Clearon Corp. v. United States

2011 CIT 142

• Court: United States Court of International Trade
• Decided: November 18, 2011
• Docket: 08-00364
• Status: Published

Opinion

Slip Op. 11-142

UNITED STATES COURT OF INTERNATIONAL TRADE

______________________________ : CLEARON CORPORATION and : OCCIDENTAL CHEMICAL : CORPORATION, : : Plaintiffs, : : v. : Before: Richard K. Eaton, Judge : UNITED STATES, : Court No. 08-00364 : Defendant, : Public Version : and : : ARCH CHEMICALS, INC., : : Defendant-Intervenor. : ______________________________:

OPINION AND ORDER

[The Final Results are remanded.]

Dated: November 18, 2011

Gibson, Dunn, & Crutcher LLP (Daniel J. Plaine, J. Christopher Wood, Andrea F. Farr, and Zia C. Oatley), for plaintiffs Clearon Corporation and Occidental Chemical Corporation.

Tony West, Assistant Attorney General; Jeanne E. Davidson, Director, Franklin E. White, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (David F. D’Alessandris); Office of Chief Counsel for Import Administration, United States Department of Commerce (Brian Soiset), of counsel, for defendant United States.

Blank Rome LLP (Peggy A. Clarke and Roberta Kienast Daghir), for defendant-intervenor Arch Chemicals, Inc. Court No. 08-00364 Page 2

Eaton, Judge: This action is before the court on the motion

of Clearon Corporation and Occidental Chemical Corporation

(collectively, “plaintiffs”) for judgment on the agency record

pursuant to USCIT Rule 56.2.1 The motion challenges certain

aspects of the United States Department of Commerce’s (“Commerce”

or the “Department”) Final Results of the Second Administrative

Review of the antidumping duty order on chlorinated

isocyanurates2 from the People’s Republic of China (“PRC”), in

which Commerce assigned dumping margins to Chinese respondents

Hebei Jiheng Chemical Corporation, Ltd. (“Jiheng”) and Nanning

Chemical Industry Co. Ltd. (“Nanning”)3 of 0.80% and 53.67%,

respectively. See Chlorinated Isocyanurates from the PRC, 73

Fed. Reg. 52,645 (Dep’t of Commerce Sept. 10, 2008) (notice of

final results); Chlorinated Isocyanurates from the PRC, 73 Fed.

Reg. 62,249 (Dep’t of Commerce Oct. 20, 2008) (notice of amended

final results) (collectively, the “Final Results”).

The Final Results cover the period of review (“POR”) June 1,

1 Plaintiffs are domestic producers of chlorinated isocyanurates. 2 “‘Chlorinated isocyanurates are derivatives of cyanuric acid, described as chlorinated s-triazine triones. . . . [They are] available in powder, granular, and tableted forms.’” Arch Chems., Inc. v. United States, 33 CIT __, __, Slip Op. 09-71 at 3 n.1 (July 13, 2009) (not reported in the Federal Supplement) (citation omitted). 3 Jiheng and Nanning are Chinese producers and exporters of chlorinated isocyanurates. Court No. 08-00364 Page 3

2006 through May 31, 2007, and incorporate by reference the

Department’s Issues and Decision Memorandum. See Issues and

Decision Mem. for the 2006–2007 Admin. Review of Chlorinated

Isocyanurates from the PRC (Dep’t of Commerce Sept. 5, 2008) (the

“Issues & Dec. Mem.”). The court has jurisdiction pursuant to 28

U.S.C. § 1581(c) (2006) and 19 U.S.C. § 1516a(a)(2)(B)(iii)

(2006).

For the reasons that follow, the Final Results are remanded.

BACKGROUND

Plaintiffs’ motion challenges three aspects of the Final

Results: (1) the selection of surrogate values for urea; (2) the

selection of surrogate values for steam coal; and (3) the

valuation of the waste ammonia gas as a by-product.

Defendant-intervenor Arch Chemicals, Inc.4 fully supports the

Final Results and asks the court to deny plaintiffs’ motion. For

its part, the Department seeks a voluntary remand on the

valuation of the waste ammonia gas by-product, but asks the court

to sustain its Final Results on the first two issues raised by

plaintiffs. Aspects of plaintiffs’ motion were addressed by this

Court when considering the First Administrative Review in Arch

4 Arch Chemicals, Inc. is an importer of subject merchandise and participated in the underlying administrative review. See Def.-Int.’s Mot. to Intervene 1, Dec. 8, 2008. Court No. 08-00364 Page 4

Chemicals, Inc. v. United States, 33 CIT __, Slip Op. 09-71 (July

13, 2009) (not reported in the Federal Supplement).

On December 14, 2009, the Department filed a motion to

dismiss certain counts in plaintiffs’ complaint. According to

Commerce, plaintiffs’ failure to serve their injunction on named

government officials at Commerce and United States Customs and

Border Protection rendered the injunction incapable of preventing

a deemed liquidation. As a result, the Department insisted that

the court dismiss portions of plaintiffs’ complaint as moot

because all entries of the subject merchandise had been

liquidated pursuant to the deemed liquidation provisions of 19

U.S.C. § 1504(d), and because the cash deposit rates at issue in

this litigation had been supplanted by those resulting from the

Third Administrative Review. Def’s Mot. to Dismiss in Part as

Moot 1, Dec. 14, 2009.

On January 15, 2010, the court stayed further action on the

Rule 56.2 motion for judgment on the agency record until the

motion to dismiss was resolved. The court then denied the motion

to dismiss in Clearon Corp. v. United States, 34 CIT __, 717 F.

Supp. 2d 1366 (2010), based on the “intent of the parties”

holding laid out in Agro Dutch Industries Ltd. v. United States,

589 F.3d 1187 (Fed. Cir. 2009).

The court now returns to the Rule 56.2 motion for judgment

on the agency record. Court No. 08-00364 Page 5

DISCUSSION

I. Surrogate Valuation of Urea

A. Legal Framework

The United States imposes duties on foreign-produced goods

that are sold in the United States at less than fair value. If

the price of a good in the home market (“normal value”) is higher

than the price for the same good in the United States (“export

price”), then the comparison produces a positive number that

indicates that dumping has occurred, and the magnitude of the

number determines the dumping margin.

In determining whether the subject merchandise is being, or

is likely to be, sold at less than fair value, 19 U.S.C.

§ 1677b(a) requires Commerce to make “a fair comparison . . .

between the export price5 or constructed export price6 and normal

value.” When merchandise that is the subject of an antidumping

5 The “export price” is “the price at which the subject merchandise is first sold . . . by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to the United States” as adjusted. 19 U.S.C. § 1677a(a). 6 The “constructed export price” is “the price at which the subject merchandise is first sold . . . in the United States . . . by or for the account of the producer or exporter of such merchandise or by a seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or exporter” as adjusted. 19 U.S.C. § 1677a(b). Court No. 08-00364 Page 6

investigation is exported from a nonmarket economy country,7 such

as the PRC, Commerce, under most circumstances, determines normal

value by valuing the factors of production (the “FOPs”) used in

producing the merchandise by employing surrogate data.8 The

statute directs Commerce to value the FOPs “based on the best

available information regarding the values of such factors in a

market economy country or countries considered to be appropriate

by the [Department].” 19 U.S.C. § 1677b(c)(1). Specifically,

Commerce’s task in a nonmarket economy review is to determine,

using surrogate costs, what a producer’s costs would be if the

inputs were valued at market prices. See Tianjin Mach. Imp. &

Ex. Corp. v. United States, 16 CIT 931, 940, 806 F. Supp. 1008,

7 A “nonmarket economy country” is “any foreign country that [Commerce] determines does not operate on market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of the merchandise.” 19 U.S.C. § 1677(18)(A). “Because it deems China to be a nonmarket economy country, Commerce generally considers information on sales in China and financial information obtained from Chinese producers to be unreliable for determining, under 19 U.S.C. § 1677b(a), the normal value of the subject merchandise.” Shanghai Foreign Trade Enters. Co. v. United States, 28 CIT 480, 481, 318 F. Supp. 2d 1339, 1341 (2004). Therefore, because the subject merchandise comes from the PRC, Commerce constructed normal value by valuing the factors of production using surrogate data from India. See 19 U.S.C. § 1677b(c)(4). 8 Section 1677b(c)(4)(A) requires that Commerce “in valuing factors of production, shall utilize, to the extent possible, the prices or costs of factors of production in one or more market economy countries that are . . . at a level of economic development comparable to that of the nonmarket economy country.” Court No. 08-00364 Page 7

1018 (1992).

B. Surrogate Data for Urea Valuation

1. Philippine Data

As it did in the First Administrative Review, Commerce

calculated the surrogate value for the input urea using the

weighted-average unit value of urea imports into India found in

the World Trade Atlas (“WTA”), concluding that the data

represents an average non-export value, and was contemporaneous

with the POR, product specific, and tax exclusive. See Issues &

Dec. Mem. at 8.

Plaintiffs object to this methodology claiming that: (1)

Commerce failed to make the legally required comparison between

the WTA data and the Philippine data they placed on the record;

and (2) the WTA data contained prices that were not set by market

forces. According to plaintiffs:

With respect to the surrogate value for urea, Commerce made two basic errors. First, Commerce misinterpreted 19 U.S.C. § 1677b to permit selection of a source of surrogate value data without comparing it to other sources on the record to determine which is the “best available information.” In this administrative review, two sources of urea price data were available on the record: Indian import data and Philippine domestic price data. Instead of comparing both sources to determine which was the “best available information,” Commerce restricted its evaluation to the adequacy of the Indian import data.

Pls.’ Mem. in Supp. of Mot. for J. on Agency R. (“Pls.’ Mem.”) 3. Court No. 08-00364 Page 8

As to plaintiffs’ second argument, they maintain that Commerce

erred by “failing to exclude from the Indian import data prices

for urea imports from Oman that were not set by market forces.”

Pls.’ Mem. 3.

As noted, plaintiffs contend that Commerce valued the input

urea using Indian import data without first assessing the

relative merits of the Indian and the Philippine data. Pls.’

Mem. 9. Therefore, the domestic producers describe Commerce’s

selection process as limited to a determination of whether the

Indian import data (1) satisfied the minimum requirements for use

as surrogate data, and (2) met the agency regulation that it

“normally will value all factors in a single surrogate country.”

19 C.F.R. § 351.408(c)(2) (2011). Plaintiffs characterize this

selection process as “foreclos[ing] any objective comparison of

the merits of the Indian and Philippine data sets.” Pls.’ Mem.

9.

In making their argument, plaintiffs claim that the phrase

“best available information” means Commerce “must compare the

relative merits of alternative sources of surrogate values on the

record.” Pls.’ Mem. 19. Thus, they insist that Commerce did not

comply with the statute when it failed to address any of their

substantive arguments or conduct an express comparison between

the Indian and Philippine data when making its determination.

Pls.’ Reply Br. in Supp. of Mot. for J. on Agency R. (“Pls.’ Court No. 08-00364 Page 9

Reply”) 1. Looking at the single sentence offered by the

Department to explain its decision not to select the Philippine

data, plaintiffs found nothing “evaluating both data sets with

respect to objective criteria for accuracy or reliability.”

Pls.’ Reply 1; see also Pls.’ Mem. 10.

Commerce’s sentence, justifying its decision not to select

the Philippine data, states that the Department found “the

domestic Philippine prices for urea not to be the best available

information on the record of this review because these prices are

for urea used as fertilizer and sold in 50-kg bags which are not

product specific to the urea used by the respondents in this

review.” Issues & Dec. Mem. at 8. For plaintiffs, this

explanation is mistaken in two “critical respects,”9 i.e., it

assumes (1) that urea used in agriculture and urea used for

industrial processes are sold in separate markets, and (2) that

the packaging of urea is a material consideration, indicating a

difference between urea used for agriculture and industrial grade

urea used for chemical feedstock. Pls.’ Mem. 10.

The domestic producers further maintain that Commerce

9 First, plaintiffs argue that “there is no record evidence . . . that ‘urea used as fertilizer’ can be differentiated from urea used for chemical production” and, in fact, . Pls.’ Mem. 10. Second,

. Pls.’ Mem. 10. Court No. 08-00364 Page 10

limited its actual analysis to testing the Indian data for “basic

indicia of adequacy” and, therefore, “failed to take into account

any of the significant differences in the quality and reliability

of the Indian and Philippine urea prices.” Pls.’ Mem. 21. They

believe that the Philippine data is “clearly superior,” and

question why Commerce “failed to consider whether a urea price

obtained from an uncontrolled, tax-free, laissez-faire urea

market in the Philippines might not be a preferable source of

market-based surrogate values.” Pls.’ Mem. 26, 22.

Plaintiffs, therefore, see Commerce’s methodology as

elevating “adequate” or “sufficient” sources of surrogate values

in a primary surrogate country over “superior sources of

information that may exist in alternative surrogate countries,”

thereby creating an “irreconcilable conflict with the plain terms

of the statute.” Pls.’ Mem. 22, 23 (“The statutory command to

use the ‘best available information’ . . . cannot be interpreted

to permit use of information from a primary surrogate country

when objectively superior data exist in a secondary surrogate

country.”). They insist, then, that “Commerce’s passing

reference to the Philippine price data plainly did not satisfy

its obligation.” Pls.’ Mem. 24. Court No. 08-00364 Page 11

The Department10 explains that it used weighted-average unit

values for Indian imports of urea as listed in the WTA, finding

that the data was “the best available information because they

are average, non-export values, contemporaneous with the period

of review, product specific, tax exclusive, and in-line with

import values from other potential surrogate countries.” Def.’s

Opp. to Pls.’ Mot. for J. on Agency R. (“Def.’s Mem.”) 8.

Moreover, using the Indian data conformed with Commerce’s

preference to value all factors within a single surrogate

country. Def.’s Mem. 9. See 19 C.F.R. § 351.408(c)(2) (“[T]he

[Department] normally will value all factors in a single

surrogate country.”).

Responding to plaintiffs’ argument that its analysis of the

Indian and Philippine data was inadequate, the Department claims

that it did consider the merits of Philippine domestic pricing

data, and determined that the data “were not product specific to

the large-scale industrial usage of chemical feedstock urea

reported by Chinese respondents in the present case and was

therefore not the best available information.” Def.’s Mem. 14.

In making its argument, the agency quotes defendant-intervenor’s

comment that purchase of urea in small bags, as it is sold in the

10 Defendant-intervenor’s arguments are substantially similar to the Department’s. Thus, only Commerce’s arguments are summarized below. Court No. 08-00364 Page 12

Philippines, would be “ludicrous” for the purpose of making the

subject merchandise. Def.’s Mem. 15.

Commerce further explains that Philippine domestic pricing

data exclusively represents urea used as fertilizer, while the

record evidence establishes there are distinct markets for urea

used in agriculture versus industrial processes. The Department

points to plaintiffs’ submission from a chemical industry website

stating that “[a]n estimated 10-15% of urea manufactured is used

in industrial processes . . . . The balance is used in

agriculture.” Pls.’ Submission to Commerce Regarding Surrogate

Values for FOPs, Ex. 14, May 27, 2008 (C.R. 834) (“Pls.’

Surrogate Value Subm.”). The Department, then, concluded that

the WTA data “represent a broad category of urea,” and “better

captures the industrial grade urea reported by respondents.”

Def.’s Mem. 15.

2. Commerce’s Conclusions Were Reached Without the Required Analysis

While the Department’s analysis indicates some examination

of the disadvantages of the Philippine data, at the very least,

“selecting the surrogate value data that yield the most accurate

dumping margin necessarily requires Commerce to conduct a fair

comparison of the data sets on the record.” Allied Pacific Food

(Dalian) Co. Ltd. v. United States, 30 CIT 736, 757, 435 F. Supp.

2d 1295, 1313—14 (2006). In addition, the Supreme Court has Court No. 08-00364 Page 13

“frequently reiterated that an agency must cogently explain why

it has exercised its discretion in a given manner.” Motor

Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S.

29, 48 (1983). Commerce’s analysis of the input urea violates

both of these principles.11

Here, the Department subjected the Philippine data to none

of the tests it used to justify its use of the Indian data, e.g.,

whether it is from a public source or contemporaneous with the

POR. Nor did Commerce compare the relative merits of the two

urea sources or explain how it reached its conclusions about the

Philippine data. That is, here the Department took steps

necessary to demonstrate that urea from India met the minimum

standards for use as a surrogate value, but failed to (1) perform

an analysis of the Philippine data using these same standards;

(2) compare the Indian data with the Philippine data in order to

determine which was the “best available information;” or (3)

11 First, “the fact that strongly suggests that no such distinctions [between urea purchased for fertilizer and industrial uses] exist.” Pls. Reply 4. Second,

[i]f packaging size does matter in valuing urea, then Commerce

.

Pls.’ Reply 5. Court No. 08-00364 Page 14

explain its conclusions with respect to product specificity or

the sale of urea in bags, and detail how these conclusions were

reached. 19 U.S.C. § 1677b(c)(1); see also Peer Bearing

Co.-Changshan v. United States, 35 CIT __, __, 752 F. Supp. 2d

1353, 1373 (2011) (“[T]he statute requires Commerce to compare

the chosen data set with other data sets on the record and

thereby determine what is the best available information.”);

Globe Metallurgical, Inc. v. United States, 28 CIT 1608, 1622

(2004), 350 F. Supp. 2d 1148, 1160 (“Commerce must compare the

reliability of each potential surrogate country’s values to

determine which values are most reliable.”); Olympia Indus., Inc.

v. United States, 22 CIT 387, 390, 7 F. Supp. 2d 997, 1000–01

(1998) (“From the statute, it is clear that Commerce must

identify and use the best information available when it values

the factors of production. . . . [Therefore,] Commerce has an

obligation to review all data and then determine what constitutes

the best information available or, alternatively, to explain why

a particular data set is not methodologically reliable.”)

(citation omitted).

Thus, the court finds that Commerce’s explanation for its

decision to disregard the Philippine data does not comply with

the unfair trade laws, and that its failure to adequately support

its conclusions with reasoning based on the record evidence

reveals that these conclusions were not supported by substantial Court No. 08-00364 Page 15

evidence.

3. Omani Prices

Plaintiffs’ primary argument with respect to the inclusion

of the Omani prices in the WTA data is that because one hundred

percent of the Oman India Fertiliser Company (“OMIFCO”) output is

sold to the Indian government at predetermined prices, the prices

are necessarily not set by the market. Indeed, the “prices for

the Omani imports do not involve typical competitive forces of

supply and demand that characterize arm’s-length market

transactions among buyers and sellers.” Pls.’ Mem. 27. Similar

arguments were advanced in Arch Chemicals where the Court

addressed this issue and found that Commerce’s decision to

include the Omani prices was supported by substantial evidence:

Here, the WTA data is from a publicly available source for the POR. Additionally, Commerce analyzed that data to ensure that “value for imports from Oman to India was not aberrational, and was comparable to imports from other market economy countries.” Def.’s Br. 11 (citation omitted). As has been seen, the Omani value was within the range of values examined, though at the low end, and was close to the average value, i.e., 6.99 rupees/KG for Oman and 8.83 rupees/KG for the average of all data sets. . . . In addition, Commerce acted reasonably in concluding that “economies of scale is one factor contributing to OMIFCO’s price [being lower than that of other urea imports into India], given the quantity of imports from Oman into India.” See I&D Mem. at Comment 1; Def.’s Br. 12 (noting that “the quantity of Omani imports of urea was higher than the quantity of all other Indian imports of urea combined”). Thus, having found that the OMIFCO data was “within the normal range” and taking into consideration the large quantity of OMIFCO imports, it cannot be said that Commerce was unreasonable in using this information. Court No. 08-00364 Page 16

Moreover, the court is unconvinced that Commerce erred by not excluding the OMIFCO data as tainted by reason of government involvement. Oman and India are market economy countries and there is no evidence that, at the time the contract was entered into, the prices set were not market-driven. In addition, Commerce could reasonably find that, the mere fact that a product is sold to a single purchaser pursuant to a long-term contract, does not necessarily make the price anomalous. Further, there was no record evidence demonstrating that urea sales made subject to the contract were distorted.

Arch Chems., 33 CIT at __, Slip Op. 09-71 at 28—30.

Here, however, the facts are not precisely the same as in

the First Administrative Review that was the subject of Arch

Chemicals. There, it was significant that the Omani import data

was “within the range of values examined” when compared to other

imports of urea into India, and there was also one urea source

priced lower than the Omani value. Id. at __, Slip Op. 09-71 at

29. In this Second Review, it appears that the Omani data no

longer fall within this range. In fact, the Government of India

noted that the “fixed price of imported urea from Oman is much

cheaper than the present prevailing international prices.” Pls.’

Rebuttal Comments on Surrogate Values for FOPs, Ex. 4 at 11, Nov.

13, 2007 (P.R. 692). An examination of a table of the prices

confirms this observation. See Prelim. Surrogate Value Mem.,

Attach. 3, Apr. 29, 2008 (P.R. 820) (“Surrogate Value Mem.”)

(adopted by Issues & Dec. Mem. 6). Court No. 08-00364 Page 17

Average Value Country Quantity (KG) (Rupees/KG) Oman 1,500,193,218 7.87 Liberia 26,451,000 11.49 Bahrain 24,003,000 11.58 Egypt 99,887,000 11.63 Russia 118,252,000 11.67 Saudi Arabia 100,085,000 11.70 Ukraine 1,036,565,024 11.73 Malaysia 69,397,000 11.74 Romania 44,000,000 11.76 Kuwait 94,831,700 11.78 Bangladesh 116,260,000 11.78 United Arab Emirates 250,283,278 11.81 Libya 141,291,921 11.87 Qatar 220,282,807 12.18 Germany 5,000,200 15.35 Total 3,846,783,148 10.26

As has been noted, in Arch Chemicals, the Omani value was at

the low end of sales prices, at 6.99 rupees per kilogram.

Although this price was less than the average unit value of 8.83

rupees per kilogram for all data sets for imports into India, it

was not outside the range of all values because urea sourced from

the United Kingdom was priced at 6.67 rupees per kilogram, while

that from Germany was priced at 30.26 rupees per kilogram. Arch

Chems., 33 CIT at __, Slip Op. 09-71 at 29. In this Second

Review, though, the Omani value, at 7.87 rupees per kilogram, was Court No. 08-00364 Page 18

the lowest value considered, and was 30% lower than the average

unit value of 10.26 rupees per kilogram for all data sets. See

Surrogate Value Mem., Attach. III. In fact, the next lowest

value that was considered, that for Liberia, was 46% higher than

the Omani value, and the remaining values ranged from 47% to 95%

more than the Omani value. Surrogate Value Mem., Attach. III.

This change from the First Administrative Review is significant

and eliminates one of the two important factors upon which the

Court relied in Arch Chemicals, because in this review it cannot

be said that “the Omani value is within the range of values

examined.” Arch Chems., 33 CIT at __, Slip Op. 09-71 at 29.

Furthermore, the Arch Chemicals Court found it significant

that “‘the quantity of Omani imports of urea was higher than the

quantity of all other Indian imports of urea combined’” in

finding that Commerce reasonably concluded that “‘economies of

scale [was] one factor contributing’” to the low Omani value.

Arch Chems., 33 CIT at __, Slip Op. 09-71 at 29. By contrast,

here the correlation between quantity and price is less

pronounced. In this Second Review, the Omani inputs comprise

less than 40% of the total during the POR, and, while Ukraine’s

export quantity was the second highest after Oman, its prices

fell about midway down the list of values. Similarly, the United

Arab Emirates had the third largest export quantity, but its

prices fell within the top four highest among those considered. Court No. 08-00364 Page 19

See Surrogate Value Mem., Attach. III. All of this being the

case, the court cannot conclude that Commerce’s “economies of

scale” explanation is supported by substantial evidence in this

Second Review.

One factor in this Second Review, however, remains

consistent with the First Review. In Arch Chemicals, the Court

found that there was no evidence that the data was “tainted by

reason of government involvement.” Arch Chems., 33 CIT at __,

Slip Op. 09-71 at 30. That is, the fact that “a product is sold

to a single purchaser pursuant to a long-term contract . . . does

not necessarily make the price anomalous.” Id. Similarly, here,

there does not appear to be any evidence on the record that

demonstrates how India’s long-term contract with Oman tainted the

sale prices of urea.

The court is aware that its task is not to “reweigh the

evidence or substitute its own judgment for that of the agency,”

Usinor v. United States, 28 CIT 1107, 1111, 342 F. Supp. 2d 1267,

1272,(2004), but rather to determine whether Commerce’s

determinations are supported “by substantial evidence on the

record.” 19 U.S.C. § 1516a(b)(1)(B)(I); see also Hoogovens Staal

Bv v. United States, 24 CIT 242, 247, 93 F. Supp. 2d 1303, 1307

(2000) (citing Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620

(1996)) (“In reviewing agency determinations, the court declines

to reweigh or reinterpret the evidence of record.”). Indeed, Court No. 08-00364 Page 20

“when reviewing substantial evidence challenges to Commerce’s

actions, the court assesses whether the agency action is

‘unreasonable’ given the record as a whole.” Catfish Farmers of

Am. v. United States, 33 CIT __, __, 641 F. Supp. 2d 1362, 1366

(2009) (citing Nippon Steel Corp. v. United States, 458 F.3d

1345, 1350-51 (Fed. Cir. 2006)). Here, given the data on the

record, and in light of its differences from the data used in

Arch Chemicals, the court finds that Commerce’s explanation for

the inclusion of the Omani data is not supported by substantial

evidence, as the Omani data no longer falls within the range of

values considered, and this price discrepancy cannot be

attributed to the quantity of urea imported from Oman.

II. Surrogate Valuation of Steam Coal

Next, in the Final Results, Commerce valued steam coal using

the prices listed in the Tata Energy Research Institute (“TERI”)

Data Directory and Yearbook. Plaintiffs argue that a producer of

chlorinated isocyanurates in India could not purchase steam coal

at these prices. They insist that only purchasers in certain

“core sectors” could buy coal at the prices listed in the TERI

data, while purchasers in non-core industries could purchase

domestic coal only at significantly higher prices from the

monopoly supplier, Coal India, or would have been required to use

imported coal. Pls.’ Mem. 30—31. Plaintiffs argue that although Court No. 08-00364 Page 21

the coal sector may have been deregulated in name, in practice,

non-core sector buyers in India cannot purchase coal at TERI

prices. Pls.’ Reply 10 n.3. Plaintiffs therefore urge the use

of the WTA Indian import data. Pls.’ Mem. 30.

According to plaintiffs, the record includes an express

identification of precisely which industries are “core sector,”

and this list plainly shows the chemical industry is not a

member. Pls.’ Mem. 31. Indeed, they insist that “every piece of

evidence on the record demonstrates that the chemical industry is

not part of the core sector in India.” Pls.’ Mem. 32. Thus,

plaintiffs argue that “[i]t makes no sense for Commerce to choose

as the ‘best available information’ for valuing steam coal a

surrogate value that would be unavailable to a hypothetical free-

market producer of chlorinated isocyanurates operating in the

structure of the Indian market.” Pls.’ Mem. 32.

In response, the Department asserts that it used the TERI

data, rather than WTA import data as proposed by plaintiffs,

“because the TERI data are more product specific to

[defendant-intervenor’s] reported coal input.” Def.’s Mem. 17.

As Commerce explains, TERI data is categorized by the major types

of coal products, while WTA import data simply lists “steam coal”

without further specificity. Def.’s Mem. 17.

With respect to plaintiffs’ argument that a producer of

chlorinated isocyanurates could not purchase steam coal at the Court No. 08-00364 Page 22

prices listed in the TERI data, the Department contends that the

record evidence regarding the “core sector” was “inconclusive,”

with no clear evidence that purported to classify the Indian

chemical industry as either a core or non-core industry. Def.’s

Mem. 18. In addition, Commerce stresses that it has repeatedly

found the use of TERI data to be the best available information

for steam coal prices in India, a conclusion that has been

affirmed by this court. Def.’s Mem. 18.

In Arch Chemicals, which decided the appeal of the First

Administrative Review, this Court held that “Commerce acted

reasonably in using the TERI data to value steam coal.” Arch

Chems., 33 CIT at __, Slip Op. 09-71 at 41. The Court found that

Commerce was reasonable in determining that “the TERI data was

the most ‘product specific’ surrogate available, and therefore

the most representative of Jiheng’s actual coal input.” Id. In

reaching this conclusion, the Court noted Commerce’s observation

that “‘TERI Data are categorized by major types of coal and UHV

value whereas WTA import data are listed under ‘steam coal’

without further specificity.’” Id. (citation omitted).

In addition, the Arch Chemicals Court found that the

evidence indicated that Commerce was reasonable in concluding

that coal was available to the chemical industry at TERI prices.

In reaching this conclusion, the Court cited to record evidence

that “revealed that deregulation occurred in 1996 and that the Court No. 08-00364 Page 23

coal used by Jiheng has been sold at market prices since 2000.”

Id. The Court also observed that one source referenced by

plaintiffs (defendant-intervenors in that action) on the “core

sector” point was “at best equivocal,” “while the other article

appear[ed] to support Commerce’s position.” Id. at __, Slip Op.

09-71 at 42. The first source noted that “‘customers in the non-

core sector are of three types - linked customers, non-linked

customers, and small and tiny industries,’” while the second

referenced companies “being ‘in the core sector like power, steel

and chemicals.’” Id. Thus, the Court concluded:

The court finds that the evidence cited by Commerce meets the substantial evidence test. Put another way, the Department has shown that: (1) the TERI data represents most closely the coal actually used by Jiheng, and (2) Clearon and OxyChem’s claim that TERI data prices were unavailable to chemical manufacturers like Jiheng is, at best, subject to conflicting interpretations of the record evidence. . . . Accordingly, the court finds the Department’s explanation to be reasonable and sustains Commerce’s surrogate value calculation for steam coal.

Id. at __, Slip Op. 09-71 at 43 (citation omitted).

Although the Arch Chemicals Court found that Commerce’s use

of the TERI data to value steam coal was supported by substantial

evidence in the First Administrative Review, the record in this

Second Review directs a different result. Plaintiffs emphasize

that the “record includes an express identification of precisely

which industries are ‘core sector’ industries, and this list

plainly shows that the chemical industry is not a member of the Court No. 08-00364 Page 24

core sector.” Pls.’ Mem. 31. Among the exhibits placed on the

record by plaintiffs are a listing of core sector industries from

Coal India’s website, an interview with Coal India’s Marketing

Director that occurred during the POR, a decision from the

Supreme Court of India, and various industry articles. Pls.’

Mem. 13; Pls.’ Surrogate Value Subm., Ex. 17, 32, 35. The list

on Coal India’s website includes the following “Core Sector

Consumers”: power, defense, railways, fertilizer, steel and other

metallurgical industries, cement, aluminum, paper, public sector

undertakings, and coal exports. Pls.’ Mem. 14; Pls.’ Surrogate

Value Subm., Ex. 17.

Additionally, Coal India’s Marketing Director stated in his

interview that Coal India “has basically two sets of consumers -

the core sector and the non-core sector. The core sector

consists of power, cement, steel, paper, aluminum, and fertilizer

manufacturing units, and Central public sector undertakings.”

Pls.’ Mem. 31–32; Pls.’ Surrogate Value Subm., Ex. 35.

Plaintiffs emphasize that none of the lists of core sectors on

the record include the chemical industry. Pls.’ Mem. 31.

Finally, a January 2006 Supreme Court of India decision provided

by plaintiffs characterizes the domestic coal market in India as

follows: Court No. 08-00364 Page 25

“[A]fter nationalization, coal consumers were categorized into two main sectors, namely, core sector and non-core sector. The core sector consumers include the vital sections of national economy related to infrastructural development as for example, power, steel, cement, defence, fertilizer, railway, paper, aluminum, export, central public sector undertaking etc. All other remaining industries/consumers constituted non-core sector.”

Pls.’ Mem. 31; Pls.’ Surrogate Value Subm., Ex. 17.

Having provided these various examples, plaintiffs believe

that Commerce’s determination that, “because there was ‘no

conclusive record evidence identifying the chemical industry as a

non-core industry’ the Department would assume that it was in the

‘core sector,’” is “a quintessential example of a decision that

is not supported by substantial evidence on the record.” Pls.’

Mem. 31 (quoting Issues & Dec. Mem. 11).

Despite the presence of this record evidence, Commerce

determined that “we find no conclusive record evidence

identifying the chemical industry as a non-core industry. While

the record evidence lists examples of ‘core’ industries, this

list is not exhaustive, and there is no listing positively

identifying the chemical industry as a non-core industry.”

Issues & Dec. Mem. 11. Defendant therefore argues that

plaintiffs “failed to demonstrate that the chemical industry is a

non-core industry,” and thus “Commerce properly concluded that

the record evidence on this issue was inconclusive.” Def.’s Mem.

18. Defendant also asserts that “Commerce has found consistently Court No. 08-00364 Page 26

in recent cases that the TERI data are the most appropriate

source for steam coal prices in India.” Def.’s Mem. 18; Issues &

Dec. Mem. 11. Finally, defendant argues that Commerce used the

TERI data because it is “more product specific” to the type of

coal used by Jiheng as the “TERI data are categorized by major

types of coal,” while the WTA import data simply list “‘steam

coal’ without further specificity.” Def.’s Mem. 17. Thus,

because the TERI data represent the most product-specific prices,

defendant argues that the data constitute the best available

information.

While defendant maintains that “there is no listing

positively identifying the chemical industry as a non-core

industry,” Issues & Dec. Mem. 11., it is equally apparent that

there is no list that identifies the chemical industry as a core

sector industry. Nor, for that matter, does the record contain

any evidence that would lead the court to conclude, as it did in

Arch Chemicals, that the evidence is subject to “conflicting

interpretations.” That is, absent from this record is the

evidence this Court found important in Arch Chemicals, i.e., the

Coal India documents that “‘clearly specified that the type of

coal used by Jiheng had been deregulated in 1996 and has been

sold at market prices since 2000,’” and the BioLab submission

that referenced companies being “‘in the core sector like power, Court No. 08-00364 Page 27

steel and chemicals.’” Arch Chems., 33 CIT at __, Slip Op. 09-71

at 40, 42 (citations omitted).

While Commerce concludes that the lists of core sector

industries provided by plaintiffs were “not exhaustive,” it does

not discuss the record evidence that supports this conclusion, or

explain how it reached this finding. It also fails to address

the record evidence from the Supreme Court of India’s decision

that listed several industries, not including the chemical

industry, and stated that “[a]ll other remaining

industries/consumers constitute[] non-core sector.” Pls.’ Mem.

31; Pls.’ Surrogate Value Subm., Ex. 17. In other words, the

Department fails to address a court decision that certainly

appears to be definitive.

Although Commerce’s conclusion with respect to the

specificity of coal types reported in the WTA and TERI data is

important, so are its conclusions with respect to core

industries. As these conclusions are not fully explained, and

there appears to be no record evidence to support the conclusion

that the chemical industry is a core sector industry, the court

finds that the surrogate value calculation for steam coal must be

remanded as not supported by substantial evidence. On remand,

Commerce “must explain its rationale . . . such that a court may

follow and review its line of analysis, its reasonable Court No. 08-00364 Page 28

assumptions, and other relevant considerations.” Allegheny

Ludlum Corp. v. United States, 29 CIT 157, 168, 358 F. Supp. 2d

1334, 1344 (2005). Its conclusions should be supported by

substantial evidence, that is, “such relevant evidence as a

reasonable mind might accept as adequate to support a

conclusion.” Consol. Edison Co. v. NLRB, 305 U.S. 197, 229

(1938).

III. Surrogate Valuation of Waste Ammonia Gas By-Product Offset

The Department generally grants an offset to normal value

for sales of by-products, generated during the production of

subject merchandise, if the respondent can demonstrate that the

by-product is either resold or has commercial value, and reenters

the respondent’s production process. See Arch Chems. v. United

States (Arch Chems. II), 35 CIT __, __, Slip Op. 11-41 at 5—6

(Apr. 15, 2011) (not reported in the Federal Supplement). In

valuing by-product offsets in nonmarket economy proceedings,

Commerce uses surrogate values, as it does for other factors of

production. See QVD Food Co. v. United States, 34 CIT __, __,

721 F. Supp. 2d 1311, 1318 (2010).

By their motion, plaintiffs challenge the Department’s

decision to value the waste ammonia gas by-product, claimed by

Jiheng, using import prices for anhydrous ammonia. Plaintiffs Court No. 08-00364 Page 29

contend that “there was no reasonable source of surrogate value

on the record for the waste ammonia gas by[-]product of Jiheng’s

cyanuric acid production” because “Jiheng’s waste ammonia gas

plainly did not consist of such anhydrous ammonia.” Pls.’ Mem.

33, 34. For plaintiffs, “[b]ecause Jiheng’s waste ammonia gas is

not comparable to anhydrous ammonia and Jiheng provided no other

sources of surrogate values, Commerce should have denied the

offset.” Pls.’ Mem. 34.

While defendant-intervenor argues this choice is supported

by substantial evidence, the Department itself “request[s] a

remand to permit Commerce to reconsider and explain its selection

of anhydrous ammonia to value Jiheng’s ammonia gas by-product

offset.” Def.’s Mem. 19. After reexamining the record,

“Commerce has determined that it has not fully explained its

reasons for selecting anhydrous ammonia to value Jiheng’s ammonia

gas by-product offset and that it should therefore reconsider and

give further explanation for its decision.” Def.’s Mem. 19.

Notably, plaintiffs do not object to this offer in their reply

brief.

“[I]f the agency’s concern is substantial and legitimate,”

granting a voluntary remand request “is usually appropriate.”

SKF USA Inc. v. United States, 254 F.3d 1022, 1029 (Fed. Cir.

2001). The court, therefore, grants Commerce’s request for a Court No. 08-00364 Page 30

voluntary remand to reconsider and explain its selection of

anhydrous ammonia to value Jiheng’s ammonia gas by-product

offset.

CONCLUSION AND ORDER

For the reasons stated, it is hereby

ORDERED that plaintiffs’ Rule 56.2 motion is GRANTED, in

part, and defendant’s motion is GRANTED, in part, and the matter

is REMANDED; it is further

ORDERED that Commerce issue, upon remand, a redetermination

that complies in all respects with this Opinion and Order, is

based on determinations that are supported by substantial record

evidence, and is in all respects in accordance with law; it is

further

ORDERED that Commerce, in preparing the Remand

Redetermination, shall reexamine its determination with respect

to (1) whether urea used for agricultural purposes can be

differentiated from urea used for chemical production, and (2)

any reason urea sold in fifty kilogram bags cannot be the source

of a surrogate price in this case; it is further

ORDERED that Commerce fully analyze the evidence presented

by both sides in reviewing its decision to exclude the Philippine

data, further examine the Philippine data using the same criteria Court No. 08-00364 Page 31

it employed in selecting the Indian data, provide a complete

comparison of the two data sets, and adequately explain how it

has come to its final determination; it is further

ORDERED that Commerce shall revisit its determination with

respect to the Omani prices, fully analyze the evidence regarding

the Omani data, and fully explain and support with substantial

evidence its determination of whether or not to include the Omani

data in the WTA data; it is further

ORDERED that Commerce revisit its determination with respect

to its surrogate valuation of steam coal, and fully analyze the

use of the TERI data, including whether the chemical industry

would be considered a core sector industry, and whether the use

of this data is supported by substantial evidence; it is further

ORDERED that Commerce’s request for a voluntary remand to

reconsider and explain its selection of anhydrous ammonia to

value the ammonia gas by-product offset is GRANTED, and Commerce

shall, on remand, reconsider and fully explain its decision and

its reasons for selecting anhydrous ammonia; it is further

ORDERED that Commerce shall fully explain why the data it

has selected for all remanded issues constitutes the best

available information, demonstrating that each of its conclusions

are supported by substantial evidence, and may reopen the record

if it finds that the existing record is inadequate; it is further Court No. 08-00364 Page 32

ORDERED that Commerce file the remand results on or before

March 19, 2012; it is further

ORDERED that plaintiffs file any comments thereon on or

before May 3, 2012; it is further

ORDERED that defendant file any rebuttal to such comments on

or before May 18, 2012.

/s/ Richard K. Eaton Richard K. Eaton

Dated: November 18, 2011 New York, New York