Court Opinion

ID: 4198304
Source: CourtListenerOpinion
Date Created: 2017-08-23 16:02:19.589667+00
Date Added: 2024-06-11T13:25:32.167034
License: Public Domain

Slip Op. 17 - 111

     UNITED STATES COURT OF INTERNATIONAL TRADE

                                           :
LA MOLISANA S.p.A,                         :
                                           :
                    Plaintiff,             :
                                           :
                 v.                        : Before: R. Kenton Musgrave, Senior Judge
                                           : Court No. 16-00047
                                           :
UNITED STATES,                             :
                                           :
                    Defendant,             :
                                           :
                and                        :
                                           :
NEW WORLD PASTA CO. and                    :
DAKATA GROWERS PASTA CO.,                  :
                    Defendant-Intervenors. :
                                           :

                                   OPINION AND ORDER

[Remanding eighteenth administrative review of certain pasta from Italy.]

                                                                            Dated: August 23, 2017

        David J. Craven and Saichang Xu, Sandler, Travis & Rosenberg, of Chicago, IL, for the
plaintiff.

       Elizabeth Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, for the defendant. On the brief were Chad A. Readler,
Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr.,
Assistant Director. Of Counsel was Mykhalo Gryzlov, Senior Counsel, Office of the Chief Counsel
for Trade Enforcement and Compliance, U.S. Department of Commerce.

        Paul C. Rosenthal and David C. Smith, Kelley Drye & Warren LLP, of Washington, DC, for
the defendant-intervenors.
Court No. 16-00047                                                                                 Page 2

                 Musgrave, Senior Judge: The plaintiff, La Molisana S.p.A., challenges two

determinations from the eighteenth (2013-2014) antidumping duty administrative review of certain

dry pasta from Italy1: (1) whether the U.S. Department of Commerce, International Trade

Administration (“Commerce” or “Department”) erred in requiring La Molisana’s pasta sales product

shapes to be reported without variance from the proceeding’s pasta shape classification list; and

whether Commerce failed to provide meaningful opportunity for addressing the agency’s differential

pricing analysis. This being a timely-filed matter described by 19 U.S.C. §1516a(a)(2), subsections

(A)(i)(I) and (B)(iii), jurisdiction is proper under 28 U.S.C. §1581(c). The standard of review is

substantial evidence on the record. 19 U.S.C. §1516a(b)(1)(B)(i). The case will be remanded per

the following.

                                               Discussion

                                                     I

                                            A. Background

                 The pasta shape classification list provides for eight different types of shape

categories: (1) long cuts (e.g., linguine, spaghetti), (2) specialty long cuts (e.g., capellini, fioccini),

(3) nested/folded/coiled, (4) lasagna, (5) short cuts (e.g., fagiolini, medium shells), (6) specialty short

cuts (e.g., mezzanelli, pasta mista), (7) soupettes (e.g., ditali, corallini), and (8) combination of

shapes. E.g., Initial Questionnaire (“IQ”) (Oct. 3, 2014), PDoc 24, at B-8, C-7. Appendix III of the

        1
           Certain Pasta From Italy: Final Results of Antidumping Administrative Review;
2013-2014, 81 Fed. Reg. 8043 (Feb. 17, 2016) (“Final Results”); Certain Pasta From Italy:
Amended Final Results of Antidumping Duty Administrative Review; 2013-2104, 8l Fed. Reg. 12690
(Mar. 10, 2016) (“Amended Final Results”) and the accompanying issues and decision memorandum
(“IDM”), PDoc 228. Citations to other specific administrative reviews are herein abbreviated “AR”
followed by its numeric sequence.
Court No. 16-00047                                                                                 Page 3

IQ sent to all respondents lists some 256 different shapes and their corresponding control number

category (i.e., CONNUMs) and provided therein in relevant part is as follows:

        SHAPE CLASSIFICATION
        You are required to classify the pasta types reported in field 3.9 into one of the shape
        categories specified in field 3.1 in accordance with the questionnaire examples and
        the attached “Classification of Pasta Shapes.” If you sold pasta in shapes that do not
        appear on the attached list, please use the most similar pasta type on this list as a
        guide for determining the appropriate shape classification. Support any such
        classification with a description and picture of the pasta type, the production line on
        which it is produced, the standard production capacity of that line (e.g., pounds per
        hour), and the line speed (e.g., pounds per hour) for the pasta type in question. Please
        note that any revisions in shape classification must also be reflected in control
        numbers and variable manufacturing cost information.

IQ at 151 (or Appx. III at 4; italics added).

                Long (and linear) cuts are made on long cut pasta machines and short cuts are made

on short cut pasta machines. Once the determination of long or short is made, the question is then

whether a cut is a “standard” or “special” cut, which for purposes of this matter is a critical

distinction: the “dividing line” is not due to any physical differences in pasta cuts within the long or

short shape categories but due to the higher production costs that would be associated with the

slower line speeds of the latter. See, e.g., Certain Pasta From Italy, 78 Fed. Reg. 9364 (Feb. 8,

2013) (AR15 final) and accompanying issues and decision memorandum (all such memoranda

hereinafter “I&D Memo”) at cmt 1; Certain Pasta From Italy, 64 Fed. Reg. 6615 (Feb. 10, 1999)

(inter alia AR1 final) and accompanying I&D Memo at cmt 7.

                Commerce attempts to frame La Molisana’s dispute as a disagreement with

methodology, but the parties rather appear in agreement that the methodology is proper and long

standing. Onward since the 1996 investigation, Commerce’s practice has been to use a 75 percent

line-speed benchmark to distinguish “speciality” cuts from “regular” cuts produced on the same long
Court No. 16-00047                                                                             Page 4

or short production line. See, e.g., id. La Molisana’s initial Section B and C questionnaire responses

included detailed exhibits in which the production speeds of the various shapes which La Molisana

believed were improperly categorized in Commerce’s shape list and which La Molisana believed

should be re-classified. La Molisana also included as part of this exhibit a list of those shapes which

it believed did not appear on Commerce list and, using the same methodology, placed these shapes

into what it believed to be appropriate categories. See LM Response to Sections B and C of the IQ

(Dec. 2, 2014), CDocs 38-54, at Exs B-1 and C-1. La Molisana had submitted pictures of these

shapes as part of its Section A response. See LM Response to Section A of the IQ (Nov. 5, 2015),

PDocs 34-39, at Ex A-13(a).

               About a month later, Commerce issued a supplemental questionnaire (“SQ”) to La

Molisana stating:

       1. In your [Section B Questionnaire Response,] page 2, and at Ex B-2, you state that
       you classified shapes “by taking the production speed for the cut on one of the lines
       as compared to the production speed for a shape classified by the Department in a
       particular category.” However, the Department does not classify products by
       production characteristics, rather through sales characteristics. Please assign shape
       codes to each of your observations in the home market and U.S. market databases
       according to the shape classifications included in Appendix III of the initial
       questionnaire. If you believe a change in the model match is warranted, you must
       submit a formal request to the Department for a change to the model match
       methodology.

SQ (Jan. 6, 2015), PDoc 86, at 2. (bracketing and italics added; footnote omitted).

               La Molisana requested clarification of this instruction on January 13, 2015, noting

Commerce’s extant practice. Commerce’s reply three days later to this request was as follows:

       A. Please report your shapes, and the appropriate shape code, according to the
       existing list of classifications as presented in Appendix III of the Initial
       Questionnaire.
Court No. 16-00047                                                                                Page 5

        B. For shapes not listed in Appendix III, please report the characteristics based on
        the most similar shape listed in Appendix III.

Dep’t Resp. to Request for Clarification (Jan. 16, 2015), PDoc 92, at 2 (italics added).

                Believing it had already placed on the record the correct classifications, La Molisana

explains, in order to avoid confusion resulting from multiple competing databases it sent in a

database of the shapes as Commerce apparently wanted them (re)classified, but it did so under

protest, noting at the time that it intended to raise this issue in its administrative case brief. In that

brief, La Molisana argued Commerce had failed to follow the established methodology for shape

classification in this order and further argued against the methodology imposed by Commerce in this

review, i.e., Appendix III governs a shape’s classification regardless of any information on the record

as to production line speed for that shape. See LM Case Brief (Oct. 6, 2015), CDoc 240, at 2-4.

                In the IDM, Commerce refused to allow the reclassification of the shapes but did not

directly address whether the methodology had shape-shifted to sales-based from production-based;

rather, Commerce indicated that the shape methodology was essentially immutable, that the list had

been “refined”, and that Commerce need not consider certain proffered facts. Commerce stated:

        Although a 75 percent throughput rate has been used to distinguish pasta shape for
        specialty long and short pasta cuts, we have never allowed respondents to reclassify
        pasta shape classifications based on its own reported line speeds without providing
        the requisite evidence to support such a reclassification. Furthermore, we have not
        allowed respondents to reclassify pasta shapes that are already included in the pasta
        shape classification table.

IDM at 6.

                                             B. Argument

                La Molisana argues generally that the above statement in the IDM is factually

inaccurate, both with respect to the review in question and also with respect to categorical statements
Court No. 16-00047                                                                              Page 6

about what has and has not been allowed in prior reviews of this order. First, it notes that the

statement is directly contradicted by Commerce’s instructions in Appendix III, in which is stated in

relevant part: “Please note that any revisions in shape classification” et cetera. See IQ at 151, supra.

Thus, La Molisana argues that the questionnaire instructions themselves clearly contemplated

revisions to the existing list of shapes, and that if Commerce’s subsequent statement that the list of

shapes is essentially immutable and that respondents are not allowed to reclassify shapes were true,

then any provision providing for the “revision” of shapes would be rendered a nullity.

                Second, La Molisana notes that Commerce has, in fact, allowed respondents to

reclassify shapes that were included in the pasta shape classification table. In the I&D Memo for the

fourth (1999-2000) administrative review,2 for example, Commerce stated: “For those cuts which

PAM believed were specialty cuts yet the Department considered a regular cut (or vice versa), it

provided the line speed data. We reviewed this information and accepted the revised shape

classification as provided by PAM.” AR4 I&D Memo at issue 19. Thus, Commerce has expressly

allowed parties in other segments to re-classify shapes on the shape list. Further, La Molisana

criticizes the defendant’s attempt to dismiss Commerce’s own decision in AR15 through claiming

that such decision stood for the proposition that Commerce did not reclassify shapes, but La

Molisana points out that stance is undercut by the language of AR15 itself:

        In the investigation the Department used a 75 percent throughput rate to distinguish
        pasta shape for specialty long and short pasta cuts. We do not use the throughput
        rates to further differentiate between specialty short and super-specialty short or
        specialty long and super-specialty long. Based on the throughput rates of the pasta
        at issue, we can classify them as specialty short and specialty long because the line

        2
          See I&D Memo accompanying Certain Pasta From Italy, 67 Fed. Reg. 300 (Jan. 3, 2002)
(inter alia, AR4 final).
Court No. 16-00047                                                                              Page 7

       speed or the throughput rates are 75 percent or less than the corresponding line speed
       or throughput rates of the short and long pasta.

AR15 I&D Memo at cmt 1. As this language makes clear, and as previously noted, Commerce since

the investigation has used speed as the dividing point between special and regular cuts, and it is

production speed, not sales characteristics, which apparently controls that distinction. And in

considering the record of AR5, Certain Pasta From Italy, 68 Fed. Reg. 6882 (Feb. 11, 2003), the

court previously acknowledged “other evidence on the record that appears to show that line speed

is a shorthand for shape.” New World Pasta Co. v. United States, 28 CIT 290, 309 n.22, 316 F.

Supp. 2d 1338, 1355 n.22 (2004). La Molisana contends that if Commerce’s standard is that the

production speed drives whether or not a cut is standard or special but for the administrative review

at bar refused to consider any evidence showing the relative production speeds of certain cuts, then

Commerce has not actually abided by its own standard but made an arbitrary decision not based on

an actual review of production data, which is not in accordance with Motor Vehicle Mfrs. Ass’n of

U.S., Inc. v. State Farm Insurance Co., 463 U.S. 29, 43 (1983) (an agency’s determination is

arbitrary and capricious if the agency “entirely failed to consider an important aspect of the problem,

offered an explanation for its decision that runs counter to the evidence before the agency”, etc.).

               Third, La Molisana argues that Commerce “did not even try” (LM Br. at 13) to

explain the departure from its prior practices and rather appears to have misconstrued both prior

practice from other reviews and the positions that it had taken in this review. Commerce claimed

that it never allowed “reclassifications” of products on Commerce’s shape list and that a “formal

request” (whatever that means) to modify the shape methodology was not made and that insufficient

information was placed on the record. Yet, as discussed above, Commerce not only has considered
Court No. 16-00047                                                                           Page 8

the reclassification of shapes, it has expressly allowed this and expressly contemplated this in the

questionnaire.

                 Fourth, La Molisana contends it was not asking that Commerce “modify” its shape

methodology but rather was simply asking that Commerce apply the existing methodology to the

facts of record including the information provided by La Molisana, and La Molisana submits that

the information placed on the record in this review would appear to be similar to that placed on the

record in AR4 (the 4th review of the antidumping duty order on pasta from Italy); and that if the

record were not sufficient without supplementation then Commerce should have asked for more

information. In AR4, Commerce did not believe the information to be sufficient to sustain the claim

and issued a supplemental questionnaire requesting more information. AR4 I&D Memo at issue 17.

La Molisana thus argues that to the extent that Commerce believed the information La Molisana

submitted was insufficient, then Commerce should have followed extant precedent and asked for

further detail from La Molisana; but rather than requesting this information, Commerce essentially

enumerated a “new standard” based on sales (i.e., an “immutable” list of shapes) and not on

production; and when confronted with the fact that this was a different standard it wound up further

mischaracterizing its own practice.

                                            C. Analysis

                 The court cannot agree that Commerce enumerated a “new” standard. Rather, for this

proceeding Commerce appears to have ossified in its approach to “considering” the facts before it.

The court, thus, can agree with La Molisana that Commerce’s practice, as established by both

administrative and judicial precedent, is quite clear, and that Commerce must follow its prior

decisions unless it is able to provide a reasoned explanation for the departure from such decisions.
Court No. 16-00047                                                                                  Page 9

See Citrosuco Paulista, S.A. v. United States, 12 CIT 1196, 1209, 704 F. Supp. 1075, 1088 ( 1988)

(“it is . . . a general rule that an agency must either conform itself to its prior decisions or explain the

reasons for its departure”); Cinsa S.A. de C.V. v. United States, 21 CIT 341, 349, 966 F. Supp. 1230,

1238 (1997) (“Commerce . . . cannot arbitrarily abandon a relied[-]upon methodology”, it “can reach

different determinations in separate administrative reviews but it must employ the same methodology

or give reasons for changing its practice”); RHP Bearings Ltd. v. United States, 24 CIT 1218, 1226,

120 F. Supp. 2d 1116, 1124 (2000) (application of a “special rule” in only two prior reviews does

not form a “long-established practice” but Commerce is still obliged “to explain the apparent

inconsistency of its approach in this review and the two preceding reviews”). See also American

Silicon Technologies v. United States, 22 CIT 776, 777, 19 F. Supp. 2d 1121, 1123 (1998).

                La Molisana is correct that an immutable list cannot take into account any changes

in technology in the production of a cut nor the specific “shape” of the cut produced by each

producer nor the speeds of each producer’s machines. However, La Molisana undercuts its own

argument to a certain degree in pointing out that each pasta producer uses its own unique dies, and

that a shape produced by one producer will not necessarily be identical to that of another producer.

The defendant thus correctly implies that the shapes list is not company-specific. See, e.g., Def’s

Resp. at 17 (“taken to its logical conclusion, permitting classifications based on company-specific

line speeds would result in a system in which (1) physically identical pasta could have different

classifications, and (2) the pasta would be classified by something other than its physical

characteristics”) (internal quotes omitted; referencing 19 U.S.C. §1677(16)(A)) On the other hand,

the defendant goes too far in attempting to characterize La Molisana’s arguments as an “attempt to

replace the well-established shape classification in the model match methodology with a system
Court No. 16-00047                                                                             Page 10

based on company-specific line speeds.” Id. at 9. The court does not interpret La Molisana’s

arguments to that extent.

               Further, the defendant argues “La Molisana has not demonstrated that the

well-established shape classification list, which was proposed by Italian pasta respondents in the

original investigation,[   ]
                               and further refined in subsequent reviews, is unreasonable” Id. at 14

(footnote omitted). The argument presumes perfection in Appendix III for this review, i.e., that the

listed shapes and their corresponding CONNUM categories are indeed immutable, and yet, as also

acknowledged, the list has been subject to at least four revisions over the years. While it appears

true, as the defendant also contends, that the list reflects a “shape-based approach [to] match[ ]

foreign pasta to domestic pasta based on the ‘physical characteristics’ of the pasta, which is precisely

what 19 U.S.C. §1677(16)(A) requires”3, it is plain that the list is also divided over those “physical

characteristics” by presumed production line speed at the start of each administrative review

segment, and it is well-established that each such segment is to be considered a separate proceeding

with its own unique facts. E.g., Shandong Huarong Machinery Co. v. United States, 29 CIT 484,

491 (2005). The questionnaire itself contemplates the possibility of revisions and, by implication,

the right of parties to seek them. La Molisana placed on the record specific information about the

line speeds used for the production of its various cuts of pasta and why the cuts that it sought to

re-classify were produced at the same line speeds as exemplar cuts. See CDocs 38-54, supra, at Exs

B-1 and C-1. La Molisana argues that this information demonstrated that some of the cuts which

Commerce had placed on the list as “special” cuts, were in fact produced at the same speed as that

       3
         Def’s Resp. at 15, referencing New World Pasta Co. v. United States, 28 CIT 290, 306, 316
F. Supp. 2d 1338, 1352 (2004).
Court No. 16-00047                                                                          Page 11

of standard cuts. The record being plain that consideration of this claim is what La Molisana sought,

to which the record and argument here reflect no adequate rejoinder, the matter will therefore be

remanded therefor.

                                                 II

               The second issue concerns Commerce’s differential pricing analysis.            In the

preliminary results Commerce determined that the differential pricing analysis did not produce a

meaningful difference between the use of average to average (“A-A”) when compared to average to

transaction (“A-T”). Certain Pasta From Italy, 80 Fed. Reg. 47467 (Aug. 7, 2015) (prelim. results)

and accompanying preliminary decision memorandum, PDoc 183 (Aug. 3, 2015), at 8. Anticipating

that when Commerce corrected any errors it might revisit this issue, La Molisana submitted

arguments in its case brief challenging Commerce’s differential pricing analysis and the potential

use of the A-T methodology. CDoc 240 at 11-12. These included a discussion of the seasonality

of the product and other factors that could explain a difference in price.

               In the Final Results, as reflected in the IDM, Commerce did not consider La

Molisana’s arguments because they were mooted by the finding in the preliminary results that the

difference was not meaningful. However, in the amended final results Commerce determined to

apply the differential pricing analysis and to use A-T methodology. Amended Final Calculation

Memorandum, PDoc 237, CDoc 264 (Mar. 7, 2016). Commerce did not address any of the

arguments La Molisana presented but appears to have simply ruled that since the A-T methodology

produced a higher rate than the A-A methodology, it was more accurate and thus should be used. La

Molisana complains Commerce neither stated why a “higher” rate is necessarily more accurate nor

addressed any of the concerns raised in its case brief.
Court No. 16-00047                                                                          Page 12

               The defendant voluntarily requests remand in order to place its analysis and

determination on the record. The defendant-intervenors oppose remand and argue for sustaining

Commerce’s determination because when La Molisana alleged clerical error in the Final Results, it

must have understood that the consequence of that allegation would result in halving its dumping

margin, which in turn would trigger a re-calculation that would invoke use of the A-T methodology.

But the court has been provided no basis on which to draw such ultimate conclusion, and it is still

a fundamental tenet of these matters that an agency must “articulate a[ ] rational connection between

the facts found and the choice made.” Burlington Truck Lines, Inc. v. United States, 371 U.S. 156,

168 (1962). See also SEC v. Chenery Corp., 332 U.S. 194, 196 (1947) (courts judge the propriety

of agency action solely on the ground invoked by the agency and are powerless to substitute “a more

adequate or proper basis”). Remand to Commerce to address the record is appropriate. See SKF

USA Inc. v. United States, 254 F.3d 1022, 1029 (Fed. Cir. 2001).

                                            Conclusion

               The matter is hereby remanded to the Department of Commerce, International Trade

Administration with instruction to reconsider La Molisana’s arguments on the application of the

speed/shape methodology to the facts of record and also to supplement the record with articulated

consideration of La Molisana’s administrative case brief comments regarding the differential pricing

issue. The results of remand shall be due November 30, 2017, and within five days of such filing

the parties shall confer and file with the court either a proposed briefing schedule for commenting

on the remand results or other indication of proceeding to final disposition. So Ordered.

Dated: August 23, 2017                               /s/ R. Kenton Musgrave
       New York, New York                            R. Kenton Musgrave, Senior Judge