Court Opinion

ID: 816083
Source: CourtListenerOpinion
Date Created: 2013-01-26 01:01:15.93037+00
Date Added: 2024-06-11T12:38:41.362462
License: Public Domain

Slip Op. 13-9

           UNITED STATES COURT OF INTERNATIONAL TRADE

Before: Nicholas Tsoucalas, Senior Judge
___________________________________
US MAGNESIUM LLC,                   :
                                    :
          Plaintiff,                :
                                    :
     v.                             :    Court No.: 12-00006
                                    :
UNITED STATES,                      :
                                    :    PUBLIC VERSION
          Defendant,                :
                                    :
          and                       :
                                    :
TIANJIN MAGNESIUM                   :
INTERNATIONAL CO., LTD.,            :
                                    :
          Defendant-Intervenor.     :
                                    :

                        OPINION and ORDER

Held: Plaintiff’s motion is granted in part so that Commerce may
reconsider its decision not to extend the deadline for USM’s
untimely submission as well as the surrogate values for labor,
financial ratios, and truck freight rates. Plaintiff’s motion is
denied with regard to TMI’s U.S. expenses.        The court defers
judgment on the issue of retort classification so that Commerce may
reconsider its determination following its analysis of the untimely
submission on remand.

                                          Dated: January 22, 2013

     King & Spalding LLP, (Stephen A. Jones and Jeffery B. Denning)
for US Magnesium LLC, Plaintiff.

     Stuart F. Delery, Acting Assistant Attorney General; Jeanne E.
Davidson, Director, Claudia Burke, Assistant Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Renee Gerber and Ryan M. Majerus); Office of the Chief
Counsel for Import Administration, United States Department of
Commerce, Melissa M. Brewer, Of Counsel, for the United States,
Defendant.

     Riggle & Craven, (David A. Riggle, Saichang Xu, and David J.
Court No. 12-00006                                                         Page 2

Craven) for Tianjin Magnesium International Co., Ltd.,               Defendant-
Intervenor.

        TSOUCALAS, Senior Judge: Plaintiff US Magnesium LLC (“USM”)

moves       for    judgment   on    the    agency    record   challenging     the

determination by the          Department of Commerce, International Trade

Administration (“Commerce”) in Pure Magnesium From the People’s

Republic of China: Final Results of the 2009–2010 Antidumping Duty

Administrative Review of the Antidumping Duty Order, 76 Fed. Reg.

76,945       (Dec.    9,   2011)   I.A.    Access    Public   Rec.   31   (“Final

Results”).1          Commerce and defendant-intervenor Tianjin Magnesium

International Co., Ltd. (“TMI”) oppose USM’s motion.

                                    Background

        The administrative review at issue concerns pure magnesium

TMI imported from the People’s Republic of China (“PRC”) during the

period of review (“POR”) beginning May 1, 2009 and ending April 30,

2010.       See id. at 76,945.     TMI imports pure magnesium supplied         by

a sole producer, [[

             ]].   P.R. 13 at 11.    [[             ]] produces pure magnesium

via the “Pidgeon” process.                Under the “Pidgeon” process, the

producer first treats magnesium-bearing dolomite in a kiln to

produce calcined dolomite.           The producer then mixes the calcined

        1
           Hereinafter all documents in the public record will be
designated “P.R.” and all documents in the confidential record
designated “C.R.” without further specification except where
relevant.   Additionally, the abbreviation “I.A.” will refer to
portions of the confidential and public records filed in Commerce’s
electronic filing system, I.A. Access.
Court No. 12-00006                                                    Page 3

dolomite with ferrosilicon and fluorite power and presses the

mixture into balls or briquettes. In order to purify the magnesium

— chemically and physically separate it from the other inputs — the

producer places the pressed mixture into retorts, which are “steel

tubes placed under a vacuum in a furnace.”         Def.’s Opp. Pl.’s Mot.

J. Agency R. at 5 (“Def.’s Br.”).         The high heat from the furnace

vaporizes the magnesium, which travels through the retort and then

“condense[s] into a highly purified form.”              Id. at 5; See Pure

Magnesium from the PRC: Issues and Decision Memorandum for the

Final Results of the 2009–2010 Administrative Review at 7 n.39,

Inv. No. A-570-832 (Dec. 5, 2011) (“I&D Memo”).            TMI reported that

[[          ]] rented retorts during the POR.           See P.R. 45 at 7.

      TMI also reported that Mr. James Gammons performed certain

“ministerial activities” in the U.S. on behalf of TMI.            P.R. 61 at

3.   The “activities” focused on [[

     ]].”   Id.   TMI claimed that “Mr. Gammons was not a sales agent

for TMI” and that he did not take possession of subject merchandise

in the U.S. prior to sales to U.S. customers.            Id.

      During   the   review,   Commerce    used   its    nonmarket   economy2

      2
       “The term ‘nonmarket economy country’ means any foreign
country that the administering authority determines does not
operate on market principles of cost or pricing structures, so that
sales of merchandise in such country do not reflect the fair value
of the merchandise.” Section 771(18) of the Tariff Act of 1930, as
amended, 19 U.S.C. § 1677(18) (2006). All further citations to the
Tariff Act of 1930 are to the relevant provisions of Title 19 of
the U.S. Code, 2006 edition.
Court No. 12-00006                                                     Page 4

(“NME”) methodology to construct the normal value3 (“NV”), Pure

Magnesium from the PRC: Preliminary Results of the 2009-2010

Antidumping Duty Administrative Review, 76 Fed. Reg. 33,194, 33,195

(June 8, 2011) (“Preliminary Results”), using surrogate data to

value       the   factors   of   production   (“FOP”).    See   19   U.S.C.   §

1677b(c)(1).        Commerce selected India as the surrogate country and

used Indian data to value TMI’s FOP.           Preliminary Results, 76 Fed.

Reg. at 33,195.             Commerce classified retorts as an indirect

material rather than as a direct material, treating them as factory

overhead in the FOP calculation.              P.R. 64 at 9.     Additionally,

Commerce determined that “the subject merchandise was sold directly

to the unaffiliated customers in the [U.S.] prior to importation.”

Preliminary Results, 76 Fed. Reg. at 33,196.             Therefore, Commerce

concluded that all of TMI’s U.S. sales were export price4 (“EP”)

sales and did not calculate a separate constructed export price

(“CEP”)5 for TMI’s U.S. sales.          Id.   Commerce did not adjust EP to

        3
       “Normal value” is “the price at which the foreign like
product is first sold (or, in the absence of a sale, offered for
sale) for consumption in the exporting country.” 19 U.S.C. §
1677b(a)(1)(B)(i).
        4
       “Export price” refers to “the price at which the subject
merchandise is first sold (or agreed to be sold) before the date of
importation by the producer or exporter of the subject merchandise
outside of the United States to an unaffiliated purchaser in the
United States or to an unaffiliated purchaser for exportation to
the United States.” 19 U.S.C. § 1677a(a).
        5
       “Constructed export price” refers to “the price at which the
subject merchandise is first sold (or agreed to be sold) in the
United States before or after the date of importation by or for the
Court No. 12-00006                                            Page 5

reflect the expenses TMI incurred in association with services Mr.

James Gammons provided for TMI in the U.S.   See I&D Memo at 3.    On

June 30, 2010 Commerce issued the preliminary results of the

review, assigning TMI a weighted average dumping margin of O.OO%.

Preliminary Results, 76 Fed. Reg. at 33,200.

     On September 1, 2011, nearly eleven months after the October

19, 2010 deadline for the submission of new factual information,

USM submitted a Chinese magnesium industry bulletin which allegedly

indicated that [[        ]] produced retorts during the POR rather

than rented them, as TMI reported.   See I.A.P.R. 11 at 2.   Commerce

rejected USM’s submission, concluding that “some of the documents

submitted by [USM] were clearly available prior to the deadline for

submission of factual information.”    Id.

     On December 9, 2011 Commerce issued the Final Results.       See

Final Results, 76 Fed. Reg. at 76,945.       Although Commerce made

certain changes to the margin calculation, it again assigned TMI a

weighted average dumping margin of 0.00%.    Id. at 76,947.

               JURISDICTION and STANDARD OF REVIEW

     This Court has jurisdiction over this matter pursuant to 19

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

     This Court will uphold Commerce’s determination unless it is

“unsupported by substantial evidence on the record, or otherwise

account of the producer or exporter of such merchandise or by a
seller affiliated with the producer or exporter” to an unaffiliated
purchaser. 19 U.S.C. § 1677a(b).
Court No. 12-00006                                                         Page 6

not in accordance with law.”              19 U.S.C. § 1516a(b)(1)(B)(i).

“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)).

                                      DISCUSSION

        USM    argues    that   the    Final    Results   are   unsupported      by

substantial evidence and are otherwise not in accord with the law

with    respect    to:    Commerce’s     classification    of   retorts    as    an

indirect material; the surrogate values used to calculate financial

ratios, labor rates, and truck freight rates; and Commerce’s

refusal to adjust the U.S. price to reflect movement expenses

associated with services Mr. James Gammons provided for TMI.                    See

Pl.’s    Br.    Supp.    Mot.   J.     Agency   R.   at   2–5   (“Pl.’s    Br.”).

Additionally, USM argues that Commerce abused its discretion by

rejecting USM’s untimely submission. Id. at 1–2. Commerce asks for

voluntary remand in order to reconsider the surrogate values for

labor and financial ratios, but opposes USM’s motion in all other

respects.      See Def.’s Br. at 1–2.

                         I. USM’s Untimely Submission

        During the review, TMI reported that [[                  ]] rented the

retorts it used in the production of pure magnesium during the POR

and that rental equipment was not treated as a direct expense for
Court No. 12-00006                                              Page 7

accounting purposes in the PRC.       See P.R. 45 at 7.       Commerce

classified retorts as an indirect material in the preliminary

results of the review.       P.R. 64 at 9.      USM challenged that

determination before Commerce, P.R. 79 at 5–23, and on September 1,

2011, submitted a newly-discovered Chinese magnesium industry

bulletin which allegedly indicated that [[                 ]] produced

retorts during the POR.    See I.A.P.R. 11 at 2.     USM also submitted

two pieces of corroborating evidence, a 2006 magnesium industry

directory and a website USM alleges belongs to [[             ]].   Id.

Although USM made the submission almost eleven months after the

deadline for submission of new factual information, it insisted

that Commerce place the submission on the record because it

allegedly demonstrated that TMI deliberately misled Commerce by

reporting that [[         ]] rented retorts.   Id.   Commerce rejected

USM’s submission because the website and the 2006 directory were

“clearly available prior to the deadline for submission of factual

information.”    Id.   Commerce continued to classify retorts as an

indirect material in the Final Results.    See I&D Memo at 6–9. USM

argues that Commerce abused its discretion because it failed to

address prima facie evidence of fraud contained in the untimely

submission.6    See Pl.’s Br. at 14–16.

     6
       USM also argues that Commerce abused its discretion because
the bulletin would have prevented a 20% understatement in the NV by
ensuring that Commerce properly classified retorts as a direct
material. Pl.’s Br. at 10–14. USM’s argument is unpersuasive as
the   bulletin   would   not   have   negated   Commerce’s   retort
Court No. 12-00006                                           Page 8

     Commerce has the discretion to establish and enforce deadlines

for the submission of factual information.   See Grobest, 36 CIT at

__, 815 F. Supp. 2d at 1365 (citing NTN Bearing Corp. v. United

States, 74 F.3d 1204, 1206–07 (Fed. Cir. 1995)).       Commerce may

extend such deadlines where it finds that there is “good cause” to

do so.   19 C.F.R. § 351.302(b) (2012).        However, “Commerce’s

discretion in this regard is not absolute.” Grobest, 36 CIT at __,

815 F. Supp. 2d at 1365 (citing NTN Bearing, 74 F.3d at 1207).   In

determining whether Commerce’s rejection of an untimely submission

amounts to an abuse of discretion, this Court considers “whether

the interests of accuracy and fairness outweigh the burden placed

on [Commerce] and the interest in finality.”    Id.

     Here, the court finds that Commerce abused its discretion

because it failed to address prima facie evidence of fraud USM

raised while the record was still open.        Courts have clearly

indicated that prima facie evidence of fraud is to be treated

differently than other untimely submitted factual information,

allowing and even ordering consideration of such evidence after the

closure of administrative proceedings. See Home Prods. Int’l, Inc.

v. United States, 633 F.3d 1369, 1381 (Fed. Cir. 2011) (ordering

classification in and of itself, but would only be a factor in the
classification determination. Cf. Grobest & I-Mei Indus. (Vietnam)
Co. v. United States, 36 CIT __, __, 815 F. Supp. 2d 1342, 1366–67
(2012) (reversing Commerce’s decision to reject respondent’s
untimely submission of separate rate eligibility certification in
part because it directly contradicted Commerce’s decision to apply
Vietnam-wide rates to respondent).
Court No. 12-00006                                            Page 9

remand where prima facie evidence of fraud was discovered after the

close of the administrative review); Tokyo Kikai Seisakusho, Ltd.

v. United States, 529 F.3d 1352, 1361 (Fed. Cir. 2008) (recognizing

that Commerce’s power to reconsider a determination is “even more

fundamental when . . . it is exercised to protect the integrity of

its own proceedings from fraud”); Tianjin Magnesium Int’l Co. v.

United States, 36 CIT __, __, 836 F. Supp. 2d 1377, 1381 (2012)

(Tsoucalas, Senior J.) (upholding Commerce’s decision to consider

prima facie evidence of fraud discovered during remand).7

     Here, USM discovered evidence that [[               ]] produced

retorts after TMI reported that [[           ]] rented retorts.   See

I.A.P.R. 11 at 2.    However, in dismissing USM submission, Commerce

limited its analysis to one factor: some of the documents were

available before the deadline.    Id.   Because of this single-minded

focus, Commerce overlooked the possibility that TMI deliberately

failed to report information to which it also clearly had access.

Prima facie evidence of fraud concerning proper classification of

FOP undermines the accuracy and fairness of a review.    Grobest, 36

     7
       In a recent case evidencing the courts’ treatment of
untimely discovered evidence of fraud, this Court granted
Commerce’s motion to expand the scope of an already ordered remand
to consider new evidence that a party provided false information
during the review.    Ad Hoc Shrimp Trade Action Comm. v. United
States, 37 CIT __, __, Slip Op. 13-4, at 9 (Jan. 9, 2013). The
Court held that Commerce provided compelling justification for
considering   the   untimely   discovered  evidence:   there   was
“information   sufficient   to   persuade  [Commerce]   that   its
determinations in the administrative review at issue may have been
based on information that was false or incomplete.” Id. at 8.
Court No. 12-00006                                           Page 10

CIT at __, 815 F. Supp. 2d at 1365.   Commerce should have exercised

its authority to protect the review from fraud by addressing that

evidence in its analysis.   Tokyo Kikai, 529 F.3d at 1361.

     Additionally, the burden on Commerce and its interest in

finality are relatively minimal in the instant case.      First, USM

submitted the information over two months before Commerce placed

information and new comments concerning the surrogate value for

truck freight onto the record and three months before Commerce

issued the Final Results.8     See NTN Bearing, 74 F.3d at 1208

(noting that because preliminary results are subject to change,

“the tension between finality and correctness simply [does] not

exist” during that stage).     Second, USM presented the evidence

while the proceedings were still open and Commerce did not address

the apparent fraud in   its determination.   See I.A.P.R. 11 at 2. As

noted above, Courts approved and even ordered the reopening of

proceedings to consider prima facie evidence of fraud discovered

after the close of proceedings. See Home Prods., 633 F.3d at 1381;

Tokyo Kikai, 529 F.3d at 1361; Tianjin Magnesium, 36 CIT at __, 836

F. Supp. 2d at 1381. Therefore, taking into account the relatively

     8
       Commerce insists that its decision to solicit and place the
information concerning surrogate data for truck freight onto the
record is distinguishable from the instant issue because Commerce
used that information during the preliminary results stage but
“inadvertently failed to place it on the record.” Def.’s Br. at
13. However, this argument is unconvincing because it overlooks
Commerce’s decision to place new comments from both parties on the
record as well. See Pl.’s Br. at 10 & n.11, 13; I.A.P.R. 23.
Court No. 12-00006                                                    Page 11

low   burden   of   accepting    the   late   submission   in   this   case,

Commerce’s failure to address prima facie evidence of fraud that

USM presented during the proceeding was an abuse of discretion.

      TMI argues that Commerce’s determination should nevertheless

be upheld because the information contained in the bulletin was

immaterial     to   Commerce’s   retort    classification.      See     Def.-

Intervenor Resp. Br. at 4.       Specifically, TMI argues that Commerce

did not consider whether [[               ]] rented or produced retorts

when classifying them as indirect materials.         Id.     However, TMI’s

argument must fail for a three reasons.         First, Commerce made its

decision without considering the information in USM’s submission

because it was not on the record.         Second, classifying retorts as

a direct material results in a higher NV and, accordingly, alters

the dumping margin.      See Pl.’s Br. at 12.      Finally, should USM’s

submission ultimately indicate fraudulent conduct by TMI, Commerce

may decide to apply adverse facts available to the issue of retort

classification.       See   19 U.S.C. § 1677e(b).          The information

contained in the bulletin is material to the classification of

retorts and, as such, Commerce should have considered whether the

bulletin contained prima facie evidence of fraud.

      Accordingly, the court remands this issue so that Commerce may

consider whether the bulletin presents prima facie evidence of

fraud.   On remand, Commerce is not required to place the bulletin

and the associated materials onto the record, but it must provide
Court No. 12-00006                                                     Page 12

an adequate explanation addressing the evidence of fraud should it

elect not to do so.         To guide its decision, Commerce should

consider the factors outlined in Home Products, including “the

interests in finality, the extent of the inaccuracies in the . . .

administrative    review,     whether   fraud    existed   in   the    .   .   .

administrative review, the strength of the evidence of fraud, the

level of materiality, and other appropriate factors.” Home Prods.,

633 F.3d at 1381.

                     II. Classification of Retorts

      Commerce classified retorts as indirect materials because they

“are not physically incorporated into the final magnesium product

and are replaced too infrequently to be considered a direct

material.”    See I&D Memo at 8.         Commerce also determined that

[[           ]] classifies retorts as an indirect material in its

accounting records.     Id. at 7.       As such, Commerce accounted for

retort costs as factory overhead in the FOP calculation. Id. at 8.

      USM claims that Commerce erroneously reclassified retorts as

an indirect material, treating them as factory overhead in the FOP

calculation and understating the NV.            See Pl.’s Br. at 17.       USM

insists that retorts should be classified instead as a direct

material, id., and offers four arguments in support of its claim:

(1)   Commerce   wrongfully    reclassified      retorts   as   an    indirect

material, ignoring the accounting practices of [[                ]] without

showing that those practices were distortive; (2) Commerce limited
Court No. 12-00006                                                            Page 13

its analysis to physical incorporation and consumption frequency

while ignoring evidence that detracted from its conclusion in

violation of this Court’s holding in Bridgestone Americas, Inc. v.

United States, 34 CIT __, 710 F. Supp. 2d 1359 (2010); (3) Commerce

failed    to    articulate      a    standard   for   its   useful     consumption

frequency determination; and (4) Industry practice is to treat

retorts as a direct material.               See Pl.’s Br. at 17–28.          Commerce

argues     that     its     determination       was   consistent           with   both

[[             ]]’s accounting records and the holding in Bridgestone.

See Def.’s Br. at 17–25.

     The       court      cannot      now    determine      whether        Commerce’s

classification was based on substantial evidence because Commerce

may choose to place USM’s untimely submission on the record during

the remand proceeding.              The results of that determination will

potentially        impact      Commerce’s       classification        of     retorts.

Accordingly, the court will defer further consideration of this

issue in order to allow Commerce to revisit its classification of

retorts    in     light   of    its   decision    concerning     USM’s       untimely

submission.       See Amanda Foods (Vietnam) Ltd. v. United States, 33

CIT __, __, 647 F. Supp. 2d 1368, 1379 (2009) (deferring judgment

on Commerce’s surrogate value selection because it would likely be

impacted by remand result of the surrogate country determination).

                               III. Surrogate Values

     “Commerce         ordinarily      determines     the    [NV]      of     subject
Court No. 12-00006                                                       Page 14

merchandise of an exporter or producer from a [NME] country ‘on the

basis    of   the    value   of   the    [FOP]    utilized    in   producing   the

merchandise.’”       Shantou Red Garden Foodstuff Co. v. United States,

36 CIT __, __, 815 F. Supp. 2d 1311, 1316 (2012) (quoting 19 U.S.C.

§ 1677b(c)(1)).        This procedure seeks “to assess the ‘price or

costs’ of [FOP]” of subject merchandise in a comparable market

economy “in an attempt to construct a hypothetical market value of

that product.”        Nation Ford Chem. Co. v. United States, 166 F.3d

1373, 1375 (Fed. Cir. 1999).            Because “the process of constructing

foreign market value for a producer in a [NME] is difficult and

necessarily imprecise,” id. at 1377 (quoting Sigma Corp. v. United

States, 117 F.3d 1401, 1407 (Fed. Cir. 1997)), Commerce must use

the “best available information” to select surrogate values for

each of the FOP.       19 U.S.C. § 1677b(c)(1).

        When selecting the best available surrogate value, Commerce

“normally will use publicly available information to value [FOP],”

19 C.F.R. § 351.408(c)(1), and it prefers to use data “reflect[ing]

a broad market average . . . contemporaneous with the period of

review, specific to the input in question, and exclusive of taxes

on exports.”        Fuwei Films (Shandong) Co. v. United States, 36 CIT

__, __, 837 F. Supp. 2d 1347, 1350–51 (2012).                Commerce has “broad

discretion     to    determine    the     ‘best   available     information.’”

Goldlink Indus. Co. v. United States, 30 CIT 616, 619, 431 F. Supp.

2d 1323, 1327 (2006) (quoting Timken Co. v. United States, 25 CIT
Court No. 12-00006                                                   Page 15

939, 944, 166 F. Supp. 2d 608, 616 (2001)).                 When reviewing

Commerce’s surrogate value selection, “[t]he Court’s role is not to

make that determination anew, but rather to decide ‘whether a

reasonable     mind   could   conclude   that   Commerce    chose   the   best

available information.’”        China First Pencil Co. v. United States,

34 CIT __, __, 721 F. Supp. 2d 1369, 1375 (2010) (quoting QVD Food

Co. v. United States, 34 CIT __, __, 721 F. Supp. 2d 1311, 1315

(2010), aff’d, 658 F.3d 1318 (Fed. Cir. 2011)).

                  A. Surrogate Value for Truck Freight

        Commerce selected Infobanc as the surrogate for truck freight

rates in India because “Infobanc data are contemporaneous, country-

wide,    and   identify   the   relevant   time   period,   distances,    and

weights.”      I&D Memo at 16.    Additionally, Commerce noted that it

has “traditionally relied on truck freight data published by

Infobanc to determine the [surrogate value] for inland freight.”

Id. Although Commerce acknowledged flaws and omissions in the

Infobanc rates, it still considered them to be the best available

information because of flaws in the two alternative surrogates

suggested by USM, World Bank’s rates from its survey “Trading

Across Borders in India” and the rates from Gati, Ltd. (“Gati”), a

truck freight company operating in India.             See id. at 16–18.

Specifically, Commerce rejected World Bank’s rates because they

included the prices of various means of inland transportation, id.

at 16–17, and Gati’s rates because it prefers to use rates that
Court No. 12-00006                                                      Page 16

“reflect[] numerous transactions between many buyers and sellers”

over the rates from a single company.            Id. at 18.     USM argues that

Infobanc     rates    are   unreliable     and   Commerce’s     selection   was

unsupported by substantial evidence in the record.               See Pl.’s Br.

at 31–37.9

      “Commerce is not permitted to select a surrogate value by

default.”      Taian Ziyang Food Co. v. United States, 35 CIT __, __,

783 F. Supp. 2d 1292, 1328 (2011). When choosing between imperfect

data sets, “Commerce’s analysis must do more than simply identify

flaws in the data sets it rejects.”           Guangdong Chems. Imp. & Exp.

Corp. v. United States, 30 CIT 1412, 1417, 460 F. Supp. 2d 1365,

1369 (2006).         “[T]he law requires Commerce to make a reasoned

decision as to the source on which it chooses to rely, and to both

adequately explain its rationale and support its decision by

reference to substantial evidence in the record.” Taian Ziyang, 35

CIT at __, 783 F. Supp. 2d 1292 at 1329.            Commerce erred in failing

to   support    its   selection    of    Infobanc    rates   with   substantial

evidence and in ignoring contradictory evidence on the record.

      First,    Commerce    does   not    appear    to   have   supported   its

determination with reference to substantial evidence in the record.

      9
       USM also asks that the court order Commerce to select World
Bank rates, Gati’s rates, or both. See Pl.’s Br. at 37. However,
this Court will not review alternative surrogate value decisions de
novo in order to replace Commerce’s selection with one of its own.
See   China First Pencil Co., 34 CIT at__, 721 F. Supp. 2d at
1375(quoting QVD Food Co., 34 CIT at __, 721 F. Supp. 2d at 1315).
Court No. 12-00006                                                Page 17

As noted above, Commerce stated that it selected Infobanc rates

because they are “contemporaneous, country-wide, and identify the

relevant time period, distances, and weights.” I&D Memo at 16.

Underlying that finding is Commerce’s conclusion that Infobanc

rates “represent actual transaction prices reflecting truck freight

between a number of Indian cities.”     Def.’s Br. at 32.     However,

Commerce does not cite any evidence in the record in support of

this claim.   See id. at 32–33.    Instead, Commerce cites earlier

reviews where it relied on Infobanc rates.    See id. (citing Wooden

Bedroom Furniture from the PRC: Final Results and Final Rescission

in Part, 75 Fed. Reg. 50,992 (Aug. 18, 2010) and Certain New

Pneumatic Off-the-Road Tires from the PRC: Final Results of the

2009-2010   Antidumping   Duty   Administrative    Review   and    Final

Rescission, in Part, 77 Fed. Reg. 14,495 (Mar. 12, 2012)).

However, Commerce’s reliance on Infobanc in earlier reviews simply

does not support its present conclusion that Infobanc rates reflect

real transaction prices throughout India.10       Moreover, Commerce’s

proffered evidence fails to establish a link between the rates and

     10
        Commerce argues, by reference to earlier reviews, that
Infobanc’s website has a “Directory of Logistics Operators, which
would indicate that Infobanc data is likely not from a single
logistics company.”    See Def.’s Br. at 33 (citing Certain New
Pneumatic Off-the-Road Tires from the PRC: Issues and Decision
Memorandum for the Final Results of the 2009-2010 Administrative
Review of the Antidumping Duty Order at 18, Inv. No. A-570-912
(Mar. 5, 2012) (emphasis added). However, that Commerce previously
found that Infobanc possibly sources its information from multiple
companies is not persuasive, especially when the record lacks
evidence in support of that conclusion.
Court No. 12-00006                                                Page 18

any actual transaction prices.     Without record evidence to support

the use of Infobanc rates, a reasonable person could not select

them as the best available surrogate.      China First Pencil Co., 34

CIT at __, 721 F. Supp 2d at 1375.

     Second, Commerce’s selection is flawed because the record does

not contain any explanatory information indicating the reliability,

sources, or methodology behind Infobanc rates.           See Allied Pac.

Food (Dalian) Co. v. United States, 34 CIT __, __, 716 F. Supp. 2d

1339, 1350 (2010) (sustaining Commerce’s decision to reject a

proposed surrogate where record evidence indicated that the prices

“lack[ed] supporting data on total value and volume and ha[d]

deficiencies with respect to count size”); Wuhan Bee Healthy Co. v.

United States, 31 CIT 1182, 1195 (2007) (not published in the

Federal Supplement) (sustaining Commerce’s decision to reject an

Indiainfoline    article   because    it   contained     “no   additional

information on the author’s qualifications or the sources of his

information”).     Here,   USM   specifically   points   out   that   “the

essential terms of the posted rates are unknown, including whether

the rates (1) relate to offers for shipments or reflect actual

transactions, (2) apply to containerized or bulk shipments, (3)

reflect long term contract or spot prices, and (4) are inclusive of

loading and unloading costs.”     Pl.’s Br. at 34–35.     While Commerce

itself recognized this infirmity, admitting that it was “unclear

whether Infobanc truck rate data on the record include costs
Court No. 12-00006                                             Page 19

associated with those activities,” I&D Memo at 18, it overlooked

this flaw because it “assume[d] the surrogate truck freight rate

used includes all costs associated with activities relating to

truck freight, absent evidence to the contrary.” Id.       In fact, the

record contains little information concerning the Infobanc data, as

each set of monthly prices merely includes the single explanatory

phrase: “Rupees per tonne for nine tonnes.” See generally I.A.P.R.

20 Att. 2.   Ultimately, Commerce fails to identify evidence in the

record sufficient to demonstrate the reliability of Infobanc rates.

     Further, record evidence indicates that during the POR there

was a significant divergence between Infobanc rates and diesel fuel

prices, which comprise a significant portion of truck freight

rates.    See I.A.P.R. 20 Att. 2; P.R. 56 Ex. 1, Att. 8.    The record

demonstrates that Infobanc rates fell 17% during the POR, I.A.P.R.

20 Att. 2; Pl.’s Br. at 33 n.53, while diesel fuel prices increased

by 17%.   See P.R. 56 Ex. 1, Att. 8; Pl.’s Br. at 32 n.50.    Commerce

disagreed with USM’s characterization of the price trends, arguing

that USM “misconstrue[d] the circumstances” in which the diesel

prices were measured by basing its calculations on inflated prices.

See I&D Memo at 17.    Commerce’s conclusion is contradicted by the

record, which contains uninflated prices from Indian Oil Corp.

during the POR depicting the price increase in diesel fuel.        See

P.R. 56 Ex. 1, Att. 8.

     Commerce argues that Infobanc data is still the best available
Court No. 12-00006                                                     Page 20

information because of flaws in the alternative data sets. See I&D

Memo at 18.        However, Commerce’s rebuttal of World Bank and Gati

data does not cure its failure to adequately explain its reliance

upon Infobanc data.        See Guangdong Chems., 30 CIT at 1417, 460 F.

Supp. 2d at 1369; Longkou Haimeng Machinery Co. v. United States,

32 CIT 1142, 1164–65, 581 F. Supp. 2d 1344, 1363–64 (ordering

remand where Commerce provided adequate reasoning for rejecting

potential surrogate data but failed to adequately “explain its

reliance” on the data set it selected) (Tsoucalas, Senior J.).

Commerce was still required to provide a reasonable explanation of

its selection of Infobanc rates with substantial evidence from the

record.     See Taian Ziyang, 35 CIT at __, 783 F. Supp. 2d 1292 at

1329.

        For the foregoing reasons, the court must remand Commerce’s

determination.       On remand Commerce must either adequately explain

its   rationale      for   selecting   Infobanc    data   with   support   from

substantial evidence in the record or select a new surrogate for

truck freight rates.

                   B. Surrogate Value for Financial Ratios

        Commerce    selected   the     financial   statements    of   Hindalco

Industries Ltd. (“Hindalco”) to calculate surrogate financial

ratios.     I&D Memo at 11.       USM argues that Hindalco’s financial

statements were not the best available information because the

majority of Hindalco’s production is dedicated to non-comparable
Court No. 12-00006                                                 Page 21

merchandise and Hindalco received countervailable subsidies during

the POR.   See Pl.’s Br. at 28–31.      Commerce “requests a remand to

reconsider [USM]’s argument concerning Commerce’s selection of

Hindalco’s financial statement for calculating surrogate financial

ratios and to determine whether Hindalco’s financial statement

continues to be the best available information on the record.”

Def.’s Br. at 35.       Accordingly, USM’s request to remand for

reconsideration of the surrogate financial ratios is granted.

                     C. Surrogate Value for Labor

      USM alleges that “Commerce made two errors when calculating

the surrogate value for labor”: (1) Commerce selected the wrong

base period for the inflation adjustment, using May 1, 2007 through

April 30, 2008 instead of April 1, 2007 through March 31, 2008 and

(2)   “Commerce   derived   the   inflation   adjustment   using   India’s

wholesale price index, when its labor policy bulletin identified

the Consumer Price Index as the preferred index.” Pl.’s Br. at 39.

Commerce requests that this Court remand the surrogate for labor so

that it might “examine these allegations.”           Def.’s Br. at 34.

Accordingly, USM’s request to remand for reconsideration of the

surrogate value for labor is granted.

                     III. U.S. Movement Expenses

      During the review, TMI reported that Mr. James Gammons engaged

in certain “ministerial activities” on behalf of TMI.         P.R. 61 at

3. Commerce concluded that TMI incurred “expenses on facilitation”
Court No. 12-00006                                           Page 22

in association with the services Mr. Gammons provided, which

included “contact[ing] customshouse brokers, freight forwarders,

trucking companies, [and] warehouse companies.”      I&D Memo at 4.

However, Commerce determined that TMI did not incur any selling

expenses in the U.S and that “the record contains no evidence that

Mr. Gammons engaged in sales of the subject merchandise on behalf

of TMI or took possession of the subject merchandise.”    Id.   Thus,

Commerce decided not to adjust the U.S. sales price to reflect the

expenses TMI incurred in payment of Mr. Gammons’ services.      Id.

Additionally, Commerce noted that all of TMI’s U.S. sales were EP

sales11 and therefore TMI was not required to report sales expenses

incurred in the U.S. because generally such expenses “are captured

in the surrogate financial ratios under the NME FOP methodology to

calculate [NV] for EP sales.”   Id.   USM argues that the expenses at

issue were movement expenses and therefore Commerce was required to

deduct them from the U.S. price under 19 U.S.C. § 1677a(c)(2)(a)

regardless of whether they were associated with CEP or EP sales.

See Pl.’s Br. at 39.

     When calculating EP or CEP, Commerce is directed to reduce the

price by “the amount, if any, included in such price, attributable

     11
       Commerce calculates EP “if the first sale to an unaffiliated
purchaser in the United States or to an unaffiliated purchaser for
export to the United States is made by the producer or exporter in
the foreign market prior to the date of importation.”        Import
Administration, Antidumping Manual, ch. 7, p. 3 (Oct. 13, 2009)
(emphasis added).
Court No. 12-00006                                          Page 23

to any additional costs, charges, or expenses, and [U.S.] import

duties, which are incident to bringing the subject merchandise from

the original place of shipment in the exporting country to the

place of delivery in the [U.S.]” 19 U.S.C. § 1677a(c)(2)(A). When

calculating CEP, Commerce makes certain additional adjustments for

selling expenses incurred in the U.S., including commissions,

credit expenses, guarantees, and warrantees.       See 19 U.S.C. §

1677a(d)(1). However, under the NME methodology, Commerce does not

adjust EP for those expenses incurred in the U.S., as they are

included in the FOP calculation of NV under selling, general and

administrative expenses.    See Antidumping Manual, ch. 10 at p. 11;

I&D Memo at 4.    The issue before the court is whether the expenses

TMI incurred were movement expenses, for which Commerce must adjust

U.S. sales price under 19 U.S.C. § 1677a(c)(2)(A).

     Here, Commerce’s decision not to adjust EP was supported by

substantial evidence because the expenses associated with Mr.

Gammon’s services are not movement expenses.       See 19 U.S.C. §

1677a(c)(2)(A).    The services Mr. Gammons provided, which included

“contact[ing] customshouse brokers, freight forwarders, trucking

companies, [and] warehouse companies,” I&D Memo at 4, were too

attenuated from the actual movement of subject merchandise to be

considered movement expenses.    Mr. Gammons did not move or store

the goods nor was he compensated for such services.      The record

supports Commerce’s conclusion that Mr. Gammons “contacted” such
Court No. 12-00006                                                      Page 24

service providers on behalf of TMI, but did not enter contracts or

act as an agent on TMI’s behalf.          See P.R. 61 at 3.        The prior

reviews   USM   cites   are   unpersuasive    because    they     are   easily

distinguishable    from   the   instant      case:    they    concern    costs

associated with the actual movement of goods.                 See Issues and

Decision Memorandum for the Final Determination in the Antidumping

Investigation of Chlorinated Isocyanurates from Spain at 20, Inv.

No. A-469-814 (May 2, 2005) (freight forwarding costs are an

element of U.S. movement expenses) and Notice of Preliminary

Determination of Sales at Less Than Fair Value and Postponement of

Final Determination: Silicon Metal from the Russian Federation, 67

Fed. Reg. 59,253, 59,261–62 (Sept. 20, 2002) (U.S. inland freight

costs are an element of U.S. movement expenses).             The “expenses on

facilitation,” I&D Memo at 4, associated with Mr. Gammons’ services

cannot be considered movement expenses.              Therefore, Commerce’s

determination regarding Mr. Gammons’ services was reasonable.

                                CONCLUSION

     For the foregoing reasons the court concludes that the Final

Results are sustained with regard to the U.S. movement expenses but

remanded as to USM’s untimely submission and the surrogate values

for truck freight, labor, and financial ratios.              The court defers

judgment on the issue of retort classification so Commerce has an

opportunity to reconsider its chosen classification should Commerce

place USM’s untimely submission on the record during remand.
Court No. 12-00006                                           Page 25

                              ORDER

     In accordance with the above, it is hereby

     ORDERED that this case is to be remanded to the United States

Department of Commerce, International Trade Administration, to

reconsider its findings regarding USM’s untimely submission and the

surrogate values for truck freight, labor, and financial ratios;

and it is further

     ORDERED that the Final Results are sustained with respect to

United States movement expenses; and it is further

     ORDERED that remand results are due within ninety (90) days of

the date this opinion is entered.     Any responses or comments are

due within thirty (30) days thereafter.    Any rebuttal comments are

due within fifteen (15) days after the date responses or comments

are due.

                                          /s/ NICHOLAS TSOUCALAS
                                           Nicholas Tsoucalas
                                              Senior Judge

Dated:    January 22, 2013
         New York, New York