Court Opinion

ID: 818252
Source: CourtListenerOpinion
Date Created: 2013-02-02 23:33:46.446167+00
Date Added: 2024-06-11T09:02:41.575156
License: Public Domain

Slip Op. 07 - 54

           UNITED STATES COURT OF INTERNATIONAL TRADE
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MUSGRAVE PENCIL CO., INC. et al.,
                                       :
                         Plaintiffs,
                                       :
                 v.
                                       :
UNITED STATES,                               Court No. 05-00491
                                       :
                         Defendant,
               -and-                   :
CHINA FIRST PENCIL CO., LTD. et al.,    :
              Intervenor-Defendants.   :
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                         Memorandum & Order

[Plaintiffs’ motion for judgment upon the
 agency record denied; action dismissed.]

                                              Decided:    April 5, 2007

     Neville Peterson LLP (George      W.   Thompson     and   Catherine
Chess Chen) for the plaintiffs.
     Peter D. Keisler, Assistant Attorney General; Jeanne E.
Davidson, Director, Patricia M. McCarthy, Assistant Director,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Michael D. Panzera); and Office of the Chief Counsel
for Import Administration, U.S. Department of Commerce (Kemba T.
Eneas), of counsel, for the defendant.
     deKieffer & Horgan (John J. Kenkel and Gregory S. Menegaz) for
intervenor-defendant Shandong Rongxin Import & Export Co., Ltd.
     Lafave & Sailer LLP (Francis J. Sailer) for intervenor-
defendants China First Pencil Co., Ltd.; Orient International
Holding Shanghai Foreign Trade Corp.; and Shanghai Three Star
Stationery Industry Co., Ltd.

          AQUILINO, Senior Judge:   Plaintiffs’ concise complaint

in this action is that the International Trade Administration,
Court No. 05-00491                                                   Page 2

U.S. Department of Commerce (“ITA”) did not rely on the best

surrogate data for manufacturer’s overhead, general expenses,

and   profit   in   rendering    its   Certain   Cased   Pencils    from   the

People’s Republic of China; Final Results and Partial Rescission

of Antidumping Duty Administrative Review, 70 Fed.Reg. 42,301

(July 22, 2005), as amended, 70 Fed.Reg. 51,337 (Aug. 30, 2005).

They seek relief from this determination made pursuant to 19

U.S.C. §1675(a) via a USCIT Rule 56.2 motion for judgment upon

the administrative record compiled by the agency in connection

therewith.

             The court’s subject-matter jurisdiction is predicated

upon 28 U.S.C. §§ 1581(c), 2631(c).

                                       I

             As indicated, the country of origin of the merchandise

that is subject to the ITA’s underlying antidumping-duty order,

59 Fed.Reg. 66,909 (Dec. 28, 1994), is the People’s Republic of

China (“PRC”), which the ITA still considers to be a “nonmarket

economy   country”1    (“NME”)    within   the    meaning   of     the   Trade

      1
       The statute defines this term, in general, to mean any
foreign country that the ITA 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. See 19 U.S.C. §1677(18)(A).
Court No. 05-00491                                                      Page 3

Agreements     Act   of    1979,    as   amended,   19    U.S.C.      §1677(18).

Compare, e.g., Notice of Final Determination of Sales at Less

Than    Fair   Value:     Certain   Cased   Pencils      From   the    People’s

Republic of China, 59 Fed.Reg. 55,625 (Nov. 8, 1994), with Gov’t

of the People’s Republic of China v. United States, 31 CIT ___,

Slip Op. 07-50 (March 29, 2007).

             To determine whether subject merchandise is being, or

is likely to be, sold in the United States at less than fair

value, the agency must make “a fair comparison . . . between the

export price or constructed export price and normal value.”                  19

U.S.C. §1677b(a).         When that merchandise emanates from an NME,

however, the actual export price is often not a valid source of

comparison due to the nature of such a country.                 Whereupon the

ITA, in general, is to

       determine the normal value of the subject merchandise
       on the basis of the value of the factors of production
       utilized in producing the merchandise and to which
       shall be added an amount for general expenses and
       profit plus the cost of containers, coverings, and
       other expenses. . . . [T]he valuation of the factors
       of production shall be based on the best available
       information regarding the values of such factors in a
       market economy country or countries considered to be
       appropriate by [it].

19 U.S.C. §1677b(c)(1).
Court No. 05-00491                                                            Page 4

                                             A

            Pursuant to formal requests, the agency commenced an

administrative    review        of    its    antidumping-duty       order    covering

certain PRC cased pencils.             The preliminary results thereof were

published in 70 Fed.Reg. 2,115, 2,118 (Jan. 12, 2005), wherein

the ITA “determined that India is comparable to the PRC in terms

of   per    capita      gross        national      product    and     the     national

distribution of labor” and also that “India is a significant

producer of comparable merchandise.”

            The preliminary results made clear that where Indian

surrogate-value      information        was      available,   it    was     preferred.

Where     such   data    were        “unable”       to   be   used,       Indonesian,

Philippine, and U.S. values were considered, in part upon a

finding that the Philippines is “also comparable to the PRC in

terms of     per capita gross national product and the national

distribution of labor, and . . . [is a] significant producer[]

of comparable merchandise.”                 70 Fed.Reg. at 2,118.           And those

results of the administrative review preliminarily

        derived ratios for factory overhead, selling, general
        and administrative [] expenses, and profit using the
        financial   statements of   Asia  Wood  International
        Corporation (Asia Wood), a wood-products producer in
        the Philippines.
Court No. 05-00491                                                             Page 5

Id. at 2,119.          That is, the ITA found Asia Wood’s information to

be the best from which to derive those ratios.

             Interested          parties     may     submit       publicly-available

information       to    value     labor,    manufacturing         overhead,        general

expenses,     and       profit     within     20     days    after      the    date     of

publication       of    the    preliminary     results      of    an    administrative

review conducted pursuant to 19 U.S.C. §1675.                      See 19 C.F.R. §§

351.301(c)(3)(ii),            351.408(c).          The    domestic      producers      cum

plaintiffs       herein    submitted       information      for   some      nine   Indian

producers of wooden bedroom furniture, data from which had been

used by the ITA in its Final Determination of Sales at Less Than

Fair Value; Wooden Bedroom Furniture From the People’s Republic

of China, 69 Fed.Reg. 67,313 (Nov. 17, 2004).                          See Appendix to

Plaintiffs’ Motion for Judgment, Attachment 2, which included

the   Department’s        Financial    Ratio       Memorandum,       company-specific

ratios for each of the nine Indian producers, and, in addition,

copies of financial statements for seven of the companies.                            The

information       supplied       concerned     the        surrogate      valuation      of

manufacturing overhead, general expenses and profit relied on by

the   ITA   in    its     investigation      of     the    pricing     of   PRC     wooden

bedroom furniture.            Plaintiffs’ proffered data purported to be
Court No. 05-00491                                                          Page 6

coincident with the period of review and from companies that use

wood as a major component in producing merchandise.

               Interested parties also have 30 days after the date of

publication of the preliminary results to submit a “case brief”

to the ITA to be considered in the determination of the final

results of an administrative review.                    See 19 C.F.R. §351.309.

The plaintiffs apparently filed such a brief, arguing that “the

Department in the final results should use the financial ratio

data from Wooden Bedroom Furniture”, declaring them to be “more

comprehensive and more reliable” than that from Asia Wood, which

was     used     in   the    preliminary         results.      See   Appendix        to

Plaintiffs’       Motion     for     Judgment,     Attachment    3   (Issues    and

Decision        Memorandum         for     the     2002-03     Antidumping      Duty

Administrative Review: Certain Cased Pencils from the People’s

Republic of China, p. 17 (July 11, 2005)).

               PRC exporters, intervenor-defendants at bar, submitted

a     rebuttal    brief     that     challenged      the     representation     that

“furniture manufacturing involves precisely the same production

processes      used   in    pencil       production”,    claiming    that    such    a

comparison “is akin to saying that bicycle production is like

automobile manufacturing.”               Appendix to Plaintiffs’ Motion for
Court No. 05-00491                                                                Page 7

Judgment, Attachment 7, p. 3.              They argued for the use of Asia

Wood’s     financial      statements      chiefly          because    they    “cover       a

producer    of    comparable       merchandise,        a     fatal     infirmity        that

infects the possible use of the furniture producers’ financial

statements.”      Id.

             The ITA rejected plaintiffs’ proposed approach.                            See

Decision Memorandum, p. 19.

                                          II

             That       determination     will        be     sustained       if    it    is

supported by substantial evidence on the record and otherwise in

accordance       with     law.      See    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.”

Consolidated      Edison     Co.   v.   NLRB,    305        U.S.    197,   229    (1938);

Shanghai Foreign Trade Enterprises Co. v. United States, 28 CIT

___, ___ , 318 F.Supp.2d 1339, 1345 (2004).

             As recited above, the agency must value the factors of

production based on the best available information regarding the

values of such factors in a market economy country or countries

considered to be appropriate by it.                        According to 19 U.S.C.

§1677b(c)(4), in doing so, the ITA
Court No. 05-00491                                                    Page 8

     shall utilize, to the extent possible, the prices or
     costs of factors of production in one or more market
     economy countries that are—

               (A) at a level of economic development com-
          parable to that of the nonmarket economy country,
          and
               (B) significant   producers  of   comparable
          merchandise.

          Although “comparable merchandise” is not defined by

this statute, the agency has “considered whether products have

similar   physical     characteristics,     end     uses,    and    production

processes.”          Issues     and    Decision     Memorandum       for     the

Administrative Review of Certain Cased Pencils from the People’s

Republic of China; Final Results, p. 17 (July 16, 2002), citing

its Glycine from the People’s Republic of China: Final Results

of New Shipper Administrative Review, 66 Fed.Reg. 8,383 (Jan.

31, 2001), and accompanying Issues and Decision Memorandum at

Comment 7; and its Notice of Final Determination of Sales at

Less Than Fair Value: Beryllium Metal and High Beryllium Alloys

From the Republic of Kazakstan, 62 Fed.Reg. 2,648 (Jan. 17,

1997).

          In    determining      the   valuation     of     the    factors     of

production,    the   critical    question   is    whether   the    methodology

used by the ITA is based on the best available information and
Court No. 05-00491                                                Page 9

establishes     antidumping   margins    as   accurately   as    possible.

Shakeproof Assembly Components, Div. of Ill. Tool Works, Inc. v.

United States, 268 F.3d 1376, 1382 (Fed.Cir. 2001).             And agency

determinations will be affirmed so long as they are “reasonable

and supported by the record as a whole, even if there is some

evidence that detracts from the [ITA]’s conclusions.”              Olympia

Indus., Inc. v. United States, 22 CIT 387, 389, 7 F.Supp.2d 997,

1000 (1998), citing Atlantic Sugar, Ltd. v. United States, 744

F.2d 1556, 1563 (Fed.Cir. 1984).

                                    A

          The    ITA   released   its   Decision   Memorandum   herein     on

July 11, 2005.      It summarized the arguments and then concluded

that Asia Wood’s financial statements are the best information,

to wit:

     . . . We based our determination on the fact that Asia
     Wood produces a variety of simple wood products
     similar to pencils in terms of physical character-
     istics, using production processes comparable to those
     used to produce pencils.    In addition, the Asia Wood
     financial statements are producer-specific data that
     are more specific to the subject merchandise than the
     industry-wide data, and thus, are more likely to
     approximate respondents’ actual experience.   Further-
     more, the 2003 Asia Wood financial ratios are
     contemporaneous with the POR, and continuing to use
     Asia Wood’s data is consistent with what has been done
     in prior segments of this proceeding.
Court No. 05-00491                                                            Page 10

Decision       Memorandum,     p.    19.         The    plaintiffs      appeal     this

conclusion,      claiming     that     the   agency       neither      evaluated   the

Indian data in accordance with the comparability-of-merchandise

test applied in its preceding 2002 Final Results or with any

other cognizable standard.2            Whereupon they pray for a remand

        so that, at the very least, Commerce can demonstrate
        . . . that it did not summarily reject the Indian data
        in contravention of Olympia.

Plaintiffs’ Memorandum in Reply, p. 6                  n. 5.

                                           (1)

               While    the    Decision      Memorandum         does    not    address

similarity in end use of the products, the lack of comparison of

cased       pencils    with   either    furniture        or    handicrafts    is   not

necessarily a fatal flaw.               See, e.g., Wheatland Tube Co. v.

United States, 161 F.3d 1365, 1370 (Fed.Cir. 1998)(while not

directly explaining a minor issue, the ITA’s decisional path is

“readily apparent”).           Indeed, neither side contends, nor could

it, that the surrogates’ respective products have more similar

end uses to cased pencils than the other.

        2
        See generally Plaintiffs’ Memorandum, pp. 10-26.  The
quality of this written submission, and of those on behalf of
the other parties, has obviated the need for oral argument.
Hence, plaintiffs’ motion therefor can be, and it hereby is,
denied.
Court No. 05-00491                                                  Page 11

            The Decision Memorandum does conclude that “Asia Wood

produces a variety of simple wood products similar to pencils in

terms of physical characteristics, using production processes

comparable to those used to produce pencils.”              This is preceded

by assertions that

     Asia Wood produces a variety of wood products,
     including furniture, but that it also produces wood
     products that are more simple in nature and more
     comparable to the pencil production of the [PRC
     exporters3]

and that

     the financial data of Asia Wood relate to the
     production of woodworks and crafts and products such
     as furniture, doors, cabinets, handicrafts, etc.,
     which is more comparable to that of the production of
     pencils than the financial data of furniture producers
     whose production activities include beds, tables,
     dressers, armoires, and chests of drawers.

Decision Memorandum, p. 19.

                                    III

            On   the   record   presented,   the   court   cannot   conclude

that this approach was not in accordance with law or supported

by substantial evidence.        Plaintiffs’ motion for remand of this

     3
         Decision Memorandum, p. 18.
Court No. 05-00491                                        Page 12

matter on the concise issue raised therefore cannot be granted.

Judgment of dismissal will enter accordingly.

           So ordered.

Decided:   New York, New York
           April 5, 2007

                                /s/ Thomas J, Aquilino, Jr.__
                                         Senior Judge
                               J U D G M E N T

               UNITED STATES COURT OF INTERNATIONAL TRADE

                 Thomas J. Aquilino, Jr., Senior Judge

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MUSGRAVE PENCIL CO., INC. et al.,
                                       :
                           Plaintiffs,
                                       :
               v.                                Court No. 05-00491
                                       :
UNITED STATES,                               :

                           Defendant.  :
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            This action having been duly submitted for decision; and

the   court,   after   due   deliberation,   having   rendered   a   decision

herein;    Now therefore, in conformity with said decision, it is

            ORDERED, ADJUDGED and DECREED that plaintiffs’ motion

for judgment on the agency record be, and it hereby is, denied;

and it is further hereby

            ORDERED, ADJUDGED and DECREED that this action be, and

it hereby is, dismissed.

Dated:    New York, New York
          April 5, 2007

                                        /s/ Thomas J. Aquilino, Jr.       ___
                                                 Senior Judge