Risen Energy Co., Ltd. v. United States

United States Court of Appeals
for the Federal Circuit
______________________
RISEN ENERGY CO., LTD.,
Plaintiff-Appellant
TRINA SOLAR CO., LTD., ET AL.,
Plaintiffs
CANADIAN SOLAR INC., CANADIAN SOLAR
INTERNATIONAL LIMITED, CANADIAN SOLAR
MANUFACTURING (CHANGSHU), INC.,
CANADIAN SOLAR MANUFACTURING
(LUOYANG), INC., CSI CELLS CO., LTD.,
CANADIAN SOLAR (USA), INC.,
Plaintiffs-Appellees
v.
UNITED STATES
Defendant-Appellee
SUNPOWER MANUFACTURING OREGON, LLC,
Defendant
______________________
2023-1550
______________________
Appeal from the United States Court of International
Trade in No. 1:20-cv-03743-CRK, Judge Claire R. Kelly.
______________________
Decided: December 9, 2024
______________________
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ALEXANDRA H. SALZMAN, DeKieffer & Horgan, PLLC,
Washington, DC, argued for plaintiff-appellant. Also
represented by JAMES KEVIN HORGAN, GREGORY S.
MENEGAZ.
ASHLEY AKERS, Commercial Litigation Branch, Civil
Division, United States Department of Justice,
Washington, DC, argued for defendant-appellee. Also
represented by REGINALD THOMAS BLADES, JR., BRIAN M.
BOYNTON, PATRICIA M. MCCARTHY; BRISHAILAH BROWN,
Office of the Chief Counsel for Trade Enforcement and
Compliance, United States Department of Commerce,
Washington, DC.
JONATHAN STOEL, Hogan Lovells US LLP, for plaintiffs-
appellees. Also represented by LINDSAY BROWN, CRAIG A.
LEWIS, NICHOLAS SPARKS.
______________________
Before DYK, STOLL, and STARK, Circuit Judges.
Opinion for the court filed by Circuit Judge DYK.
Opinion concurring-in-part and dissenting-in-part
filed by Circuit Judge STARK.
DYK, Circuit Judge.
This appeal concerns the Sixth Administrative Review
of an antidumping order concerning crystalline silicon
photovoltaic cells (commonly referred to as “solar cells”)
from the People’s Republic of China.
Appellant Risen Energy Co., Ltd. (“Risen”) is a Chinese
exporter of solar cells, whose products are subject to the
antidumping order imposed by the Department of
Commerce (“Commerce”). Risen was selected as a
mandatory respondent for such review. Since China is a
nonmarket economy to calculate a dumping margin,
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Commerce used surrogate values from Malaysia for
computing normal values (home market price) for the Sixth
Administrative Review. The Court of International Trade
(“Trade Court”) sustained Commerce’s surrogate value
calculations for Risen’s physical inputs and its surrogate
financial ratio calculations. See Risen Energy Co. v. United
States, 569 F. Supp. 3d 1315, 1326 (Ct. Int’l Trade 2022)
(Risen I); Risen Energy Co. v. United States, 611 F. Supp.
3d 1384, 1389–94 (Ct. Int’l Trade 2022) (Risen II). Risen
appeals, challenging Commerce’s surrogate value
calculations for its backsheet and ethyl vinyl acetate
(“EVA”), and Commerce’s overhead ratio calculation.
Because Commerce’s selections of surrogate values for
Risen’s backsheet and EVA inputs were supported by
substantial evidence, but Commerce’s surrogate overhead
ratio calculation was not, we affirm in part, vacate in part,
and remand.
BACKGROUND
I
The government imposes antidumping duties on
foreign merchandise sold “in the United States at less than
its fair value.” Changzhou Trina Solar Energy Co. v.
United States, 975 F.3d 1318, 1321 (Fed. Cir. 2020)
(quoting 19 U.S.C. § 1673(1)). To determine the duties,
Commerce calculates a “dumping margin” for each entry of
merchandise subject to review. 19 U.S.C.
§ 1675(a)(2)(A)(ii). A dumping margin is “the amount by
which the normal value exceeds the export price or
constructed export price of the subject merchandise.” Id.
§ 1677(35)(A).
“Normal value” generally will be “the price at which the
foreign like product is first sold . . . for consumption in the
exporting country, in the usual commercial quantities and
in the ordinary course of trade and, to the extent
practicable, at the same level of trade as the export price or
constructed export price[.]” Id. § 1677b(a)(1)(B)(i).
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However, if it is determined that “the subject merchandise
is exported from a nonmarket economy” (such as China),
and “available information does not permit the normal
value of the subject merchandise to be determined” using
the price of the product as first sold in the originating
country, Commerce must calculate normal value by valuing
the “factors of production utilized in producing the
merchandise” in a comparable “market economy country or
countries.” Id. § 1677b(c)(1).
The factors of production that Commerce must value
include, but are not limited to, “hours of labor required,
quantities of raw materials employed, amounts of energy
and other utilities consumed, and representative capital
cost, including depreciation.” Id. § 1677b(c)(3). Once
Commerce identifies surrogate values for these factors of
production, “an amount for general expenses and profit
plus the cost of containers, coverings, and other expenses”
is added to calculate normal value. Id. § 1677b(c)(1)(B).
Commerce values these expenses “by using financial ratios
derived from financial statements of producers of
comparable merchandise in the surrogate country.” Ad Hoc
Shrimp Trade Action Comm. v. United States, 618 F.3d
1316, 1319 (Fed. Cir. 2010).
By identifying a surrogate country and surrogate
values for the factors of production, Commerce
approximates “what a non-market economy manufacturer
might pay in a market economy setting.” Shakeproof
Assembly Components Div. of Ill. Tool Works v. United
States, 268 F.3d 1376, 1382 (Fed. Cir. 2001).
II
In March 2019, Commerce initiated this Sixth
Administrative Review of an earlier antidumping order
covering solar cells from China for a period of review from
December 1, 2017, through November 30, 2018. See
Initiation of Antidumping Duty and Countervailing Duty
Administrative Reviews, 84 Fed. Reg. 9300 (Dep’t of Com.
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Mar. 14, 2019). Risen was selected as a mandatory
respondent. See Crystalline Silicon Photovoltaic Cells,
Whether or Not Assembled Into Modules, From the
People’s Republic of China: Preliminary Results, 85 Fed.
Reg. 7532 (Dep’t of Com. Feb. 10, 2020); see also 19 U.S.C.
§ 1677f-1(c)(2); 19 C.F.R. § 351.204(c)(2).1
China is a nonmarket economy, so Commerce was
required to select a primary surrogate country and
individual surrogate values for Risen’s various inputs. See
19 U.S.C. § 1677b(c).
In October 2020, Commerce published the final results
of its administrative review. See Crystalline Silicon
Photovoltaic Cells, Whether or Not Assembled Into
Modules, From the People’s Republic of China: Final
Results, 85 Fed. Reg. 62,275 (Dep’t of Com. Oct. 2, 2020).
Commerce selected Malaysia as the primary surrogate
country, and it used import data from certain of the
Malaysia Harmonized Tariff Schedule (“HTS”) categories
applicable to “plates and sheets” to value Risen’s backsheet
and EVA inputs,2 rejecting Risen’s position that Commerce
should use the import data related to the HTS categories
that apply to “film” instead. Commerce additionally used
the 2018 financial statement from Malaysian solar cell
producer Hanwha Q Cells Malaysia to calculate surrogate
financial ratios, including overhead. Risen filed suit in the
Trade Court, arguing that Commerce’s determinations
1 Trina Solar Co., Ltd. (“Trina”) was also selected as
a mandatory respondent and participated in the litigation
below by challenging certain of Commerce’s
determinations. Trina did not join in Risen’s appeal.
2 Backsheet is a flexible plastic product used to
protect the back of solar cells from water, sunlight,
corrosion, and other environmental factors. EVA is a
flexible plastic product used to encapsulate solar cells and
protect them from ultraviolet aging and weathering.
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were not supported by substantial evidence. See Risen I,
569 F. Supp. 3d at 1320.
The Trade Court initially agreed with Risen that
Commerce’s valuations of its backsheet and EVA inputs
under the HTS categories it chose were “not supported by
substantial evidence.” Id. at 1327, 1331–32. The Trade
Court agreed that Commerce had selected different HTS
categories to value Risen’s backsheet and EVA in a prior
administrative review, and Commerce had not adequately
explained its reasons for its change in practice. Id. at
1331–32. The Trade Court remanded the matter to
Commerce for the agency to further “explain its departure
from its historical treatment” of those inputs. Id. at 1332.
However, the Trade Court sustained Commerce’s
surrogate financial ratio calculation for overhead, despite
its reservations about Commerce’s rationale, finding
“Commerce’s reasoning could be clearer.” Id. at 1332.
Nonetheless, the court could “reasonably discern from
Commerce’s citation” to two notes within the 2018 Hanwha
financial statement that Commerce’s allocation
methodology was compliant with a standard in the
International Financial Reporting Standards (“IFRS”)
applicable to inventories. Id. at 1333–34.
On remand, Commerce reopened the record to further
substantiate its choice of HTS categories for Risen’s
backsheet and EVA inputs. See Risen II, 611 F. Supp. 3d at
1391–93. Commerce placed on the record abstracts from
two standards of the American Society for Testing and
Materials (“ASTM”), ASTM D4801 and ASTM D6988,
relating to film and sheet. See id. at 1392–93. Commerce
continued to value Risen’s backsheet and EVA with the
HTS categories applicable to “sheet,” as opposed to the
“film” categories Risen wanted, because in Commerce’s
view, the ASTM standards define “sheet” as materials with
a thickness greater than 0.25 mm, and both of Risen’s
inputs meet that definition. The Trade Court sustained
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Commerce’s remand determinations, concluding that they
were reasonable in light of the new definition provided by
the ASTM standards. See id. at 1392–94.
Risen appeals. We have jurisdiction pursuant to 28
U.S.C. § 1295(a)(5).
DISCUSSION
We review Commerce’s determinations using the same
standard as the Trade Court—that is, whether those
determinations are “unsupported by substantial evidence
on the record, or otherwise not in accordance with law[.]”
19 U.S.C. § 1516a(b)(1)(B)(i); see Changzhou Trina Solar
Energy, 975 F.3d at 1325.
I
We first address the issue of Commerce’s classification
of Risen’s backsheet and EVA inputs under the Malaysia
HTS categories applicable to “sheet” instead of “film.”
In assessing factors of production, Commerce is
obligated to use the “best available information” from the
surrogate country to identify an exporter’s inputs and
assign surrogate values to them. See Shakeproof Assembly
Components, 268 F.3d at 1381 (quoting 19 U.S.C.
§ 1677b(c)(1)). Commerce “has broad discretion” to
determine what information meets that standard because
the tariff statute does not define what constitutes the “best
available information.” Changzhou Trina Solar Energy,
975 F.3d at 1331 (quoting QVD Food Co. v. United States,
658 F.3d 1318, 1323 (Fed. Cir. 2011)). In general,
Commerce will select, “to the extent practicable, surrogate
values that are publicly available, are product-specific,
reflect a broad market average, and are contemporaneous
with the period of review.” Id. (quoting Qingdao Sea-Line
Trading Co. v. United States, 766 F.3d 1378, 1386 (Fed. Cir.
2014)).
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Commerce frequently uses import data from HTS
categories as the “best available information” to calculate
a specific surrogate price by weight (or unit) for the input
under the HTS category chosen. See, e.g., id. at 1332–33
(holding that Commerce’s “decision to value Trina’s module
glass using Thai imports of tempered glass classified under
HTS Subheading 7007.19.900000” was supported by
substantial evidence). In doing so, Commerce seeks to
select the HTS category that most precisely corresponds to
the particular input. See SolarWorld Ams., Inc. v. United
States, 910 F.3d 1216, 1223 (Fed. Cir. 2018).
Risen agrees that valuation using import data from
HTS categories is appropriate but objects to Commerce’s
choice of HTS “sheet” categories for its backsheet and EVA
inputs, arguing that Commerce could not reasonably rely
upon the ASTM standards because those standards do not
bear a “reasonable relationship to the inputs in question or
defin[e] film and sheet.” Appellant Br. 16. Instead, Risen
argues, Commerce should have used the product
specifications and marketing materials Risen placed on the
record to select HTS categories. We disagree.
We have recognized that, under the statute, industry
standards are highly relevant to determining what
merchandise is subject to an antidumping duty order. For
example, in ArcelorMittal Stainless Belgium N.V. v. United
States, 694 F.3d 82 (Fed. Cir. 2012), we stated that
“[b]ecause the primary purpose of an antidumping order is
to place foreign exporters on notice of what merchandise is
subject to duties, the terms of an order should be
consistent, to the extent possible, with trade usage.” Id. at
88. More recently, in Saha Thai Steel Pipe Public Co. v.
United States, 101 F.4th 1310 (Fed. Cir. 2024), we affirmed
Commerce’s scope ruling in part because the fact that the
exporter’s merchandise was certified “in compliance with
ASTM specifications” supported Commerce’s reading of the
plain language of the order to include the exporter’s
products. Id. at 1327. Moreover, Commerce’s regulations
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specifically direct the agency to consult industry standards
where the scope of an antidumping duty order is
ambiguous. See 19 C.F.R. § 351.225(k). Given this
practice, it was not unreasonable for Commerce to seek
guidance from a familiar source—industry standards—to
inform its choice of which HTS categories best apply to
Risen’s inputs.
The first standard relied upon by Commerce, ASTM
D6988, is titled “Standard Guide for Determination of
Thickness of Plastic Film Test Specimens,” and “covers the
determination of the thickness of plastic films where the
thickness is used directly in determining the results of
tests for various properties.” J.A. 7417–18. The standard
defines “film” as an “optional term for sheeting having a
nominal thickness no greater than 0.25 mm[.]” J.A. 7418.
The second standard, ASTM D4801, is titled “Standard
Specification for Polyethylene Sheeting in Thickness of
0.25 mm (0.010 in.) and Greater,” and “covers the
requirements for extruded (cast or blown) and
compression-molded sheeting made from low-, medium-,
and high-density polyethylenes and copolymers[.]” J.A.
7421–22. Taken together, Commerce understood these
standards as setting forth a distinction between
polyethylene “sheet” and “film,” which turned on the
thickness of the material. The fact that the thickness of
Risen’s backsheet and EVA inputs fell within the “sheet”
definition (and not the “film” definition) led Commerce to
conclude that those inputs were more appropriately
categorized under the HTS categories for “sheet” rather
than “film.”
Commerce’s choices of the HTS categories applicable to
“sheet” for Risen’s backsheet and EVA inputs were
supported by substantial evidence and not otherwise
contrary to law.
Risen’s arguments to the contrary are not persuasive.
First, we reject Risen’s argument that the ASTM standards
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should be disregarded because they do not mention Risen’s
inputs or the solar industry more generally. The standards
cited by Commerce are not limited to particular products
and appear to cover a broad array of plastic materials.
Risen offers no alternative industry standards, and we
conclude that it was reasonable for Commerce to determine
that the industry standards it introduced constituted the
best available information to distinguish between “sheet”
and “film.”
As the Trade Court indicated, the product
specifications and marketing materials submitted by Risen
do not provide better information than the definitions
found in the ASTM standards. See Risen II, 611 F. Supp.
3d at 1392–93. Beyond identifying backsheet and EVA as
“film,” the materials submitted by Risen do not
demonstrate why those inputs are considered “film” or shed
light on the distinction between “sheet” and “film.”
Further, at least as to EVA, these materials use the terms
“sheet” and “film” interchangeably, such that the use of the
term “film” in those materials is stripped of any
definitional quality that it might otherwise hold.3
Nor are we persuaded that Commerce erred by
selecting new HTS categories for Risen’s inputs in this
review. “Commerce may change its conclusions from one
review to the next based on new information and
arguments, as long as it does not act arbitrarily and it
articulates a reasonable basis for the change.” Qingdao
Sea-Line, 766 F.3d at 1387. Here, Commerce provided
3 Risen additionally argues that flexibility should
have been the distinguishing characteristic to select
between the “sheet” and “film” HTS categories for its
backsheet and EVA inputs. However, all the HTS
categories in dispute here cover materials that are non-
rigid, so flexibility is not an appropriate means of
distinguishing between them.
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sufficient explanation for why the HTS categories for
“sheet” were preferable to the HTS categories for “film” in
this Sixth Administrative Review.
Commerce explained that it chose the HTS category
applicable to “sheet” for Risen’s backsheet, but did not do
so in prior reviews, because the ASTM standards were
placed on the record here, whereas Commerce did not have
the benefit of those standards in previous reviews. That is
sufficient to sustain Commerce’s determination, as Risen
has not shown that “Commerce consistently followed a
contrary practice in similar circumstances and provided no
reasonable explanation for the change in practice.” Consol.
Bearings Co. v. United States, 348 F.3d 997, 1007 (Fed. Cir.
2003).
We further agree with the Trade Court that
Commerce’s characterization of EVA as “sheet” as opposed
to “film” was not inconsistent with Commerce’s selection of
HTS categories in prior administrative reviews where
Thailand was selected as the surrogate country. Risen II,
611 F. Supp. 3d at 1393–94. In those proceedings,
Commerce used an “other” Thai HTS category that covered
“plates, sheets, film, foil and strips of polymers of
ethylene.” J.A. 19. Commerce explained that Thailand’s
tariff schedule did not distinguish between “sheet” and
“film” of polyethylene, but instead grouped them together
in a single category. Malaysia, by contrast, had separate
categories for polyethylene “sheet” and “film.” Using
Malaysia’s more precise HTS categories, Commerce
determined that the category applicable to “sheet” more
appropriately matched Risen’s EVA input. But Commerce
did not, as Risen contends, previously classify Risen’s EVA
input as a “film” rather than a “sheet.”
We conclude that Commerce’s classifications of Risen’s
backsheet and EVA inputs under the Malaysia HTS
categories applicable to “sheet” were reasonable and
supported by substantial evidence. We affirm the Trade
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Court on this point. We further reject Risen’s alternative
argument that Commerce should have calculated
surrogate values by averaging the values applicable to the
HTS categories for “sheet” and “film” for each of its inputs
because we do not find the record ambiguous on this issue.
II
The second issue is whether Commerce properly
characterized certain unidentified costs in the 2018
Hanwha financial statement as overhead.
Separate from physical inputs, Commerce must
calculate surrogate financial ratios for manufacturing
overhead, selling, general, and administrative expenses,
and profit. See 19 U.S.C. § 1677b(c)(1)(B). Commerce often
uses the financial statements of producers of comparable
merchandise in a surrogate country as sources from which
to derive its surrogate financial ratios. See, e.g., Ad Hoc
Shrimp Trade Action Comm., 618 F.3d at 1319; Qingdao
Sea-Line, 766 F.3d at 1387.
Although Commerce enjoys discretion in how it
calculates surrogate financial ratios, see Fujitsu Gen. v.
United States, 88 F.3d 1034, 1045 (Fed. Cir. 1996),
including in how it “valu[es] the factors of production on
which factory overhead is based[,]” Magnesium Corp. of
Am. v. United States, 166 F.3d 1364, 1372 (Fed. Cir. 1999),
“[a]n overriding purpose of Commerce’s administration of
the antidumping laws is to calculate dumping margins as
accurately as possible.” Yangzhou Bestpak Gifts & Crafts
Co. v. United States, 716 F.3d 1370, 1379 (Fed. Cir. 2013)
(citing Rhone Poulenc, Inc. v. United States, 899 F.2d 1185,
1191 (Fed. Cir. 1990)). Commerce is required to
demonstrate that its calculations are supported by
“substantial evidence” and otherwise “in accordance with
law[.]” 19 U.S.C. § 1516a(b)(1)(B)(i); see, e.g., US
Magnesium LLC v. United States, 839 F.3d 1023, 1026
(Fed. Cir. 2016); SolarWorld, 910 F.3d at 1222. “This
standard requires Commerce to examine the record and
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articulate a satisfactory explanation for its action.”
Yangzhou Bestpak Gifts & Crafts, 716 F.3d at 1378; CS
Wind Vietnam Co. v. United States, 832 F.3d 1367, 1376
(Fed. Cir. 2016). Stated differently, Commerce bears the
burden of demonstrating that its conclusions are of a kind
that a reasonable mind might accept as adequately
supported when viewing the record as a whole. See
Downhole Pipe & Equip., L.P. v. United States, 776 F.3d
1369, 1374 (Fed. Cir. 2015). Speculation and guesswork
are not substitutes for substantial evidence. See Yangzhou
Bestpak Gifts & Crafts, 716 F.3d at 1378; Seah Steel Vina
Corp. v. United States, 950 F.3d 833, 847 (Fed. Cir. 2020).
Risen primarily argues that Commerce’s surrogate
overhead ratio calculation is not supported by substantial
evidence because Commerce’s calculation is not supported
by the financial statement on which Commerce relies. The
Trade Court observed that Commerce’s explanation for
why it determined that unidentified costs were allocable to
overhead “could be clearer,” but nonetheless sustained
Commerce’s determination. Risen I, 569 F. Supp. 3d at
1332. We think Commerce’s approach is so unclear that it
is insufficient.4
4 Contrary to the Dissent at 2, in holding that
Commerce’s explanation is insufficient, we are not going
beyond the parties’ arguments. We are simply holding that
the explanation given was insufficient because it lacked
substantial evidence (as argued by Risen) but that
Commerce should be given a second opportunity to explain
why it reached the correct result notwithstanding the lack
of substantial evidence for its original theory. Risen
explicitly sought a remand. In any event, we cannot review
a decision that we cannot understand. “[T]he courts cannot
exercise their duty of review unless they are advised of the
considerations underlying the action under review . . . .
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Commerce began calculating its overhead ratio by
selecting the 2018 Hanwha financial statement as the best
available information from which to derive its surrogate
ratios. Risen does not object to Commerce’s selection of this
financial statement as the best available information.
Using that statement, Commerce calculated a final
overhead ratio of 21.70 percent for Risen by dividing what
it deemed “overhead costs” by the costs for materials, labor,
and energy (“MLE”).5
Commerce began its analysis with Hanwha’s costs of
goods sold, which was 2,003,400 Malaysian ringgits.6 From
that total, Commerce sought to identify what proportion of
the costs of goods sold represented MLE. Note 17 to the
financial statement explained that, of the total costs of
goods sold, 1,648,000 ringgits are attributable to
“inventories.” Commerce considered these inventory costs
to be roughly synonymous with Hanwha’s total MLE costs,
based on Note 2.12 of the financial statement. That Note
provided as follows:
[T]he orderly functioning of the process of review requires
that the grounds upon which the administrative agency
acted b[e] clearly disclosed and adequately sustained.”
SEC v. Chenery Corp., 318 U.S. 80, 94 (1943).
5 The parties do not explain the impact that
Commerce’s ultimate overhead calculation had on the final
dumping margin applied to Risen. We assume, based on
the statutory scheme and the nature of the parties’ dispute,
that a larger overhead ratio correlates to an increase in
normal value which, in turn, will lead to a higher dumping
margin for an exporter. See 19 U.S.C. § 1677b(a).
6 The financial statement specifies that these values
are shown in the thousands of ringgits.
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Costs incurred in bringing the Inventories to their
present location and condition are accounted for as
follows: . . .
Finished goods and work-in-progress: costs of
direct materials and labour and a proportion of
manufacturing overheads based on normal
operating capacity.
J.A. 6666. Commerce concluded that Note 2.12’s reference
to a “proportion of manufacturing overheads based on
normal operating capacity” was “a reference largely to
energy costs” and not production overhead. J.A. 7165–66.
Based on this assumption, after minor adjustments to
account for the change in goods in inventory, Commerce
determined that Hanwha’s overhead expenses totaled
essentially the difference between its costs of goods sold
and inventory costs.
Commerce concluded that the difference had to be
overhead (other than energy costs) because Commerce had
already identified MLE costs (as included in inventories)
and “the income statement explicitly identifies the sales,
general, administrative, and interest costs . . . as separate
line items.” J.A. 7132. Stated differently, Commerce found
that because Hanwha’s financial statement “specifies that
MLE costs are included in the ‘Inventories’ portion of the
‘[c]ost of sales,’ . . . the remaining, unidentified costs of
sales were not MLE but rather overhead.” Appellee Br. 37.
Commerce’s theory does not appear to be supported by
the financial statement upon which it relies. The inclusion
of MLE costs in “inventories” does not preclude the
possibility that manufacturing overhead would also be
included in inventory costs. In fact, it appears that this is
precisely what occurred here, as stated in Note 2.12 to the
financial statement.
Nonetheless, Commerce argues that its calculation is
supported by substantial evidence because the Hanwha
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financial statement was composed in compliance with the
IFRS standard applicable to inventories.7 The standard
does not support Commerce’s approach. The standard
explains that inventories should include “a systematic
allocation of fixed and variable production overheads that
are incurred in converting materials into finished goods.”
Int’l Fin. Rept. Standards Found., IAS 2 Inventories ¶ 12
(Mar. 2024) (“IAS 2”).
Given the similarity in language, we understand the
standard’s use of the term “production overheads” to be
synonymous with the term “manufacturing overheads” in
Note 2.12 of the Hanwha financial statement. As we have
explained, and as Note 2.12 confirms, manufacturing
overheads already were included in Hanwha’s inventory
costs. J.A. 6666.
We are not persuaded by Commerce’s argument that it
was reasonable to understand the phrase “a proportion of
manufacturing overheads” in Note 2.12 to be “a reference
largely to energy costs” included in inventories. J.A. 7165–
66; Oral Arg. at 31:34–45. At no point has Commerce
provided an adequate explanation or, indeed, any
explanation for why it drew this conclusion. Further,
7 Risen suggests that Commerce’s reliance on the
IFRS standards is no more than post hoc rationalization for
its overhead calculation, as Commerce first introduced the
IFRS standards during oral argument before the Trade
Court. “Agency action cannot be sustained on post hoc
rationalizations supplied during judicial review.” Timken
Co. v. United States, 894 F.2d 385, 389 (Fed. Cir. 1990)
(quoting Tabor v. Joint Bd. for Enrollment of Actuaries, 566
F.2d 705, 709–10 (D.C. Cir. 1977)). We need not decide the
issue of whether Commerce impermissibly attempted to
justify its actions after the fact because, for the reasons we
explain, Commerce’s explanation is inadequate, regardless
of when it was first raised.
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RISEN ENERGY CO., LTD. v. US 17
nothing in the Hanwha financial statement or the IFRS
standard can be read to suggest that proportional
“production overheads” are coterminous with, or even
largely made up by, a company’s energy costs, as Commerce
asks us to conclude.
Finally, Commerce suggests that under the IFRS
standard, inventory costs do not include fixed overhead
costs and that those fixed expenses would be allocable to
overhead separately from inventories in the costs of goods
sold. Appellee Br. 35. This is an incorrect interpretation of
the standard, which requires “fixed and variable
production overheads that are incurred in converting
materials into finished goods” to be allocated on a
systematic basis to the cost of inventories. IAS 2 ¶ 12
(emphasis added). To be sure, the standard states that
“administrative overheads that do not contribute to
bringing inventories to their present location and
condition[,] and selling costs” are to be excluded from the
inventories total. IAS 2 ¶ 16. But the fact that
administrative overheads and selling costs are excluded
from the inventories total does not mean that those costs
are additional overhead included in the costs of goods sold,
as Commerce suggests. Indeed, the Hanwha financial
statement specifically identifies the company’s “[s]elling
and administrative expenses” separately from cost of goods
sold, consistent with the standard. J.A. 6648.
On the present record, Commerce’s allocation of the
remaining 257,063 ringgits in unidentified costs to
overhead appears to be based on nothing more than
guesswork or speculation, not substantial evidence.
Accordingly, we vacate the judgment of the Trade Court
sustaining Commerce’s determination and remand the
matter back to Commerce for further proceedings to give
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RISEN ENERGY CO., LTD. v. US 18
Commerce an opportunity to identify substantial evidence
for its calculation.8
CONCLUSION
We sustain the Trade Court’s affirmance of Commerce’s
categorization of Risen’s backsheet and EVA inputs under
the Malaysia HTS categories applicable to sheet. We
vacate the Trade Court’s decision sustaining Commerce’s
surrogate financial ratio calculation for overhead. We
direct the Trade Court to remand the matter regarding the
overhead issue to Commerce for further proceedings
consistent with this opinion.
AFFIRMED IN PART, VACATED
AND REMANDED IN PART
COSTS
No costs.
8 Such a remand is particularly appropriate because
Risen also has provided no valid explanation for the
difference between costs of goods sold and inventories in
the Hanwha financial statement. Risen’s contention that
the unidentified remaining costs should be considered
additional MLE is unsupported. The IFRS standard
provides that the cost of inventories shall include “all costs
of purchase, costs of conversion . . . and other costs incurred
in bringing the inventories to their present location and
condition,” IAS 2 ¶ 10 (emphasis added), and nothing in the
Hanwha financial statement suggests that the company
deviated from that requirement.
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United States Court of Appeals
for the Federal Circuit
______________________
RISEN ENERGY CO., LTD.,
Plaintiff-Appellant
TRINA SOLAR CO., LTD., ET AL.,
Plaintiffs
CANADIAN SOLAR INC., CANADIAN SOLAR
INTERNATIONAL LIMITED, CANADIAN SOLAR
MANUFACTURING (CHANGSHU), INC.,
CANADIAN SOLAR MANUFACTURING
(LUOYANG), INC., CSI CELLS CO., LTD.,
CANADIAN SOLAR (USA), INC.,
Plaintiffs-Appellees
v.
UNITED STATES
Defendant-Appellee
SUNPOWER MANUFACTURING OREGON, LLC,
Defendant
______________________
2023-1550
______________________
Appeal from the United States Court of International
Trade in No. 1:20-cv-03743-CRK, Judge Claire R. Kelly.
______________________
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RISEN ENERGY CO., LTD. v. US 2
STARK, Circuit Judge, concurring-in-part and dissenting-
in-part.
I agree with the majority that Commerce’s surrogate
values for Risen’s backsheet and EVA inputs are supported
by substantial evidence. Accordingly, I join in that portion
of the majority opinion. See Maj. at 7-12. However, I be-
lieve that Commerce’s surrogate financial ratio calcula-
tions are also supported by substantial evidence.
Therefore, I would affirm the judgment of the Court of In-
ternational Trade (“Trade Court”), which reached this
same conclusion, in its entirety.
I
As an initial matter, I choose not to join the majority
on the surrogate financial ratios issue because the majority
faults Commerce on grounds that the appellant, Risen, has
not raised. And it provides relief, a remand, that Risen
never requested.
A
The majority is vacating and remanding because “Com-
merce’s approach is so unclear that it is insufficient.” Maj.
at 13; see also id. at 16 n.7 (“Commerce’s explanation is in-
adequate, regardless of when it was first raised.”). Yet at
no point, at either the Trade Court or here, has Risen, the
party that brings this case to us, argued that Commerce’s
approach is unclear.
Risen understands what Commerce did in calculating
the surrogate financial ratios and why it did so. It just dis-
agrees with Commerce – and, before us, insists that Com-
merce’s determination is not supported by substantial
evidence. As Risen accurately summarizes, “Commerce ex-
plained that it understood that labor and energy were al-
ready included in the [materials labor and energy (“MLE”)]
denominator because the ‘Inventories’ line item [in the
Hanwha Q Cells Malaysia (“Hanwha”) financial statement]
included these expenses.” Open. Br. at 22 (emphasis
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RISEN ENERGY CO., LTD. v. US 3
added). The sole issue Risen presses has nothing to do with
the quality or content of Commerce’s explanation. Instead,
it is only whether the decision by Commerce is “contrary to
the evidence in Hanwha’s financial statement and contrary
to basic accounting” and, as a result, unsupported by sub-
stantial evidence. Open. Br. at 22.
The majority claims that it is “not going beyond the
parties’ arguments” and is “simply holding that the expla-
nation given was insufficient because it lacked substantial
evidence.” Maj. at 13 n.4 (emphasis added). But the ma-
jority points to nowhere that Risen actually argued either
that Commerce’s explanation was insufficient or that the
purported lack of substantial evidence has anything to do
with the clarity of Commerce’s explanation. Risen’s brief-
ing makes clear it did not raise either of these points. See,
e.g., Open. Br. at 6 (“Commerce calculated the surrogate
financial ratios in a manner unsupported by the record. . . .
The resulting calculation significantly overstated the over-
head costs [and was] [c]ontrary to accounting principles,
Commerce’s usual understanding of ratio calculations, and
the information in the financial statement itself.”); id. at
20 (“Commerce’s calculation of the financial ratios are in-
accurate [and] does not reasonably interpret the record in-
formation in the financial statement . . . .”); id. at 21-22
(“[Commerce’s allocation of remaining costs to overhead,
instead of MLE,] is contrary to Commerce’s practice and
contrary to the notes of the [Hanwha] statement.”); Reply
Br. at 7 (“[Commerce’s] allocation is contrary to the notes
of the statement and accounting principles.”); id. at 11
(“Commerce has calculated inaccurate ratios not based on
substantial evidence . . . .”).
While “Commerce is required to demonstrate that its
calculations are supported by ‘substantial evidence,’” Maj.
at 12 (citing 19 U.S.C. § 1516a(b)(1)(B)(i)), and as the Trade
Court noted, “Commerce’s reasoning could be clearer,” J.A.
51, there is still, in my view, a crucial distinction between
an appeal challenging the substantiality of record evidence
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RISEN ENERGY CO., LTD. v. US 4
– asking us to reverse a trial court – and an appeal chal-
lenging the adequacy of an explanation – and seeking, as
an alternative to reversal, remand for the trial court (or
originating agency) to “articulate a satisfactory explana-
tion,” Yangzhou Bestpak Gifts & Crafts Co. v. United
States, 716 F.3d 1370, 1378 (Fed. Cir. 2013). When, as
here, an appeal presents only the first type of challenge, we
should focus our review on whether there is substantial ev-
idence, rather than imposing a remand sought by neither
party.
“In our adversary system . . . we follow the principle of
party presentation,” which instructs us to “rely on the par-
ties to frame the issues for decision and assign to courts the
role of neutral arbiter of matters the parties pre-
sent.” Greenlaw v. United States, 554 U.S. 237, 243 (2008).
Hence, the Supreme Court has been clear that, with rare
exceptions, “in both civil and criminal cases, in the first in-
stance and on appeal,” id., we should “decide only questions
presented by the parties,” United States v. Sineneng-
Smith, 590 U.S. 371, 376 (2020). We have ourselves on
multiple occasions recognized this constraint on our re-
view, including very recently in Astellas Pharma, Inc.
v. Sandoz Inc., 117 F.4th 1371, 1377 (Fed. Cir. 2024),
where we vacated a judgment of patent invalidity because
“the district court disregarded the longstanding principle
of party presentation and, in doing so, abused its discre-
tion.”
The majority does not attempt to show the presence of
circumstances that could make it “appropriate” for us “to
take a ‘modest initiating role’ in the shape of the litigation.”
Astellas, 117 F.4th at 1377 (quoting Sineneng-Smith, 590
U.S. at 376). In my view, then, we should limit our review
to considering whether or not there is substantial evidence
to support Commerce’s calculation of the surrogate finan-
cial ratios.
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RISEN ENERGY CO., LTD. v. US 5
B
The majority says that Risen “explicitly sought a re-
mand.” Maj. Op. at 13 n.4. I disagree.
The only reference Risen has made to a possible re-
mand is an aside in the middle of its reply brief, which is
untimely. See In re Cygnus Telecomms. Tech., LLC Patent
Litig., 536 F.3d 1343, 1356 (Fed. Cir. 2008) (holding appel-
lant forfeited argument for reversal of summary judgment
by failing to raise request in opening brief); SmithKline
Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1320 (Fed.
Cir. 2006) (“Our law is well established that arguments not
raised in the opening brief are waived.”). In any event,
even the tangential, belated reference to a remand cannot
fairly be read as an actual request. Instead, in the course
of complaining that the IFRS standards only first came up
at the Trade Court, Risen observes that “[t]his has made
briefing at the Court more cumbersome” and then adds:
“This alone should require remand to Commerce to con-
sider as it is an agency role to do in the first instance on all
issues.” Reply Br. at 7. But Risen never asks for such a
remand – and most certainly not on the grounds of a pur-
portedly unclear explanation by Commerce.
Rather, Risen is consistent and explicit about its sole
goal on appeal, which is reversal of the Trade Court’s entry
of judgment for the government. In both its Opening and
Reply Briefs, under sections headed “Conclusion and State-
ment of Relief Sought,” it writes a single, identical sen-
tence:
In light of the foregoing, Plaintiff-Appellant
requests that this Court enter judgment in its
favor and find Commerce’s determination of
the best available information for backsheet
and EVA and Commerce’s financial ratio cal-
culation are not supported by substantial evi-
dence.
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RISEN ENERGY CO., LTD. v. US 6
Open. Br. at 27; Reply Br. at 12 (same).
Therefore, I would limit our review to deciding whether
to reverse or affirm the Trade Court’s judgment, which I
will turn to now.
II
The question actually presented in this appeal is far
easier to state than it is to answer. As context, it is undis-
puted that because Risen is a Chinese company, and China
has a nonmarket economy, Commerce had to calculate a
dumping margin by using surrogate values – here, from
Malaysia – to estimate the “normal value” at which Risen
would sell its products in its home market (China). There
is no challenge before us to Commerce’s decision to use the
financial statement of a Malaysian manufacturer of solar
cells, Hanwha, as the best available information from
which to calculate the necessary surrogate financial ratios,
such as overhead ratio. There is also no disagreement be-
tween the parties that what Commerce did, as pertinent to
this appeal, was to start with Hanwha’s reported “cost of
sales,” RM2,003,400 (Malaysian ringgits), subtract certain
costs appearing on other lines in Hanwha’s statement – in-
cluding inventories, which note 17 of the Hanwha financial
statement reports as RM1,648,000 for 2018, adjusted to
RM1,646,244 for the change in finished goods1 – and end
up with RM257,063 of unidentified costs. J.A. 7149; see
also Open. Br. at 22; Gov’t Br. at 32-33. The only point of
contention concerns the proper treatment of this unidenti-
fied amount: Commerce allocated it to overhead, putting
the RM257,063 in the numerator of the particular ratios,
while Risen prefers to allocate it to MLE – that is,
1 The other costs subtracted from the cost of sales are
RM6,767 for “depreciation property” and RM93,326 for “de-
preciation of plant and equipment.” J.A. 7149.
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RISEN ENERGY CO., LTD. v. US 7
materials, labor, and energy – which would put it in the
denominator of the ratios.
In my view, Commerce had substantial evidence for its
decision to allocate the unidentified costs to overhead.
That becomes clear when looking more closely at what
Commerce did and why.
The issue of how to allocate the unidentified costs was
first addressed by Commerce in its Preliminary Results is-
sued in January 2020. See J.A. 6838-39 (calculating 6.29%
overhead ratio). In those Preliminary Results, Commerce
used a “constructed MLE” for Hanwha. J.A. 7131. Both
the petitioner in the administrative review (SolarWorld
Americas Inc.) and Risen sought adjustments to the Pre-
liminary Results and, consequently, Commerce, having not
done so before, considered two notes in the Hanwha finan-
cial statement: note 2.12, describing what Hanwha in-
cluded in its reported “Inventories,” and note 17, reporting
figures for 2017 and 2018 “Inventories.” J.A. 6666, 6688.
Commerce found that these notes, which I describe in more
detail below, “specifically identified direct product costs,”
making the reported Inventories figure “a more appropri-
ate reflection of MLE” than the constructed figure on which
Commerce had earlier relied. J.A. 7131. Based on this new
insight, in its Final Results, issued in October 2020, Com-
merce decided to “treat[] the difference between the total
manufacturing costs and MLE” – that is, the unidentified
costs – “as overhead costs.” J.A. 7132; see also J.A. 7133
(“[B]ased on the information contained in the [Hanwha] fi-
nancial statements, we have concluded that the remaining
unidentified costs are overhead costs.”); id. (calculating
21.70% overhead ratio).2 Risen disagreed with Commerce,
2 As the government notes, “Risen does not challenge
Commerce’s determination to move from a constructed
value to a calculated value for MLE between the prelimi-
nary and final results.” Gov’t Br. at 33-34 n.7.
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RISEN ENERGY CO., LTD. v. US 8
insisting “it is Commerce practice to classify unidentified
costs in financial statements as [MLE] costs” and not over-
head. J.A. 7133. Commerce responded that it was “una-
ware of any such practice.” Id.
Thereafter, in a November 2, 2020 memo responding to
allegations of ministerial errors in the Final Results, Com-
merce stated that it had calculated the surrogate financial
ratios based “solely on the financial statements of
Hanwha.” J.A. 7165. Commerce explained:
In doing so, we determined that labor and energy,
as well as material costs, were included in the cat-
egory identified as “inventories recognized as an
expense in cost of sales.” We made this conclusion
based in part on the statement from the financial
statements that “inventories” include “costs of di-
rect materials and [labor] and a proportion of man-
ufacturing overheads based on normal operating
capacity.” We believed the “proportion of manufac-
turing overheads based on normal operating capac-
ity” to be a reference largely to energy costs.
J.A. 7165.
In other words, Commerce read Hanwha’s financial
statement as disclosing that all MLE costs were already
included in “Inventories,” which, in turn, meant that the
unidentified costs must be overhead, because if any of the
unidentified costs were actually materials, labor, or energy
then those costs would have already been included in In-
ventories. See J.A. 7166 (“[W]e treated the ‘Inventories’ ex-
pense [in Hanwha’s financial statement] as materials,
labor, and energy expenses which we included in the de-
nominator of the surrogate financial ratios.”). In making
this factual determination, Commerce again rejected
Risen’s contention that Commerce was departing from past
practice, as its decision was based on the “specific state-
ment in the [Hanwha] financial statements indicating”
that “labor and energy were included in the ‘Inventories.’”
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RISEN ENERGY CO., LTD. v. US 9
Id.; see also id. (Commerce stating it “made a methodologi-
cal decision based on record information”).3
Commerce’s reading of the Hanwha financial state-
ment – that Hanwha’s reported inventories included all
MLE, so the unidentified costs cannot also be MLE but in-
stead should be allocated to overhead – was reasonable and
supported by substantial evidence. Commerce based its
conclusion primarily on note 2.12 of Hanwha’s statement.
Note 2.12, entitled “Inventories,” begins by referencing
“Costs incurred in bringing the inventories to their present
location and condition,” J.A. 6666, which Commerce rea-
sonably understood to be a category of costs that includes
the cost of energy to make and move the items found in in-
ventory. The note then continues:
[These costs] are accounted for as follows:
Raw materials: purchase costs are derived by using
the weighted average cost method.
Finished goods and work-in-progress: costs of di-
rect materials and labour and a proportion of man-
ufacturing overheads based on normal operating
capacity.[4] These costs are assigned by using the
weighted average cost method.
3 Commerce also relied on note 17, also entitled “In-
ventories,” which includes this text: “During the year
[2018], the amount of inventories recognised as an expense
in cost of sales of the Group and of the Company were
RM1,648 million (2017: RM2,142 million).” J.A. 6688.
4 As government counsel explained at oral argu-
ment, “Commerce, knowing how to interpret financial
statements, knows that that [i.e., ‘manufacturing over-
heads based on normal operating capacity’] means energy.”
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RISEN ENERGY CO., LTD. v. US 10
J.A. 6666 (emphasis added). In sum, then, as can be seen,
the note expressly references materials and labor, and im-
plicitly describes energy.
Thus, I agree with the Trade Court that it was “reason-
able” for Commerce to have “relied in part” on note 2.12 “as
evidence that labor and energy costs are included in the
valuation of” Hanwha’s inventories. J.A. 53-54. I further
agree with the Trade Court that this understanding of the
Hanwha statement gains further support from the fact
that the statement was prepared in accordance with the
IFRS. J.A. 54; see also J.A. 6653 (“The financial statements
of the [Hanwha] Group and of the Company have been pre-
pared in accordance with . . . [the IFRS].”). IFRS Standard
IAS2, which “provid[es] guidance for determining the cost
of inventories and the subsequent recognition of the cost as
an expense,” requires that “financial statements expense
all variable costs in the cost of inventory.” J.A. 54 & n.30.
There is no dispute that materials, labor, and energy are
variable costs. Hence, as the Trade Court concluded, we
“can reasonably discern from Commerce’s citation to both
Notes 2.12 and 17 that Commerce believes that because
Hanwha’s financial statement is compliant with IFRS, it
must include labor and energy costs in inventories cost.”
J.A. 54-55. And “[h]aving accounted for MLE, depreciation,
and the change in finished goods balance, Commerce
Oral Arg. at 23:40-50, available at https://oralargu-
ments.cafc.uscourts.gov/default.aspx?fl=23-1550_0903202
4.mp3; see also J.A. 7165-66 (Commerce considering, and
rejecting, Risen’s contention that “energy expenses are not
specifically identified in the financial statements”). Risen
identifies no persuasive reason to doubt Commerce’s un-
derstanding, although it would have been better practice
for Commerce to have provided more detail as to its reason-
ing.
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RISEN ENERGY CO., LTD. v. US 11
reasonably allocated the remaining amount of the cost of
sales balance to overhead.” J.A. 55.
I agree with this analysis of the Trade Court, which
(along with what I have set out here) describes the substan-
tial evidence basis for Commerce’s decision. While, of
course, Commerce could have done a better job explaining
itself, it does not follow that, as my colleagues conclude,
Commerce’s decision was “based on nothing more than
guesswork or speculation.” Maj. at 17. Commerce’s finding
was grounded in the record evidence and its explanation of
its reasoning was adequate to enable appellate review. The
Trade Court was right to affirm.
III
Commerce confronted a complicated, case-specific fact
question, calling on its expertise and experience with finan-
cial statements and accounting standards. It was a ques-
tion that the government candidly acknowledges (as do I)
has no “black-and-white answer.” Oral Arg. at 26:11-22.
Reasonable minds could well differ as to whether the uni-
dentified costs in the Hanwha financial statement should
be allocated to MLE or to overhead. But “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). At best for Risen,
that is the situation presented by this appeal.
Accordingly, we should affirm the Trade Court’s affir-
mance of Commerce’s determination of the surrogate finan-
cial ratios. Thus, I respectfully dissent from the majority’s
decision to remand this issue for further proceedings.
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