Diamond Sawblades Manufacturers' Coalition v. United States

Slip Op 17 - 36
UNITED STATES COURT OF INTERNATIONAL TRADE
:
DIAMOND SAWBLADES 	:
MANUFACTURERS’ COALITION, 	:
:
Plaintiff, 	:
:
v. 	: 	Before: R. Kenton Musgrave, Senior Judge
:
UNITED STATES, 	: 	Consol. Court No. 15-00164
:
Defendant, 	:
:
and 	:
:
BEIJING GANG YAN DIAMOND 	:
PRODUCTS COMPANY, GANG YAN 	:
DIAMOND PRODUCTS, INC., CLIFF 	:
INTERNATIONAL LTD., HUSQVARNA 	:
CONSTRUCTION PRODUCTS NORTH 	:
AMERICA, INC., HEBEI HUSQVARNA-JIKAI 	:
DIAMOND TOOLS CO., LTD., WEIHAI 	:
XIANGGUANG MECHANICAL INDUSTRIAL 	:
CO., LTD., BOSUN TOOLS CO., LTD., and 	:
BOSUN TOOLS INC., 	:
:
Defendant-Intervenors. 	:
:
OPINION AND ORDER
[Remanding fourth administrative review of antidumping duty order on diamond sawblades and parts
thereof from the People’s Republic of China.]
Dated: March 31, 2017
Daniel B. Pickard, Maureen E. Thorson, and Stephanie M. Bell, Wiley, Rein & Fielding,
LLP, of Washington, DC, for plaintiff.
John J. Todor, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, for the defendant. With him on the brief were Benjamin
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C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin
E. White, Jr., Assistant Director. 	Of Counsel on the brief was David P. Lyons, Attorney-
International, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department
of Commerce, of Washington, DC.
Jeffrey S. Neeley and Michael S. Holton, Hush Blackwell, LLP, of Washington, DC, for
defendant-intervenors Beijing Gang Yan Diamond Products Company and Gang Yan Diamond
Products, Inc..
Gregory S. Menegaz, J. Kevin Horgan, and Alexandra H. Salzman, deKeiffer & Horgan,
PLLC, of Washington, DC, for defendant-intervenors Bosun Tools, Co., Ltd. and Bosun Tools Inc.
Musgrave, Senior Judge: This consolidated suit concerns the record of the fourth of
the administrative reviews of diamond sawblades (“DSBs”) and parts thereof from the People’s
Republic of China (“PRC”). See Diamond Sawblades and Parts Thereof From the PRC, 80 Fed.
Reg. 32344 (June 8, 2015) (final results of antidumping duty administrative review; 2012-2013)
(“Final Results”), as explained by its accompanying issues and decision memorandum, Public
Record Document (“PDoc”) 354 (June 2, 2015) (“IDM”). The review’s preliminary results had been
published six months earlier, Diamond Sawblades from the PRC, 79 Fed. Reg. 71980 (Dec. 4, 2014)
(“Preliminary Results”), PDoc 324, as articulated in its accompanying preliminary decision
memorandum (“PDM”), PDoc 307, which was approximately eleven months after the review’s
initiation in December 2013, covering the November 1, 2012, through October 31, 2013 period of
review (“POR”).
The IDM explains Commerce’s reasoning, inter alia, on its (1) selection of surrogate
financial statements, (2) valuation of steel cores, and (3) assignment of the PRC-wide rate of 82.05
percent to the “ATM entity,” of which Beijing Gang Yan Diamond Products, Co. (“BGY”) and Gang
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Yan Diamond Products, Inc. (“GY”) (together with BGY, “Gang Yan”) are part.1 Diamond
Sawblades Manufacturers’ Coalition (“DSMC”) challenges those first two matters while Gang Yan
challenges the latter.
Jurisdiction here is proper under 28 U.S.C. §1581(c), pursuant to which final
determinations of the International Trade Administration, U.S. Department of Commerce
(“Commerce” or “Department”) will be upheld unless 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).
For the following reasons, the matter requires remand.
Discussion
I. 	Valuation of Steel Cores
As part of the review, Commerce once again had to determine surrogate values for
all of the factors of production (“FOPs”) for DSBs, in particular for steel cores, which are a major
DSB input and subject merchandise in their own right.
A. Background
In the original investigation, Commerce valued the steel cores using import data for
Indian Harmonized Tariff Schedule (“HTS”) provision 7326.19.00 in accord with its preference for
valuing input factors using official import data.2 In subsequent administrative reviews, however,
1 BGY along with Advanced Technology & Materials Co., Ltd. and three other affiliated
companies has been treated in all segments of the antidumping proceeding thus far as collapsed into
a single “ATM entity.” See IDM at 2. The papers do not elaborate on GY, in particular whether it
is an independent entity apart from BGY, cf., e.g., id., but they evince uniform regard of GY as also
part of the ATM entity.
2 See, e.g., Diamond Sawblades and Parts Thereof from the People’s Republic of China, 78
(continued...)
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Commerce abandoned this approach after deciding that the tariff schedules of its choice of primary
surrogate country (i.e., Thailand) did not provide a reasonable analogue for the cores themselves, and
it resorted to valuing both self-produced and purchased cores based on the FOPs reported by
respondents for producing them, i.e., a “build-up” methodology.3 See IDM at 38.
For the matter at bar, during the course of the administrative review DSMC urged
Commerce to (re)consider using Thai HTS subheading 8202.31.10 for surrogate valuation of DSB
steel cores. DSMC pointed out that this subheading reflected an amendment of Thai HTS heading
8203 to provide for merchandise that was highly similar, if not commercially identical, to cores for
DSBs. See generally PDoc 232. In particular, DSMC argued, the subheading covers steel “toothed
blanks”, i.e., cores, for circular sawblades, and they averred that the provision was specific to cores
for circular sawblades with a working edge of steel. Id. DSMC also placed information on the
record indicating that the production process used and costs incurred to make steel cores for DSB
cores and cores with metal working parts were largely identical. See CDoc 174, PDoc 226, at Att.
1.
2 (...continued)
Fed. Reg. 11143 (Feb. 15, 2013) (final results of admin. rev.; 2009-2010) and accompanying issues
and decision memorandum (“I&D Memo”) at cmt. 11 (“we prefer country-wide information such
as government import statistics to information from a single source and we prefer industry-wide
values to values of a single producer because industry-wide values better represent prices of all
producers in the surrogate country.”).
3 See id.; Diamond Sawblades and Parts Thereof Final Results of Antidumping Duty
Administrative Review; 2010-2011, 78 Fed. Reg. 36166 (June 17, 2013) and accompanying I&D
Memo at cmt. 8; Diamond Sawblades and Parts Thereof Final Results of Antidumping Duty
Administrative Review; 2011-2012, 79 Fed. Reg. 35723 (June 24, 2014) and accompanying I&D
Memo at cmt. 12.
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Commerce preliminarily rejected reliance upon Thai HTS 8202.31.10 after finding
that the resulting surrogate value was “unreasonably high.” 	See PDoc 314-15 at 7. 	Rather,
according to the defendant, Commerce continued to follow its recent “build-up” practice, in this
instance by relying on purchases from unaffiliated suppliers Bosun Tools Co., Ltd. (“Bosun”) and
Weihai Xiangguang Mechanical Industrial Co., Ltd. (“Weihai”), the two mandatory respondents
selected for individual examination, with the addition of surrogate values for steel, labor, and
electricity used to produce the cores. Def.’s Resp. at 4, citing PDM at 22; Preliminary Surrogate
Value Memo, PDoc 314, at 7. Commerce justified continued reliance on its build-up methodology
due to the absence of “appropriate HTS codes or other data source we can rely on to value cores
directly.” Id.
Commerce then verified Weihai’s FOPs information between January 26 and 30,
2015, including the information Weihai had provided for steel cores used to produce subject
merchandise. Weihai Verification Report (Feb. 20, 2015), PDoc 349, CDoc 271, at 1, 10. The
verification report summarizes Weihai’s opinion that Thai HTS item 8202.31 does not cover
diamond sawblade cores. Id.
In its administrative case brief, DSMC sought to rebut the preliminary finding that
the Thai surrogate produced “unreasonably high” results. See CDoc 275, PDoc 356 at 4-8. It did
so by comparing the average unit value (“AUV”) of import data for Thai HTS 8202.31.10 with the
prices at which Weihai actually purchased cores. Id. Regarding that subheading’s coverage, DSMC
asserted that steel cores for sawblades with working edges of different materials are made according
to highly similar production processes, such that any differences in producing steel cores for
sawblades with steel working parts and those with working parts of diamond segments do not
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meaningfully impact their costs. Id. at 10-11. DSMC further argued that Commerce’s build-up of
the respondents’ FOPs for self-produced cores did not adequately account for the value of purchased
cores insofar as the build-up method produced valuations that were [[ 	]] than the
prices at which the respondents actually purchased cores. Id. at 8-9. Further, DSMC argued that
given the fact that respondents did not produce [[
]]. 	Id. at 9-10. 	Thus, DSMC argued, the
agency’s preliminary core valuation methodology did not produce accurate results.
Considering that argument, Commerce continued to credit Weihai’s opinion that Thai
HTS 8202.31 does not cover DSB cores and to find that the products covered by Thai HTS
subheading 8202.31.10 are “different from” DSB cores, and that when it can value cores respondents
purchased from NME suppliers using the inputs they used to self-produce the identical types of cores
(i.e., DSB cores), it need not “resort to an AUV derived from a Thai HTS subheading for
merchandise different from cores for diamond sawblades (with the exception of a circular physical
appearance in general).” IDM at 38-39. Explaining more fully:
In the last review, with the petitioner's support, we decided that this build-up
methodology is the best methodology to value cores in the absence of a better
alternative.[ ] We do not consider that an AUV based on an HTS subheading for
nonidentical products is a better alternative to the build-up methodology, which is
based on the inputs for the production of the identical products, cores for diamond
sawblades. 	Even if the build-up methodology uses inputs consumed for the
production of cores with specifications different from the cores purchased from NME
suppliers, we find that such differences within the identical products, cores for
diamond sawblades, do not justify the use of the alternative valuation methodology
the petitioner proposes.
We find that the prices Weihai paid to its unaffiliated NME suppliers and the
petitioner used in its price comparisons are unsuitable as benchmarks to determine
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whether the petitioner’s suggested AUV is reasonable because these prices are (1)
Weihai’s business proprietary information and thus do not necessarily represent
industry-wide prices available to other producers and (2) NME prices presumably
distorted by the PRC government interference.[ ] Accordingly, we did not rely on
Weihai’s actual NME purchase prices for our decision not to use the petitioner’s
proposed AUV.
We also find that the petitioner’s methodology in attempting to demonstrate the
reasonableness of its proposed AUV itself is flawed because the petitioner did not
take into account the weight of the cores that Weihai purchased from NME suppliers
when the petitioner used the NME prices of these cores in its demonstration. We
tested the petitioner’s methodology by taking into account the weight of these cores
and we found that the petitioner’s proposed AUV overvalues cores much more than
the petitioner claims in its demonstration.[ ] This leads us to conclude that the
petitioner’s demonstration methodology is flawed because, by averaging the weight
of all cores Weihai reported, the petitioner’s demonstration methodology masks the
fact that valuing certain cores with this AUV, $32.45/kg, can result in valuing cores
at much higher prices than the petitioner claims with its demonstration. Both Bosun
and Weihai reported cores in a weight/piece basis for each CONNUM.[ ] So, for
example, if a particular core a respondent purchased from an unaffiliated NME
supplier can be reasonably valued at $32.45/piece in Thailand, this core weighs 10
kilograms, and the respondent reported this core on a kilogram/piece basis for a
CONNUM in its FOP database, then the use of this AUV would result in valuing this
core at $324.50/piece, which is 10 times higher than the reasonable surrogate price,
$32.45/piece.
Id. at 39 (footnotes omitted). 	Thus, for the Final Results, Commerce continued to value all
respondent cores using build-up methodology based on the respondents’ reported FOPs, rather than
using Thai import data for toothed blanks. Id. at 38-40.
B. Analysis
The record persuades that remand of this DSB core valuation issue is necessary for
three broad reasons. First, DSMC is correct that there is no guidance in the record from which to
adduce what is or is not “unreasonably high,” which is akin to asking “how high is ‘up’?” There is
nothing inherently unreasonable about a method that produces a value that is ten times higher (or
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lower) than the compared value when the reliability of the latter is uncertain, as Commerce indicated,
see supra, and the reader has no way of knowing from the record if a 10-kilogram core “can be
reasonably valued at $32.45/piece in Thailand”.
Second, the defense here is that rejection of DSMC’s analysis of the Thai surrogate
value, an analysis that compared the Thai AUV with Weihai’s purchase prices from NME suppliers,
was proper because that analysis was (1) based on proprietary NME prices that do not necessarily
represent industry-wide prices available to other producers, and (2) did not properly take core weight
into account. Def.’s Resp. at 32; Bosun’s Resp. at 4-5. But Commerce itself compared the Thai
surrogate value against Weihai’s own NME purchase prices,4 supra, and the finding that Weihai’s
purchase prices “do not necessarily” represent “industry-wide” prices at which other PRC suppliers
might be able to purchase cores appears unsupported. See DSMC’s Br. at 13-14. Either Commerce
believes it is appropriate to use Weihai’s purchase prices to test the reasonableness of the surrogate
value or it does not; it cannot have it both ways.
Regarding 	the 	agency’s 	conclusion 	that 	the 	Thai 	AUV 	method 	results 	in
overvaluation, the conclusion is based on cores selected from Weihai’s NME purchases for use in
production that are atypical of Weihai’s average core weight. Cf. CDoc 283, PDoc 377 at 4, with
CDoc 275, PDoc 356, at 7 (establishing average weight of Weihai’s cores). Thus, while faulting
DSMC’s analysis for inadequately taking core weight into account, Commerce does not appear to
have considered whether its own build-up methodology adequately considered core weight. DSMC
4 One might assume that the wider the results diverge from Weihai’s actual purchase prices,
the more unreasonable the method used to produce the comparison becomes. 	That, however,
assumes that the actual purchase prices form a reliable benchmark in this first place, which, in the
case of Weihai’s NME purchases, Commerce has already rejected.
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more fully elucidates by example the core valuations produced by the build-up methodology as
compared with those cores’ purchase prices in its confidential briefs, but its presentment makes clear
that the build-up methodology suffers from the same “problem,” albeit inverted, that formed the
agency’s logical basis for rejecting the DSMC’s proposed Thai surrogate valuation method, i.e., that
the build-up methodology in this review apparently produces “unreasonably low” valuations for
many certain cores when applying an inverted “unreasonably high” standard thereto that Commerce
apparently used to evaluate DSMC’s Thai HTS method on the record.5
Third, although Commerce’s finding -- to wit, that the products covered by Thai HTS
provision 8202.31.10 are “different” from the cores used in production of DSBs -- is not incorrect,
it is only accurate insofar as the products covered by Thai HTS 8202.31.10 are not meant to be fitted
with diamond segments. 6 The finding does not meaningfully distinguish products covered by Thai
HTS 8202.31.10 from DSB cores to support the outright rejection of that HTS tariff item and the
import data therefor as a suitable surrogate.
The sole commonality expressed in the IDM is “circular appearance in general”. And
indeed, Thai HTS 8202.31.10 covers circular blanks, e.g., cores, for circular saw blades (including
slitting or slotting saw blades) with a working edge of steel. But, DSB cores, to which individual
5 DSMC further explains it was and is not seeking to have Weihai’s own purchase prices
used as the surrogate; rather, it is apparent that DSMC simply used those prices in order to assess
the reasonableness of the potential surrogate values while acknowledging that this would be a
different issue if the data were used as surrogate values rather than merely as a tool of comparison.
DSMC’s Br. at 13, citing 19 C.F.R. §351.408(c)(1). Furthermore, DSMC points out, the agency’s
antidumping duty calculations in general are based, at least in part, on business proprietary data, and
this data is used in determining margins for companies other than the submitter. Id.
6 Compare PDoc 232, with PDoc 369 at 38-39.
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diamond segments are attached, are (also) circular in profile and “slotted,” i.e., have cut-outs and
indentations that on the whole are akin to the squared-off “teeth” covered by Thai HTS 8202.31.10,
see PDoc 369 at 4, quoting scope language to the effect that “[d]iamond sawblade cores are circular
steel plates, whether or not attached to non-steel plates, with slots”; further, cores for DSBs are also
produced from steel, see id., through a multi-step process that involves cutting a steel plate or sheet
into the precise shape required (inclusive of slotting), heat-treatment, flattening, and grinding, CDoc
174, PDoc 226 at Att. 1, and cores for circular sawblades with steel edges are produced in largely
the same manner and from the same material, although such cores are generally shaped with pointed
teeth, rather than squared-off slots, id., see also PDoc 369 at 5 (describing out-of-scope non-diamond
sawblade cores/blades).7 Hence, given the close resemblance of diamond sawblade cores and cores
for blades with a working part of steel, and given record evidence showing that both diamond
sawblades cores and cores for blades with working parts of steel are produced from the same
materials and by the same processes and costs,8 it is unclear why the agency found products covered
7 DSMC thus argued that the record showed that, while not completely identical with
diamond sawblade cores, Thai HTS 8202.31.10 cores were produced from the same materials and
in almost the same manner -- with any production differences being immaterial to their cost. CDoc
174, PDoc 226 at Att. 1 (describing affiant’s company’s production of blanks for diamond
sawblades, carbide sawblades and sawblades with cutting edges of metal, and stating that “the
production processes for these different types of blanks are very similar; the differences do not
meaningfully impact their production costs.”). As further support for the similarities between cores
for diamond sawblades and cores for steel-edged sawblades, DSMC pointed out that [[
]], as did [[ 	]]. See id.; CDoc 275,
PDoc 356 at 10-11.
8 And indeed, [[ 	]]. See, e.g., CDoc 275, PDoc 356 at 10-11; CDoc
174, PDoc 226 at Att. 1 (describing affiant’s company’s production of blanks for diamond
sawblades, carbide sawblades and sawblades with cutting edges of metal, and stating that “the
production processes for these different types of blanks are very similar; the differences do not
(continued...)
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by Thai HTS 8202.31.10 meaningfully “different” or why it found the Thai import data prima facie
unsuitable as a means of valuing cores; nor, as the DSMC explain more fully in their confidential
reply, 9 does the verification report and its exhibits (referenced in the agency’s decision) elucidate
Commerce’s thinking. The court agrees with the DSMC that Commerce appears to have overstated
the differences and failed to address the many similarities.
As it appears that material and undisputed record evidence shows that the two types
of cores are highly similar, Commerce was compelled to address this evidence. See Usinor v. United
States, 26 CIT 767, 783 (2002) (discussing agencies’ “responsibility to explain or counter salient
evidence that militates against [their] conclusions.”). An administrative determination is inadequate
when the agency “entirely failed to consider an important aspect of the problem.” Motor Vehicle
Mfrs. Ass’n v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 43 (1983); see also United States v. Nova
8 (...continued)
meaningfully impact their production costs.”).
9 The cited pages of the report describe Weihai as stating that it did not import DSB cores
into the PRC under subheading 8202.31 of the PRC HTS, and that Thai HTS subheading 8202.31
does not cover cores for diamond sawblades. CDoc 271, PDoc 349 at 10. The cited pages of the
accompanying exhibits comprise a [[
]], CDoc 266-270, PDoc 347 at Ex. 18, pp. 21-22, a
page from [[ 	]],
id., p. 23, two pages from [[
]], id., pp. 24-25, and four pages from [[
]]. 	Id., pp. 26-29.
These materials simply show that, as no one has contested, [[
]]. As for the pages from the [[ 	]], these confirm
that [[
]]. The [[
]].
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Scotia Food Prods. Corp., 568 F.2d 240, 252 (2d Cir.1977) (holding that “[i]t is not in keeping with
the rational [agency] process to leave vital questions, raised by comments which are of cogent
materiality, completely unanswered.”).
Last, but perhaps most importantly, the conclusion that Commerce “[do]es not need
to resort” to import data when it “can value” using build-up methodology seems to present a
seemingly insurmountable hurdle to arguments in favor of an alternative methodology, which
conclusion also glosses over Commerce’s previously expressed preference for official import data.
See supra note 2 and accompanying text. The DSMC contend the official import data of record
comport with “Commerce’s practice . . . to prefer surrogate values that are product-specific,
representative of a broad market average, publicly available, contemporaneous with the [POR]”, e.g.,
Def.’s Resp. at 35, citing PDM 19, but further consideration thereof is for Commerce on remand.
In passing, the court notes the defendant’s argument that “Commerce reasonably
preferred as the best available information steel cores that are identical, rather than at most merely
similar, to those used to produce diamond sawblades.” Id. at 33. But this elides over the fact that
the “identical” steel cores, to which the defendant refers, are “virtual,” i.e., non-existent, and merely
the result of build-up cost methodology. As such, it paints an incomplete picture. The valuation of
“identical” steel cores is the ideal, of course, but analysis of each surrogate valuation method in this
instance reveals that both methods produce unreasonable values for certain cores at the heavier or
lighter weight core spectrum depending upon the method used, implying that neither DSMC’s
method nor Commerce’s method by itself seems to produce adequately representative surrogate
values. The bottom line here is that, when viewed in light of the record as a whole, Commerce has
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not explained or countered “salient evidence that militates against its conclusions”, Usinor, 26 CIT
at 783, and the matter therefore requires reconsideration.
II. Selection Of Surrogate Financial Statements
DSMC also challenges Commerce’s use of the financial statements of Trigger Co.
Philippines, Inc. (“Trigger”), a producer of comparable merchandise located in a country not on
Commerce’s list of economically comparable countries, to value the financial factors. DSMC argues
for using those of Tyrolit Thai Diamond Company Limited (“Tyrolit”) and K.M.&A.A. Co., Ltd.
(“KM”), producers from the primary surrogate country. DSMC’s Br. at 5-7.
A. Background
Commerce has articulated a preference for valuing all FOPs from the primary market
economy to be used as a surrogate for the NME country producing the subject merchandise, and
familiarity with that process is here presumed. 10 See 19 C.F.R. §351.408(c)(2). In NME cases,
10 However, by way of further background, “normal value” is usually determined as the price
at which the merchandise in question is sold in the exporting country. NME country domestic “sales
of merchandise . . . do not reflect the fair value of the merchandise” because those counties “do[ ]
not operate on market principles of cost or pricing structures”. 	19 U.S.C. §1677(18). The
antidumping statute thus requires that normal value for NME countries be determined “on the basis
of the value of the [FOPs] utilized in producing the merchandise[,] to which shall be added an
amount for general expenses and profit plus the cost of containers, coverings, and other expenses.”
Id. §1677b(c)(1). Commerce’s preference for such cases is to use the values of FOPs that prevail
in a single “primary” surrogate market economy country that Commerce finds to comport with the
statutory requirement of being both (a) economically comparable to the non-market economy country
in question and (b) a significant producer of the merchandise in question. 	See 19 U.S.C.
§1677b(c)(2); 19 C.F.R. §351.408(c)(2); see, e.g., Dorbest Ltd. v. United States, 604 F.3d 1363 (Fed.
Cir. 2010). In this instance, and in accordance with established policy, Commerce again regarded
the PRC as an NME. See Diamond Sawblades and Parts Thereof From the People’s Republic of
China: Preliminary Results of Antidumping Duty Administrative Review; 2012-2013, 79 Fed. Reg.
71980 (Dec. 4, 2014) (Preliminary Results). Commerce’s NME practice for selecting the primary
surrogate country involves requesting from the Office of Policy (“OP”) a list of potential surrogates
with per capita gross national income (“GNI”) falling within a range of “comparability” to the GNI
(continued...)
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Commerce must also obtain surrogate values for financial factors in addition to those for the physical
inputs used in production. 	See 19 U.S.C. §1677b(c); see also 19 C.F.R. §351.408(c)(4). 	For
surrogate financial values, Commerce’s regulation states that nonproprietary data will be “gathered
from producers of identical or comparable merchandise in the surrogate country.” 19 C.F.R.
§351.408(c)(4).
Commerce’s OP list, for the matter at bar, contained six potential surrogate countries,
which included Thailand but not the Philippines. Commerce found the six countries “at the same
level of economic development as the PRC” based on their “per capita gross national incomes.”
PDM at 12; PDoc 39 at Attachment. Commerce selected Thailand as the primary surrogate country
“because it is at the level of economic development of the PRC, because it is a significant producer
of merchandise comparable to subject merchandise, and because of the availability and quality of
Thai data for valuing FOPs.” IDM at 5, referencing PDM at 12-14.
For the Final Results, and as it had in the preliminary determination, Commerce
selected Trigger’s financial statements for surrogate financial factors after determining that Trigger’s
represented the only usable financial statements on the record. IDM at 47-51. Commerce’s position
is that Trigger’s offers the best available information. Id. at 48-51. Commerce recognized that the
10 (...continued)
of the NME in question, identifying among the potential surrogates on the OP list those countries
that are producers of comparable merchandise, determining whether any of the countries producing
comparable merchandise are “significant” producers of such comparable merchandise, and selecting
the country with the best data as the primary surrogate based on an evaluation of data quality. See
Non-Market Economy Surrogate Country Selection Process, Policy Bulletin 04.1 (Import Admin.,
U.S. Dep’t of Commerce, 2004) (“Policy Bulletin 04.1”); see also Ad Hoc Shrimp Trade Action
Committee v. United States, 36 CIT ___, ___, 882 F. Supp.2d 1366, 1371 (2012). 	The policy
bulletin explains that in cases of “[l]imited data availability” Commerce may “‘go off’ the OP list
“in search of a viable primary surrogate country.” Policy Bulletin 04.1.
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Philippines did not appear on the OP list for this review, but it highlighted that the Philippines is still
at “a level of economic development comparable to the PRC.” Id. at 49 (comparing the per capita
GNI of the Philippines ($2,470) to that of Indonesia ($3,420), which is included on the OP list).
Commerce also noted its determinations in the prior two reviews of this order that Trigger’s financial
statements were the best available information to calculate surrogate financial ratios. Id. at 47.
Commerce reasoned that it could not use either KM’s or Tyrolit’s financial
statements. It claimed that it could not use KM’s statements because the company did not produce
subject merchandise during the POR and that the statements lacked detailed line items such as
inventories open and closed. Id. Regarding Tyrolit, although record evidence indicated that the
company did produce comparable merchandise as in the prior review, Commerce determined that
the absence of specific line items barred reliance upon Tyrolit’s statements to calculate surrogate
financial ratios. Id. In particular, Commerce claimed that the line item expense for “Raw materials
and consumables used” was unclear as to whether it includes direct material costs only or also
includes other expenses such as factory overhead, and that the only identifiable line item for
manufacturing overhead is “Depreciation”, which Commerce determined could not reasonably be
deemed the only manufacturing overhead amount, particularly in light of the financial statements for
Trigger, the company located in the Philippines upon whose financial statements Commerce
ultimately determined to rely.
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B. Analysis
Commerce’s Policy Bulletin 04.1 covers two possible scenarios: (1) when no country
on the OP list meets both criteria of being economically comparable to the NME country and a
significant producer of comparable merchandise, and (2) when the OP list includes possible
surrogates that are economically comparable to the NME country and significant producers of
comparable merchandise but the record lacks adequate data for all countries on the OP list, in which
case Commerce “should” request a second list from OP and follow the aforementioned steps to
choose a surrogate country, but the bulletin also indicates that adhering to an OP-generated list is not
always the solution: “[l]imited data availability sometimes is the reason why the team will ‘go off’
the OP list in search of a viable primary surrogate country.” Policy Bulletin 04.1. In either event,
Commerce is to follow procedure and provide a memorandum for the record providing “substantive
reasons on the record for why . . . . it is a ‘significant producer’.” Id.
Policy Bulletin 04.1 states that “the country with the best factors data is selected as
the primary surrogate country.” Id. It further indicates that “[a]n additional surrogate is sometimes
used to fill factor price ‘holes’ in the primary surrogate.” 	Id. at n. 7. 	The standards by which
Commerce resorts to off-list data are unclear. It is, however, at least clear that in going “off list” to
select Philippine data in this matter, Commerce was seeking an additional surrogate to fill factor
price “holes” in Thailand’s data. See id. But, in order to fill such a hole, common sense dictates that
a hole must exist in the first place. By extension, that the burden of showing the existence of a hole
would be on the party claiming its existence. The burden, thus, is on Commerce to demonstrate the
inadequacy of the Thai data.
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1. Thailand Data
As indicated, two choices were on the record for Thai data: KM and Tyrolit.
Commerce avers each failed a critical element of Policy Bulletin 04.1. At issue here is whether
Commerce accurately concluded that KM did not produce comparable or identical merchandise
during the POR, and whether Tyrolit had sufficient data quality. 	The reasoning that follows
demonstrates that Commerce satisfied this burden with regards to both KM and Tyrolit.
a. KM Financial Statements
DSMC argues that the record evidence sufficed for Commerce to conclude that KM
produced comparable or identical merchandise during the POR. DSMC’s Br. at 39-41. DSMC’s
argument depends upon pages from KM’s website that postdate the POR by thirteen months.
Commerce determined that the information indicated by those pages are not
represented in statements in KM’s financial statement, to wit, that during the POR the company KM
produced only whetstone, hand glider, and polished stones -- products that are not comparable to
subject merchandise. The defendant argues that Commerce therefore reasonably determined that
KM’s financial statements were not suitable11 and that, as in Nails from China, Commerce placed
greater weight on “more reliable financial statements” than on information printed from a company’s
website. Def.’s Resp. at 28, referencing IDM at 47. “Indeed, the facts of this proceeding present an
even stronger case than Nails from China because the KM webpages relied upon by DSMC postdate
11 In calculating the normal value of merchandise from a nonmarket economy, the statute
directs Commerce to use merchandise “comparable to the subject merchandise.” 	19 U.S.C.
§1677b(c)(2). 	In evaluating whether a company produces “comparable” merchandise, it is
Commerce’s stated practice to place particular weight on that company’s audited financial
statements. IDM at 47. See, e.g., Certain Steel Nails from China, 75 Fed. Reg. 34425 (June 17,
2010) (final results of new shipper rev.) and attached I&D Memo at cmt. 4 (Nails from China).
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the POR by thirteen months and, as Commerce observed, ‘[n]othing in these website pages indicates
that KM produced [comparable merchandise] during the POR or fiscal year 2013.’” Id.
DSMC argues that Commerce’s determination that the KM webpages do not support
the conclusion that KM produced comparable merchandise during the POR relies on the assumption
that, between the POR and the date DSMC downloaded pages from KM’s website, KM altered
production from non-comparable to encompass comparable merchandise. DSMC’s Br.at 40-41.
The defendant argues the contrary, that it is DSMC’s position that would require
Commerce to assume that post-POR information held true during the POR. Def.’s Resp. at 28. The
defendant further supports this by noting that the post-POR KM webpage information was
contradicted by contemporaneous information in KM’s financial statements, which showed that KM
only produced non-comparable merchandise during the POR. Id., citing IDM at 47. The defendant
continues that consistent with its practice, Commerce placed greater weight on the information
contained in KM’s own audited financial statements. Id.
DSMC contends Commerce’s reasoning turns a blind eye to overwhelmingly
reasonable inferences from the record to infer that KM “suddenly,” post-POR, had the capacity and
capability of producing grinder wheels. 	But howsoever unreasonable that may seem to be, in
accordance with the substantial evidence standard of review Commerce has the discretion as to how
it may reasonably interpret the record, and its determination is apparently consistent with its
established practice and the record of this segment. Commerce determined that KM did not produce
comparable or identical merchandise during the POR and that KM’s financial statements were
unusable consistent with its practice. 	The court cannot substitute judgment therefor. 	See, e.g.,
American Spring Wires Corp. v. United States, 8 CIT 20, 22, 590 F. Supp. 1273, 1276 (1984),
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quoting Universal Camera v. NLRB, 340 U.S. 474, 488 (1951) (internal citations and quotations
omitted).
b. Tyrolit Data
The parties do not dispute that Tyrolit produced diamond sawblades during the POR,
the dispute at this point rests on the quality and specificity in Tyrolit’s financial statements.
Commerce found that these lacked sufficient line-item specificity and necessitated its decision to go
off the OP list.
DSMC argues Commerce erred when concluding that Tyrolit’s financial statements
were deficient and thus not usable. See DSMC’s Br. at 23-29. In brief, DSMC acknowledges the
line item deficiencies identified by Commerce, but it nonetheless argues that the lack of specificity
in the Tyrolit statements should be excused due to alleged problems with the Trigger financial
statements. See DSMC’s Br.at 30-31.
The argument is limited to the alleged conflicting standards applied to Trigger and
Tyrolit financial statements. Id. at 29-38. Here the court is evaluating whether the Tyrolit data was
sufficiently lacking such as to necessitate going off-list to fill holes from the primary surrogate
country. Cf. infra (Trigger’s Financial Data). And the “fuzzy” problem here, as the Federal Circuit
in Dorbest observed, is not only that 19 U.S.C. §1677b(c)(4) simply requires that Commerce select
surrogate data from an economically comparable country “to the extent possible”, Dorbest Ltd. v.
United States, 604 F.3d 1363, 1371-72 (Fed. Cir. 2010) (“Dorbest”), the court must avoid invasion
of the reasonable fact-finding province that is Commerce’s.
In the prior administrative review of the antidumping duty order, Commerce
determined that the Tyrolit financial statements lacked specific line items necessary to calculate
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surrogate financial ratios, e.g., for raw materials, overhead, and financing. Def.’s Resp. at 22, see
also IDM at 48, n.166, citing AR3 Final Results at cmt. 16. 	Commerce acknowledged that the
financial statements show a line item for “Raw materials and consumables used,” and the defendant
reiterates that they provide no indication of whether that expense includes just direct material costs
or, alternatively, direct material costs in addition to other expenses, such as factory overhead. Def.’s
Resp. at 20, citing IDM at 48. This is significant, according to the defendant, because in order to
calculate the surrogate manufacturing overhead ratio Commerce must segregate such additional costs
from the direct material costs. Id. Commerce also explained that this lack of detail was only one
factor that made the Tyrolit financial statements unusable. See IDM at 48-49.
The defendant further argues that Commerce’s preference for statements coming from
the primary surrogate country does not cure Tyrolit’s financial statements of the deficiencies that
render them unusable for calculation of financial ratios. Def.’s Resp. at 20, citing IDM at 51. For
its part, DSMC does not contest Commerce’s determination that it lacked a basis to discern from the
general descriptor “Raw materials and consumables used” whether the category included direct
material costs only or additional expenses, such as factory overhead. 	See DSMC’s Br. at 30.
Instead, DSMC argues that Commerce held Tyrolit’s financial statements to a stricter standard than
Trigger’s financial statements. 	The argument, however, fails to confront directly Commerce’s
factual determination that Tyrolit’s financial statements contained inadequate detail to distinguish
direct material costs from other expenses and that such deficiency was a factor rendering Tyrolit’s
financial statements deficient. See IDM at 48.
Commerce found that the one line item identifiable as “Manufacturing Overhead” was
the line item “Depreciation” and it explained that it could not reasonably assume that depreciation
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Court No. 15-00164 	Page 21
represented the only manufacturing overhead. Id. at 49. This contributed to Commerce’s evaluation
that the Tyrolit financial statements contained insufficient detail to calculate financial ratios. Id. at
48-49. 	The defendant contrasts that point against Trigger’s financial statements, which contain
multiple manufacturing overhead amounts. Def.’s Resp. at 21.
On the one hand, the defendant’s contrast does not detail why a single manufacturing
overhead line item is intrinsically insufficient beyond the conclusory and/or speculative statement
to that effect. See Def.’s Resp. at 21. DSMC, for example, points to Commerce’s prior reliance
upon a financial statement that listed depreciation as the only manufacturing overhead. DSMC’s Br.
at 34, citing IDM at 49, citing Xanthan Gum From The People’s Republic Of China, 78 Fed. Reg.
33351 (June 4, 2013) (final determ.) and attached issues and decision memorandum at cmt. 2)
(“Xanthan Gum”). On the other hand, common sense dictates that it is not unreasonable to infer that
manufacturing has more overhead than mere depreciation.
The defendant points out that Commerce distinguished Xanthan Gum as reflecting
certain “unique circumstances”, for example among the record financial statements from the primary
surrogate country the financial statements in question were “the only complete and fully translated
financial statements.” Def.’s Resp. at 22, citing IDM at 49; see Xanthan Gum I&D Memo at cmt.
2. The court can agree that relying on limited data once, of necessity, does not require Commerce
to forever accept questionable data in the future, however the defendant’s point appears to undercut
its reasoning for going off-list, as Xantham Gum rather appears to support using data from the
primary surrogate country “to the extent possible”. See 19 U.S.C. §1677b(c)(4). But be that as it
may, Commerce identified an additional reason for why it could not use Tyrolit’s financial
statements: they contained only a general heading for “net financing costs” the precise composition
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of which Commerce could not discern. IDM at 49. The portion of Tyrolit’s financial statement cited
by Commerce shows “net financing costs” as a general expenditure category that is not broken down
into specific line items. 	Id., citing DSMC Surrogate Value Comments, June 25, 2014, ex. 3A.
Commerce explained that the entry for “net financing costs” contains no subcategories or specific
line items, id., and it also justified rejecting Tyrolit on this basis by drawing the comparison to
Trigger’s financial statements as “provid[ing] detailed line items that permitted [it] to identify ‘profit
and adjustment to profit’ and ‘SG&A and interest (SGA).’” Id. Elaborating, Commerce stated that
“when available on the record [it prefers] to use financial statements that contain the full level of
details, including line-item expenses that comprise manufacturing overhead.” Def.’s Resp. at 21,
citing IDM at 49.
Based on the aforementioned discussion, a reasonable mind could accept Commerce’s
conclusion that the Tyrolit statement lacked sufficient line item specificity for its purposes. The
agency’s determination, thus, was supported by substantial evidence. DSMC claims that if there is
any “viable” financial data in Thailand, then the Department must rely on it instead of a country off
the list, DSMC’s Br. at 25, but the argument seeks to hold Commerce to choosing data of lesser
quality containing “holes” from the primary surrogate country over data that is of better quality from
an on-list country. Commerce, however, retains the flexibility to rely on an additional surrogate
country “to fill factor price ‘holes’ in the primary surrogate”, Policy Bulletin 04.1 at n.7, when
seeking the “best available information”. 	See 19 U.S.C. §1677b(c)(1)(B). 	Having noted the
inadequacies of the KM and Tyrolit financial statements, Commerce satisfied the process of Policy
Bulletin 04.1 to find the “best available information” and justifiably opted to consider data from
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off-list countries. This, however, is not to be construed as an affirmation that Tyrolit data can never
be used.12
2. Philippine Data
DSMC challenges Commerce’s decision to go off list and use Philippine data.
Commerce justified this decision by first demonstrating the inadequacies of Thai data and second
by arguing that the Philippine data was the only usable data. The former claim has already been
addressed and accepted. The latter claim is addressed herein. Commerce explained that Trigger’s
financial statement represented “the only financial statements on the record of this review that are
useable.” Def.’s Resp. at 3, quoting PDM at 22. 	Although Commerce selected Thailand as the
primary surrogate country, id. at 5, it explained that the absence of viable financial statements from
that country required that it consider other options. Id. at 3-4, citing PDM at 22. DSMC argues that
there is insufficient support on the record to use surrogate data from the off-list country the
Philippines, because the Trigger data is not supported as the best data available. See DSMC’s Br.
at 31-35. Although, as also discussed above, this court agrees that Commerce may have cause to go
off list in certain circumstances, the determinations discussed as follows are insufficiently supported.
a. Decision to go “Off List”
The DSMC first criticize Commerce for going “off list” in selecting a Philippine
financial statement instead of one from the selected primary surrogate country. DSMC contends that
the agency’s determination appears to be at odds with OP’s decision not to place the Philippines on
12 If, for example, Commerce were to find on remand that Trigger, infra, has the
inadequacies identified by DSMC, then Commerce would necessarily seem to compel to reevaluate
whether the Tyrolit data should be used in light of deficiencies in both data sets and agency
preference for a single surrogate country.
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Court No. 15-00164 	Page 24
the list of potential surrogate countries, that the agency failed to explain the basis for its
determination that the Philippines were at a level of economic development comparable with that
of China, and that the prior agency precedent referenced for support does not suffice to explain
Commerce’s actions here. DSMC’s Br. at 27. Commerce explains that the countries on the OP list
had the “same” GNI, whereas the Philippines GNI is “comparable”. Def.’s Resp. at 17.
Determining whether GNI is “comparable” is a rather imprecise standard, as all
countries are “comparable” to some degree. 	Commerce appears to generally equate the term
“comparable” with “approximate.” Be that as it may, “the statute does not require the Department
to use a surrogate country that is at a level of economic development most comparable to the NME
country.” Policy Bulletin 04.1 at n.5 (emphasis in original). Indeed, Commerce routinely resorts to
“comparable” countries that are less comparable nonetheless.13 Such an inquiry is presumptively
driven by the statutory requirement of finding the “best available” data for the case at hand.
DSMC argues that because the Philippines was not found to be at the “same” level
of economic development as the PRC and the other countries on the OP list, Commerce contradicts
itself in finding the Philippines nonetheless “comparable”. See DSMC 56.2 Br. at 26-29. This kind
of distinction, however, is a well-established Department practice insofar as Commerce views
countries on its surrogate country list as being “at” the “same” level of economic comparability and
it views countries outside of this band (i.e., lower and upper ranges of the per capita GNI) as still
13 See, e.g., Freshwater Crawfish Tail Meat From The People’s Republic of China, Fed. Reg.
60,134 (Oct. 6, 2014) (prelim. results of admin. rev.) and attached Preliminary Decision Memorandum
at 4-5 (unchanged in Freshwater Crawfish Tail Meat From The People’s Republic of China, 79 Fed. Reg.
75,535 (Dec. 18, 2014) (final results of admin. rev.). Wherein confronting the absence of usable data
from any of the potential surrogate countries prompted Commerce to rely upon data from Spain, a country
that did not appear on the list. Id.
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being economically comparable, only less so. This terminology and finding is a common distinction
used by the Department.14
Here , Commerce found that the Philippines is less economically comparable to the
PRC than Thailand, but that the Philippines is still economically “comparable” to a certain degree
nonetheless. The Department articulated its policy about relying on less comparable countries in its
surrogate value letter:
This list provides you countries that are at the same level of economic development
as [the PRC]. In general, the countries listed below are likely to have good data
availability and quality, i.e., the specificity of these countries’ data are more likely
to assist the team in its valuation of inputs. However, you may also consider other
countries on the case record that are significant producers of comparable merchandise
if the record provides you adequate information to evaluate them. Countries on the
case record that are at the same level of economic development as [the PRC] should
be given equal consideration for the purposes of selecting a surrogate country.
Countries that are not at the same level of economic development as [the PRC], but
still at a level of economic development comparable to [the PRC], should be selected
only to the extent that data considerations outweigh the difference in levels of
economic development.
Dep’t Surr. Country Ltr (Feb. 6, 2014) at 2.
The defendant argues that Commerce correctly found that the problems with the Thai
statements outweighed the fact that Thailand is more economically comparable with the PRC than
the Philippines. By extension, they argue that the outcome is consistent with Commerce’s standard
written policy.
14 See e.g. Pure Magnesium from the People’s Republic of China: Preliminary Results of
2011-2012 Antidumping Duty Administrative Review, 78 Fed. Reg. 34646 (June 10, 2013), and
accompanying issues and decision memorandum at 9-12; see also Certain Activated Carbon From
the People’s Republic of China: Final Results of Fourth Antidumping Duty Administrative Review;
2013-2014, 80 Fed. Reg. 61172 (Oct. 9, 2015) and accompanying issues and decision memorandum
at 6-7 (while ultimately finding no need to resort to these countries, the Department still notes that
Indonesia and the Philippines are “at a less comparable level of economic development”).
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DSMC claims that if there is any “viable” financial data in Thailand, then the
Department must rely on it instead of a country off the list. DSMC 56.2 Br. at 25. This is incorrect.
Simply “viable” is not the Department’s preferred standard to select surrogate values. 	The
Department retains the flexibility to select values from other countries because it has an overriding
obligation to value factors accurately, according to the “best available information.” See 19 U.S.C.
§1677b(c)(1)(B); see also Calgon Carbon Corp. v. United States, 40 CIT __, __, 145 F. Supp.3d
1312, 1326-28 (2016) (“Commerce has promulgated a regulation providing that ‘the Secretary
normally will value all factors in a single surrogate country.’ This ‘preference,’ however, carries the
day only when it is used to ‘support a choice of data as the best available information where the other
available data “upon a fair comparison, are otherwise seen to be fairly equal.” . . . the preference on
its own is not a sufficient reason to reject superior data.’”) (citations omitted).
DSMC continues in this vein, arguing that non-economically comparable country can
be a source only when it is “impossible” to derive the value in the primary surrogate country.
DSMC’s Br. at 26, citing Dorbest, 604 F.3d at 1371-72. This is a misstatement of the issue at hand.
The Dorbest court merely held what the plain language of the statute indicates, i.e., that the
Department shall obtain surrogate values from economically comparable countries. Dorbest, 604
F.3d at 1371-72. The Federal Circuit clearly understood that there was flexibility in the statute in
order to permit the Department to achieve the overarching goal of using the “best available
information.” See id.; 19 U.S.C. §1677b(c)(1)(B).
Dorbest supports the Department’s policy decision to rely on Trigger in two important
respects: (1) it upheld the Department’s authority to rely on multiple countries, and (2) it recognized
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that a particular country source could be disregarded if the data were “irretrievably tainted by some
statistical flaw.” See 604 F.3d at 1371-72.
As it were, even if this GNI data made the Philippines and PRC incomparable
markets, Commerce is required to follow economic comparability and significant producer of
comparable merchandise “only to the extent possible”. Policy Bulletin 04.1 (emphasis in original).
DSMC argues that Commerce did not provide sufficient evidence on the record for its conclusion
that the Philippines is economically comparable to China. DSMC’s Br. at 25-29. In response, the
defendant and Bosun both argue that (1) Commerce is permitted to utilize data from an economically
comparable country other than the primary surrogate country or those identified by the Office of
Policy and (2) Commerce here found that the Philippines is economically comparable to the PRC.
Def.’s Resp. at 15-19; Bosun’s Resp. at 6-10. These responses fail to address a critical shortcoming
in Commerce’s conclusion -- Commerce’s lack of an explanation as to why and on what basis it
found the Philippines and the PRC to be economically comparable.
“Commerce must explain the basis for its decisions; while its explanations do not
have to be perfect, the path of Commerce’s decision must be reasonably discernable to a reviewing
court.” 	NMB Singapore Ltd. v. United States, 557 F.3d 1316, 1319 (Fed. Cir. 2009) (citation
omitted). 	Here, Commerce did not articulate the basis for its conclusion that the Philippines is
economically comparable to the PRC. Commerce’s discussion of the issue was limited to observing
that “[t]he 2012 per capita[] GNI was $5,740 for the PRC, $3,420 for Indonesia (the listed potential
surrogate country with the lowest per capita GNI), and $2,470 for the Philippines.” PDoc 369 at 49.
Missing from this explanation is any discussion of why these figures establish the Philippines as
economically comparable to the PRC. 	Likewise, Commerce did not identify the factors that it
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considered in assessing economic comparability, or address how they influenced its decision.
Regardless of its method used to determine comparability Commerce is not absolved from providing
a memorandum detailing the methods used and related explanations. 	Accordingly, Commerce
should address those on remand.
For example, in DuPont Teijin Films v. United States, this Court reviewed
Commerce’s selection of India as the primary surrogate country. 37 CIT __, __, 896 F. Supp.2d
1302, 1305 (2013). Although India was identified by OP as one of six economically comparable
countries based on 2008 GNI data, plaintiffs argued that 2009 GNI data, which were subsequently
placed on the record, demonstrated that India and the PRC could no longer be considered
economically comparable. Id. at 1304-06. Commerce, however, based its determination on 2008
GNI data alone and “justified its decision to disregard the 2009 GNI data by noting that the change
in disparity between India’s and PRC’s GNI between 2008 and 2009 was not significant enough to
render India not economically comparable to the PRC.” Id. at 1307. In finding that Commerce’s
analysis was “conclusory and unsupported”, the court explained:
Commerce did not provide any explanation as to why the change in proportionality
was too “small” to warrant consideration or affect the economic comparability
analysis, why Commerce chose to rely on a change in proportionality between two
countries, or how Commerce determines what is 	an acceptable change in
proportionality of GNI. Commerce has previously warned that there is a point at
which the disparity between India’s and the PRC’s GNI will be too great for India to
be considered economically comparable to the PRC. Commerce has not, however,
provided any explanation as to why the change in disparity between the 2008 and
2009 data either does or does not rise to such a level. Commerce merely stated,
without further explanation, that the change in disparity was not significant.
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Id. at 1308 (citations omitted). Accordingly, the court remanded the issue, directing Commerce to
either provide a reasoned explanation for disregarding the 2009 GNI data or include such data in its
surrogate country selection determination. Id. at 1309-10.
A conclusory statement of comparability is not sufficient evidence on the record.
Here, too, Commerce provided no explanation of why it determined that the Philippines is
economically comparable to the PRC. Instead, Commerce merely stated, without further elucidation,
that it was so. Thus, Commerce’s conclusion that the Philippines is economically comparable to the
PRC cannot be sustained without further elucidation on the record.
b. Trigger’s Financial Data
DSMC also argues the Trigger financial data are not the “best available” records.
DSMC takes issue with several perceived defects in the Trigger data. DSMC requests a remand in
order for Commerce to provide further explanation.
DSMC questions the level of detail included in Trigger’s selling expenses,
particularly when compared to Tyrolit. See DSMC’s Rep. at 31-35. They observed that the Trigger
statements did not enumerate line items for selling expenses. 	To correct for this, Commerce
determined the selling expenses by shifting data from other line items in the report. DSMC noted
that this was not done by Trigger’s auditors and that there was no explanation as to why these line
items could or should have been reclassified as such. Id. at 31-32.
The defendant states that the Tyrolit and Trigger values were not distinguishable on
the issue of selling expenses. Def.’s Resp. at 24-25. If so, the defendant undermines a reason for
going off the OP list. The defendant also states that Commerce compared the line items of Trigger
and Tyrolit records, explaining that although the line items were not in the same places on the
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expense reports, the same general matters are included. Def.’s Resp. at 24. Bosun argues further
that a lack of delineation for selling expenses does not preclude the existence of selling expenses.
See Bosun’s Resp. at 15. While that is true, Commerce is seeking the best available information.
If data must be shifted arbitrarily from one category to another, this draws into question the
sufficiency of that data. Likewise, while Bosun argues that selling expenses are generally a small
part of a company’s expenses, see id., that does not deplete the relevance of an inquiry into their
specificity.
Further, DSMC argues Trigger primarily sold to its parent company, unlike the
subject companies who sold to unaffiliated third parties. DSMC claims that Trigger is a captive
supplier of its parent company and this is evidenced by the fact that 99 percent of Trigger sales are
to the parent company. DSMC’s Br. at 35. DSMC argues that this qualified Trigger as a captive
supplier, which inherently distorts Trigger’s financial performance. They attest this is proven by
Trigger’s relatively low profit ratio and markups falling nearly 50 percent over the previous year.
Id. In essence, the argument surmises that Trigger’s performance is not driven by market conditions,
but by the needs and desires of the parent company. Id. DSMC presses that equating the subject
companies to Trigger is inappropriate because the sales structure of the subject companies sold to
non-affiliated companies, not to parent companies. Id.
The defendant responds that Trigger was not alone in making sales to a parent
company. Def.’s Resp. at 25-26. Rather, Tyrolit and KM both had sold to parent companies. Id.
The IDM adds that “sales to the parent company do not undermine specificity, contemporaneity, and
quality” of financial statements. IDM at 51.
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Bosun also expounds that DSMC gave no explanation to support its argument that
this financial position makes the data unreliable. Bosun’s Resp. at 15-16. Bosun is correct that
DSMC has not proven that this financial arrangement makes the data unreliable, id.; however, a
reasonable mind can see that the trends and information have a tendency to indicate a divergence
from that of a market based or non-captive enterprise. Bosun also argues that the same negative
conjecture can be made about KM and Tyrolit, arguing that a plaintiff cannot pick and choose on
the basis of financially favorable loan conditions. Id. But, DSMC accurately identifies this as post
hoc rationalization, which cannot be considered. DSMC’s Rep. at 15; Burlington Truck Lines, Inc.v.
United States, 371 U.S. 156, 168-69, 83 S. Ct. 239, 246 (1962) (the court may not accept “post hoc
rationalizations for agency action” and agency action may be “upheld, if at all, on the same basis
articulated in the order by the agency itself”). Bosun also argues that the effects of this simply cancel
out, Bosun’s Resp. at 16, but without the data and calculations to support such conclusions, the court
is unpersuaded.
Without sufficient evidence on the record, this court is left to consider conclusory
statements and post hoc rationalizations on all sides. The matter must therefore be remanded. On
remand Commerce is requested to provide support with the regards to whether and to what extent
Trigger is a captive producer and whether that state undermines the applicability of Trigger as an
appropriate surrogate.
DSMC also contends that Trigger’s use of prison labor compromised the usefulness
of its labor data. DSMC’s Br. at 36-38. DSMC explains that the purpose of surrogate data is to
replace a NME with a market economy, whereas prison laborers are unlikely to be able to negotiate
market wages, reduced wages likely affect profits and expenses in Trigger data. Id. Chiefly, DSMC
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Court No. 15-00164 	Page 32
argues prison labor may broadly affect the overall financial experience and that the implications on
the overall financial experience make Trigger an unsuitable proxy. DSMC’s Rep. at 16-17.
The defendant counters that it relies on industry-specific labor data, not Trigger’s
data, when it calculates labor costs. Def.’s Resp. at 25. The defendant also points out that DSMC
did not argue the amount of prison labor or how specifically it distorted the financial statements, i.e.,
what the effect of prison labor was, if any. Id. Bosun states that only three percent of the labor
comes from inmates and that there is no evidence indicating the labor is subsidized. Bosun’s Resp.
at 17. Further, Bosum argues that the data would not be used in the labor calculation, but it could
be used in the denominator, where it would be undervalued. Id.
In focusing on the influence on the use of labor costs alone, Commerce and Bosun
“[f]ailed to consider an important aspect of the problem.” State Farm, 463 U.S. at 43. Commerce
must address arguments of “cogent materiality.” Altx Inc., 25 CIT 1100, 1103, 167 F. Supp.2d 1353,
1359 (2001), quoting United States v. Nova Scotia Food Prods., 568 F.2d 240, 252 (2d Cir. 1977).
Commerce did not merely gloss over the primary concerns raised by DSMC, but failed to address
the broader implications entirely. As Bosun identifies, three percent is the amount of labor coming
from prison, but this gives little insight to what butterfly effect such a change may create. It also
does not resolve whether and how Commerce indeed considered the implication of such down the
line non-market expenses. Commerce is requested on remand to evaluate the influence of prison
labor on Trigger’s overall financial picture. In particular, whether the use of this labor materially
alters the financial position of Trigger, making it non-comparable.
DSMC argues that Trigger’s 2013 income was so small that the tax liability increased
from 10.5 percent before-tax profits in 2012 to 80.5 percent in 2013. DSMC’s Br. at 35-37. DSMC
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further argues that Commerce failed to address DSMC’s concerns. DSMC’s Rep. at 35-36. The
defendant simply asserts that the tax liability was resolved and there are no deficiencies. Def.’s
Resp. at 25-26, citing IDM at 5-51. Bosun supports this by stating that Commerce does not look into
tax situations of surrogate countries when audited locally. Bosun’s Resp. at 17. DSMC’s concern
here is over how this, in the aggregate, influence’s Trigger’s ability to be comparable. See IDM at
50. They do not take into account markups. Id.
The tax data alone does not give reason to question the validity of the Trigger data.
Further, DSMC fails to provide any support that would indicate Commerce’s normal methodology
is to give such tax changes an increased weight. However, given the overarching implications in an
aggregation of these elements, on remand Commerce is requested to reevaluate whether Trigger is
indeed comparable and appropriate to use as a surrogate source, or whether additional factors should
be included to account for any such variation in Trigger’s data.
C. Assignment of PRC-Wide Rate To ATM
The last issue concerns Gang Yan’s challenges to the application of the PRC-wide
rate and the rate itself.
1.
The initiation notice for this fourth DSB review stated in relevant part that
“companies that received a separate rate in a completed segment of the proceeding that have
subsequently made changes, including, but not limited to, changes to corporate structure, acquisitions
of new companies or facilities, or changes to their official company name, should timely file a
Separate Rate Application to demonstrate eligibility for a separate rate in this proceeding.” Initiation
of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in
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Court No. 15-00164 	Page 34
Part, 78 Fed. Reg. 79392, 79393 (Dec. 30, 2013) (initiation of admin. rev.) (footnote omitted). The
ATM entity duly submitted a “separate rate certification” (“SRC”) on February 28, 2014, a form for
firms previously awarded separate rate status. See PDoc 53, CDoc 9.
For the review at bar, Commerce selected for individual examination Bosun and
Weihai as the two entities with the largest volume of imports of subject merchandise during the
POR. PDoc 95, CDoc 42, at 5-6. Commerce did not conduct an “individual” examination of the
ATM entity.
During the proceeding, and prior to publication of the preliminary determination, the
Court of Appeals for the Federal Circuit affirmed, per curium and pursuant to CAFC Rule 36, this
court’s ruling on the ATM entity’s appeal of the issue of its eligibility for a separate rate status that
Commerce reversed on redetermination, and this court sustained. Advanced Technology & Materials
Co. v. United States, 581 Fed. Appx. 900 (Fed. Cir. Oct. 24, 2014); see also Advanced Technology
& Materials Co. v. United States, 37 CIT ___, 938 F. Supp. 2d 1342 (2013).
During the proceeding at bar, Commerce concluded from the ATM entity’s
declaration on its SRC that its status was essentially the same as that of the prior administrative
review(s). Commerce therefore concluded the ATM entity had not demonstrated eligibility for a
separate rate pursuant to Commerce’s evaluation of its de jure and de facto government control tests
and the ATM entity is properly considered part of the PRC-wide entity that includes the Central Iron
and Steel Research Institute Group and/or China Iron and Steel Research Institute Group
(“CISRI”).15 Preliminary Results, 79 Fed. Reg. 71980, 71981 n.11; PDM at 9. 	Commerce
15 Advanced Technologies noted record evidence from the investigation that CISRI “is a state
owned enterprise that is wholly owned and controlled by the State Asset Supervision and
(continued...)
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preliminarily assigned to the ATM entity the PRC-wide entity the rate of 164.09 percent, the margin
calculated in the original investigation. 79 Fed. Reg. at 71980-81; PDM at 10-11.
Between the preliminary and Final Results, Commerce adjusted the PRC-wide margin
to 82.05 percent consistent with remand results on prior administrative reviews.16 See 80 Fed. Reg.
32344. For the final results, Commerce continued to rely on the fact that the ATM entity did not
demonstrate its eligibility for a separate rate as a distinct entity from the PRC-wide entity, IDM at
6-7, but in accordance with judicial proceedings on the prior administrative reviews subsequent to
the preliminary fourth DSB review determination, Commerce revised downward the rate assigned
to the ATM entity from 164.09 to 82.05 percent. 	IDM at 12. 	Commerce calculated the 82.05
percent rate through a simple average of the PRC-wide rate, 164.09 percent, and the 0.00 percent
margin calculated for the ATM entity for the second administrative review of the order. 	Id.
Commerce explained that the ATM entity’s rate was based not on adverse inferences but, rather, (1)
“the rate applied to the PRC-wide entity based on the actions of the PRC-wide entity” and (2) the
ATM entity’s “experience as a fully cooperative mandatory respondent” in the second administrative
review. IDM at 11. Commerce further explained that its application of the PRC-wide rate to the
15 (...continued)
Administration Commission (“SASAC”), a PRC government agency.” Advanced Technology &
Materials Co.v. United States, 35 CIT __, __, Slip Op. 11-122, 11 (2011).
16 Relevant to this case, the court previously sustained redetermination of the PRC-wide
margin for the first and second administrative reviews to 82.05 percent, via voluntary remand. See
Diamond Sawblades Manufacturers Coalition v. United States, No. 13-00078, Apr. 10, 2015, ECF
No. 76 (AR1 final remand results); Diamond Sawblades Manufacturers Coalition v. United States,
No. 13-00241, May 18, 2015, ECF No. 96 (AR2 final remand results); see also Diamond Sawblades
Mfrs. Coal. v. United States, 39 CIT __, Slip Op. 15-105 at 16 (Sep. 23, 2015) (DSMC AR1)
(sustaining results of redetermination of first administrative review); Diamond Sawblades Mfrs.
Coal. v. United States, 39 CIT ___, Slip Op. 15-116 (Oct. 21, 2015) (DSMC AR2) (sustaining results
of redetermination of second administrative review).
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ATM entity, and its calculation of that rate, was consistent with its approach from the remand results
in the first and second administrative reviews. See IDM at 12.
2.
Many of Gang Yan’s arguments emanate from the perspective that the ATM entity
is an “individual” -- separate and apart from the PRC entity -- and therefore entitled to be considered
as such. But that is a factually incorrect characterization of the Final Results for the ATM entity and
inaccurately characterizes the law. The relevant issue here is Commerce’s authority to impose a
PRC-wide rate to the ATM entity and the propriety of that rate itself, not the ATM entity’s
“individual” behavior.
19 U.S.C. §1677f-1 only speaks to authorizing Commerce to “use averaging and
statistically valid samples” and “determine the weighted average dumping margins for a reasonable
number of exporters or producers by limiting its examination to -- 	(A) a sample of exporters,
producers, or types of products that is statistically valid based on the information available to the
administering authority at the time of selection, or (B) exporters and producers accounting for the
largest volume of the subject merchandise from the exporting country that can be reasonably
examined.” 	19 U.S.C. §1677f-1(a), (c)(2).
By contrast, Commerce’s authority to impose a “PRC-wide” margin emanates from
its authority to determine an estimated “all others” rate under 19 U.S.C. §1673d(c)(1)(B), not 19
U.S.C. §1677f-1. See Sigma Corp. v. United States, 117 F.3d 1401, 1405-06 (Fed. Cir. 1997). And
in accordance with Antidumping Proceedings: Announcement of Change in Department Practice
for Respondent Selection in Antidumping Duty Proceedings and Conditional Review of the
Nonmarket Economy Entity in NME Antidumping Duty Proceedings, 78 Fed. Reg. 65963, 65970
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Court No. 15-00164 	Page 37
(Nov. 4, 2013), Commerce will now review that “all others” PRC-wide rate if it receives a review
request. 19 U.S.C. §1675(a)(1). Section 1677f-1(c) has no bearing on the determination of that rate
or its application to companies within the PRC-wide ambit, such as the ATM entity: once a company
is determined ineligible for a separate date, 19 U.S.C. §1677f-1 ceases to have any applicability
because the question of the authority to apply that rate to all companies within the PRC-wide ambit
has been answered in the affirmative by Sigma Corp. and Transcom, Inc. v. United States, 294 F.3d
1371, 1379 (Fed. Cir. 2002) (conditionally reviewed companies also are deemed to have received
sufficient notice in the initiation).
During the course of this review, Commerce changed its approach to the standards
for separate rates, due to earlier decisions of this court. As a result, Commerce declared the ATM
entity part of the PRC-wide entity. Further, as mentioned, Commerce modified its prior practice of
“conditionally” reviewing the NME entity whenever, even absent a request, review of an exporter
requesting a separate rate was unable to demonstrate that it was separate from the PRC-wide entity,
such that Commerce’s current practice is to conduct an administrative review of the NME-wide
entity if it receives a request for, or self-initiates, a review of that entity. 78 Fed. Reg. at 65970.
The PRC-wide rate of 82.05 percent for this fourth DSB review is the same rate as
that sustained for prior administrative reviews, and Commerce found it to be of continued relevance
for this review. Gang Yan argues that the PRC-wide entity was not a named entity under review
(conditional or otherwise), so the fact that the ATM entity (of which BGY is a part) was determined
to be part of the PRC-wide entity means that BGY’s shipments during the POR must be liquidated
“as entered” in accordance with 19 C.F.R. §351.212(c) (in the absence of request for review of an
antidumping duty order, imports are to be liquidated as entered). If by liquidated “as entered”, Gang
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Court No. 15-00164 	Page 38
Yan means subject to the PRC-wide rate of 82.05 percent, see 80 Fed. Reg. at 32345, the court
agrees. 	Gang Yan’s argument otherwise appears to confuse what it means to be “subject to” a
review and the actual review process, but 19 U.S.C. §1675(a) is clear in stating that Commerce will
“review and determine” the amount of any antidumping duty for a 12-month review period if a
request for such review is received. Which, of course, does not imply that if no request for review
is received then subject merchandise will enter without antidumping duties imposed -- it simply
means that the rate from the prior review period will carry forward. 	And if by liquidated “as
entered”, Gang Yan means Commerce is obligated to issue liquidation instructions that do not
impose the PRC-wide rate of antidumping duties on the ATM entity’s subject merchandise, the
argument is untenable because the status of the ATM entity changed during the course of the review
when it lost its entitlement to a rate separate from the PRC-wide entity. That is, the “automatic
assessment” provisions of 19 C.F.R. §351.212(c) indeed apply, but they apply to and as the PRC-
wide entity rate for purposes of the ATM entity’s subject merchandise’s liquidation.
Elsewhere, Gang Yan’s arguments conflate its identity as an “individual” company
with the identity of the PRC-wide entity. Gang Yan intimates that the ATM entity “responded” as
part of the PRC-wide entity and “participated” in the review as a part of the PRC-wide entity.
However, the record belies that stance, as the ATM entity specifically sought separate rate status for
BGY and filed no-shipment certifications for its other three exporters. Further, nothing of record
indicates the ATM entity was authorized to speak for the PRC-wide entity or otherwise had standing
to do so. Gang Yan does not here purport to represent, or be representative of, that PRC-wide entity.
Gang Yan also argues that the 164.09 percent rate from the investigation is an adverse
facts available rate, see 19 U.S.C. §1677e, and that there is nothing on the record indicating the PRC-
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Court No. 15-00164 	Page 39
wide entity failed to cooperate and no finding of non-cooperation of the PRC-wide entity by
Commerce, and that an adverse rate cannot be “assigned” to the ATM entity. 	The argument
misleads what transpired on the record for two primary reasons. First, the 164.09 percent rate is only
tangentially relevant at this point, as the rate for the PRC-wide entity from the previous review that
Commerce carried forward to this review was not that rate but reflected the fact that as a
consequence of judicial proceedings over the investigation, the PRC-wide entity was reconsidered
to consist of a portion that had in fact cooperated as well as an uncooperative portion. Rather than
attempt to weight-average those portions for purposes of subsequent administrative reviews,
Commerce generously applied a simple average that actually inured to the PRC-wide entity’s benefit.
The ATM entity has, from then onwards, been considered a part of that PRC-wide entity, and the
ATM entity’s “separate” existence or behavior ceased to have further meaning apart from the impact
that it had on the reconsideration of the margin from the investigation that carried forward to
subsequent administrative reviews that were judicially challenged and subsequently modified as a
consequence thereof. See, e.g., Peer Bearing Co.-Changshan v. United States, 32 CIT 1307, 1313,
587 F. Supp.2d 1319, 1327 (2008) (“[T]here is no requirement that the PRC-wide entity rate based
on AFA relate specifically to the individual company. It is not directly analogous to the process used
in a market economy, where there is no countrywide rate. 	Here, the rate must be corroborated
according to its reliability and relevance to the countrywide entity as a whole.”) (citations omitted).
Second, “cooperation” implies responsiveness to a request for action, and although
the PRC-wide entity was “subject to” the review and the results of it, as Gang Yan acknowledges,
the PRC-wide entity was not actively reviewed because Commerce did not receive a request for
review of the PRC-wide entity. Gang Yan argues that if Commerce had any questions about whether
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non-responding companies were controlled by the PRC government, it could simply have asked that
government, but the argument inverts Commerce’s well-established presumption regarding the PRC-
wide entity and the burden of proof thereon. Nothing of record indicates that the PRC government
could not itself, for example, have requested review of the PRC-wide entity, via, for example, the
agency of CISRI or SASAC. See 19 U.S.C. §1677(9)(B) (defining the government of a country in
which subject merchandise is produced or manufactured, or from which such merchandise is
exported, as an “interested party”). In this instance, because the PRC-wide entity was not itself being
reviewed, the fact that there is no finding of cooperation, partial cooperation, or non-cooperation of
the PRC-wide entity on the record is irrelevant.
Gang Yan further argues Commerce failed to corroborate the PRC-wide rate.
However, once Commerce established the PRC-wide rate, it was permitted to use that rate in the
manner it did in this review. 	Gang Yan identifies no basis for departing from the court’s prior
rulings sustaining Commerce’s application of the PRC-wide rate to the ATM entity. Nonetheless,
as those rulings are currently on appeal to the Federal Circuit, Commerce of course retains the
authority to revisit this issue in consequence of any decision of that court during remand of this
matter to Commerce. The court considered parties’ remaining arguments and finds they lack merit.
Conclusion
For the above reasons, Diamond Sawblades and Parts Thereof from the Republic
of China, 80 Fed. Reg. 32344 (June 8, 2015), is hereby remanded to the International Trade
Administration, U.S. Department of Commerce for further proceedings consistent with this
opinion.
The parties shall provide comment, or indication of none, on the sufficiency of the
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information indicated to be redacted from the confidential version of this opinion (indicated
above by double bracketing) to the Clerk of the Court within seven (7) days, including any
indication of information that should be but is not presently indicated as subject to redaction.
The results of remand shall be due July 31, 2017, whereupon by the fifth business
day thereafter, the parties shall file a joint status report as to a proposed scheduling of comments,
if any, on the remand results, as well as a proposed page limitations(s) thereof.
So ordered.
/s/ R. Kenton Musgrave
R. Kenton Musgrave, Senior Judge
Dated: March 31, 2017
New York, New York
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