Court Opinion

ID: 2713760
Source: CourtListenerOpinion
Date Created: 2014-08-05 20:59:58.955827+00
Date Added: 2024-06-11T13:16:45.393859
License: Public Domain

Slip Op. 13- 110

                UNITED STATES COURT OF INTERNATIONAL TRADE

 MICHAELS STORES, INC.,

                       Plaintiff,

                .v.                                  Before: Jane A. Restani, Judge

 UNITED STATES,                                      Court No. 12-00146

                       Defendant.                    Public Version

                                           OPINION

[Plaintiff’s motion for summary judgment in antidumping duty matter is denied, and summary
judgment is entered in favor of defendant.]

                                                                   Dated: August 21, 2013

             Lewis E. Leibowitz, Craig A. Lewis, Eric B. Gillman, and Wesley V. Carrington
Hogan Lovells US LLP, of Washington, DC, for plaintiff.

               Carrie A. Dunsmore, Trial Attorney, Commercial Litigation Branch, Civil
Division, United States Department of Justice, for defendant. With her on the brief were Stuart
F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M.
McCarthy, Assistant Director. Of counsel on the brief was Daniel J. Calhoun, Attorney, United
States Department of Commerce.

               Restani, Judge: This matter is before the court following denial of Defendant

United States’ motion to dismiss in Michaels Stores, Inc. v. United States, Slip Op. 12-161, 2012

Ct. Int’l Trade LEXIS 161 (Dec. 27, 2012). Plaintiff Michaels Stores, Inc. (“Michaels”)

challenges the liquidation and cash deposit instructions issued by the Department of Commerce

(“Commerce”) in administering the antidumping duty (“AD”) order for certain cased pencils

from the People’s Republic of China (“PRC”). See Antidumping Duty Order: Certain Cased

Pencils from the People’s Republic of China, 59 Fed. Reg. 66,909, 66,909 (Dep’t Commerce
Court No. 12-00146                                                                            Page 2

Dec. 28, 1994) (“Cased Pencils Initial Order”). For the reasons below, the court determines that

Commerce lawfully issued liquidation instructions covering the 2008–2009 and 2009–2010

administrative review periods for certain cased pencils that were imported by Michaels.

                                        BACKGROUND

               At issue in this case is the content of liquidation instructions issued following

administrative reviews covering two periods of review (“POR”), the 2008–2009 POR and the

2009–2010 POR, both arising out of the 1994 AD order on cased pencils. See Initiation of

Antidumping and Countervailing Duty Administrative Reviews, Request for Revocation in Part,

and Deferral of Initiation of Administrative Review, 75 Fed. Reg. 4770, 4771 (Dep’t Commerce

Jan. 29, 2010) (“Initiation of Administrative Review 2010”); Initiation of Antidumping and

Countervailing Duty Administrative Reviews, 76 Fed. Reg. 5137 (Dep’t Commerce Jan. 28,

2011) (“Initiation of Administrative Review 2011”). The parties appear to agree on the facts

presented below.

               During the 2008–2009 POR, Michaels purchased goods that had been produced

by three manufacturers of cased pencils, China First Pencil Co., Ltd. (“China First”), Shanghai

Three Star Stationery Industry Co., Ltd. (“Three Star”), and Shandong Rongxin Import and

Export Co., Ltd. (“Rongxin”). Mem. of Points & Authorities in Supp. of Pl.’s Mot. for Summ. J.

(“Pl.’s Mem.”) at 2; Def.’s Resp. to Pl.’s Mot. for Summ. J. (“Def.’s Resp.”) at 6. Michaels

received these pencils from three different PRC exporters. Pl.’s Mem. at 2; Def.’s Resp. at 6.

Similarly, during the 2009–2010 POR, Michaels purchased goods that had been produced by two

manufacturers, China First and Rongxin. Pl.’s Mem. at 6; Def.’s Resp. at 12. Again, Michaels

did not receive the pencils directly from these producers, but instead it received them from two
Court No. 12-00146                                                                            Page 3

different PRC exporters.1 Pl.’s Mem. at 6; Def.’s Resp. at 12.

               The cash deposit instructions issued by Commerce, to which the liquidation

instructions referred, informed U.S. Customs and Border Protection (“Customs”) that “if any

entries of this merchandise are exported by a firm other than the exporters listed above, then the

following instructions apply.” Pl.’s Mem. Ex. 6 at 1–2, Ex. 9 at 2, Ex. 11 at 1–2 (emphasis

added). Commerce first ordered Customs to use a separate rate “[i]f the PRC or non-PRC

exporter of the subject merchandise has its own rate.”2 Id. (emphasis added). Because the

exporters of the subject merchandise were not given separate rates in the instructions, Customs

continued to the second paragraph, which required Customs to apply the PRC-wide rate to

subject merchandise “[f]or all PRC exporters of subject merchandise which have not been

assigned to a separate rate.”3 Id. As a result, although the cash deposit instructions included

separate rates for the companies that produced the merchandise in question, those rates applied

       1
         Collectively, the exporters from which Michaels received the merchandise in question
will be referred to as the “subject” exporters. Michaels refers to these exporters that were not
individually reviewed as the “unreviewed” exporters, but this term is a misnomer, as the court
concludes that these exporters, in fact, were reviewed collectively as part of the PRC-wide entity.
       2
         Commerce’s separate rate procedure is not compelled by statute. Instead, Commerce’s
procedure requires companies in nonmarket economies (“NME”) to assert their independence to
avoid being classified as part of the PRC-wide entity. Mandatory respondents may apply for
separate rate status through an antidumping questionnaire response, and nonmandatory
respondents may apply through a separate rate application. See Yangzhou Bestpak Gifts &
Crafts Co. v. United States, 716 F.3d 1370, 1374 (Fed. Cir. 2013).
       3
          Here, Commerce’s instructions, rather than the ministerial implementation of those
instructions, are at issue as jurisdiction is asserted under 28 U.S.C. § 1581(i). A parallel case has
been filed under § 1581(a) that addressed the protests filed by Michaels related to the
appropriateness of Custom’s actions in implementing the instructions. Michaels Stores, Inc. v.
United States, Ct. No. 12-145 (CIT filed May 23, 2012). For purposes of this action, Michaels
claims that Commerce’s instructions were clear on their face, provided no discretion to Customs,
and were contrary to law.
Court No. 12-00146                                                                           Page 4

only when those companies directly exported the merchandise to the United States. See id.

               During both PORs, Michaels made cash deposits for the entries of cased pencils

with Customs pursuant to Michaels’ interpretation of the AD order. Pl.’s Mem. at 2, 6. The

corresponding cash deposit instructions indicated that the cash deposit rate for exporters not

specifically listed and without a separate rate, however, was “the PRC-wide rate of 114.90

percent.”4 Id. Michaels instead made cash deposits at the cash deposit rates assigned to the

corresponding producer of the pencils. Pl.’s Mem. at 2, 6; Def.’s Resp. at 6, 12. While

Commerce initiated administrative reviews of some of the producers at issue here, certain

producers withdrew their requests for administrative review, and Commerce reviewed only one

of the producers at issue here, Rongxin, and only for the 2008–2009 POR. Final Results 2011,

76 Fed. Reg. at 27,989. None of the subject exporters were specifically identified by Commerce,

and none of the subject exporters requested a review. See Certain Cased Pencils From the

People’s Republic of China: Preliminary Results and Partial Rescission of Antidumping Duty

Administrative Review, 76 Fed. Reg. 2337, 2339 (Dep’t Commerce Jan. 13, 2011) (“Partial

Rescission of AD Review”); Certain Cased Pencils From the People’s Republic of China:

Rescission of Antidumping Duty Administrative Review, 76 Fed. Reg. 27,990, 27,990 (Dep’t

Commerce May 13, 2011) (“Rescission of AD Review”). For both PORs, Commerce issued

       4
         Although the PRC-wide entity was not specifically examined for this particular POR,
the PRC-wide rate applied here was “the rate established in the administrative review for the
most recent period.” Certain Cased Pencils From the People’s Republic of China: Final Results
of the Antidumping Duty Administrative Review, 76 Fed. Reg. 27,988, 27,989 (Dep’t Commerce
May 13, 2011) (“Final Results 2011”). Commerce most recently conducted a reexamination of
the PRC-wide entity for the 2007–2008 POR and confirmed the PRC-wide rate to be 114.90
percent. See Certain Cased Pencils From the People’s Republic of China: Final Results of the
Antidumping Duty Administrative Review, 75 Fed. Reg. 38,980, 38,981 (Dep’t Commerce July
7, 2010) (“Final Results 2010”).
Court No. 12-00146                                                                            Page 5

liquidation instructions, ordering Customs to liquidate the subject entries at the cash deposit rate

in effect at the time of entry. Pl.’s Mem. at 2–4, 7–8; Def.’s Resp. at 8, 10, 14–15.

                Furthermore, following the 2008–2009 administrative review of Rongxin,

Commerce issued a producer’s rate for Rongxin of 0.17 percent. Pl.’s Mem. at 4; Def.’s Resp. at

9. Commerce also issued “exporter/importer-specific”5 liquidation instructions for Rongxin

without including Michaels on the importer list.6 Def.’s Resp. at 9–10. Consequently, for

pencils manufactured by Rongxin during the 2008–2009 POR that were purchased by Michaels

through a different export company, Customs also liquidated these entries at a rate equal to the

       5
          Commerce repeatedly referred to “exporter/importer-specific” rates, but that term is not
defined in the statute or regulations. Instead, Commerce apparently uses this term to refer to the
rate calculated for the subject merchandise when it enters the United States pursuant to § 351.212
of its regulations. See 19 C.F.R. § 351.212(b)(1); see also Final Results 2011, 76 Fed. Reg. at
27,989 (referencing § 351.212(b)(1) as the source of the “exporter/importer-specific” or
“customer-specific” rate). The regulation, to which Commerce referred, provides:

       If the Secretary has conducted a review of an antidumping order under § 351.213
       (administrative review), § 351.214 (new shipper review), or § 351.215 (expedited
       antidumping review), the Secretary normally will calculate an assessment rate for
       each importer of subject merchandise covered by the review. The Secretary
       normally will calculate the assessment rate by dividing the dumping margin found
       on the subject merchandise examined by the entered value of such merchandise
       for normal customs duty purposes. The Secretary then will instruct the Customs
       Service to assess antidumping duties by applying the assessment rate to the
       entered value of the merchandise.

19 C.F.R. § 351.212(b)(1). Of course, an assessment rate is not a less than fair value rate, i.e. the
dumping rate, but a rate based on the value of the entered merchandise, as noted in the
regulation. Id.
       6
           [[
                               ]] See Def.’s Confidential App. in Supp. of its Resp. to Pl.’s
Mot. for Summ. J. at A30–32 (“Def.’s Confidential App.”).

                                                                  Confidential Information Deleted
Court No. 12-00146                                                                           Page 6

PRC-wide rate of 114.90 percent. Def.’s Resp. at 11.

               Following liquidation, Michaels was assessed supplemental duties associated with

these entries, seeking the difference between the cash deposits Michaels made at the producer’s

rate and liquidation at the PRC-wide rate. Pl.’s Mem. at 6, 9. After most of Michaels’ protests

with Customs were unsuccessful, Michaels filed the present action. Although defendant

attempted to dismiss the majority of Michaels’ claims for lack of jurisdiction, the court denied

that motion on December 27, 2012. See Michaels Stores, 2012 Ct. Int’l Trade LEXIS 161, at *4.

                      JURISDICTION AND STANDARD OF REVIEW

               As established in its previous opinion, the court has jurisdiction pursuant to 28

U.S.C. § 1581(i) (2006).7 The court will find unlawful an action by Commerce if it is “arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C.

§ 706(2)(A); see 28 U.S.C. § 2640(e) (directing the court to evaluate 28 U.S.C. § 1581(i) cases

under the standards set forth in the Administrative Procedure Act). Moreover, the court will find

       7
         The court’s jurisdiction is proper despite defendant’s claim that Michaels did not
properly exhaust administrative remedies by participating in the administrative review.
Defendant misrepresents the scope and purpose of an administrative review, which does not
provide a remedy for improperly issued liquidation instructions. Def.’s Resp. 32–34. Rather, an
administrative review simply allows a company to challenge its rate. See Consol. Bearings Co.
v. United States, 348 F.3d 997, 1003–04 (Fed. Cir. 2003) (refusing to hold that a company, which
did not request an administrative review, failed to satisfy the exhaustion doctrine when
challenging liquidation instructions, recognizing that an administrative review cannot serve as a
challenge to the validity of liquidation instructions because an administrative review can only
challenge the rate calculated and not instructions issued by Commerce). In this case, Michaels
does not challenge the PRC-wide rate, its producers’ rates, or request its own or an exporter’s
separate rate. Rather it challenges how Commerce interprets a regulation dictating final
liquidation. In fact, the court already made clear in this case that there are no jurisdictional
concerns related to exhaustion of remedies. See Michaels Stores, 2012 Ct. Int’l Trade LEXIS
161, at *4. Further, the regulation at issue is not completely clear, and Michaels is not charged
with knowing how Commerce finally would interpret it, to the extent this is a discretionary issue.
Court No. 12-00146                                                                            Page 7

that Commerce has abused its discretion if its “decision (1) is clearly unreasonable, arbitrary, or

fanciful; (2) is based on an erroneous conclusion of law . . . or (4) follows from a record that

contains no evidence on which [Commerce] could rationally base its decision.” See Sterling Fed.

Sys. v. Goldin, 16 F.3d 1177, 1182 (Fed. Cir. 1994) (quoting Gerritsen v. Shirai, 979 F.2d 1524,

1529 (Fed. Cir. 1992)).

                                          DISCUSSION

I.     Michaels’ Motion for Summary Judgment

               After apparently conceding that the administrative record8 would not be sufficient

to adjudicate this case, defendant incorrectly argues that Michaels’ motion for summary

judgment is improper. See Def.’s Resp. at 20. Under 28 U.S.C. § 1581(i)(4), the court has

jurisdiction over civil actions pertaining to the “administration and enforcement” of certain

actions taken by Commerce. Summary judgment is proper if “there is no genuine dispute as to

any material fact and the movant is entitled to judgment as a matter of law.” USCIT R. 56(a).

Therefore, when the plaintiff’s “case hinges on pure questions of law, resolution by summary

judgment is appropriate.” Can. Wheat Bd. v. United States, 32 CIT 1116, 1121, 580 F. Supp. 2d

1350, 1356 (2008) (finding summary judgment appropriate in a § 1581(i) case).

       A motion for summary judgment, as opposed to judgment on the agency record, is

       8
          Defendant contends that Michaels was required to move for judgment on the agency
record rather than summary judgment, thereby limiting the court’s review to the agency record
related to the liquidation instructions, preventing Michaels from referencing the cash deposit
instructions. See Def.’s Resp. at 20. Defendant admits, however, that Michaels could have
moved to supplement the agency record and that the liquidation instructions incorporate, by
reference, the cash deposit instructions. Id. Thus, the cash deposit instructions were in substance
part of the record. Michaels’ motion for summary judgment merely included in concrete form
what should have been in the record, with the same result. Further amelioration in this regard is
unnecessary.
Court No. 12-00146                                                                            Page 8

appropriate in this case because Michaels’ arguments do not challenge the final results of an

administrative review. Michaels merely challenges the liquidation instructions and, only by

reference, the cash deposit instructions. The liquidation instructions are not part of an

administrative review but rather implement the results of a review. Pl.’s Mem. at 17, 19, 22; see

Consol. Bearings Co. v. United States, 348 F.3d 997, 1002 (Fed. Cir. 2003) (distinguishing

between a challenge to the final results of administrative review and a challenge to liquidation

instructions). Consequently, just as in Canadian Wheat Board where the plaintiffs properly

challenged a notice of revocation with a motion for summary judgment, here the “true nature” of

Michaels’ argument is a challenge to the administration and enforcement of Commerce’s final

determination and not to the determination itself. See 32 CIT at 1127, 580 F. Supp. 2d at 1356.

Thus, Michaels’ motion for summary judgment is properly before the court.9

II.    Appropriateness of Michaels’ Cash Deposit Instructions Claims

                 Defendant contends that Michaels is barred from disputing the lawfulness of the

cash deposit instructions because: (1) Michaels did not explicitly raise the issue in its complaint,

(2) Michaels’ challenges to the cash deposit instruction are time barred, and (3) the court lacks

subject matter jurisdiction because Michaels failed to exhaust all remedies.10 Def.’s Resp. at

       9
         Additionally, the court will interpret the United States’ prayer for relief seeking
judgment in its favor as a cross motion for summary judgment. Def.’s Resp. at 34 (“[Defendant]
respectfully request[s] that the Court deny plaintiff’s motion and enter judgment in favor of the
United States.”); see Shell Oil Co. v. United States, 781 F. Supp. 2d 1313, 1322 (CIT 2011)
(“[S]ummary judgment may be granted sua sponte in favor of the non-moving party, or even in
the absence of any motion, provided that all parties are afforded an appropriate opportunity to
come forward with relevant evidence.” (citing Celotex Corp. v. Catrett, 477 U.S. 317, 326
(1986)), aff’d, 688 F.3d 1376 (Fed. Cir. 2012).
       10
            The issue of exhaustion is dealt with above. To reiterate, requesting an administrative
                                                                                       (continued...)
Court No. 12-00146                                                                               Page 9

29–34. Moreover, defendant contends that even if Michaels can challenge indirectly the cash

deposit instructions, those instructions are lawful. Def.’s Resp. at 24–29. Here, the court

addresses whether Michaels properly asserted a challenge to the cash deposit instructions as part

of the liquidation instructions.

                The court simply requires that pleadings contain “a short and plain statement of

the claim showing that the pleader is entitled to relief . . . which may include . . . different types

of relief.” USCIT R. 8(a)(2)–(3); see also USCIT R. 8(f) (“Pleadings must be construed so as to

do justice”). Pleadings are sufficient if they adequately notify the defendant of “what the . . .

claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555

(2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Separately, a cause of action under

28 U.S.C. § 1581(i) “is barred unless commenced . . . within two years after the cause of action

first accrues.” 28 U.S.C. § 2636(i).

                Defendant fails to demonstrate that all claims referencing the cash deposit

instructions should be disregarded. Even though the initial complaint did not mention explicitly

the cash deposit instructions, defendant was put on notice that Michaels intended to challenge the

validity of those cash deposit instructions because Michaels expressly challenged the liquidation

rate that was set by reference to the cash deposit instructions. Compl. ¶¶ 1, 29–31, 43–44, 47,

50; Pl.’s Mem. Ex. 6 at 69, Ex. 9 at 84, Ex. 11 at 91. Defendant acknowledges that Michaels’

complaint alleges that the liquidation instructions were improper. Def.’s Resp. at 30. Michaels

has consistently advanced one argument, that the liquidation instructions were improper, and it

        10
          (...continued)
review would not remedy improper liquidation instructions, even though they reference deposit
instructions; therefore, it is not a remedy that must be exhausted.
Court No. 12-00146                                                                           Page 10

simply clarified in its motion for summary judgment that Commerce’s allegedly unlawful

conduct likely stems back to the cash deposit instructions, as plaintiff now understands how

Commerce construes the deposit rate instructions. Therefore, the complaint sufficiently put

defendant on notice because it alleged that the cash deposit instructions that were incorporated

into the liquidation instructions, were incorrect. Pl.’s Reply Br. to Def.’s Resp. to Pl.’s Mot. for

Summ. J. (“Pl.’s Reply”) at 6; see Twombly, 550 U.S. at 555 (describing the requirement of fair

notice in the context of the analogous Federal Rule of Civil Procedure). As a result, defendant

cannot claim that it was surprised by Michaels’ claims and arguments raised here.

               Moreover, this claim is not time-barred because the cause of action accrued once

the liquidation instructions were issued and final duties were assessed on Michaels’ entries.11

Michaels can challenge the lawfulness of the liquidation instructions that give final effect to the

cash deposit instructions, as interpreted by Commerce.12 See Pl.’s Mem. at 11–12; Def.’s Resp.

at 8, 13, 15. Until the liquidation instructions were issued for plaintiff’s specific merchandise

and it was liquidated, Commerce’s final interpretation of the deposit instructions and their

meaning as to plaintiff’s merchandise were not definitive.

       11
           The liquidation instructions under which Michaels’ entries were liquidated were issued
on July 15, 2011, with respect to the 2008–2009 POR, and June 1, 2011, with respect to the
2009–2010 POR. Def.’s Public App. in Supp. of Its Resp. to Pl.’s Mot. for Summ. J. at A6–7,
A16–17. The summons and complaint in this case were filed on May 23, 2012, Dkt. Entry Nos.
1, 5, well within the applicable statute of limitations. See 28 U.S.C. § 2636(i) (providing for a
two year statute of limitations).
       12
          The United States operates a retrospective system of antidumping duties, where the
final dumping margin is not calculated until after the subject merchandise has already been
imported. See 19 C.F.R. § 351.212(a); SSAB N. Am. Div. v. United States, 32 CIT 795, 797–98,
571 F. Supp. 2d 1347, 1350–51 (2008) (describing the retrospective system and the importance
of both cash deposits and suspension of liquidation).
Court No. 12-00146                                                                              Page 11

III.   Content of Commerce’s Cash Deposit and Liquidation Instructions

               Michaels argues that Commerce should have used the producer’s rate to determine

the cash deposit rate, and ultimately the liquidation rate, applicable to the entries of the subject

merchandise, instead of utilizing the PRC-wide rate, which Michaels characterizes as an “all

others” rate. See Pl.’s Mem. at 15–17. Defendant argues, in effect, that the PRC-wide rate

serves as a noncombination rate assigned to all PRC exporters who have not obtained a separate

rate, given the presumption of state control in NMEs,13 and therefore is applicable here. Def.’s

Resp. at 24–26. Accordingly, the only dispute here is whether the PRC-wide rate for the PRC-

entity serves as a specific, i.e. noncombination, rate applicable to the subject exporters.14

Because Commerce has an established policy of treating non-separate NME companies as a

single entity, unless they prove that they are not under state control,15 Commerce issued lawful

instructions when it treated the subject exporters as part of the PRC-entity. Stated otherwise,

       13
          Although the continued presumption of state control within an NME like the PRC has
been questioned in other cases, the PRC remains classified by Commerce as an NME. See 19
U.S.C. § 1677(18) (defining an NME). Compare GPX Int’l Tire Corp. v. United States, 893 F.
Supp. 2d 1296, 1304 (CIT 2013) (discussing countervailing duties, in a recent case, and noting
that “Commerce based its change in policy on the evolution of China’s economy from a
centrally-controlled monolithic economy towards a market economy”), with Sigma Corp. v.
United States, 117 F.3d 1401, 1405–06 (Fed. Cir. 1997) (noting Commerce’s practice, in an
earlier case, that “because the PRC is a nonmarket economy, all commercial entities in the
country are presumed to export under the control of the state.” (emphasis added)). The court
does not discuss the continued validity of this presumption because Michaels has not challenged
the classification of the PRC as an NME or otherwise challenged the presumption.
       14
           Although this is the central dispute between the parties, the issue is not clearly argued
in the briefs.
       15
         Michaels has not challenged the validity or reasonableness of Commerce’s separate rate
methodology, and therefore, the court does not address that question here. Michaels instead
claims that Commerce failed to follow its own regulations.
Court No. 12-00146                                                                            Page 12

because the subject exporters did not seek separate rates, they are reviewed as part of the

collective PRC-entity and assigned the PRC-wide rate, not a separate rate or a separate

combination exporter/producer rate, as will be explained further.

               Commerce’s actions in determining the appropriate cash deposit rate for

nonproducing exporters where an AD order is in place are governed by 19 C.F.R. § 351.107

(2013). It provides, in relevant part:

       [I]f the Secretary has not established previously a combination cash deposit rate
       . . . for the exporter and producer in question or a noncombination rate for the
       exporter in question, the Secretary will apply the cash deposit rate established for
       the producer. If the Secretary has not previously established a cash deposit rate
       for the producer, the Secretary will apply the “all-others” rate . . . .”

Cash Deposit Rates for Nonproducing Exporters; Rates in Antidumping Proceedings Involving a

Nonmarket Economy Country, 19 C.F.R. § 351.107(b)(2). Combination and noncombination

rates in market economies (“ME”) are company-specific rates,16 and the all others rate typically is

the weighted average of the rates for the companies investigated, with certain exclusions. 19

U.S.C. § 1673d(c)(1)(B)(i), (c)(5). The regulations clarify, however, that for non-market

economies, “‘rates’ may consist of a single dumping margin applicable to all exporters and

producers.” 19 C.F.R. § 351.107(d). Moreover, whenever the statute is silent on a particular

issue, it is well-settled that Commerce may “formulate policy and make rules ‘to fill any gap left,

implicitly or explicitly, by Congress.’” SKF USA Inc. v. United States, 254 F.3d 1022, 1030

(Fed. Cir. 2001) (quoting Chevron U.S.A., Inc. v. Nat’l Res. Def. Council, Inc., 467 U.S. 837,

       16
          Although 19 U.S.C. § 1673d does not define noncombination rates, a plain reading of
19 C.F.R. § 351.107(b)(2) makes clear that a noncombination rate and an all others rate are
distinct concepts because they are listed as different options for Commerce to utilize in assigning
the appropriate rate.
Court No. 12-00146                                                                         Page 13

843 (1984)).

               The regulations above define Commerce’s practice of determining the appropriate

cash deposit rates in the ME context, by providing a sequence of options. NMEs are treated

differently because Commerce applies a presumption of state control in NME countries over both

producers and exporters. Separate Rates and Combination Rates in Antidumping Investigations

Involving Non-Market Economy Countries, 70 Fed. Reg. 17,233, 17,233 (Dep’t Commerce Apr.

5, 2005). Pointing to this presumption of state control, Commerce rejected the idea that it should

assign cash deposit rates to entries based on the identity of the producer of the merchandise as

opposed to the identity of the nonproducing exporter. See Antidumping Duties; Countervailing

Duties, 62 Fed. Reg. 27,296, 27,303, 27,305 (Dep’t Commerce May 19, 1997) (“Preamble”)

(explaining that the new regulation does not alter Commerce’s practice in NME cases). Both

parties agree that at issue in this case are nonproducing exporters in the NME context, which

requires the application of 19 C.F.R. § 351.107(b)(2) in conjunction with (d) to determine the

cash deposit rate. Pl.’s Mem. at 2, 6; Def.’s Resp. at 6, 12.

               For non-producing exporters, like trading companies, Commerce has said that it

“intend[s] to continue calculating AD rates for NME export trading companies, and not the

manufacturers supplying the trading companies.” Preamble, 62 Fed. Reg. at 27,305 (providing

Commerce’s first clarification of § 351.107). As a result, under Commerce’s present

methodology, exporters are required to prove that they are not part of the NME-wide entity to be

eligible for a separate rate, which occurs through a formal investigation process. See Transcom,

Inc. v. United States, 294 F.3d 1371, 1381 (Fed. Cir. 2002) (“Commerce made clear the

consequences to an exporter of not rebutting the presumption of state control and establishing its
Court No. 12-00146                                                                              Page 14

independence: the exporter would be assigned the single rate given to the NME entity”).17 Only

upon achieving separate rate status can an exporter be eligible for the NME equivalent of the all

others rate for separate rate companies. See Yangzhou Bestpak, 716 F.3d at 1374 (“The separate

rate for eligible non-mandatory respondents is generally calculated following the statutory

method for determining the ‘all others rate.’”). Failure to qualify for a separate rate means that

Commerce will analyze the exporter through the lens of the presumption of state control. See id.

at 1373 (citing Sigma Corp., 117 F.3d at 1405).

                During the POR, liquidation is suspended for all entries of covered goods until

Commerce concludes its review, if any. Then, liquidation instructions are issued by Commerce

to Customs to liquidate at either the review rate or at the appropriate cash deposit rate if the

company is not reviewed. 19 C.F.R. § 351.212(b),(c)(1)(i). Here, all of the merchandise from

the subject exporters was liquidated pursuant to these instructions at the PRC-wide rate. Pl.’s

Mem. at 6, 9.

                In the present matter, although all of the producers of cased pencils imported by

Michaels during the PORs in question were individually investigated and assigned their own

rates, those rates are irrelevant to the exporters’ rates because the regulation calls for the rates of

        17
            This presumption of state control and the separate rate analysis is explained in more
detail by Commerce’s various policies and orders. See Policy Bulletin 05.1: Separate-Rates
Practice and Application of Combination Rates in Antidumping Investigations involving
Non-Market Economy Countries at 4 (Apr. 5, 2005), available at
http://ia.ita.doc.gov/policy/bull05-1.pdf (last visited Aug. 19, 2013) (“Policy Bulletin 05.1”)
(requiring a company to prove to Commerce a lack of de facto and de jure control to achieve
separate rate status); see, e.g., Brake Rotors From the People’s Republic of China: Rescission of
Second New Shipper Review and Final Results and Partial Rescission of First Antidumping Duty
Administrative Review, 64 Fed. Reg. 61,581, 61,583 (Dep’t Commerce Nov. 12, 1999)
(engaging in an analysis of de facto and de jure control related to Commerce’s rebuttable
presumption of state control).
Court No. 12-00146                                                                             Page 15

the exporters to be used, if such exist, prior to looking at the producers’ rates. 19 C.F.R.

§ 351.107(b)(2). Here, the PRC-wide rate serves as a noncombination rate for these

nonproducing exporters because § 351.107(d) of the regulation sheds light on the meaning of

§ 351.107(b)(2). The regulation indicates that for an AD proceeding involving an NME, such as

the PRC in the present case, the term “rate” can be read to include the possibility of a single rate

for exporters, producers, or both. See 19 C.F.R. § 351.107(d). This “single rate” here is the

PRC-wide rate.

               Although Commerce allows exporters to apply for separate rates, no evidence

exists, in this instance, that the exporters used by Michaels did so. Therefore, the subject

exporters were not eligible for separate rates and were presumed by Commerce to be under state

control. See Transcom, 294 F.3d at 1381–82 (affirming the CIT’s decision to sustain

Commerce’s separate rate NME procedure); cf. Certain Oil Country Tubular Goods From the

People’s Republic of China: Final Determination of Sales at Less Than Fair Value, Affirmative

Final Determination of Critical Circumstances and Final Determination of Targeted Dumping, 75

Fed. Reg. 20,335, 20,338, 20,340 (Dep’t Commerce Apr. 19, 2010) (utilizing the PRC-wide rate

for exporters not individually examined for separate rate status, but providing separate rates to

exporters who applied for and established independence and were individually examined).

Rather, this failure to apply for separate rate status resulted in the use of the single PRC-wide rate

for the exporters in question under Commerce’s methodology.18

       18
         Michaels attempts to differentiate the cased pencils that were produced by Rongxin.
Pl.’s Mem. 13–14. Commerce acted lawfully and reasonably here as well by liquidating the
entries manufactured by Rongxin, but exported by non-separate rate companies, at the PRC-wide
rate. Michaels admits that Rongxin was not the exporter of the goods but simply the
                                                                                    (continued...)
Court No. 12-00146                                                                           Page 16

                 Both sides also raise the additional issue of the change in Commerce’s NME

policy,19 but the policy is of no consequence because it impacts only situations in which there is

an exporter that is given a separate rate.20 Pl.’s Mem. at 23–24; Def.’s Resp. at 28–29; see Non-

Market Economy Antidumping Proceedings: Assessment of Antidumping Duties, 76 Fed. Reg.

65,694, 65,694–95 (Dep’t Commerce Oct. 24, 2011) (“Assessment of AD Duties, Notice of

Policy”).21 Here, the court has already concluded that the subject exporters did not apply for a

       18
          (...continued)
manufacturer. Id. at 20. Again, this exporter was not eligible for a separate rate because it had
not applied through Commerce’s separate rate procedure. Instead, Commerce applied the PRC-
wide rate for the exporter because it was presumed to be a part of the PRC-wide entity. Accord
Royal United Corp. v. United States, 714 F. Supp. 2d 1307, 1311 n.6 (CIT 2010) (collecting
cases upholding Commerce’s practice of notifying unnamed exporters from the relevant NME
that they will be subject to the results of the review as part of the NME entity unless they
establish their separate rate status).
       19
        This issue is raised only in reference to the liquidation rate of cased pencils produced
by Rongxin during the 2008–2009 POR. See Pl.’s Mem. at 23.
       20
          Although Michaels argues that this policy is more than a refinement and constitutes a
significant change, based on the Federal Circuit’s comments on an analogous change in the ME
context in Parkdale Int’l v. United States, 475 F.3d 1375, 1379 (Fed. Cir. 2007), Parkdale does
not affect the analysis in this case because the court has determined that the policy does not apply
to the subject exporters. Accordingly, the court will not decide whether the NME policy
refinement constitutes a “significant change,” but the court notes that this situation is different
from the change in policy for MEs, given the presumption of state control in the NME context.
       21
            Commerce’s policy “refinement” states:

       [F]or merchandise entered at the separate rate applicable to a reviewed exporter,
       but which . . . . are not reported in the reviewed company’s U.S. sales databases
       submitted to the Department during an administrative review, or otherwise
       determined not covered by the review (i.e., the reviewed exporter claims no
       shipments), the Department will instruct [Customs] to liquidate such entries at the
       NME-wide rate as opposed to the company-specific rate declared by the importer
       at the time of entry.

                                                                                      (continued...)
Court No. 12-00146                                                                          Page 17

separate rate through Commerce’s separate rate procedure. Additionally, the policy may be of

little consequence given a 2005 policy by Commerce that clarifies that an exporter’s entries are

not eligible for separate cash deposit rates if the corresponding merchandise is not reported by

the producer during the investigation or review. See Policy Bulletin 05.1 at 6–7.

               Moreover, defendant’s position here is not a post-hoc rationalization, as Michaels

puts it, but instead it logically flows from Commerce’s previous statements and policies

regarding exporters in NMEs. See Pl.’s Reply at 16. Specifically, Commerce legitimately

attempts to prevent NME companies from avoiding Commerce’s AD orders. The language in

§ 351.107(d), when read in conjunction with § 351.107(b)(2), upholds two key policy rationales

in the NME context: that an exporter’s rate is preferable to a producer’s rate as the exporter is

likely the party to set prices and know which goods are destined for the United States, and that

each exporter has the burden of proving it is eligible for a separate rate. See Since Hardware

(Guangzhou) Co. v. United States, Slip Op. 10-108, 2010 Ct. Int’l Trade LEXIS 119, at *3–4

(Sep. 27, 2010) (quoting Sigma Corp., 117 F.3d at 1405–06 (explaining that exporters have more

information related to issues of state control)); Preamble, 62 Fed. Reg. at 27,303–05. Therefore,

even though the producers had separate rates, Commerce’s concern remains that these producers

will use a state-controlled exporter, allowing the state to dump the goods through that exporter

while benefitting from the producer’s lower rate.22

       21
       (...continued)
Assessment of AD Duties, Notice of Policy, 76 Fed. Reg. at 65,694 (emphasis added).
       22
          This concern is especially evident when the producer does not know or report the
ultimate destination of its goods that are eventually purchased by a PRC-based exporter and sent

                                                                                       (continued...)
Court No. 12-00146                                                                           Page 18

               It is not that the producer’s rate will never be used by Commerce in the NME

context; the producer, however, may need to export the goods itself or use a separate rate

exporter to avoid the PRC-wide rate. Under Michaels’ theory, Commerce would be required to

list every PRC-controlled exporter, known or unknown, in its investigation and indicate that each

exporter’s entries will be assessed at a specific rate, the PRC-wide rate. Not only is this burden

on Commerce possibly impracticable, but this also could allow PRC firms to establish new,

unlisted exporters that have not applied for a separate rate to export their goods during a new

POR, avoiding the PRC-wide rate, and possibly avoiding review. See Royal United, 714 F.

Supp. 2d at 1310 (noting Commerce’s practice that every exporter from an NME country that is

not particularly referenced in the review is in fact “covered by the results of the review” and is

assessed the NME-wide rate).23 Instead, Commerce presumes the PRC to be one entity with one

PRC-wide rate to prevent such conduct.

               Thus, Commerce lawfully applied the PRC-wide rate to the subject exporters

because the PRC-wide rate constitutes a noncombination rate for exporters that are part of the

PRC-wide entity under Commerce’s methodology. Consequently, pursuant to 19 C.F.R.

       22
          (...continued)
into the United States[[                                                     ]]. Def.’s
Confidential App. at A27–28. In those situations, the sales are not reviewed when calculating a
rate for the producer, a situation which could allow dumping to continue unnoticed.
       23
           A new shipper is defined as “an exporter or producer that did not export, and is not
affiliated with an exporter or producer that did export, to the United States during the period of
investigation.” 19 C.F.R. § 351.214(a). Therefore, under Commerce’s methodology in the NME
context, a new shipper would have to apply for separate rate status to show a lack of affiliation
with the government entity that did export during the period of investigation.

                                                                  Confidential Information Deleted
Court No. 12-00146                                                                        Page 19

§ 351.107(b)(2), Commerce lawfully issued instructions ordering liquidation of these entries at

the PRC-wide rate and not the producer’s rate.

                                        CONCLUSION

               For the foregoing reasons, the court denies Michaels’ motion for summary

judgment. Although the United States did not move separately for summary judgment and

instead requested judgment only at the conclusion of its brief, the court’s holding compels the

conclusion that the court should enter summary judgment in favor of the United States.

Judgment will be entered accordingly.

                                                               /s/ Jane A. Restani
                                                                 Jane A. Restani
                                                                     Judge

Dated: August 21, 2013
       New York, New York