Court Opinion

ID: 4245837
Source: CourtListenerOpinion
Date Created: 2018-02-16 16:04:09.687309+00
Date Added: 2024-06-11T13:27:09.440412
License: Public Domain

Slip Op. 18-12

                UNITED STATES COURT OF INTERNATIONALTRADE

ARKEMA, INC., THE CHEMOURS COMPANY
FC, LLC, HONEYWELL INTERNATIONAL INC.,
                                                        PUBLIC VERSION
                     Plaintiffs,
                                                        Before: Leo M. Gordon, Judge
                     v.
                                                        Court No. 16-00179
UNITED STATES,

                     Defendant.

                                   OPINION and ORDER

 [Final material injury determination sustained in part, and remanded in part to the ITC.]

                                                                Dated: February 16, 2018

        James R. Cannon, Jr., Cassidy Levy Kent (USA) LLP, of Washington, DC, argued
for the Plaintiffs Arkema, Inc., The Chemours Company FC, LLC, Honeywell International
Inc. and Plaintiff-Intervenor The American HFC Coalition. With him on the brief were
Jonathan M. Zielinski and Nina R. Tandon.

       Patrick V. Gallagher, Jr., Attorney-Advisor, Office of the General Counsel,
U.S. International Trade Commission, of Washington, DC, argued for Defendant United
States. With him on the brief were Dominic L. Bianchi, General Counsel, and Andrea C.
Casson, Assistant General Counsel for Litigation.

       Ned H. Marshak, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of New
York, NY, argued for Defendant-Intervenors Shandong Dongyue Chemical Co. Ltd.,
Zhejiang Sanmei Chemical Ind. Co., Ltd., Sinochem Environmental Protection Chemicals
Co., Ltd., and Zhejiang Quhua Fluor-Chemistry Co., Ltd. With him on the brief were Max F.
Schutzman and Jordan C. Kahn.

       Frank Morgan, Trade Law Defense PLLC, of Alexandria, VA, argued for Defendant-
Intervenor ICOR International Inc.

       Jarrod M. Goldfeder, Trade Pacific PLLC, of Washington, DC, argued for
Defendant-Intervenor National Refrigerants, Inc. With him on the brief was Jonathan M.
Freed.
Court No. 16-00179                                                                   Page 2

              Gordon, Judge: This action involves the final affirmative material injury

determination of the U.S. International Trade Commission (“ITC” or the “Commission”) in

the antidumping duty investigation covering hydrofluorocarbon (“HFC”) blends and

components from the People's Republic of China (“PRC”). See Hydrofluorocarbon Blends

and Components from China, 81 Fed. Reg. 53,157 (Int’l Trade Comm’n Aug. 11, 2016)

(“Final Determination”); see also Views of the Commission, USITC Pub. 4629, Inv. No.

731-TA-1279 (Final) (Aug. 2016), ECF No. 33-3 (“Views”); ITC Staff Report, Inv. No. 731-

TA-1279 (July 8, 2016), as revised by Mem. INV-OO-062 (July 13, 2016), ECF Nos. 33-

1 & 33-2 (“Staff Report”).1 Before the court is the USCIT Rule 56.2 motion for judgment

on the agency record filed by Plaintiffs Arkema, Inc., The Chemours Company FC, LLC,

Honeywell International Inc. and Plaintiff-Intervenor The American HFC Coalition

(collectively, “Plaintiffs”). See Plaintiffs’ Rule 56.2 Mot. J. Agency R., ECF No. 43 (“Pls.’

Br.”); see also Def. Int'l Trade Comm'n's Opp'n Pls.' Mot. J. Agency R., ECF No. 45

(“Def.’s Resp.”); Pls.’ Reply Br., ECF No. 60 (“Pls.’ Reply Br.”); Def.-Intervenors

Shandong Dongyue Chemical Co. Ltd., Zhejiang Sanmei Chemical Ind. Co., Ltd.,

Sinochem Environmental Protection Chemicals Co., Ltd., and Zhejiang Quhua Fluor-

Chemistry Co. Ltd.'s Opp'n Pls.' Mot. J. Agency R., ECF No. 50 (“Chinese Def.-

Intervenors Resp.”); Def.-Intervenor ICOR International Inc.’s Opp'n Pls.' Mot. J. Agency

R., ECF No. 52; Def.-Intervenor National Refrigerants, Inc.’s Opp'n Pls.' Mot. J.

Agency R., ECF No. 53 (“Nat’l Refrigerants Resp.”). The court has jurisdiction pursuant

1
  All citations to the Views, the agency record, and the parties’ briefs are to their
confidential versions.
Court No. 16-00179                                                                     Page 3

to Section 516A(a)(2)(B)(i) of the Tariff Act of 1930, as amended, 19 U.S.C.

§ 1516a(a)(2)(B)(i) (2012),2 and 28 U.S.C. § 1581(c) (2012).

                                                               I. Standard of Review

              The court sustains the Commission’s “determinations, findings, or conclusions”

unless they are “unsupported by substantial evidence on the record, or otherwise not in

accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). More specifically, when reviewing

agency determinations, findings, or conclusions for substantial evidence, the court

assesses whether the agency action is reasonable given the record as a whole. Nippon

Steel Corp. v. United States, 458 F.3d 1345, 1350–51 (Fed. Cir. 2006); see also Universal

Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951) (“The substantiality of evidence must

take into account whatever in the record fairly detracts from its weight.”). Substantial

evidence has been described as “such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,

407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.
197, 229 (1938)). Substantial evidence has also been described as “something less than

the weight of the evidence, and the possibility of drawing two inconsistent conclusions

from the evidence does not prevent an administrative agency’s finding from being

supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620

(1966). Fundamentally, though, “substantial evidence” is best understood as a word

formula connoting reasonableness review. 3 Charles H. Koch, Jr., Administrative Law and

2
 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2012 edition.
Court No. 16-00179                                                                      Page 4

Practice § 9.24[1] (3d ed. 2017). Therefore, when addressing a substantial evidence issue

raised by a party, the court analyzes whether the challenged agency action

“was reasonable given the circumstances presented by the whole record.” 8A West’s Fed.

Forms, National Courts § 3.6 (5th ed. 2017).

                                                               II. Discussion

              In June 2015, after receiving a petition from Plaintiffs, the Commission commenced

an investigation to determine whether imports of certain HFC blends and HFC

components3 from China were causing or threatening to cause material injury to the U.S.

industry pursuant to 19 U.S.C. § 1673d(b). See Final Determination. In its preliminary

determination, the Commission found the “domestic like product” at issue to be “a single

domestic like product consisting of HFC blends and HFC components within Commerce’s

scope definition.” See Views at 10; see also 19 U.S.C. § 1677(10) (“The term ‘domestic

like product’ means a product which is like, or in the absence of like, most similar in

characteristics and uses with, the article subject to an investigation under this subtitle.”).

Plaintiffs agreed with this finding, while Defendant-Intervenors argued that the

Commission should instead find that HFC Blends and Components are two separate like

products. See Views at 10–11. In its final determination, the Commission agreed with

3
  For purposes of the investigation and this opinion, “HFC Components” refer to three
single component hydrofluorocarbons: R-32, R-125, and R-143a. “HFC Blends” include:
R-404A, R-407A, R-407C, R- 410A, and R-507A—as these are the only five blends that
included two or more of the HFC Components, or the out-of-scope component R-134a
and at least one of the HFC Components. See Staff Report at I-10–I-12 (detailing scope
of investigation of HFC blends and components); Pls.’ Br. 10–11 (providing concise
explanations for these definitions with references to the Staff Report).
Court No. 16-00179                                                                 Page 5

Defendant-Intervenors and found HFC Blends and Components to be separate like

products. The Commission also unanimously concluded that imports of HFC Blends from

China were causing material injury to a U.S. industry, but that imports of HFC

Components from China were not causing or threatening to cause material injury to a

U.S. industry. See Final Determination. Plaintiffs challenge both the ITC’s determination

that HFC Blends and HFC Components are not a single like product, and that imports of

the HFC Components are not causing or threatening to cause material injury to a

U.S. industry. See Pls’. Br. at 1; Pls.’ Reply Br. at 21–23.

       In addressing the issue of whether HFC Blends and HFC Components are a single

domestic like product or two separate like products, the Commission utilized its semi-

finished products analysis. See Views at 13–14. “In a semiǦfinished product analysis,

the Commission currently examines: (1) whether the upstream article is dedicated to the

production of the downstream article or has independent uses; (2) whether there are

perceived to be separate markets for the upstream and downstream articles;

(3) differences in the physical characteristics and functions of the upstream and

downstream articles; (4) differences in the costs or value of the vertically differentiated

articles; and (5) significance and extent of the processes used to transform the upstream

into the downstream articles.” Id. at 14 n.40.

       Plaintiffs challenge the Commission’s application of the semi-finished products

analysis as unreasonable given the record. Specifically, Plaintiffs challenge as

unsupported by substantial evidence the Commission’s findings as to the “dedicated for

use,” “differences in value,” and “the significance and extent of transformation processes”
Court No. 16-00179                                                                       Page 6

prongs, as well as the Commission’s ultimate conclusion that HFC Blends and HFC

Components are separate like products. See Pls.’ Br. 7–24. Plaintiffs also contend that

the ITC’s findings as to four of the five prongs of its semi-finished products analysis were

unreasonable or arbitrary when compared to prior agency decisions. Id. at 24–33. The

court remands the Commission’s Final Determination as to the “dedicated for use” and

“value added” prongs for further reconsideration, and sustains the Final Determination as

to all other challenges raised by Plaintiffs.

                                                                  A. Dedicated for Use

              The first prong in the ITC’s semi-finished products analysis is whether the

upstream articles, HFC Components, are dedicated for use in the production of the

downstream articles, HFC Blends. See Views at 14. Here, the ITC found that

“consumption of domestically produced inǦscope HFC components for the production of

outǦofǦscope HFC blends and more than 30 outǦofǦscope refrigerants was not insignificant

during the [period of investigation (“POI”)]” (“dedicated for use finding”). Id. The ITC

calculated that, during the POI, “[a]pproximately [X] percent4 [(“X percent figure”)] of

domestic production of inǦscope HFC components was used in the production of outǦofǦ

scope refrigerant blends.” Id.

              Plaintiffs raise two challenges: (1) that the ITC’s finding that HFC Components are

not “dedicated for use” in the production of HFC Blends was unsupported by substantial

evidence, and (2) that the ITC’s dedicated for use finding was contrary to past practice.

4
    The X percent figure is [[                                 ]] percent.
Court No. 16-00179                                                                   Page 7

See Pls.’ Br. 12–17, 28–30; Pls.’ Reply Br. 2–9. Plaintiffs argue that the ITC incorrectly

attributes the X percent figure as representing the percentage of HFC Components used

in out-of-scope blends, arguing that the ITC misread its own data and that the X percent

figure describes “the ratio of in-scope to out-of-scope blends.” Pls.’ Br. at 12. Plaintiffs

contend that the ITC’s adoption of this ratio as a proxy for the proportion of HFC

Components used in out-of-scope blends demonstrates that the “Commission thus

misunderstood or misstated the extent to which HFC Components were dedicated to the

production of HFC blends [sic].” Id. at 13. Plaintiffs argue that the Commission’s

determination resulted in an overstatement of the usage of HFC Components in out-of-

scope blends. Id. at 12–15. Plaintiffs maintain that instead of relying upon the allegedly

incorrect X percent figure as the estimate of in-scope components used to produce out-

of-scope blends, the Commission should have selected the four percent figure put forth

by Plaintiffs’ witness at an ITC hearing. Id. at 12–15.

       The ITC maintains that the adoption of the ratio of the production volume of out-

of-scope blends to the volume of all total blends was a reasonable basis for estimating

the approximate percentage of in-scope components used to produce out-of-scope

blends. See Def.’s Resp. at 16–17. The ITC argues that the record demonstrates that the

majority of out-of-scope blends contained at least one HFC Component. Id. The

Commission emphasizes that it considers the totality of the facts and circumstances

regarding its semi-finished products analysis and that the Commission’s dedicated for

use finding was not based solely on the X percent figure. Id. at 17–18. The ITC further

contends that its finding is reasonable both as to its specific analysis on the dedicated for
Court No. 16-00179                                                                         Page 8

use prong, and as to the semi-finished products analysis as a whole, based on the totality

of the record. Id. Overall, the Commission maintains that it had competing data sets on

the record from which it chose to “place more weight on the compiled questionnaire data

in this case, rather than on an anecdotal estimate by one industry witness [proffered by

Plaintiffs].” Id. at 17.

              The Commission did not solely predicate its dedicated for use finding on the

X percent figure. See Views at 14–15. In finding that “consumption of domestically

produced in-scope HFC components for the production of out-of-scope HFC blends and

more than 30 out-of-scope refrigerants was not insignificant during the POI,”

the Commission noted that two HFC Components had stand-alone end uses in addition

to their uses as components. Id. This finding was limited, however, as the Commission

highlighted the parties’ agreement that “no more than [Y] percent5 of in-scope HFC

components are used as stand-alone products.” Id.

              The court agrees with Plaintiffs that it appears that the ITC incorrectly relied upon

the X percent figure as the approximate percentage of HFC Components used in out-of-

scope blends, and that this figure weighed significantly in the ITC’s finding that HFC

Components are not dedicated for use in the production of HFC Blends. The Views and

Staff Report are unclear as to how much weight the ITC placed on this data and how it

weighed the “dedicated for use” prong in comparison to the other four prongs in reaching

the ultimate determination. Accordingly, the court will remand this issue to the ITC so that

5
    Y percent is [[ ]] percent.
Court No. 16-00179                                                                        Page 9

the Commission may reconsider the use of the X percent figure and the weight assigned

to this prong of its analysis.

              Plaintiffs also argue that the ITC’s dedicated for use finding was not in accordance

with past practice. Specifically, Plaintiffs contend that the ITC’s “dedicated for use” finding

is tantamount to a requirement that 100 percent of components must be dedicated for

use in order to satisfy this prong, given that the record demonstrates that over Z percent6

of HFC Components are used to produce HFC Blends. SeePls.’ Br. at 28–29. Plaintiffs

maintain that the ITC has never set a 100 percent threshold for its dedicated to use

analysis and that the use of that threshold in this action is contrary to the Commission’s

established precedent. Id. The Commission agrees with Plaintiffs that there is not a 100

percent threshold for the “dedicated for use” prong, and explains that it has never

established any threshold percentage in evaluating this prong. Def.’s Resp. at 26. As to

past practice, the ITC argues that prior ITC determinations do not provide much guidance

for the agency’s examination of the “dedicated for use” prong of its semi-finished products

analysis given the fact-intensive nature of the inquiry. See Views at 19 n.62.

              The court agrees with the ITC that it did not, as Plaintiffs contend, adopt a 100

percent threshold in considering whether HFC Components are dedicated for use in the

production of HFC Blends. Rather the Commission based its “dedicated for use” finding

on the record as a whole rather than a simple numerical threshold. See id. at 14, 18.

Accordingly, the ITC reasonably explained the differences between this proceeding and

6
    Z percent is [[ ]] percent.
Court No. 16-00179                                                                            Page 10

its prior “dedicated for use” treatment.

                                                                 B. Differences in Value

              In comparing the value of HFC Components with HFC Blends, the ITC found

“[b]ased on reported financial data, the value added by blending operations of the

integrated domestic producers ranged from A to B percent7 during the POI, while the

value added by [National Refrigerant’s] blending operations ranged from C to D percent8

during the period.” Views at 16–17. Plaintiffs argue that in calculating the “value added”

by blending, the ITC erred in its analysis in two respects. First, Plaintiffs contend that the

ITC wrongly relied upon value added data that included costs and expenses associated

with the manufacture of HFC Components, rather than the blending of HFC Components

into Blends. See Pls.’ Reply Br. at 9–10. Second, Plaintiffs maintain that the ITC’s value

added calculations wrongfully “included costs of cylinders, other packaging costs, and

labor and overhead costs that were not related to blending operations,” thus distorting the

final value comparison. See Pls.’ Br. 17–21; see also Pls.’ Reply Br. 11–15. In addition to

these substantial evidence challenges, Plaintiffs contend that the ITC’s finding that there

are significant differences in the value of HFC Components and Blends was contrary to

prior ITC practice. See Pls.’s Br. 33; Pls.’ Reply Br. 20–21. The ITC, however, maintains

that its analysis of this prong was reasonable and should be sustained. See Def.’s Resp.

18–20.

              Plaintiffs contend that the financial data relied upon by the Commission in

7
    The range of A to B is [[                                  ]] percent to [[ ]] percent.
8
    The range of C to D is [[                                  ]] to [[ ]] percent.
Court No. 16-00179                                                                Page 11

calculating the value added by blending operations of the integrated domestic producers

was drastically overinflated and did not actually reflect the value added by blending HFC

Components. See Pls.’ Reply Br. at 9–10. Specifically, Plaintiffs argue that the data

underlying the A to B range calculated by the ITC for the integrated producers improperly

included significant labor and overhead costs incurred in the manufacture of components

rather than in blending operations. Id. The Commission does not dispute this contention,

but rather suggests that the data could serve as a sufficient approximation for the value

added by the integrated producers for the purposes of ITC’s broader consideration of

semi-finished products analysis. See Transcript of Oral Argument at 70–71, ECF No. 67

(Jan. 10, 2018). Counsel for the ITC pointed out that even if the value added data for the

integrated producers was improperly inflated, the value added data for National

Refrigerants was also cited and relied upon by the ITC and contained no such flaws. Id.

      Similar to the problem with the data set selection in the “dedicated for use” prong,

the court agrees with Plaintiffs. It appears that the ITC relied upon the incorrect data in

determining the A to B range as the approximate percentage of value added by the

integrated producers in the blending of HFC Components into HFC Blends. The Views

provide very limited discussion of how the ITC used this range, in conjunction with the

value added data from National Refrigerants, in considering the “value added” prong and

the ultimate separate like product determination. See Views at 16–17 (citing value added

and average unit value data, without any comment on how that data influenced the

separate like product determination and the subsidiary “value added” finding); see also

id. at 18–19 (“Conclusion” section describing how each factor, except “value added”,
Court No. 16-00179                                                                 Page 12

supported the ITC’s determination that HFC Components and Blends are separate like

products). The Views and the Staff Report are unclear as to how much weight the ITC

placed on these data points and how it weighed the “value added” prong in comparison

to the other four prongs in reaching the ultimate determination. Accordingly, the court will

remand so that the Commission may reconsider the use of the data in the A to B range

and the weight assigned to this prong.

       Plaintiffs also argue that the ITC included an overly broad set of “conversion costs”

in its value added calculation. Plaintiffs seek to narrowly limit the “blending” process to

include only the actual mixing of the HFC Components into a resultant HFC Blend, with

no regard to any attendant or subsequent processes required to produce, transport, and

maintain the final product. The court disagrees. The ITC requested and evaluated the full

ambit of conversion costs incurred in transforming HFC Components into the final product

of HFC Blends, including associated expenses for packaging. See Def.’s Resp. at 19–20

(“conversion costs (direct labor and other factory costs -- those costs associated with

transforming a more basic product into a salable product) have been consistently treated

by the Commission as the relevant numerator in the value added calculation”).

Additionally, it appears from the record that Plaintiffs were well aware that the ITC viewed

costs associated with blending operations broadly as including packaging costs and

related overhead, but failed to object to the questionnaires’ language with respect to this

data or provide the ITC with a breakdown of their data that separated out these costs.

The ITC’s decision to consider the full set of data associated with the “conversion costs”

of blending, including attendant costs covering the expense of packaging the HFC Blends
Court No. 16-00179                                                                              Page 13

into cylinders suitable for storage and sale, is reasonable given the available data on the

record for calculating the “value added” to HFC Components by blending them into HFC

Blends.

              Plaintiffs further argue that even if the Commission’s evaluation of the “value

added” prong is supported by substantial evidence, the Commission nevertheless acted

contrary to prior ITC practice. Specifically, Plaintiffs contend that, by not finding HFC

Blends and Components to be a single like product, the ITC departed from past practice

in that it had previously found a single like product where the value of a component

accounted for 50–70% of the final product’s value. See Pls.’ Br. at 33–34 (citing Outboard

Engines from Japan, Inv. No. 731-TA-1069 (Final), USITC Pub. 3752 (Feb. 2005) at 6);

Pls.’ Reply Br. at 20–21. Plaintiffs maintain that a similar determination that components

and blends are a single like product is appropriate in this action given that the Commission

found that “the ratio of the average unit value of … subject HFC components to the

average unit value of HFC blends ranged from [E to F] percent.”9 Views at 16.

              The Commission distinguishes Outboard Engines from Japan, noting that, in that

proceeding, “it determined a single like product, in part, based on its findings that there

were significant differences in costs and values between the component and the finished

product.… [A]lthough the component comprised a significant percentage of the value of

the finished article, the Commission found that the upstream article (powerhead) had no

separate market as it was internally consumed by the producer in the manufacture of

9
    The E to F range is from [[                                ]] percent to [[   ]] percent.
Court No. 16-00179                                                                Page 14

another article.” Def.’s Resp. at 30. Plaintiffs argue that the Commission’s distinction is

unavailing because it eliminates any difference between the Commission’s consideration

of the “dedicated for use” prong and the “value added” prong. See Pls.’ Reply Br. at 20–

21.

       Given that the ITC may reasonably place more weight on the finding that there

were independent uses and markets for the HFC Components, and give little weight to

the finding that the total cost of HFC Components was a high percentage of the HFC

Blends, the ITC’s consideration of the “value added” prong did not deviate from past

practice.

              C. Transformation of HFC Components into HFC Blends

       The Commission evaluated the significance and the extent of processes used to

transform HFC Components into Blends, and found that the “processes to transform the

HFC components into HFC blends are not insubstantial.” See Views at 17–18. Plaintiffs

challenge this finding as unsupported by substantial evidence, raising similar arguments

to those regarding the “value added” prong, namely, that the ITC’s calculation of labor

and other expenses involved in the blending and creation of HFC Blends was over-

inclusive as compared with the production of HFC Components. See Pls.’ Br. 21–24, 33–

34; see also Pls.’ Reply Br. 9–15, 20–21. The ITC maintains that it reasonably relied on

industry questionnaire responses as to the costs and labor involved in the production of

HFC Blends and Components separately. See Def.’s Resp. 20–25. This data included

packaging and associated labor costs with respect to the production of both HFC

Components and Blends. Id. at 21–23. Plaintiffs’ arguments fail to convince the court that
Court No. 16-00179                                                                   Page 15

the ITC unreasonably considered employee numbers or costs associated with blending

operations too broadly.

      With respect to the labor data, the ITC specifically “requested that the employee

data be broken down by the number of employees involved in blending in-scope HFC

components, out-of-scope R-134a, and in-scope HFC blends.” Id. at 23 (citing to

language from the producer questionnaire issued to Plaintiffs). The producers provided

this data that covers “all aspects of both the component and blending production

processes including the tasks required for the production, warehousing, and sale for

components and blends separately.” Id. On review of this data, the Commission

determined that “[t]he processes to transform HFC components into HFC blends are not

insubstantial.” Views at 17. As the Commission explained, “[t]he blending process is not

as capital intensive as the process to produce HFC components, and an HFC blending

facility costs significantly less than an HFC component [production] facility….

Nevertheless, the production of HFC blends involves technical expertise and

sophisticated equipment.” Id. In making this finding, the Commission highlighted the facts

that an HFC blender “must have a highly skilled workforce” and that “a higher number of

production-related workers were involved in HFC blending operations than in the

production of HFC components.” Id. at 18.

      Plaintiffs again seek to limit “blending” to refer only to the specific process of mixing

the HFC Components to form HFC Blends. Plaintiffs’ limitation, however, ignores the data

conveying the broader costs associated with creating the HFC Blends as marketable

products. The Commission’s questionnaires requested a data set to provide a full picture
Court No. 16-00179                                                                   Page 16

as to the magnitude and complexity of the processes of creating a final HFC Blend product

from HFC Components. Therefore, the ITC acted reasonably in using this full dataset,

rather than the limited and narrow data specifically relating to particular “blending

operations” preferred by Plaintiffs. Accordingly, the court sustains the ITC’s finding on this

prong.

                                    D. Separate Markets

         Plaintiffs’ sole challenge to the ITC’s finding under the “separate markets” prong is

that the Commission departed from its “well-established precedent” without explanation.

See Pls.’ Br. 25, 30–31. Specifically, Plaintiffs contend that “Commission practice permits

finding a single market to encompass different stages of processing.” Id. at 30. Plaintiffs

argue that the Commission has “specifically rejected the argument that sale of parts to

processors and sales of the finished product to distributors constitute separate markets.”

Id. at 31 (citing Certain Oil Country Tubular Goods from India, Korea, the Philippines,

Taiwan, Thailand, Turkey, Ukraine, and Vietnam, Inv. Nos. 701-TA-499- 500, 731-TA-

1215-1217, and 1219-1223 (Final), USITC Pub. 4489 (Sept. 2014) at 10).

         The Commission distinguishes the specific precedent relied upon by Plaintiffs,

noting that in the determinations cited by Plaintiffs the Commission had found “no

independent uses for the component parts…other than as part of the downstream article.”

Def.’s Resp. at 28. To the contrary, the ITC explains that “the record in the HFC

investigation contained evidence of independent uses for the HFC components. That is,

based on the facts and in particular market-specific questionnaire responses, the

Commission reasonably found that there is an independent market for HFC components
Court No. 16-00179                                                                    Page 17

separate and apart from the market for them to be used in finished HFC blends.” Id. (citing

Views at 14). Moreover, in the Views, the Commission distinguished the prior

investigations cited by Plaintiffs on the facts. See Views at 19 (explaining that

investigations cited by Plaintiffs were dissimilar to analysis of HFC Components and

Blends, as cited investigations involved products where components were used

exclusively to produce final product, or where component product was sold without further

processing “it was sold to the same end users for the same applications as the

downstream product”).

              Plaintiffs maintain that the Commission was overly simplistic in its analysis how

HFC Components are sold to blenders for their eventual use in HFC Blends. See Pls.’

Reply Br. at 17–18. Plaintiffs also note that the record established beyond dispute that

any “independent uses” of HFC Components (i.e., uses other than for the production of

HFC Blends) amounted to “no more than [Y] percent10 of the consumption of

components.” Id. at 18. Plaintiffs contend that a mere Y percent for independent usage

cannot constitute a “material difference” that should play into the Commission’s evaluation

of the markets in which HFC Components and Blends are sold. Id. While Plaintiffs would

ignore the existence of a small market for independent uses of HFC Components, the

Commission disagreed and found “meaningful distinctions” between the markets for

HFC Blends and Components. Views at 19. The ITC explained that the evidence of the

sales of HFC Components between integrated producers and independent blenders

10
     See explanation of Y, supra note 5.
Court No. 16-00179                                                                 Page 18

indicated that “the markets for HFC blends and HFC components operate differently.” Id.

at 15. The court sustains the ITC’s evaluation of the “separate markets” prong as

reasonable.

              E. Differences in Physical Characteristics and Functions

       As with the previous prong, Plaintiffs’ sole claim is that the Commission maintains

a “generally consistent practice” as to the “differences in the physical characteristics and

functions” prong and that the Commission erred by departing from its “well-established

precedent” without explanation. See Pls.’ Br. 25, 31–33. Specifically, Plaintiffs challenge

the ITC’s consideration of the HFC Components’ physical characteristics with respect to

each other and “without regard to the impact of those characteristics on the resulting HFC

Blend.” Id. at 32. Plaintiffs argue that the Commission’s past practice in evaluating the

physical characteristics prong of the semi-finished product analysis does not involve a

comparison of the semi-finished components of finished goods against each other,

but rather an evaluation of the physical characteristics of semi-finished components with

a focus on “whether the components impart essential attributes to the finished product.”

Id. (citing prior ITC determinations concluding that essential components of finished

goods may be semi-finished products within the same class as the finished product

instead of separate like products).

       The Commission explains that the ITC findings in prior investigations highlighted

by Plaintiffs involve different industries and products and do not conflict with the ITC’s

findings in this investigation. See Views at 19 n.62; Def.’s Resp. at 29. In the ITC

determinations cited by Plaintiffs, the semi-finished products/components “had no
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independent function or use” other than as parts of the finished products; however, here,

the ITC found that the HFC Components do in fact have independent uses other than as

parts of finished HFC Blends. See Views at 19 n.62. In the court’s view, Plaintiffs’ reliance

on prior ITC practice in these circumstances is misplaced.

       Plaintiffs ignore the fact that the Commission emphasized significant differences

between HFC Blends and HFC Components, finding that

              HFC components are used, in most cases, as intermediate
              products because such components are hazardous and, for
              two of the components, flammable (RǦ32 and RǦ143a).
              Accordingly, HFC components must be mixed together in
              prescribed ratios to make nonǦtoxic, nonǦflammable HFC
              blends suitable for use as refrigerants in air conditioning and
              refrigeration applications. Thus, there are some significant
              differences in the physical characteristics of the upstream and
              downstream products.

Id. at 16; see also Staff Report at I-29 (detailing the “physical differences between the

semifinished in-scope components and the downstream in-scope blends.”). Accordingly,

the court sustains the ITC’s consideration of the “differences in the physical

characteristics and functions” of HFC Components and HFC Blends as reasonable.

                                      III. Conclusion

       Based on the foregoing, the Court remands the Commission’s Final Determination

for reconsideration of the “dedicated for use” and “value added” prongs of its semi-

finished products analysis, and sustains the remaining portions of that analysis.

       Accordingly, it is hereby

       ORDERED that the Final Determination is sustained, with the exception of the

Commission’s dedicated for use and value added prongs of its semi-finished products
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analysis; it is further

       ORDERED that the Final Determination is remanded to the Commission to

reconsider the dedicated for use and value added prongs of its semi-finished products

analysis; it is further

       ORDERED that the Commission shall file its remand results on or before April 18,

2018; and it is further

       ORDERED that, if applicable, the parties shall file a proposed scheduling order

with page limits for comments on the remand results no later than seven days after the

Commission files its remand results with the court.

                                                           /s/ Leo M. Gordon
                                                         Judge Leo M. Gordon

Dated: February 16, 2018
       New York, New York