled through

verification were not only credible, but also failed to provide

the Department with “any evidence, let alone substantial

evidence, that Jinfu-USA was owned by any person other than [CEO

B].”    Id.

       Commerce takes issue with plaintiff’s argument that the

State of Washington documents remove all doubt as to when Jinfu

USA existed as a corporate entity.    See Def.’s Opp’n at 17.    The

Department further asserts that plaintiff’s proffered documents

fail to establish that CEO B owned either Yousheng USA or Jinfu

USA, and, thus, do not support a finding that Jinfu PRC and the

U.S. company were affiliated as of November 2, 2002.    See id.

According to Commerce:

       [T]he documents upon which [plaintiff] relies are all
       dated after November 2, 2002, the date of the subject
       sale and, therefore, do not demonstrate control on
       November 2.

       Additionally, in the “Master Application” filed with
       the state of Washington on November 18, 2002, sixteen
       days after the new shipper sale, which lists all
       owners, neither Jinfu PRC nor its CEO are purported to
       be owners, but rather the only name present is an
       employee of Jinfu USA’s predecessor company, Yousheng
       USA. Furthermore, although the “Master Application”
       requested notification of any change of ownership, no
       change was indicated upon the record. Further still,
       the portion of the form stating whether Jinfu USA, “is
       owned by, controlled by, or affiliated with any other
       business entity,” is blank.

Id.
Court No. 04-00597                                        Page      20

     Moreover, the Department states that:

     [R]ecord evidence from the State of Washington and the
     “Amended Articles of Incorporation” prepared by
     Yousheng USA’s/Jinfu USA’s U.S. attorney, contradict
     the information submitted and statements by Jinfu PRC
     concerning the date on which the transfer of ownership
     took place. First, none of the documents filed with
     the State of Washington state that the CEO of Jinfu PRC
     is the owner of Yousheng USA or Jinfu USA or that
     either Yousheng USA or Jinfu USA changed ownership.
     . . . [T]he record lacks evidence demonstrating that
     Jinfu USA informed the State of Washington of any
     alleged change in ownership as late as November 8,
     2002. Furthermore, Jinfu USA’s “Amended Articles of
     Incorporation” were signed well after January 2003,
     further calling into question the alleged date of
     transfer of ownership, and it is unclear from the
     record whether this document was in fact filed by Jinfu
     USA with the State of Washington. Lastly, Jinfu USA’s
     application for a “Master Business License,” examined
     by the Department at its Jinfu CEP Verification,
     contradicts Jinfu PRC’s assertion that its CEO owned
     Jinfu USA on October 25, 2002. . . .

Issues and Decision Memorandum for the Final Results and Final

Rescission, In Part, of the New Shipper Review of the Antidumping

Duty Order on Honey from the PRC (ITA Oct. 25, 2004) (“Issues &

Decision Mem.”) at 11.     In other words, Commerce maintains that

plaintiff’s evidence that a company named Jinfu USA existed on

November 2, 2002 and that CEO B owned that company, is not

probative of the facts plaintiff wishes to establish.

     Commerce further observes that the Certificate of Transfer

of Shares, which memorialized the transfer of ownership of

Yousheng USA to CEO B, did not become legally effective until

signed.   See id. at 10.    Although bearing the date October 25,
Court No. 04-00597                                          Page   21

2003, Commerce notes that the document was not signed until

December 30, 2003, more than one year after the date of the

claimed new shipper sale.    In an effort to explain this

discrepancy, plaintiff submitted the affidavit of CEO B, in which

he claimed that in December 2003, he recognized that he had not

signed the transfer, and so he signed it and backdated it October

25, 2003.   See Def.’s Opp’n at 18.   For Commerce, the admission

by CEO B that he backdated the document renders unreliable

plaintiff’s claim that it was not dated October 25, 2002 because

of a clerical error.

     Commerce finds additional fault with the Certificate of

Transfer of Shares, which purported to transfer complete

ownership of Yousheng USA to Jinfu PRC through the transfer of

10,000 shares of stock.    According to Commerce, the March 24,

2003 Amended Articles of Incorporation for Jinfu USA, however,

state that there were 500,000 shares of the company outstanding

as of that date.     See Def.’s Opp’n at 18.   Thus, the Department

asserts that a controlling interest in the company could not have

been achieved by the transfer of only 10,000 shares of stock.

See id. at 17; see also Issues & Decision Mem. at 24 (“[T]he

amount of shares allegedly transferred to the CEO of Jinfu PRC on

October 25, 2002 is different from the amount of shares listed in

Jinfu USA’s ‘Amended Articles of Incorporation’ dated March 24,
Court No. 04-00597                                       Page      22

2003.”).

     It is apparent that Commerce was not unreasonable in

concluding that a company named Jinfu USA did not exist on

November 2, 2002, and that CEO B did not own Jinfu USA or its

predecessor Yousheng USA on that date.    First, while Mr. A

formally applied to change Yousheng USA’s name to Jinfu Trading

(U.S.A.) Co., Ltd., he did not do so until November 8, 2002.

Second, the November 12, 2002 Certificate of Existence, the

document that recognized Yousheng USA’s name change, indicates

that Mr. A incorporated Yousheng USA, not Jinfu USA, on October

4, 2002.   As of that date, the company was owned by either Mr. A

or Mr. D,15   not CEO B.   Third, all of the evidence relied upon

by plaintiff to show ownership by CEO B is both equivocal and

dated after November 2, 2002.    That is, the Certificate of

Existence indicating that Yousheng USA had been renamed Jinfu USA

is dated November 12, 2002; the Master Application for Jinfu

USA’s business license is dated November 18, 2002; the

Certificate of Transfer of Shares was signed on December 30,

2003, but backdated to October 25, 2003; the Amended Articles of

Incorporation are dated March 24, 2003; and Jinfu USA’s 2002 tax

     15
          Mr. D, the general manager of
[[                   ]], assumed the [[        ]] fee
Mr. A incurred as a result of incorporating Yousheng USA.       See
Pl.’s Br. at 9, 13; see also Pl.’s Conf. App. 7, 10.
Court No. 04-00597                                        Page   23

return is dated June 13, 2003.    Thus, the court cannot agree with

plaintiff that these documents, all dated after November 2, 2002,

support its claim that CEO B owned either Yousheng USA or Jinfu

USA on that date.

     Further, the court finds unavailing plaintiff’s argument

that the Certificate of Transfer of Shares did not require the

parties’ signatures in order to become effective.    By its terms,

the document provides that: “THIS CERTIFICATE TRANSFER IS

EFFECTIVE UPON EXECUTION BY THE UNDERSIGNED.”    Pl.’s Conf. App.

7.   It is clear, therefore, that the Certificate of Transfer of

Shares was not to gain legal effect unless and until the parties

signed it.     Even if this document were found to be effective as

of October 25, 2003, an unlikely conclusion given that it was

actually signed and backdated by CEO B on December 30, 2003, it

would still have been effective eleven months after November 2,

2002.     Further undermining plaintiff’s argument that the law of

contracts gives effect to the Certificate of Transfer of Shares

on October 25, 2002 although neither party had signed the

document as of that date, is CEO B’s failure to pay Mr. D the

consideration for the shares until more than one year after the

date of the claimed new shipper sale.16    In other words, because

     16
             According to the verification report, CEO B paid the
[[           ]] debt incurred by [Mr. A] on [[                  ]]
                                                      (continued...)
Court No. 04-00597                                        Page     24
the transfer was not supported by valid consideration until well

after November 2, 2002, plaintiff cannot rely on an unwritten

contract as support for its claim of ownership.

       It is likewise apparent that the substance of plaintiff’s

other evidence is equally lacking with respect to CEO B’s claim

of ownership in Jinfu USA.    For instance, the portion of the

Master Application in which it was asked if Yousheng USA was

owned, controlled, or affiliated with another entity was left

blank, thereby providing evidence that as late as November 12,

2002, Yousheng USA was still owned by Mr. D.     See Pl.’s Conf.

App. 10, Ex. 1 at 3(h) (“If this business is owned by, controlled

by, or affiliated with any other business entity, please indicate

that business entity’s name . . . [no company reported] . . .

.”).    Finally, the court finds plaintiff’s assertion regarding

Jinfu USA’s 2002 tax return to be without merit.    The tax return

was dated June 13, 2003.    In addition, the tax return is not

signed and it is not clear that it was ever filed.    Therefore,

while the tax return stated that Jinfu USA was wholly owned by

CEO B, it was reasonable for Commerce to conclude that the 2003

document was not alone sufficient to establish ownership on

November 2, 2002.

       16
      (...continued)
as part of the consideration for the transfer.     See Pl.’s Br. at
13.
Court No. 04-00597                                        Page    25
     Based on the foregoing, the court finds that there is no

evidence that Jinfu USA was the name of a corporate entity on

November 2, 2002.    Likewise, nothing indicates that any ownership

interest in either Yousheng USA or Jinfu USA was transferred to

CEO B on or before November 2, 2002.   While CEO B may have made

some effort to obtain ownership of Yousheng USA and then change

its name to Jinfu USA, the record does not reflect that he was

successful in doing so by November 2, 2002.    Thus, the court

cannot find as unsupported by substantial evidence Commerce’s

determination that CEO B did not have sole ownership of either

Yousheng USA or Jinfu USA as of the claimed new shipper sale.

     C.   Evidence of Affiliation: Control

     A conclusion with respect to ownership does not end the

court’s inquiry as a finding of affiliation does not rest on

ownership.   In this regard, plaintiff further asserts that the

Department unreasonably concluded that CEO B was not in a

position to exercise control over either Yousheng USA or Jinfu

USA within the meaning of 19 U.S.C. §§ 1677(33)(F) or (G) on

November 2, 2002.    See Pl.’s Br. at 27.   According to plaintiff,

Commerce disregarded the changes to affiliation law imposed by

the Uruguay Round Agreements Act of 199417 with respect to the

     17
          The Uruguay Round Agreements Act of 1994 modified the
then existing law to include, among other things, subsection (G),
                                                   (continued...)
Court No. 04-00597                                      Page   26
importance of control to the agency’s analysis, as well as this

Court’s interpretation of those changes.   See id. at 28.

     Plaintiff first disputes the Department’s finding that the

record was devoid of evidence demonstrating CEO B’s potential to

influence Jinfu USA’s sales or pricing decisions.   See Issues &

Decision Mem. at 26.   In particular, plaintiff directs the

court’s attention to the interview with Mr. A, who became

Yousheng USA’s resident officer.   For plaintiff,

     [Commerce’s] U.S. Sales Verification Report of May 5,
     2004, . . . summarized [the] interview of [Mr. A],
     which unequivocally confirmed that [CEO B] controlled
     Jinfu-USA. The [Department’s] conclusion also is
     contradicted by the communications between [Mr. A] and
     [CEO B], which confirm that [CEO B] approved [Mr. A’s]
     sales price to Jinfu-USA’s customer. Finally, [the
     Department’s] conclusion ignores all of the evidence
     presented by the parties regarding the transfer of
     ownership of Jinfu-USA to [CEO B]. Thus, even if the
     parties did not complete the legal niceties of
     transferring ownership prior to the actual sales
     transactions in issue, there can be no serious dispute
     that [CEO B] attempted to acquire 100% ownership of
     Jinfu-USA and that [CEO B] and [Mr. A’s] business
     relationship was based on their mutual understanding
     that [CEO B] owned Jinfu-USA. . . .

Pl.’s Br. at 29.

     17
      (...continued)
which added the notion of control to the statute. See H.R. Doc.
No. 103-465 at 838, reprinted in 1994 U.S.C.C.A.N. (108 Stat.)
4041, 4174. As the Statement of Administrative Action states,
“[t]he Administration believe[d] that including control in the
definition of ‘affiliated’ [would] permit a more sophisticated
analysis which better reflects the realities of the marketplace.”
Id.
Court No. 04-00597                                         Page   27
     Thus, plaintiff challenges the Department’s finding that

Jinfu PRC and Yousheng USA or its successor Jinfu USA “had an

ongoing, arm’s-length commercial relationship established for the

mutual benefit of each party.”    Issues & Decision Mem. at 27; see

also Pl.’s Br. at 29–30.    According to plaintiff, “the

communications between the parties verified by the [Department]

clearly establish that [Mr. A] advised [CEO B] of all material

aspects of his resale, including the name of the U.S. customer,

and that the resale by Jinfu-USA was not finalized until the

resale price had been approved by [CEO B].”    Pl.’s Br. at 30.

Thus, plaintiff argues that it did not deal with Yousheng USA or

its successor Jinfu USA at arm’s length, but rather enjoyed

substantial control over the company’s business decisions,

particularly those dealing with pricing.

     As previously noted, a finding of control requires proof

that one person is legally or operationally in a position to

exercise restraint or direction over the other person, and that

“the relationship with the third party must have the potential to

impact decisions concerning the production, pricing, or cost of

the subject merchandise.”    TIJID, Inc. v. United States, 29 CIT

__, __, 366 F. Supp. 2d 1286, 1293 (2005); see also 19 U.S.C. §

1677(33).
Court No. 04-00597                                         Page   28
     Here, the court finds that the record contains definite and

uncontroverted evidence that CEO B not only had the potential to

influence what was then Yousheng USA’s pricing decisions, but, in

fact, exercised that control; and further that Mr. A believed his

resale prices were subject to CEO B’s approval.   Indeed, the

record leaves little doubt that CEO B, while he may not have

owned the U.S. entity,18 certainly controlled that company’s

pricing decisions.   In addition, Commerce fails to cite

substantial evidence that would support the opposite conclusion.

Therefore, the court finds that Commerce unreasonably concluded

that the two entities were not affiliated.

     Support for this finding is found primarily in the

Department’s verification report.   For instance, in the report,

Mr. A explains that for transactions where he resells honey

originally purchased from Jinfu PRC, he takes the following

steps:

     (1) negotiate material terms of sale with U.S.
     customer; (2) enter a non-binding sales contract with
     the U.S. customer; (3) purchase merchandise from Jinfu
     in the PRC; (4) inform [CEO B] by telephone of
     finalized . . . material terms of sale and fax him a
     copy of the sales contract; (5) receive bill of lading,
     which includes on-board date of the merchandise; (6)

     18
          With respect to the question of affiliation, it is
simply immaterial that as of November 2, 2002, Yousheng USA had
not yet been renamed Jinfu USA. Whatever the name at a
particular time, Yousheng USA and Jinfu USA were the same
corporation.
Court No. 04-00597                                      Page     29
     receive shipping notification of estimated arrival
     date; (7) prepare sales invoices for estimated arrival
     date; and (8) issue invoice to the U.S. customer once
     the merchandise has cleared FDA.

Pl.’s App. 13 at 7.   For the sale in question, Mr. A stated that:

     Subsequent to his negotiations with [Customer C], . . .
     [Mr. A] faxed a letter to [CEO B] relaying the result
     of his negotiations . . . and U.S. honey market
     research. . . . In a reply fax, [CEO B] agreed that
     the sale with [Customer C] was a good opportunity for
     Jinfu USA and that the negotiated price was reasonable.
     As such, . . . [Mr. A] entered into a sales contract
     with [Customer C] . . . .

Id. at 6–7.

     As a result, the fax sent by Mr. A to CEO B on November 13,

2002, read as follows:

     Firstly, I would like to report you that the current
     market price of honey in the United States is between
     [[      ]] and [[      ]] per pound. Because of the
     sharp reduction of the export of honey from other
     countries, the domestic sales and price of honey in the
     United States is very promising.

     I contacted a US local client who was willing to order
     a container of honey at the ex-warehouse price of [[
         ]] USD per ton on the condition that it can pass
     the examination of US customs and FDA. Since the
     annual purchasing amount of this client is relatively
     significant, if a good relationship can be established
     with this client, it will be of great help to our
     company’s sales to the US.

     Please let me know you[r] opinion and advise me
     further.

Pl.’s App. 7.   CEO B sent a reply fax on the same day stating

that:

     We received you[r] letter and felt happy that there are
     clients are [sic] interested in the honey product of
Court No. 04-00597                                           Page      30
      our company. You did a good job on the report of the
      US market. We finished a container . . . on November
      5.

      In order to open the US market and better understand
      the marketing information, I agree with you. We accept
      the client’s quotation of [[       ]] USD per ton19 as
      ex-warehouse price on the condition that it passes the
      examination of the US customs and FDA. Please make the
      preparation and keep in touch with the client for
      purpose of long term cooperation. I hereby authorize
      you to sign contract with the client.

Id.

      This evidence demonstrates that CEO B exercised control over

Yousheng USA’s resale price of the honey to Customer C.       In his

reply to Mr. A, CEO B stated that “[w]e accept the client’s

quotation of [[           ]] USD per ton . . . .”   Id.   That is,

based on the quoted price, he authorized Mr. A to enter into the

transaction.    See id.    In addition, when speaking of the benefits

of the Customer C deal, Mr. A stated that “it will be of great

help to our company’s sales to the US.”      Id.    The reference to

“our” company can only be understood as a broad reference to

“Jinfu Trading,” which would encompass both Jinfu PRC and

Yousheng USA.   Thus, the faxes indicate that Mr. A did not enter

into the transaction at the quoted price before getting the

approval of CEO B, and that he believed he was working for a

      19
          The sale price between Jinfu PRC and Yousheng USA was
[[      ]] USD per ton. See Jinfu PRC’s Response to First
Supplemental Section A & C Questionnaire at 7.
Court No. 04-00597                                        Page     31
single enterprise encompassing Jinfu PRC and Yousheng USA.

     The record also demonstrates that Mr. A believed that his

resale prices were subject to CEO B’s control and indeed acted in

accordance with that belief.    In addition to the faxes, the

Department’s discussion with Mr. A reveals that, after

negotiating a deal with a U.S. customer, Mr. A would enter a non-

binding contract with that customer, and then notify CEO B of the

pending transaction.20    See id.   Once the agreed-upon price was

approved by CEO B, Mr. A would finalize the U.S. transaction.

This clearly shows that Mr. A believed he was subject to CEO B’s

control.   Further, the record contains several references by Mr.

A to Jinfu PRC as his company’s “affiliate.”     See, e.g., id. at 3

(“[Mr. A] stated that Jinfu USA’s parent company, and only

affiliate, is Jinfu in the PRC.”); see also id. at 9 (“[Mr. A]

stated that Jinfu USA only purchases honey from its affiliate,

Jinfu in the PRC.”).     Thus, it is apparent that Mr. A understood

that his pricing decisions were subject to CEO B’s approval on

November 2, 2002.    At no point does the Department demonstrate

that it considered the relevance of this evidence with respect to

     20
          In the verification report, the Department noted that
“[a]ccording to [Mr. A], within his culture sales contracts are
not considered to be binding, and therefore, can be broken at any
time.” Pl.’s Conf. App. 13 at 7 n.1. This does not, however,
alter the fact that Mr. A would not finalize a transaction with a
U.S. customer unless and until he had received CEO B’s approval.
Court No. 04-00597                                      Page     32
the potential for CEO B to control Yousheng USA’s resale price

and his actual control of the price in the November 2, 2002

transaction.   Rather, Commerce rests its finding on evidence

relating to the ownership of the company.   See, e.g., Issues &

Decision Mem. at 21 (“For purposes of these final results, we

continue to find that Jinfu PRC and Jinfu USA were not affiliated

based on our analysis of record evidence demonstrating that Jinfu

PRC did not own Jinfu USA at the time of the relevant U.S.

sale.”).   Therefore, the court finds that Commerce has not

supported with substantial evidence its conclusion that Mr. A

acted independently from CEO B’s control, and that, in fact, the

cited record evidence demonstrates the opposite conclusion.     See

19 C.F.R. § 351.102(b); see also Ta Chen Stainless Steel Pipe, 23

CIT at 809, 811 (finding control where, among other things, the

controlled company had been established by officers and managers

of the controlling company, and where the controlled company only

distributed the controlling company’s products).

                            CONCLUSION

     Therefore, in accordance with the foregoing, the court finds

that Commerce’s conclusions with respect to affiliation in the

Final Results are not supported by substantial evidence and,

thus, remands this case.   On remand, Commerce is directed to

either find that Jinfu PRC and Yousheng USA were affiliated as of
Court No. 04-00597                                        Page      33
November 2, 2002, and to reinstate plaintiff’s new shipper

review, or to provide other record evidence to support its

conclusion that the companies were not affiliated.    In the event

that the Department does not concur with the court’s finding, it

shall reopen the record to provide plaintiff with an opportunity

to place thereon further evidence with respect to affiliation and

to provide an explanation of that evidence.    Remand results are

due December 6, 2006.   Comments are due January 5, 2007.   Replies

to such comments are due January 16, 2007.

                                              /s/Richard K. Eaton
                                                 Richard K. Eaton

Dated:    September 7, 2006
          New York, New York