Hiep Thanh Seafood Joint Stock Company v. United States

Slip Op. 11-74
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Leo M. Gordon, Judge
Consol. Court No. 09-00270
[Remand results remanded.]
Dated: June 23, 2011
Mayer Brown LLP (Matthew J. McConkey, Jeffrey C. Lowe) for Plaintiff Hiep
Thanh Seafood Joint Stock Co.
Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, Franklin
E. White, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice (Richard P. Schroeder); and Office of the Chief Counsel for
Import 	Administration, 	U.S. 	Department 	of 	Commerce 	(David 	Richardson), 	senior
counsel, for Defendant United States.
Akin, Gump, Strauss, Hauer & Feld, LLP (Valerie A. Slater, Jarrod M. Goldfeder,
Nicole 	M. 	D’Avanzo, 	Natalya 	D. 	Dobrowolsky) 	for 	Defendant-Intervenors 	Catfish
Farmers of America, America's Catch, Consolidated Catfish Companies, LLC, d/b/a
Country Select Fish, Delta Pride Catfish Inc., Harvest Select Catfish Inc., Heartland
Catfish Company, Pride of the Pond, Simmons Farm Raised Catfish, Inc., and Southern
Pride Catfish Company, LLC.
OPINION and ORDER
Gordon, Judge: This action involves the third new shipper review conducted by
the 	U.S. 	Department 	of 	Commerce 	(“Commerce”) 	of 	the 	antidumping 	duty 	order
covering certain frozen fish fillets from the Socialist Republic of Vietnam. 	Certain
Frozen Fish Fillets from the Socialist Republic of Vietnam, 74 Fed. Reg. 37,188 (Dep’t
HIEP THANH SEAFOOD JOINT STOCK CO.,
Plaintiff,
v.
UNITED STATES,
Defendant.
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of 	Commerce 	July 	28, 	2009) 	(amended 	final 	results 	admin. 	review) 	(“Final
Results”); see also Issues and Decision Memorandum, A-552-801 (June 15, 2009),
available 	at 	http://ia.ita.doc.gov/frn/summary/VIETNAM/E9-14607-1.pdf 	(last 	visited
June 23, 2011) (“Decision Memorandum”). 	Before the court are the Final Results of
Redetermination (Jan. 31, 2011) (“Remand Results”) filed by Commerce pursuant
to Hiep Thanh Seafood Joint Stock Co. v. United States, 34 CIT ___, 752 F. Supp. 2d
1330 (Nov. 5, 2010) (“Hiep Thanh”) (order remanding to Commerce). 	The court has
jurisdiction pursuant to Section 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended,
19 U.S.C. § 1516a(a)(2)(B)(iii) (2006), 1 and 28 U.S.C. § 1581(c) (2006). 	For the
reasons set forth below, the court remands this matter to Commerce for further
consideration.
Standard of Review
When reviewing Commerce’s antidumping determinations under 19 U.S.C. §
1516a(a)(2)(B)(iii) and 28 U.S.C. § 1581(c), the U.S. Court of International Trade
sustains 	Commerce‘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). 	Substantial evidence
1 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2006 edition.
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has been described as “such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.” 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
Practice § 9.24[1] (3d. ed. 2011). 	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.” Edward D. Re,
Bernard J. Babb, and Susan M. Koplin, 8 West's Fed. Forms, National Courts § 13342
(2d ed. 2010).
Separately, the two-step framework provided in Chevron, U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837, 842-45 (1984), governs judicial review of
Commerce's interpretation of the antidumping statute. Dupont Teijin Films USA v.
United States, 407 F.3d 1211, 1215 (Fed. Cir. 2005); Agro Dutch Indus. v. United
States, 508 F.3d 1024, 1030 (Fed. Cir. 2007). 	“[S]tatutory interpretations articulated by
Commerce during its antidumping proceedings are entitled to judicial deference under
Chevron.” Pesquera Mares Australes Ltda. v. United States, 266 F.3d 1372, 1382 (Fed.
Cir. 2001); see also Wheatland Tube Co. v. United States, 495 F.3d 1355, 1359 (Fed.
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Cir. 2007) (“[W]e determine whether Commerce's statutory interpretation is entitled to
deference pursuant to Chevron.”).
Background
This case involves the proper treatment of sales of subject merchandise made by
respondent/producer 	Hiep 	Thanh 	Seafood 	Joint 	Stock 	Co. 	(“Hiep 	Thanh”) 	to 	an
unaffiliated Mexican customer who entered the merchandise for U.S. consumption. The
issue is whether these sales should be included within Hiep Thanh’s margin calculation
as part of Hiep Thanh’s U.S. sales database, or accounted for elsewhere within the new
shipper review. 	In the Final Results Commerce included the sales within Hiep Thanh’s
U.S. sales database. 	Decision Memorandum at cmt 5. 	Hiep Thanh then commenced
this action, arguing that Commerce erred because Heip Thanh had no knowledge,
actual or constructive, that those sales were destined for U.S. customers. 	Hiep Thanh,
34 CIT at ___, 752 F. Supp. 2d at 1332, 1334. 	The court remanded the matter for
further 	consideration 	by 	Commerce 	because 	it 	was 	unclear 	from 	the 	Decision
Memorandum whether Commerce (1) applied its standard “knowledge test” to analyze
the sales in question, or (2) may have applied a different framework that did not depend
on Hiep Thanh's knowledge of the “ultimate destination” of the merchandise, but rather
Hiep Thanh's more limited knowledge that the merchandise was destined in some form
for the United States (as a transshipment) coupled with actual consumption entries that
Hiep Thanh may not have known about. Id. at 1335.
In the Remand Results Commerce has provided a more detailed explanation of its
decision to include the sales within Hiep Thanh’s U.S. sales database. 	Nevertheless,
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for the reasons that follow, the court cannot sustain the Remand Results, and again
remands the matter to Commerce for further consideration. Familiarity with the Remand
Results is presumed.
Discussion
Hiep Thanh contends that this is a simple case that turns on the meaning of the
phrase—“for exportation to the United States”—in the antidumping statute’s U.S. price
provision, which defines export price, in relevant part, as “the price at which the subject
merchandise is first sold . . . to an unaffiliated purchaser for exportation to the United
States.” 	19 U.S.C. § 1677a(a). 	There is no dispute that Hiep Thanh’s Mexican
customer was the first unaffiliated purchaser of the subject merchandise or that Hiep
Thanh shipped the subject merchandise to the United States. 	The only question is
whether that shipment constitutes “exportation” within the meaning of the statute. In the
Remand Results Commerce concludes that it does:
[T]he sales at issue meet the definition of a U.S. sale under 19 U.S.C. §
1677(a) 	as 	these 	sales 	were 	made 	to 	an 	unaffiliated 	purchaser 	for
exportation to the United States. 	. . . 	A review of the evidence on the
record 	shows 	that 	in 	the 	commercial 	invoices 	Hiep 	Thanh 	indicated
shipment was to be made to a United States port. . . . The accompanying
bills of lading for these shipments indicated that the port of discharge for
these sales at issue was in the United States. In other words, the product
was exported to the United States and delivered to the United States.
Upon arrival, the entries were classified as type 3 entries (consumption).
Hiep Thanh essentially asks the Department to ignore these record facts
which ultimately satisfy 19 U.S.C. § 1677(a). 	Hiep Thanh’s knowledge of
whether the subject merchandise would be re-exported to a third country
is a mere assumption, when compared to the action taken—shipped to the
United States and purchased from an unaffiliated customer. 	As such,
Hiep Thanh was in a position to price discriminate between the U.S.
market and other markets as they sold the merchandise to an unaffiliated
customer for delivery in the United States. 	As the merchandise was
entered into the United States for consumption subject to AD/CVD duties,
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those 	sales 	provide 	the 	appropriate 	prices 	to 	be 	included 	in 	the
antidumping duty calculation.
Remand Results at 7-8.
The above excerpt from the Remand Results makes it appear that this is indeed
a simple case, one in which Hiep Thanh’s sales to the Mexican customer fit squarely
within the purview of 19 U.S.C. § 1677a. 	Nevertheless, the court cannot sustain this
determination in its present posture because the Remand Results are wanting in two
respects: 	First, Commerce does not adequately summarize the sales in issue, which
prevents Commerce from reasonably addressing the record evidence that suggests that
Hiep Thanh’s sales to the Mexican customer, at least from Hiep Thanh’s perspective,
were for exportation to Mexico and not the United States. 	Second, to the extent that
Commerce’s determination interprets the phrase “exportation to the United States,” the
Remand Results have too many internal inconsistencies and unexplained conclusions
to constitute a reasonable construction of the statute.
Commerce correctly notes that Hiep Thanh delivered the subject merchandise to
the Mexican customer at a U.S. port, and that the U.S. port was noted on the
commercial invoices. 	The record, though, reveals much more about the full context of
these sales. 	Hiep Thanh made the sales to the Mexican customer by first using an
unaffiliated third party on commission to negotiate the volume and value. 	See Hiep
Thanh Verification Report at 8, CD 35 at frm. 8. 2 It appears that Hiep Thanh dealt with
the Mexican customer for the first time during the period of review. 	The commercial
invoices 	and 	packing 	lists 	name 	the 	Mexican 	customer 	and 	specify 	the 	ultimate
2 “CD __” refers to a document contained in the confidential administrative record.
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destination of the product as “Mexico via [a port within the United States].” 	See, e.g.,
Confidential Joint Appendix, Tab P3, Ex. 3, Attachs. B, C, & D, ECF No. 48. 	The
sanitary certificates also indicate a final destination in Mexico. 	Id. 	The bills of lading,
however, only list shipment to the U.S. port (with no subsequent Mexican destination),
but identify both a U.S. and Mexican contact. 	Id. 	Once the shipment was received by
the Mexican customer at the U.S. location (apparently by its agent), the Mexican
customer (through its agent) entered the product for consumption in the United States.
See, e.g., id., Tab P4. 	Hiep Thanh made a number of similar sales to the same
Mexican customer that were shipped to the same U.S. location, but were then shipped
to Mexico. See, e.g., id., Tab P2. These other sales were not included in Hiep Thanh’s
U.S. sales database. 	Remand Results at 6. 	Additionally, Hiep Thanh made a number
of similar sales to a U.S. customer that were also shipped to the same U.S. location, but
those sales were not entered for consumption by the U.S. customer; these sales were
also not included in Hiep Thanh’s U.S. sales database. 	Decision Memorandum at cmt
4.
Hiep Thanh explained in its briefs to the court that the Mexican customer
requested that the sales be shipped through the U.S. for logistical efficiency. 	Pl.’s
Resp. to Remand at 5, ECF No. 58 (“To save on shipping costs, the customer
requested that Hiep Thanh transport the product to the continental United States, where
it was to be shipped in-bond to Mexico for formal importation and sale in that country.”)
There is no direct record evidence to substantiate that claim, but it might reasonably be
inferred from Hiep Thanh’s experience with sales to the same Mexican customer that
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were entered for consumption in Mexico, as well as Hiep Thanh’s experience with a
U.S. customer who also requested shipment to the United States for sales ultimately
destined for Mexico. 	An important question remains: 	How did Mexican sales, shipped
to the United States for logistical efficiency, enter the U.S. for consumption? 	Hiep
Thanh 	pleads 	ignorance, 	placing 	blame 	on 	the 	Mexican 	customer. 	Id. 	at 	5-6
(“unbeknownst to Hiep Thanh, some (but not all) of the product was imported for
consumption 	in 	the 	United 	States 	by 	the 	unaffiliated 	customer.”). 	Perhaps,
unbeknownst 	to 	Hiep 	Thanh, 	the 	Mexican 	customer 	believed 	it 	was 	purchasing
wholesale product for both the Mexican and U.S. markets. 	Perhaps the Mexican
customer and/or Hiep Thanh’s third party liaison lied to Hiep Thanh about the ultimate
market for the sales. 	Or perhaps Hiep Thanh knew the Mexican customer would
distribute the product to either Mexico or the U.S. and included the additional Mexican
references in the invoices and sanitary certificates in case the customer sold the
merchandise in Mexico. 	The possibilities are varied and numerous because the
administrative record does not provide a clear answer.
Additional insight and analysis of the sales, however, may not be relevant if Hiep
Thanh’s delivery of subject merchandise to a U.S. port (without additional safeguards
against entry for consumption) constitutes “exportation to the United States.” 	As noted
from the quoted excerpt above, Commerce so concludes, but its proffered interpretation
of the statute, including a discussion of its “knowledge test,” makes this supposedly
simple case decidedly more complex.
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Recall that the court remanded the matter for further consideration because it
was unclear from the Decision Memorandum whether Commerce applied its standard
“knowledge test” or some other framework when concluding that the sales should be
included within Hiep Thanh’s U.S. sales database. 	Hiep Thanh, 34 CIT at ___, 752 F.
Supp. 2d at 1334-35. 	In the Remand Results Commerce discusses its “knowledge
test”, explaining that the test (1) emerged from the statute’s U.S. price provision (quoted
above), and (2) reflects the guidance of the Statement of Administrative Action that
accompanied the Trade Agreements Act of 1979: “if the producer knew or had reason to
know that the goods were for sale to an unrelated U.S. buyer ... the producer's sales
price 	will 	be 	used 	as 	[the 	U.S. 	price].” 	Statement 	of 	Administrative 	Action
accompanying the Trade Agreements Act of 1979, H.R. Rep. No. 4537, 388, 411,
reprinted in 1979 U.S.S.C.A.N. 665, 682 (“SAA”). 	Remand Results at 4. 	Commerce
has elsewhere explained:
If . . . the producer has no knowledge of sales to the United States made
by a reseller (where a producer believes the ultimate consumer for its
sales is the customer in the home market or third country), then those
sales 	are 	not 	included 	in 	the 	Department's 	margin 	analysis 	for 	the
producer because the proper respondent for these sales to the United
States is the reseller.
Antidumping and Countervailing Duty Proceedings: Assessment of Antidumping Duties,
68 Fed. Reg. 23,954, 23,957 (Dep’t of Commerce May 6, 2003). 	In the Remand
Results Commerce further explains that the purpose of the “knowledge test” is to
identify “the price discriminator” for the U.S. sale, Remand Results at 3, and that “[i]t is
the activity of the price discriminator for which the antidumping law provides a remedy.”
Id.
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Commerce 	concludes 	that 	because 	Hiep 	Thanh 	shipped 	the 	subject
merchandise to the U.S., “Hiep Thanh was in a position to price discriminate between
the U.S. market and other markets, and thus these sales belong in Hiep Thanh’s U.S.
sales database for calculating their antidumping duty margin.” Id. Commerce offers this
conclusion without any analysis of the actual pricing of the sales in issue; there is no
comparison of the pricing to the other Hiep Thanh sales that passed through the U.S. to
Mexico. It would be interesting to learn Commerce’s thoughts if the sales in issue have
similar pricing as the Mexican sales, and whether that might indicate that for the sales in
issue Hiep Thanh was price discriminating for the Mexican, not the U.S., market.
Commerce also fails to account for the role of the Mexican customer that entered the
merchandise for consumption. 	Hiep Thanh may have been in a “position” to price
discriminate, but the record suggests that the Mexican customer actually did because
the Mexican customer was responsible for the consumption entry. 	And while failing to
account for the role of the Mexican customer in its “price discriminator” analysis is an
unreasonable omission, it is not the only problem with Commerce’s application of its
“knowledge test.”
In response to Hiep Thanh’s arguments that the commercial invoices, packing
lists, and sanitary certificates demonstrated that Hiep Thanh had knowledge of Mexican,
not U.S., sales, Commerce concludes that it need not consider that record evidence,
stating that it would be “inappropriate because it would place certain respondents in a
position to exclude U.S. sales from reporting requirements by claiming them as sales to
be shipped through the United States when, in reality, the sales remain in the United
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States and are entered for consumption subject to AD/CVD duties.” Remand Results at
5-6. 	Such antifraud concerns may well be important for Commerce’s administration of
antidumping proceedings, but one wonders what remains of a knowledge test that
excludes the very evidence that establishes the respondent’s knowledge of the sales?
A further problem with the Remand Results is Commerce’s citation to Allegheny
Ludlum Corp. v. United States, 215 F. Supp. 2d 1322, 1331 (2000) to support its
conclusion that Hiep Thanh’s “shipment” constitutes “exportation” to the United States.
See Remand Results at 3 (“This conclusion is supported by [Allegheny Ludlum] insofar
as there is evidence on the record to demonstrate that Hiep Thanh knew that the
merchandise was being shipped to the United States.”). 	The word “shipment” does not
appear 	in 	Allegheny 	Ludlum, 	which, 	among 	other 	things, 	sustained 	Commerce’s
interpretation of 19 U.S.C. § 1677b(a) and corresponding determination that certain
sales belonged in a respondent’s home market database. Allegheny Ludlum, therefore,
does not appear to address the issue of “exportation” to the United States or whether
certain U.S. sales should be included within a producer’s (Hiep Thanh’s) or reseller’s
(the 	Mexican 	customer’s) 	margin 	calculation. 	Without 	further 	explanation 	from
Commerce, it is difficult to understand its relevance here.
Finally, there is the issue of the “knowledge test” itself. 	The guidance from the
SAA quoted by Commerce in the Remand Results focuses on whether “the producer
knew or had reason to know that the goods were for sale to an unrelated U.S. buyer.”
SAA, 1979 U.S.S.C.A.N. 665, 682. 	Framed for this case, the inquiry would seem to be
whether Hiep Thanh knew or had reason to know that the subject merchandise sold to
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the Mexican customer ultimately was for sale to an unrelated U.S. buyer. Likewise, the
knowledge 	test 	contemplated 	in 	Commerce’s 	assessment 	rate 	policy 	focuses 	on
whether the “producer has no knowledge of sales to the United States made by a
reseller (where a producer believes the ultimate consumer for its sales is the customer
in . . . [a] third country),” 68 Fed. Reg. at 23,957, which applied here would question
whether 	Hiep 	Thanh 	had 	no 	knowledge 	(actual 	or 	constructive) 	of 	the 	Mexican
customer’s U.S. sales, believing the ultimate consumer for those sales was a customer
in Mexico. 	In the Remand Results Commerce articulates a more limited “standard” of
“whether the party making the first sale to the unaffiliated party knew or should have
known at the time of the sale that the merchandise was going to the United States.”
Remand Results at 5 (emphasis added). 	With that knowledge test in hand, Commerce
easily reaches the forgone conclusion that Hiep Thanh’s “knowledge at the time of the
sale” that it was “shipping the goods to the United States” is “enough to satisfy the
knowledge test.” 	Id. 	Commerce adds, somewhat repetitively: “With the requirement at
the time of sale that the merchandise was to be shipped to the United States, Hiep
Thanh knew or should have known that the goods were being shipped to the United
States, regardless of whether the stated intent of the [Mexican customer] was to
subsequently ship the goods to Mexico.” Id.
Commerce’s “finding” that “Hiep Thanh knew or should have known that the
goods were being shipped to the United States,” id., is especially curious because Hiep
Thanh freely admitted that fact during the administrative review. 	It was not in dispute.
Such “fact-finding”, coupled with the needless repetition, makes it seem like Commerce
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is simply trying too hard to justify a particular result. 	What is more problematical,
though, is Commerce’s additional qualifier about the irrelevance of “the stated intent of
the [Mexican customer] . . . to subsequently ship the goods to Mexico.” That conclusion
seems irreconcilable with the knowledge test contemplated by the SAA or Commerce’s
assessment rate policy, under which the intent of the Mexican customer seems all too
relevant for analyzing Hiep Thanh’s knowledge of whether the sales would be sold in
Mexico or the U.S. 	Such preclusion also prompts the question of how Commerce can
reasonably identify the “price discriminator” for the U.S. sale when the actions and intent
of the Mexican customer are removed from consideration?
In the court’s view Commerce’s Remand Results raise more questions than they
resolve and do not reasonably decide the issue of the proper treatment of Hiep Thanh’s
sales 	to 	the 	Mexican 	customer. 	The 	court, 	however, 	is 	not 	prepared 	to 	order
Commerce to exclude the sales from Hiep Thanh’s U.S. sales database. 	The law and
record evidence are not so clear as to dictate that result; it may be one possible
outcome, but it is not mandated. 	Because the statute does not specifically resolve
whether individual sales of subject merchandise should be included within a particular
respondent’s U.S. sales database, Commerce must exercise its gap-filling discretion to
derive a reasonable approach to the problem.
On remand Commerce can cure one obvious defect with the Remand Results by
beginning with a reasonable summary of the sales in issue, like the one the court
provides in the paragraph that begins at the bottom of page 6 of this opinion. 	From
there, Commerce may wish to simplify its approach by first addressing the basic issue
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of statutory interpretation presented by this case: whether Hiep Thanh’s shipment to the
U.S. constitutes “exportation” within the meaning of the statute. 	Although Commerce
concludes in the Remand Results that it does (in the excerpt from pages 7-8 block-
quoted above), Commerce does so without ever defining the term “exportation.” 	The
agency needs to put forth its interpretation of that term on the record. 	Commerce can
also explain how circumspect a producer like Hiep Thanh needs to be when shipping
subject merchandise to the United States to a new customer. 	The court can then
review Commerce’s interpretation and explanation for reasonableness against “the
express terms of the provisions at issue, the objective of those provisions, and the
objectives of the antidumping scheme as a whole.” 	Wheatland Tube Co., 495 F.3d at
1361 (citation omitted).
As for the “knowledge test,” it is a framework that Commerce has used to resolve
various issues in the past. 	See Wonderful Chem. Indus. v. United States, 27 CIT 411,
416, 259 F. Supp. 2d 1273, 1279 (2003) (listing instances in which knowledge test has
been applied). 	None of the numerous cases involving Commerce’s application of the
knowledge test, though, provide much guidance here. 	For example, the Court in LG
Semicon Co. v. United States, 23 CIT 1074 (1999), notes that “Commerce interprets the
phrase ‘for exportation to the United States’ to mean that the reseller or manufacturer
from whom the merchandise was purchased knew or should have known at the time of
the sale that the merchandise was being exported to the United States.” 	Id. at 1079
(emphasis in original) (citation omitted). 	That circular formulation, however, does not
answer the question of what “export” or “exportation” means, the central issue here. 	It
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may be that once Commerce provides an interpretation of the term “exportation,” resort
to the knowledge test may be unnecessary. 	That though is a matter for Commerce to
decide.
Conclusion
For the foregoing reasons the court cannot sustain the Commerce’s Remand
Results. Accordingly, it is hereby
ORDERED that this action is remanded to Commerce to further explain its
decision to include the disputed sales within Hiep Thanh’s U.S. sales database; it is
further
ORDERED that Commerce shall file its remand results on or before August 10,
2011; 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
Commerce files its remand results with the court.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: June 23, 2011
New York, New York
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