Arkema, Inc. et al v. United States

Slip Op. 18-12
UNITED STATES COURT OF INTERNATIONALTRADE
PUBLIC VERSION
Before: Leo M. Gordon, Judge
Court No. 16-00179
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.
ARKEMA, INC., THE CHEMOURS COMPANY
FC, LLC, HONEYWELL INTERNATIONAL INC.,
Plaintiffs,
v.
UNITED STATES,
Defendant.
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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.
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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.
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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
components 3 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).
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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”
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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] percent 4 [(“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.
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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
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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] percent 5 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
5Y percent is [[ ]] percent.
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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 percent 6
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.
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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 percent 7 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.
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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”,
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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
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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.
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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
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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
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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
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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] 	percent 10 	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.
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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
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