LG Chem, Ltd. et al v. United States

Slip Op. 21-
UNITED STATES
COURT OF INTERNATIONAL TRADE
Court No. 20-00096
LG CHEM, LTD., et ano.,
Plaintiffs,
v.
UNITED STATES,
Defendant,
and
COALITION FOR ACETONE
FAIR TRADE,
Defendant-Intervenor.
Before: M. Miller Baker, Judge
OPINION
[The court denies Plaintiffs’ motion for judgment on
the agency record and grants judgment for Defendant
and Defendant-Intervenor.]
Dated: August 13, 2021
Daniel L. Porter and James P. Durling, Curtis, Mallet-
Prevost, Colt & Mosle LLP of Washington, DC, argued
for Plaintiffs. With them on the reply brief was James
C. Beaty.
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Ct. No. 20-00096 	Page 2
Kyle S. Beckrich, Trial Attorney, Commercial Litiga-
tion Branch, Civil Division, U.S. Department of Jus-
tice of Washington, DC, argued for Defendant. With
him on the brief were Brian M. Boynton, Acting Assis-
tant Attorney General; Jeanne E. Davidson, Director;
and Tara K. Hogan, Assistant Director. Of counsel on
the brief was Hendricks Valenzuela, Office of the Chief
Counsel for Trade Enforcement & Compliance, U.S.
Department of Commerce of Washington, DC.
Daniel L. Schneiderman, King & Spalding, LLP, of
Washington, DC, argued for Defendant-Intervenor.
With him on the brief was Stephen J. Orava.
Baker, Judge: In this case, a Korean acetone pro-
ducer challenges its antidumping duties, arguing that
the Department of Commerce improperly calculated
its cost of production and impermissibly rejected cer-
tain factual submissions. The court concludes that the
producer’s challenge to Commerce’s cost calculation
fails, and that any error in rejecting the producer’s fac-
tual submissions was harmless. The court therefore
sustains 	the 	Department’s 	decision 	imposing 	anti-
dumping duties.
Statutory Background
The Tariff Act of 1930, as amended, provides a
mechanism to combat dumping, that is, the sale of im-
ported merchandise in the United States at “less than
its fair value.” 19 U.S.C. § 1673(1). Under the statute,
domestic producers and other affected entities can pe-
tition Commerce and the International Trade Com-
mission to investigate alleged dumping and its effects
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Ct. No. 20-00096 	Page 3
on U.S. industry. If Commerce determines that dump-
ing is occurring, and the ITC determines that such
dumping is injuring domestic industry, the former can
impose antidumping duties.
To determine whether dumping is occurring, the
statute requires Commerce to make “a fair compari-
son” between the price charged by the foreign pro-
ducer-exporter to U.S. customers “and normal value.”
19 U.S.C. § 1677b(a). “Normal value” is generally “the
price a producer charges in its home market.” U.S.
Steel Corp. v. United States, 621 F.3d 1351, 1353 (Fed.
Cir. 2010); see also 19 U.S.C. § 1677b(a)(1)(B)(i) (defin-
ing normal value by reference to home market sales
“in the ordinary course of trade”). Commerce calcu-
lates an antidumping margin based on the difference
between the U.S. customer price and the normal value.
Uttam Galva Steels Ltd. v. United States, 997 F.3d
1192, 1194 (Fed. Cir. 2021).
In determining “normal value” based on the home
market sales price, Commerce may disregard sales
made for “less than the cost of production.” 19 U.S.C.
§ 1677b(b)(1). The statute defines the cost of produc-
tion as “the sum of” three distinct categories of costs,
id. § 1677b(b)(3), two of which (as relevant here) are
“the cost of materials and of fabrication or other pro-
cessing of any kind,” id. § 1677b(b)(3)(A), and overhead
costs described as “selling, general, and administra-
tive expenses,” id. § 1677b(b)(3)(B).
If, after disregarding home country sales made at
less than the cost of production, “no sales made in the
ordinary course of trade remain,” id. § 1677b(b)(1),
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Ct. No. 20-00096 	Page 4
then Commerce must base “normal value . . . on the
constructed value of the merchandise,” id. The statute
also allows Commerce to base normal value on “con-
structed value” if for any reason the Department can-
not determine the normal value of the imported goods
using the sales price in the home country pursuant to
§ 1677b(a)(1)(B)(i). See id. § 1677b(a)(4).
Constructed value, defined in 19 U.S.C. § 1677b(e),
and the cost of production, defined in § 1677b(b)(3),
“are closely related.” Saha Thai Steel Pipe (Pub.) Co.
v. United States, 635 F.3d 1335, 1338 (Fed. Cir. 2011).
Constructed value under § 	1677b(e) “generally in-
cludes the same or similar elements as [cost of produc-
tion defined in § 1677b(b)(3)], but with the additional
component of profit.” Id. (citing § 1677b(e)); see also
Uttam Galva, 997 F.3d at 1194 (“Constructed value is
essentially the cost of production plus profit.” (citing
§ 1677b(e))).
Whether Commerce calculates the cost of produc-
tion pursuant to § 1677b(b)(3) for determining normal
value, or instead pursuant to § 1677b(e) for determin-
ing constructed value, “[f]or purposes of” both provi-
sions
[c]osts shall normally be calculated based on the
records of the exporter or producer of the mer-
chandise, if such records are kept in accordance
with the generally accepted accounting princi-
ples of the exporting country (or the producing
country, where appropriate) and reasonably re-
flect the costs associated with the production
and sale of the merchandise.
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Ct. No. 20-00096 	Page 5
Id. § 1677b(f)(1)(A).
Factual and Procedural Background
In 2019, the Coalition for Acetone Fair Trade—a
group of several domestic acetone producers—peti-
tioned Commerce asserting that producers in Korea
and several other countries were dumping acetone in
the U.S. market. Appx1000. In response, Commerce
commenced several antidumping investigations cover-
ing calendar year 2018. Acetone from Belgium, the Re-
public of Korea, the Kingdom of Saudi Arabia, Singa-
pore, the Republic of South Africa, and Spain: Initia-
tion of Less-Than-Fair-Value Investigations, 84 Fed.
Reg. 9755, 9756 (Dep’t Commerce Mar. 18, 2019).
As relevant here, Commerce selected two Korean
producers, LG Chem, Ltd., 1 and Kumho P&B Chemi-
cals, 	Inc., 	as 	mandatory 	respondents. 	Appx1569;
Appx1461. 2 Commerce then issued questionnaires to
both companies requesting information on various top-
ics, including—in accordance with the statutory re-
quirement that “[c]osts shall normally be calculated
based on the records of the exporter or producer,”
19 U.S.C. § 1677b(f)(1)(A)—information on how they
1 The investigation of LG Chem also included one of its cor-
porate affiliates, LG Chem America, Inc., co-plaintiff in
this action. For convenience, the court refers to them col-
lectively as LG Chem.
2 For an explanation of the role mandatory respondents
play in antidumping investigations, see New Am. Keg v.
United States, Ct. No. 20-00008, Slip Op. 21-30, at 5–6,
2021 WL 1206153, at *2 (CIT Mar. 23, 2021).
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calculate their “cost[s] of materials and of fabrication
or other processing of any kind,” id. § 1677b(b)(3)(A).
LG Chem’s and Kumho’s questionnaire responses
revealed that they calculate their costs of materials
and 	processing 	using 	two 	different 	methodologies.
ECF 36, at 8–9. To understand them, it is helpful to
understand how both companies produce acetone us-
ing the “cumene process.” Appx1576.
The cumene process requires two inputs, benzene
and propylene. Appx1576. These inputs react to form
a new molecule, cumene. Id. The cumene molecule has
a part corresponding to each input: a benzene part and
a propylene part. Id. The cumene molecule breaks
down to create two outputs, phenol and acetone. Id.
The benzene part of the cumene molecule becomes
phenol, and the propylene part of the cumene molecule
becomes acetone. Id. In sum, the benzene input be-
comes the phenol output, and the propylene input be-
comes the acetone output. The following diagram de-
scribes this process visually in material part:
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Ct. No. 20-00096 	Page 7
Appx1576 (describing chemical process); ECF 36, at 8
(containing diagram).
Kumho 	allocates 	its 	cost 	of 	materials 	and 	pro-
cessing based on what the parties call a “direct-assign-
ment methodology,” which essentially states that the
cost of acetone equals the cost of the input, propylene,
contained within the acetone. Appx1576.
By contrast, LG Chem allocates its cost of materials
and processing based on what the parties call a “value-
based” methodology, which allocates the joint costs for
the benzene and propylene inputs between acetone
and phenol based on the “net realizable value” of the
acetone and phenol outputs. Id. That is, LG Chem first
determines the relative value of the acetone and phe-
nol outputs, and then applies the ratio of those respec-
tive values to allocate the joint input costs of propylene
and benzene between the acetone and phenol outputs. 3
To calculate the net realizable value of acetone and
phenol, LG Chem’s methodology relies on the prices of
acetone and phenol in China. Appx1467; Appx1576.
After receiving this (and other) information, the De-
partment 	preliminarily 	determined 	that 	acetone
3 To illustrate, assume that LG Chem’s cumene process
yields 100 kilograms of acetone priced at $5.00 per kilo-
gram (totaling $500.00 in value) and 30 kilograms of phe-
nol priced at $10.00 per kilogram (totaling $300.00 in
value). The “net realizable value” of the coproducts pro-
duced by the cumene process is $800.00. In this hypothet-
ical, five-eighths of the joint production costs of the cumene
process would be assigned to acetone, and three-eighths
would be assigned to phenol.
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Ct. No. 20-00096 	Page 8
imported from Korea was being dumped in the United
States at less than fair value and assigned LG Chem,
the plaintiff in this case, a 7.67 percent estimated
weight-averaged dumping margin. Acetone from the
Republic of Korea: Preliminary Affirmative Determi-
nation of Sales at Less Than Fair Value, Postponement
of Final Determination, and Extension of Provisional
Measures, 84 Fed. Reg. 50,005, 50,005–06 (Dep’t Com-
merce Sept. 24, 2019); Appx1452. In contrast, the De-
partment 	assigned 	a 	much 	steeper 	47.70 	percent
dumping margin to Kumho. 84 Fed. Reg. at 50,006;
Appx1452.
In assigning LG Chem’s preliminary dumping mar-
gin, Commerce concluded that certain aspects of the
company’s cost of production of acetone were “not ap-
propriately 	quantified 	or 	valued.” 	Appx1467. 4 	As
4 Commerce’s preliminary determination memorandum
stated that the Department calculated the cost of produc-
tion pursuant to § 1677b(b)(3), Appx1464, and (incongru-
ously) that it calculated normal value based on constructed
value (where the cost of production is calculated pursuant
to § 1677b(e)), id. In any event, the cost of production pro-
visions under § 1677b(b)(3) and § 1677b(e) are materially
identical except for the latter’s inclusion of profits, and both
(as 	discussed 	in 	detail 	below) 	are 	subject 	to
§ 1677b(f)(1)(A). Cf. Dillinger France S.A. v. United States,
981 F.3d 1318, 1321 n.1 (Fed. Cir. 2020) (observing that it
was unclear in Commerce’s final decision whether the De-
partment’s “calculation of normal value involved determin-
ing constructed value (determining the sum of ‘the cost of
materials and fabrication or other processing of any kind
employed in producing the merchandise’ and other factors
under 19 U.S.C. § 1677b(e)), or involved determining cost
of production so as to exclude home market sales made
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Ct. No. 20-00096 	Page 9
relevant here, the Department identified two specific
problems.
First, LG Chem’s value-based methodology relied
on Chinese non-market economy prices to determine
the net realizable value of the acetone and phenol out-
puts. 	Appx1467–1468. 	Commerce 	accordingly
swapped out the Chinese pricing data for Southeast
Asian pricing data from market economies, id., while
otherwise retaining the company’s value-based meth-
odology.
Second, LG Chem improperly excluded certain com-
pany-wide overhead costs from its calculation of “gen-
eral 	and 	administrative 	expenses,” 	19 	U.S.C.
§ 1677b(b)(3)(B). Appx1468. Commerce therefore in-
cluded those expenses in its cost calculations. Id.
After issuing its preliminary determination, Com-
merce received full briefing from the parties and held
a public hearing. Thereafter, the Department issued a
final decision reaffirming its preliminary determina-
tion that Korean producers were dumping acetone in
the United States. In so doing, however, Commerce as-
signed LG Chem a substantially higher 25.05 percent
estimated weight-averaged dumping margin. Acetone
from Belgium, the Republic of South Africa, and the
Republic of Korea: Antidumping Duty Orders, 85 Fed.
Reg. 17,866, 17,866 (Dep’t Commerce Mar. 31, 2020);
Appx1661; see also Issues and Decision Memorandum
for the Final Affirmative Determination in the Less-
below cost of production under § 1677b(b)(3),” but that
§ 1677b(f) applies “[i]n either event”).
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Ct. No. 20-00096 	Page 10
Than-Fair-Value Investigation of Acetone from the Re-
public of Korea (Feb. 6, 2020), Appx1568–1585.
As relevant here, Commerce explained that in ac-
cordance with 19 U.S.C. § 1677b(f)(1)(A), it “normally
relies on data from a respondent’s . . . books and rec-
ords” to calculate costs, and in its preliminary deter-
mination it had found that “LG Chem’s reported costs
did not reasonably reflect the cost associated with the
production and sales of acetone because [among other
reasons] the joint cost allocation factors were based on
non-market economy prices.” Appx1576. Based on that
finding, the Department’s preliminary determination
had adjusted LG Chem’s joint costs for acetone and
phenol based on Southeast Asian market index prices
in lieu of the Chinese price index used by the company.
Appx1576–1577.
Commerce then noted that although its prelimi-
nary determination had accepted LG Chem’s value-
based methodology (as adjusted using Southeast Asian
rather than Chinese prices), for the final determina-
tion the Department had “reevaluated whether it is
appropriate” to use that methodology to determine the
company’s acetone production costs “considering spe-
cific facts surrounding this investigation.” Appx1577.
Commerce explained that a value-based methodol-
ogy such as LG Chem’s “can be problematic in an an-
tidumping context.” Id. First, there is the problem of
“circularity,” meaning that “prices are used to deter-
mine the product-specific costs which in turn are ei-
ther compared to those same prices or are used to con-
struct prices (i.e., through the sales-below-cost test
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Ct. No. 20-00096 	Page 11
and constructed value).” Id. Second, “market factors
may also create problems with using prices as a basis
of allocation,” including “volatile market prices” and
“temporary surges in supply and demand.” Id. Finally,
“the statute directs Commerce to determine the actual
cost to produce the merchandise under consideration
and establishes that cost as a floor for the comparison
prices.” Id.
Commerce also observed that although it previ-
ously accepted the value-based methodology in certain
cases involving the joint production of coproducts, in
view of these problems it did so “as a last resort be-
cause using an alternative methodology such as a vol-
ume-based or a direct assignment allocations [sic]
were [sic] either not possible or would lead to an un-
reasonable result.” Id. None of those cases involved
fact patterns such as this case’s, “where the inputs
consumed in the joint production process can be clearly
traceable to specific-output coproducts.” Id. The De-
partment explained how “acetone and phenol are pro-
duced from the same joint production process where
. . . the benzene portion of the cumene molecule be-
comes phenol and the propylene portion of the cumene
molecule becomes acetone through the purification
process.” Appx1578.
Commerce concluded that it was still “distortive
and unreasonable to rely on the value-based allocation
methodology used in LG Chem’s normal books and rec-
ords,” even as adjusted by the preliminary determina-
tion’s use of Southeast Asian rather than Chinese
prices, for three reasons. Id.
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First, LG Chem’s use of a third-party price index to
determine the value of its acetone and phenol coprod-
ucts created the problem of “circularity” described
above. Id. Second, because of price volatility in the
Southeast Asian prices used by Commerce in its pre-
liminary determination to adjust the company’s costs,
“the potential problems inherent in the value-based al-
location methodology still [were] not eliminated.” Id.
Finally, in view of these circularity and price volatility
problems, it was “distortive and unreasonable to rely
on the value-based allocation methodology used in LG
Chem’s normal books and records, particularly when
the production process in this case allow[ed] for an ac-
curate tracing of input raw materials to the output fin-
ished 	products 	(i.e., 	[Kumho’s] 	direct 	assignment
methodology).” Id.
Because 	of 	these 	problems, 	Commerce 	applied
Kumho’s direct-assignment methodology, which used
“a formula that incorporates the cost of the propylene
input (i.e., the component of cumene that eventually
becomes acetone) . . . . Under this approach, propylene
costs are assigned to acetone, whereas benzene costs
are assigned to phenol.” Id. (footnote reference omit-
ted). The Department stated that it found this “for-
mula 	reasonable 	because 	it 	recognizes 	the 	actual
chemical reactions associated with acetone produc-
tion, the relative quantity and value of propylene con-
tained in acetone, and the relative production quantity
of acetone during” the relevant period. Id.
Finally, Commerce stated that it would adhere to
its previous conclusion (in the preliminary determina-
tion) 	that 	LG 	Chem’s 	calculation 	of 	its 	acetone
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Ct. No. 20-00096 	Page 13
production 	costs 	had 	improperly 	excluded 	various
company-wide general and administrative costs, and
the Department therefore included those costs in cal-
culating 	LG 	Chem’s 	dumping 	margin. 	Appx1584–
1585.
LG 	Chem 	thereafter 	brought 	this 	action 	under
19 U.S.C. § 1516a to contest Commerce’s final deci-
sion. See ECF 10 (complaint). LG Chem now moves for
judgment on 	the 	agency 	record. 	ECF 	38; 	see 	also
USCIT R. 56.2. The government and the Coalition op-
pose. ECF 37 (government); ECF 36 (Coalition). The
court thereafter heard oral argument. ECF 41.
Jurisdiction and Standard of Review
The court has subject-matter jurisdiction pursuant
to 28 U.S.C. § 1581(c).
In actions such as this brought under 19 U.S.C.
§ 1516a(a)(2)(A)(i)(II), “[t]he court shall hold unlawful
any determination, finding, or conclusion found . . . to
be unsupported by substantial evidence on the record,
or otherwise not in accordance with law . . . .” 19 U.S.C.
§ 1516a(b)(1)(B)(i).
As 	to 	evidentiary 	issues, 	the 	question 	is 	not
whether the court would have reached the same deci-
sion on the same record—rather, it is whether the ad-
ministrative record as a whole permits Commerce’s
conclusion, even if the court might have weighed the
evidence differently:
Substantial evidence has been defined as more
than a mere scintilla, as such relevant evidence
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Ct. No. 20-00096 	Page 14
as a reasonable mind might accept as adequate
to support a conclusion. To determine if substan-
tial evidence exists, we review the record as a
whole, including evidence that supports as well
as evidence that fairly detracts from the sub-
stantiality of the evidence.
Nippon Steel Corp. v. United States, 337 F.3d 1373,
1379 (Fed. Cir. 2003) (cleaned up).
Discussion
I.
The principal issue raised in LG Chem’s motion is
Commerce’s adjustment of the company’s costs using
Kumho’s 	direct-assignment 	methodology. 	ECF 	38,
at 	22. 	LG 	Chem 	first 	argues 	that 	19 	U.S.C.
§ 1677b(f)(1)(A) creates a presumption in favor of us-
ing a respondent’s records to calculate the cost of pro-
duction, and that Commerce can depart from those
records only if they are not kept in accordance with the
exporting 	country’s 	generally 	accepted 	accounting
principles, or if they do not reasonably reflect a re-
spondent’s cost of production. ECF 38, at 22–28.
As the first of the two statutory requirements is not
at issue here, 5 LG Chem challenges Commerce’s con-
clusion that the company’s value-based methodology—
as adjusted by the preliminary determination’s substi-
tution of Southeast Asian prices for Chinese prices—
5 It is undisputed that LG Chem’s value-based cost alloca-
tion methodology is consistent with generally accepted ac-
counting principles in Korea.
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Ct. No. 20-00096 	Page 15
still did not reasonably reflect the cost of production.
Id. at 28–48. LG Chem argues that Commerce’s con-
clusion is not supported by substantial evidence, and
as a result, the Department’s further adjustment of its
costs in the final decision by using Kumho’s direct-as-
signment methodology is unlawful. Id.
A.
As a threshold matter, the Coalition disputes how
LG Chem has framed the issue. The Coalition observes
that the company “[does] not contend that Commerce
erred in rejecting LG Chem’s use of [Chinese] prices
and 	in 	reallocating 	costs” 	using 	Southeast 	Asian
prices. ECF 36, at 10. “To the contrary, [LG Chem] ar-
gue[s] that this adjustment (made in the preliminary
determination) already remedied any significant dis-
tortions in reported costs, thereby obviating the need
to jettison a sales value-based allocation in favor of di-
rect assignment.” Id. at 10 (citing ECF 38, at 41).
As a result, the Coalition argues, there is no dispute
that Commerce permissibly departed from LG Chem’s
records in calculating the cost of production. Id. at 11.
Thus, according to the Coalition, the issue here is not
whether Commerce’s departure from the company’s
records 	was 	warranted—the 	issue 	is 	Commerce’s
choice between two different departures: (1) the pre-
liminary 	determination’s 	substitution 	of 	Southeast
Asian prices for Chinese prices, and (2) the final deci-
sion’s substitution of the Kumho direct-assignment
methodology 	for 	the 	value-based 	methodology. 	Id.
at 11–12.
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This framing is significant, the Coalition argues,
because where (as here) an adjustment is appropriate
due to a respondent’s records not reasonably reflecting
the cost of production, 19 U.S.C. § 1677b(f)(1)(A) im-
poses 	no 	impediment 	to 	Commerce’s 	discretionary
choice of the most reasonable adjustment. Id. at 12.
Therefore, to justify its adjustment using the Kumho
direct-assignment methodology, in the final decision
“Commerce was obligated only to show that the origi-
nally reported costs were distorted (a point that is un-
contested), not that the costs as reallocated in the pre-
liminary determination were still distorted notwith-
standing the elimination of nonmarket pricing.” Id. 6
On reply, LG Chem responds that Commerce’s cost
adjustment in its preliminary determination (swap-
ping out Chinese prices for Southeast Asian prices
while retaining the company’s value-based methodol-
ogy) and its later decision to abandon the company’s
methodology altogether “were made pursuant to sepa-
rate legal authority with different legal requirements.”
ECF 39, at 12.
Specifically, LG Chem observes that Commerce in-
voked 19 U.S.C. § 1677b(b)(3) in adjusting costs in its
preliminary determination. See ECF 39, at 12–13 (cit-
ing Appx1464). The company then argues that unlike
6 The government, for its part, does not challenge LG
Chem’s framing of the issue; instead, the government ar-
gues that substantial evidence supports Commerce’s con-
clusion in the final decision that the company’s value-based
methodology remained unreasonably distorted even after
the replacement of nonmarket Chinese pricing with South-
east Asian pricing. See ECF 37, at 26–33.
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Ct. No. 20-00096 	Page 17
§ 1677b(f)(1)(A), § 1677b(b)(3) “does not address the
reasonability of the method used by the respondent be-
fore making an adjustment.” ECF 39, at 13. It further
argues that Commerce’s preliminary determination
accepted its value-based methodology as reasonable,
and “only adjust[ed] the benchmark [the price index]
that feeds into the methodology pursuant to 19 U.S.C.
§ 1677b(b)(3), a different section of the statute with
different legal requirements.” Id. at 14.
What 	LG 	Chem 	overlooks, 	however, 	is 	that
§ 1677b(f)(1)(A) reads onto § 1677b(b)(3). The former
provides:
(f) Special rules for calculation of cost of
production 	and 	for 	calculation 	of 	con-
structed value
For purposes of subsections (b) and (e)—
(1) Costs
(A) In general
Costs shall normally be calculated based on the
records of the exporter or producer of the mer-
chandise, if such records are kept in accordance
with the generally accepted accounting princi-
ples of the exporting country (or the producing
country, where appropriate) and reasonably re-
flect the costs associated with the production
and sale of the merchandise.
19 U.S.C. § 1677b(f)(1)(A) (emphasis added).
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Ct. No. 20-00096 	Page 18
Thus, § 1677b(f)(1)(A) requires that Commerce un-
dertake 	cost 	of 	production 	calculations 	under
§ 1677b(b)(3) and § 1677b(e) 7 based on the respond-
ent’s records, “if such records . . . reasonably reflect the
costs associated with the production and sale of the
merchandise.” Id. Consistent with this reading of the
statute, Commerce’s final decision explained that its
preliminary determination “found that LG Chem’s re-
ported costs did not reasonably reflect the cost associ-
ated with the production and sales of acetone because
the joint cost allocation factors were based on non-
market economy prices.” Appx1576 (emphasis added).
Therefore, contrary to the company’s argument, Com-
merce’s adjustment of its costs in the Department’s
preliminary determination was very much an exercise
of § 1677b(f)(1)(A) authority, because Commerce read
§ 1677b(b)(3) through the prism of § 1677b(f)(1)(A) as
the statute requires.
That said, there remains the question of the mean-
ing of § 1677b(f)(1)(A). The statute directs Commerce
to calculate costs under § 1677b(b)(3) and § 1677b(e)
using a producer’s records, “if such records are kept in
accordance with the generally accepted accounting
principles . . . and reasonably reflect the costs associ-
ated with the production and sale of the merchandise.”
19 U.S.C. § 1677b(f)(1)(A) (emphasis added).
The statute unambiguously imposes two binary
yes/no 	conditions—either 	the 	respondent’s 	records
(1) “are kept in accordance with the generally accepted
accounting principles” and (2) “reasonably reflect the
7 See above note 4.
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Ct. No. 20-00096 	Page 19
costs associated with the production and sale of the
merchandise,” or they do not. Id.; see also Dillinger,
981 F.3d at 1321–22 (“The dual nature of the test
seems apparent from the face of the statute and is
clear as well from our prior decisions and the legisla-
tive history.”). Once Commerce concludes that a pro-
ducer’s records do not satisfy one of these conditions—
which the Department did in its preliminary determi-
nation, a finding that is undisputed here—the statute
relieves it of any further obligation to use those records
in adjusting costs.
One might argue that 19 U.S.C. § 1677b(f)(1)(A)
should be read to permit Commerce to make cost of
production adjustments only insofar as a respondent’s
records do not satisfy the statute’s two conditions.
Such an interpretation, however, is impermissible.
The statute’s text does not qualify the two condi-
tions with “insofar,” “to the extent,” or similar lan-
guage that in effect would operate as a severability
clause, requiring Commerce to apply whatever portion
of a producer’s cost calculations that might be sal-
vaged. Instead, the statute uses binary yes/no condi-
tions, presumably as a matter of administrative con-
venience. Diluting the force of those binary conditions
with qualifiers violates the omitted-case canon, the
principle that an “absent provision cannot be supplied
by the courts.” Scalia & Garner, Reading Law: The In-
terpretation of Legal Texts 94 (2012); cf. Comm’r v. As-
phalt Prods. Co., 482 U.S. 117, 120 (1987) (tax statute
that provided for 5 percent underpayment penalty “if
any part of any underpayment” were due to negligence
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Ct. No. 20-00096 	Page 20
could not be read as limiting the penalty to the portion
of the underpayment due to negligence).
In § 1677b(f)(1)(A), Congress directed Commerce to
“normally” use a respondent’s records in calculating
costs if two conditions were satisfied. No conclusion
can be drawn from the statute other than that if either
of those conditions were unsatisfied, Congress desired
Commerce to adjust the respondent’s costs as neces-
sary (in the Department’s discretion) to ensure the
most accurate dumping margin.
At oral argument, LG Chem’s counsel stated that
the company does not dispute the reasonableness of
Commerce’s adjustment of its costs using Kumho’s di-
rect-assignment 	methodology—that 	is, 	that 	Com-
merce’s choice of the direct-assignment methodology is
supported by substantial evidence. Instead, LG Chem
contends that the statute precluded Commerce from
making that choice unless the Department permissi-
bly found that the company’s value-based methodol-
ogy—as adjusted by Commerce using Southeast Asian
market prices—was unreasonable. The company ar-
gues that the Department’s finding to that effect was
not supported by substantial evidence.
But LG Chem does not challenge the Department’s
conclusion that the company’s use of Chinese pricing
rendered its value-based methodology unreasonable.
Because that determination is uncontested, the stat-
ute did not require Commerce to undertake a severa-
bility analysis to determine whether the company’s
methodology could be saved with use of another pric-
ing index. Therefore, the court need not determine
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Ct. No. 20-00096 	Page 21
whether substantial evidence supported Commerce’s
determination that LG Chem’s methodology, as ad-
justed in the preliminary determination with South-
east Asian prices, still did not reasonably reflect the
company’s costs.
Instead, the Department having made the unchal-
lenged determination that LG Chem’s use of Chinese
pricing rendered its methodology unreasonable, the
statute allowed Commerce to adjust the company’s
costs in whatever manner the Department thought ad-
visable. Contrary to LG Chem’s argument, there was
no statutory impediment to Commerce’s replacement
of 	the 	company’s 	value-based 	methodology 	with
Kumho’s direct-assignment methodology in the final
decision.
B.
Commerce, of course, decided this matter on a dif-
ferent basis, i.e., that LG Chem’s value-based method-
ology—as adjusted with Southeast Asian prices—still
did 	not 	reasonably 	reflect 	the 	cost 	of 	production.
Appx1577–1578. Nevertheless, the court can affirm on
a ground not addressed by the Department where “the
agency would have reached the same ultimate result
under the court’s legal theory,” provided that “there is
no room for the agency to exercise discretion in decid-
ing the legal issue under review.” Grabis v. Off. of Pers.
Mgmt., 424 F.3d 1265, 1270 (Fed. Cir. 2005) (cleaned
up); see also McCarthy v. Merit Sys. Prot. Bd., 809 F.3d
1365, 1373 (Fed. Cir. 2016); In re Comiskey, 554 F.3d
967, 974–75 (Fed. Cir. 2009).
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Ct. No. 20-00096 	Page 22
In concluding that 19 U.S.C. § 1677b(f)(1)(A) per-
mitted Commerce to adjust LG Chem’s costs using
Kumho’s direct-assignment methodology based on the
Department’s unchallenged finding that use of Chi-
nese pricing rendered the value-based methodology
distortive, the court does not tread upon Commerce’s
authority to interpret the statute. Under the familiar
“step one” of Chevron, U.S.A., Inc. v. Natural Re-
sources Defense Council, Inc., 467 U.S. 837 (1984),
there is no room for the agency to exercise discretion
(and hence no deference) when “traditional tools of
statutory construction” make it clear that Congress
“has directly spoken to the precise question at issue.”
Cathedral Candle Co. v. U.S. Int’l Trade Comm’n, 400
F.3d 1352, 1362 (Fed. Cir. 2005).
Here, employing traditional tools of statutory con-
struction, the court concludes that § 1677b(f)(1)(A) un-
ambiguously imposes two binary yes/no conditions.
Once Commerce found in its preliminary determina-
tion that LG Chem’s records did not satisfy either of
these binary conditions, the statute relieved the De-
partment of any further obligation to use those records
in adjusting the company’s costs. No exercise of the
Department’s interpretative authority was necessary
here, as Congress has directly spoken to the precise
question at issue.
C.
LG Chem’s opening brief argues—in passing, and
without citation to authority—that Commerce’s final
decision needed to explain the Department’s change in
approach 	from 	the 	preliminary 	determination. 	See
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Ct. No. 20-00096 	Page 23
ECF 38, at 41–42. LG Chem fleshes out this argument
in its reply with citations to authority. See ECF 39,
at 14.
This argument is unavailing. To begin with, LG
Chem waived it by only raising the argument in pass-
ing in its opening brief. See I.D.I. Int’l Dev. & Inv.
Corp. v United States, Ct. No. 20-00107, Slip Op.
21-82, at 32, 2021 WL 3082807, at *11 (CIT July 6,
2021) (“Passing references do not raise arguments.”)
(citing ArcelorMittal France v. AK Steel Corp., 700
F.3d 1314, 1325 n.6 (Fed. Cir. 2012)).
In any event, any error by Commerce in failing to
adequately explain its change of view amounted to
harmless error because, as discussed above, it is un-
disputed here that (1) LG Chem’s value-based meth-
odology did not reasonably reflect its cost of production
due to its use of Chinese prices and (2) the Depart-
ment’s adjustment of LG Chem’s costs using Kumho’s
direct-assignment methodology was supported by sub-
stantial evidence. See Nat’l Ass’n of Home Builders v.
Defs. of Wildlife, 551 U.S. 644, 659–60 (2007) (“In ad-
ministrative law, as in federal civil and criminal liti-
gation, there is a harmless error rule[.]”) (quoting PDK
Labs. Inc. v. U.S. Drug Enf’t Admin., 362 F.3d 786, 799
(D.C. Cir. 2004)). 8 Because the statute did not require
8 Section 706 of the Administrative Procedure Act provides
that when a court hears a challenge to an agency action,
“due account shall be taken of the rule of prejudicial error.”
5 U.S.C. § 706. Section 706 thus “requires application of a
traditional harmless-error analysis and . . . the person
seeking relief from the error has the burden of showing
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Ct. No. 20-00096 	Page 24
Commerce to determine that LG Chem’s methodology,
as adjusted with Southeast Asian prices, was still un-
reasonable, any deficiency in the Department’s expla-
nation for its change of view was not prejudicial.
II.
The second issue raised in LG Chem’s motion is
Commerce’s rejection—after its preliminary determi-
nation—of certain factual information submitted by
the company as untimely. See Appx1484 (Commerce’s
explanation of its rejection). Commerce did not con-
sider this information in rendering its final decision.
LG Chem now contends that Commerce erred as a
matter of law in rejecting its factual information as un-
timely, ECF 38, at 13–15, or alternatively abused its
discretion in so doing, id. at 15–22. The government
contests both propositions on the merits. ECF 37,
at 13–23. The Coalition, for its part, argues that the
court should not consider this issue because the com-
pany failed to raise it before Commerce’s final decision
prejudice caused by the error.” Suntec Indus. Co. v. United
States, 	857 	F.3d 	1363, 	1368 	(Fed. 	Cir. 	2017) 	(citing
Shinseki v. Sanders, 556 U.S. 396, 406, 409 (2009)). In this
case brought under 28 U.S.C. § 1581(c), review “is under
28 U.S.C. § 2640(b), which does not expressly refer to sec-
tion 706. Even so, section 706 review applies since no law
provides 	otherwise.” 	SolarWorld 	Ams., 	Inc. 	v. 	United
States, 962 F.3d 1351, 1359 n.2 (Fed. Cir. 2020) (citing
Dickinson v. Zurko, 527 U.S. 150, 154 (1999)).
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Ct. No. 20-00096 	Page 25
and thereby failed to exhaust its administrative reme-
dies. ECF 36, at 4–7. 9
Curiously, the parties do not describe the actual
substance of the factual information rejected by Com-
merce, 10 but pulling the curtain back reveals that any
error by the Department was harmless. Commerce re-
quired LG Chem to withdraw factual information sup-
porting the propositions that (1) LG Chem’s value-
9 Congress has mandated that “the Court of International
Trade shall, where appropriate, require the exhaustion of
administrative remedies.” 28 U.S.C. § 2637(d). This provi-
sion “indicates a congressional intent that, absent a strong
contrary reason, the court should insist that parties ex-
haust their remedies before the pertinent administrative
agencies.” Boomerang Tube LLC v. United States, 856 F.3d
908, 912 (Fed. Cir. 2017) (quoting Corus Staal BV v. United
States, 502 F.3d 1370, 1379 (Fed. Cir. 2007)).
“The [statutory] requirement that invocation of exhaus-
tion be ‘appropriate,’ however, requires that it serve some
practical purpose when applied.” Itochu Bldg. Prods. v.
United States, 733 F.3d 1140, 1145 (Fed. Cir. 2013). Here,
the government is conspicuously agnostic on the question
of exhaustion—at argument, it confirmed that it takes no
position. In the court’s view, the government’s agnosticism
is tantamount to a concession “that additional filings with
[Commerce] would [have been] ineffectual.” Id. at 1146. As
it would have been futile for LG Chem to reargue its posi-
tion, requiring exhaustion here is inappropriate because it
would serve “no agency or judicial interest.” Id.
10 LG Chem glosses over the substance of the rejected in-
formation, characterizing it as “new factual information
that directly rebutted the new factual allegations regard-
ing the cost allocation that [the Coalition] made in its pre-
preliminary comments,” ECF 38, at 9, while the govern-
ment and the Coalition ignore it altogether.
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Ct. No. 20-00096 	Page 26
based methodology is consistent with generally ac-
cepted accounting principles in Korea, Appx1444 (LG
Chem submission), and (2) the Chinese acetone prices
used in LG Chem’s methodology were not, in fact, vol-
atile and distortive, as compared to prices in other
markets. 	Appx1446–1447 	(LG 	Chem 	submission);
Appx1471–1473 (LG Chem defending its submission);
Appx 1484 (Commerce directing LG Chem to with-
draw identified portions of LG Chem’s submission).
The first of these issues—that LG Chem’s value-
based methodology is consistent with generally ac-
cepted accounting principles in Korea—is not in dis-
pute. Remanding for Commerce to consider this fac-
tual information could make no difference to the out-
come. Likewise, the second issue—the volatility of Chi-
nese market prices—is no longer in dispute, as LG
Chem does not challenge Commerce’s conclusion in its
preliminary determination that Chinese market prices
were distortive. Remanding for Commerce to consider
this information would be pointless—even under LG
Chem’s theory of the case, which focuses on the rea-
sonableness of its value-based methodology as ad-
justed with Southeast Asian prices. As a result, any
error by the Department in rejecting LG Chem’s fac-
tual information was harmless. See above note 8.
III.
The final issue raised by LG Chem’s motion is Com-
merce’s calculation of the company’s general and ad-
ministrative 	expenses 	on 	a 	company-wide 	basis.
Appx1584. LG Chem argues that because acetone ac-
counted for a small fraction of its total sales of all
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Ct. No. 20-00096 	Page 27
products, one-half of one percent, Commerce should
have calculated LG Chem’s general and administra-
tive expenses on a more tailored “division-specific” ba-
sis. ECF 38, at 49–51; ECF 39, at 25–27. Specifically,
LG Chem argues that Commerce should have used the
profit and loss statement for the company division that
produced acetone—a division that accounted for about
55 percent of total sales—“and excluded the very dif-
ferent and unrelated expenses for the other LG Chem
divisions that had nothing to do with manufacturing a
basic chemical like acetone.” ECF 38, at 49.
The government and the Coalition disagree, argu-
ing that consistent with both the law and its practice,
Commerce properly calculated LG Chem’s general and
administrative expenses on a company-wide basis.
ECF 37, at 33–36; ECF 36, at 21–22.
The 	“cost 	of 	production” 	under 	19 	U.S.C.
§ 1677b(b)(3) includes “an amount for selling, general,
and administrative expenses based on actual data per-
taining to production and sales of the foreign like prod-
uct 	by 	the 	exporter 	in 	question 	. 	. 	. 	.” 	Id.
§ 1677b(b)(3)(B). 11 LG Chem argues that “the statute
11 As explained above, the statute requires that Commerce
base 	its 	cost 	of 	production 	calculations 	under
§ 1677b(b)(3)—including the calculation of “general and ad-
ministrative expenses” under subparagraph (B)—on the
exporter’s 	records 	if 	the 	two 	conditions 	of 	19 	U.S.C.
§ 1677b(f)(1)(A) are satisfied. Nevertheless, the parties
have briefed the question of Commerce’s calculation of
“general 	and 	administrative 	expenses” 	under
§ 	1677b(b)(3)(B) 	without 	any 	discussion 	of 	how
§ 1677b(f)(1)(A) informs—or should have informed—that
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Ct. No. 20-00096 	Page 28
requires a focus on the ‘foreign like product’—the prod-
uct being investigated—and not overall production op-
erations,” and that by “ignoring the divisional break-
down of [general and administrative] expenses, Com-
merce wandered too far afield from the product under
investigation.” ECF 38, at 50.
The government argues, however, and on reply the
company does not dispute, that Chevron deference ap-
plies 	to 	the 	government’s 	interpretation 	of
§ 1677b(b)(3). See ECF 37, at 33. “Under that stand-
ard, a court must defer to an agency’s construction of
a statute governing agency conduct if the court finds
that the statute in question is ambiguous and the
agency’s interpretation is reasonable.” Cathedral Can-
dle, 400 F.3d at 1361.
Section 1677b(b)(3)(B) is ambiguous, in that it does
not speak “to the precise question at issue,” id. at 1362,
i.e., how general and administrative expenses” are to
be allocated to a “foreign like product,” 19 U.S.C.
§ 1677b(b)(3)(B). As a result, the court must defer to
Commerce’s interpretation if “the agency’s answer is
based on a permissible construction of the statute.”
Cathedral Candle, 400 F.3d at 1362 (quoting Chevron,
467 U.S. at 843).
Commerce’s reading is surely permissible, if not the
better 	reading. 	The 	CIT 	has 	previously 	construed
calculation. Accordingly, the court addresses Commerce’s
treatment of general and administrative expenses as the
parties 	have, 	in 	isolation 	and 	without 	regard 	to
§ 1677b(f)(1)(A).
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Ct. No. 20-00096 	Page 29
“general and administrative expenses” to “relate to the
activities of the company as a whole rather than to
[the] production process.” U.S. Steel Grp. a Unit of
USX Corp. v. United States, 998 F. Supp. 1151, 1154
(CIT 1998) (quoting Rautaruukki Oy v. United States,
19 CIT 438, 444 (1995)). LG Chem’s statutory inter-
pretation challenge therefore fails.
That leaves the company’s substantial evidence
challenge to Commerce’s allocation of general and ad-
ministrative expenses on a company-wide rather than
division-specific 	basis. 	Before 	the 	Department, 	LG
Chem argued that (1) it is a large and diversified
chemical manufacturer; (2) the general and adminis-
trative 	expenses 	of 	manufacturing 	basic 	chemicals
such as acetone are different from LG Chem’s other
expenses; (3) most of the company’s general and ad-
ministrative expenses are not allocated, but tracked
separately by division; (4) the company uses this allo-
cation system in the ordinary course of business; and
(5) the divisional general expenses more closely resem-
ble the general and administrative expenses of produc-
ing acetone. ECF 38, at 51. And so, LG Chem asked
that Commerce use its division-specific financial state-
ment 	to 	calculate 	general 	and 	administrative 	ex-
penses.
Commerce, however, declined, explaining that gen-
eral and administrative expenses “by their nature are
indirect expenses incurred by the company as a whole,
and are not directly related to a process or product.”
Appx1585. Commerce accordingly included company-
wide general and administrative expenses “as rec-
orded on company-wide financial statements” in its
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Ct. No. 20-00096 	Page 30
calculation despite LG Chem’s effort to exclude them.
Id.; cf. Appx1583 (summarizing LG Chem’s arguments
for excluding the broader data).
Here, Commerce weighed the evidence and chose to
base its general and administrative calculations on LG
Chem’s 	company-wide 	financial 	statements 	rather
than its division-specific financial statements. In so
doing, Commerce captured all the company’s general
and 	administrative 	expenses 	in 	its 	calculations.
Whether or not the court agrees with that determina-
tion, it is reasonable and supported by substantial ev-
idence; the court has no basis upon which to remand
and require Commerce to recalculate LG Chem’s gen-
eral and administrative expenses on a division-specific
basis merely because acetone accounted for one-half of
one percent of the company’s sales.
Conclusion
For the reasons explained above, the court denies
LG Chem’s motion for judgment on the agency record
and grants judgment on the agency record in favor of
the 	government 	and 	the 	Coalition. 	See 	USCIT
R. 56.2(b) (authorizing the court to enter judgment in
favor of a party opposing a motion for judgment on the
agency 	record, 	“notwithstanding 	the 	absence 	of 	a
cross-motion”). A separate judgment will enter. See
USCIT R. 58(a).
Dated: 	August 13, 2021 	/s/ M. Miller Baker
New York, NY 	M. Miller Baker, Judge
Case 1:20-cv-00096-MMB Document 42 Filed 08/13/21 Page 30 of 30