China Mfrs. Alliance, LLC v. United States

2019 CIT 115

Opinion

Slip Op. 19-115

UNITED STATES COURT OF INTERNATIONAL TRADE

CHINA MANUFACTURERS ALLIANCE, LLC and DOUBLE COIN HOLDINGS LTD., et al.,

Plaintiffs, Before: Timothy C. Stanceu, Chief Judge v. Consol. Court No. 15-00124 UNITED STATES,

Defendant.

OPINION

[Sustaining a remand redetermination issued in response to court order in an action contesting the final results of an administrative review of an antidumping duty order on pneumatic off-the-road tires from the People’s Republic of China]

Dated: September 3, 2019

Daniel L. Porter, Curtis, Mallet-Prevost, Colt & Mosle LLP, of Washington, D.C., for plaintiffs China Manufacturers Alliance, LLC and Double Coin Holdings Ltd. With him on the brief were James P. Durling, Matthew P. McCullough, and Tung A. Nguyen.

Ned H. Marshak, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of Washington, D.C., for plaintiffs Guizhou Tyre Co., Ltd. and Guizhou Tyre Import and Export Co., Ltd. With him on the brief were Brandon M. Petelin, Dharmendra N. Choudhary, Andrew T. Schutz, and Jordan C. Kahn.

John J. Todor, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for defendant. With him on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director. Of counsel was James H. Ahrens II, Attorney, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of Washington, D.C.

Stanceu, Chief Judge: In this consolidated case, plaintiffs contested a final determination

of the International Trade Administration, U.S. Department of Commerce (“Commerce” or the Consol. Court No. 15-00124 Page 2

“Department”) concluding the fifth periodic administrative review of an antidumping duty order

on certain off-the-road pneumatic tires (“OTR tires”) from the People’s Republic of China

(“China” or the “PRC”).

Before the court is the Department’s decision (the “Second Remand Redetermination”)

responding to the court’s order in China Mfrs. Alliance, LLC. v. United States, 43 CIT __,

357 F. Supp. 3d 1364 (2019) (“CMA II”). Final Results of Redetermination Pursuant to Ct.

Remand (Apr. 16, 2019), ECF No. 231-1. The court sustains the Second Remand

Redetermination because it complies with the court’s order in CMA II and because no party has

commented in opposition.

I. BACKGROUND

Background on this case is presented in the court’s prior opinions and supplemented

briefly herein. CMA II, 43 CIT at __, 357 F. Supp. 3d at 1366-68; China Mfrs. Alliance, LLC v.

United States, 41 CIT __, 205 F. Supp. 3d 1325 (2017) (“CMA I”).

A. The Parties

Plaintiffs China Manufacturers Alliance, LLC and Double Coin Holdings Ltd.

(collectively, “Double Coin”), and plaintiffs Guizhou Tyre Co., Ltd. and Guizhou Tyre Export

and Import Co., Ltd. (collectively, “GTC”) were the mandatory respondents in the fifth review.

They are the plaintiffs in this litigation. Defendant is the United States.

B. The Contested Decision

The contested administrative decision is Certain New Pneumatic Off-the-Road Tires

From the People’s Republic of China: Amended Final Results of Antidumping Duty

Administrative Review; 2012-2013, 80 Fed. Reg. 26,230 (Int’l Trade Admin. May 7, 2015)

(“Amended Final Results”). Commerce issued the Amended Final Results to correct a Consol. Court No. 15-00124 Page 3

ministerial error in its earlier decision, Certain New Pneumatic Off-the-Road Tires From the

People’s Republic of China: Final Results of Antidumping Duty Administrative Review;

2012-2013, 80 Fed. Reg. 20,197 (Int’l Trade Admin. Apr. 15, 2015) (“Final Results”). In the

Amended Final Results, Commerce assigned GTC a weighed average dumping margin of

11.41%. Commerce determined that Double Coin was a member of the “PRC-wide entity,”

concluding that Double Coin had failed to establish its independence from the government of the

PRC and assigned it the rate it determined for that entity, which was 105.31%.

II. DISCUSSION

A. Jurisdiction and Standard of Review

The court exercises jurisdiction pursuant to section 201 of the Customs Courts Act of

1980, 28 U.S.C. § 1581(c) (2012), which grants the Court of International Trade jurisdiction of

any civil action commenced under 19 U.S.C. § 1516a.1 The 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).

B. Prior Judicial Proceedings

In CMA I, the court remanded the Amended Final Results to Commerce with respect to

four determinations. Only one of those determinations pertained to Double Coin: the court

rejected the Department’s decision to assign Double Coin the 105.31% rate that Commerce

determined for the PRC-wide entity and directed Commerce to assign Double Coin the

weighted-average dumping margin of 0.14% (a de minimis margin) that Commerce determined

from its examination of Double Coin’s own sales. CMA I, 41 CIT at __, 205 F. Supp. 3d

1 All citations to the United States Code herein are to the 2012 edition. Consol. Court No. 15-00124 Page 4

at 1334-41. The other three determinations pertained to GTC’s margin. First, the court held

unlawful the Department’s decision to make an 8% reduction in the starting prices used to

determine export price (“EP”) and constructed export price (“CEP”) to account for what

Commerce termed “irrecoverable” value-added tax (“VAT”). Id., 41 CIT at __, 205 F. Supp. 3d

at 1344-51. The court reasoned that Commerce, based on an impermissible construction of

19 U.S.C. § 1677a(c)(2)(B), resorted to a presumption in reducing the starting prices without

reaching a finding that any specific amount actually was imposed by the government of the PRC

as an “export tax, duty, or other charge” within the meaning of that provision. Id. Second, the

court ordered Commerce to reconsider its calculations of deductions from CEP for GTC’s

brokerage and handling costs and ocean freight costs, concluding that the Department’s finding

that these calculations were free of “double counting” was not supported by substantial evidence

on the record. Id., 41 CIT at __, 205 F. Supp. 3d at 1356-58. Finally, the court ordered

Commerce to reconsider its decision not to make an inflation adjustment for GTC’s domestic

warehousing costs. Id., 41 CIT at __, 205 F. Supp. 3d at 1358-59.

In CMA II, the court ruled on the decision (“First Remand Redetermination”) Commerce

submitted to the court in response to the court’s opinion and order in CMA I. In the First

Remand Redetermination, Commerce, under protest, assigned Double Coin a weighted average

dumping margin of 0.14% (de minimis). Making several changes to its calculations, Commerce

revised GTC’s margin from 11.41% to 11.33%. CMA II, 43 CIT at __, 357 F. Supp. 3d at 1367.

CMA II sustained two of the changes to GTC’s margin calculation in the First Remand

Redetermination, changes to which neither party objected. Commerce concluded that one

element of its calculation of deductions from CEP for GTC’s brokerage and handling and ocean

freight expenses, “Shanghai Port Charges,” was double counted and made a correction for this Consol. Court No. 15-00124 Page 5

purpose. Commerce also redetermined GTC’s surrogate warehousing expenses, adjusting for

inflation. Id., 43 CIT at __, 357 F. Supp. 3d at 1369.

In the First Remand Redetermination, Commerce, under protest, assigned Double Coin

the 0.14% margin it had calculated based on Double Coin’s own sales, in response to the court’s

order. Id., 43 CIT at __, 357 F. Supp. 3d at 1381. After Commerce submitted the First Remand

Redetermination to the court, defendant moved for a partial remand that would allow Commerce

to revisit the issue of Double Coin’s weighted-average dumping margin in light of the decision

of the Court of Appeals for the Federal Circuit in Diamond Sawblades Mfrs. Coal. v. United

States, 866 F.3d 1304 (Fed. Cir. 2017) (“Diamond Sawblades”). Id. Three issues then remained

in this litigation: (1) defendant’s motion for a partial remand to reconsider Double Coin’s rate;

(2) whether the Department’s deductions from the EP and CEP starting prices for irrecoverable

VAT were lawful; and (3) whether elements of the Department’s calculation of deductions for

GTC’s brokerage and handling costs, and ocean freight costs, other than the Shanghai Port

Charges, also were double counted.

In considering defendant’s motion for a partial remand, the CMA II opinion analyzed the

holdings in Diamond Sawblades, one of which the court considered to bear on this case. The

opinion described that holding as follows: “Diamond Sawblades holds that the Tariff Act allows

Commerce to assign the rate it assigns to the PRC-wide entity to a cooperative respondent it

selected as a mandatory respondent, provided the respondent fails to rebut the Department’s

presumption of control by the government of the PRC.” Id., 43 CIT at __, 357 F. Supp. 3d

at 1382. Without deciding the question of whether Double Coin had rebutted the Department’s

presumption of government control, the CMA II opinion concluded, for various reasons as

explained therein, that “the only rate supported by the record evidence that Commerce Consol. Court No. 15-00124 Page 6

reasonably could apply to the PRC-wide entity—and therefore to Double Coin—were the court

to grant the requested partial remand, would be one equivalent to the 0.14% margin Commerce

already determined for Double Coin in the Remand Redetermination.” Id., 43 CIT at __, 357 F.

Supp. 3d at 1388. The court observed that “Commerce never requested any information from the

government of the PRC or from any part of the PRC-wide entity other than Double Coin.” Id.,

43 CIT at __, 357 F. Supp. 3d at 1387. The court also observed that only four exporters or

producers of OTR tires specifically were included in the fifth review. Id. Two of these were the

mandatory, and fully cooperating, respondents, i.e., Double Coin and GTC, and the other two

were unexamined respondents Commerce found to have demonstrated independence from the

PRC government, both of which were assigned the rate determined for GTC. Id. Noting that

Double Coin was the only Chinese exporter or producer of OTR tires that Commerce considered

to be part of the PRC-wide entity and that can be identified from the record as actually being in

the fifth review, the court concluded that “the only record information relevant to determining a

rate for the PRC-wide entity was the information pertinent to Double Coin.” Id., 43 CIT at __,

357 F. Supp. 3d at 1388. The court reasoned that because Commerce already had assigned the

0.14% de minimis rate to Double Coin in the First Remand Redetermination and “does not seek

to reconsider the 105.31% rate it assigned to the PRC-wide entity (except with respect to Double

Coin), granting defendant’s motion for a partial remand would serve no purpose.” Id.

For the First Remand Redetermination, Commerce retained the 8% reduction in GTC’s

EP and CEP starting prices for what Commerce considered to be irrecoverable value-added tax.

The court set aside that decision as unlawful in CMA II. Citing Qingdao Qihang Tyre Co. v.

United States, 42 CIT __, __, 308 F. Supp. 3d 1329, 1338-47 (2018), which was issued after

CMA I was decided, the court concluded that the statutory interpretation under which Commerce Consol. Court No. 15-00124 Page 7

made deductions from EP and CEP starting prices for irrecoverable VAT “contravenes the plain

meaning, statutory history, and legislative history” of 19 U.S.C. § 1677a(c)(2)(B). CMA II,

43 CIT at __, 357 F. Supp. 3d at 1375. After discussing provisions in the Tariff Act that

addressed domestic taxes such as value-added taxes separately from the export taxes falling

within the scope of § 1677a(c)(2)(B), the court concluded that “Congress had a specific intent

with respect to VAT imposed by an exporting country on subject merchandise or the materials

used to produce it.” Id. “Congress did not intend that irrecoverable VAT, i.e., VAT that was not

refunded or avoided by reason of exportation of the good, would increase a dumping margin

(although it did intend that recoverable VAT, in some circumstances not present here, could

reduce a dumping margin.)” Id. “In addition, Commerce erred in finding, without any

evidentiary support, that Chinese irrecoverable VAT is a tax not imposed on the domestic good.”

Id. CMA II ordered Commerce to “take the appropriate corrective action to remove from the

calculation of GTC’s margin its downward EP and CEP adjustments for VAT.” Id.

CMA II held that substantial evidence on the record was not available to support the

Department’s finding in the First Remand Redetermination that only one cost category of the

brokerage and handling and ocean freight costs, i.e., the Shanghai Port Charges, were double

counted. Id., 43 CIT at __, 357 F. Supp. 3d at 1379. The court ordered Commerce to ensure that

no costs are double counted either as between brokerage and handling costs and ocean freight

costs, or as between ocean freight costs and U.S. inland freight costs. Id.

C. The Second Remand Redetermination

In the Second Remand Redetermination, Commerce recalculated GTC’s weighted

average dumping margin, reducing it from 11.33%, as determined in the First Remand

Redetermination, to 4.59%. Second Remand Redetermination 14. Commerce, under protest, Consol. Court No. 15-00124 Page 8

eliminated its deductions for irrecoverable VAT and, reconsidering its calculations of GTC’s

brokerage and handling and ocean freight costs, eliminated additional cost elements it

determined to have been double counted. The court addresses each of these changes below.

1. Elimination of Irrecoverable VAT Adjustment in Calculating GTC’s Dumping Margin

In CMA II, the court directed Commerce to recalculate EP and CEP without making a

reduction in the EP and CEP starting prices for irrecoverable VAT. Commerce, in response,

eliminated its irrecoverable VAT deduction. Commerce stated that “[w]e respectfully disagree

with the court’s decision in China Mfr. Alliance II [CMA II] concerning the irrecoverable VAT

adjustment used in GTC’s weighted-average margin calculation,” Second Remand

Redetermination 4, but provided no explanation of why it disagreed with the analysis of the VAT

issue in CMA II.

2. Recalculation of GTC’s Ocean Freight Surrogate Value

Commerce obtained a surrogate value for GTC’s export brokerage and handling costs

from a World Bank publication, Doing Business 2014: Indonesia, Indonesia being the surrogate

country Commerce used for surrogate values in the review. CMA II, 43 CIT at __,

357 F. Supp. 3d at 1375. Commerce valued GTC’s trans-Pacific ocean freight using shipping

price quotes published online by Descartes Systems Group, Inc. (“Descartes”). Id., 43 CIT at __,

357 F. Supp. 3d at 1376. It also used Descartes price data to derive a value for U.S. inland

freight. Id. In CMA II, the court ordered Commerce to “ensure that no costs are double counted

either as between (1) brokerage and handling (based on the Doing Business report) and ocean

freight (based on the Descartes quotes), or (2) ocean freight (based on the Descartes quotes) and

U.S. inland freight (based on the Descartes price lists).” Id., 43 CIT at __, 357 F. Supp. 3d

at 1379. The court concluded in CMA II that Commerce did not explain why seven charges Consol. Court No. 15-00124 Page 9

identified as ocean freight charges in Descartes price quotes were not accounted for again in the

U.S. inland freight charges. These were the Automated Manifest System (“AMS”) Charge,

Chassis Usage Charges, International Ship and Port Security Charges, ISD Handling Charges,

Traffic Mitigation Fee, Clean Truck Fee, and Documentation Charges. Id., 43 CIT at __,

357 F. Supp. 3d at 1378.

Commerce stated in the Second Remand Redetermination that, pursuant to the court’s

order in CMA I, it reopened the record to solicit information on potential double counting.

Second Remand Redetermination 6. On the basis of the expanded record, Commerce eliminated

the Shanghai Port Charge from the ocean freight calculation. Id. Upon re-examining the record,

Commerce concluded in the Second Remand Redetermination that no additional double counting

of costs occurred between the brokerage and handling and the ocean freight cost categories. Id.

at 8. Also, Commerce noted that, after the Shanghai Port Charge was removed from the ocean

freight surrogate value, no party argued that additional double counting occurred between

brokerage and handling costs and ocean freight costs. Id.

In examining potential double counting between ocean freight charges and U.S. inland

freight charges, Commerce concluded that four of the seven charges listed above appeared on

only one of the twenty-four ocean freight price quotes Commerce used and therefore did not

appear to be customary charges. Commerce eliminated this price quote from its calculation.

Commerce then considered whether the remaining three types of charges—AMS Charges,

Documentation Charges, and Traffic Mitigation Fees—were duplicated in the data it used for

inland freight charges. Id. at 9-10.

Of the three charges in question, Commerce concluded that only the Traffic Mitigation

Fees are reasonably attributable to inland freight expenses and removed these fees from its Consol. Court No. 15-00124 Page 10

calculation of international freight expense. Commerce cited record evidence from the first

remand in concluding that the Traffic Mitigation Fees are “charged to truck freight carriers upon

pick-up of cargo from the port, to fund operations of the port to allow for off-peak hour pick up

of freight from the ports of Los Angeles and Long Beach to mitigate traffic congestion,” id. at 12

(footnote omitted), and are “reasonably attributable to U.S. inland freight expenses,” id. at 13.

Commerce cited record information—specifically, the Descartes logistics and supply

chain glossary—in concluding that the Automated Manifest System Charge is an ocean freight

expense related to arrival of cargo at the port of destination. Id. at 11. The record information

indicates that the charge is for the providing electronic transmission of manifest information

from the vessel to Customs and Border Protection. Id. The record supports the Department’s

conclusion that the charge is not related to U.S. inland movement of freight and therefore was

not double counted.

Commerce stated that “Documentation Charges” appear on approximately half of the

Descartes quotes for ocean freight charges. Id. at 11-12. Commerce reiterated its finding from

the First Remand Redetermination that these charges relate to documents such as the master bill

of lading, which covers all containers aboard an ocean-going vessel, and to U.S. destination

document fees. Id. at 12. Commerce concluded that evidence did not support a finding that

these documentation charges related to inland freight, id., a conclusion the record supports.

In summary, the court concludes that Commerce’s findings and conclusions pertaining to

possible double counting were supported by substantial evidence on the augmented record and

comply with the court’s order in CMA II. Consol. Court No. 15-00124 Page 11

II. CONCLUSION

The court concludes, for the reasons discussed above, that the Second Remand

Redetermination complies with the court’s order in CMA II. Judgment sustaining the

determinations therein will enter accordingly.

/s/ Timothy C. Stanceu Timothy C. Stanceu, Chief Judge

Dated: September 3, 2019 New York, New York