Slip Op. 15- 45
UNITED STATES COURT OF INTERNATIONAL TRADE
CS WIND VIETNAM CO., LTD. and CS WIND CORPORATION,
Plaintiffs,
v. Before: Jane A. Restani, Judge
UNITED STATES, Court No. 13-00102
Defendant,
WIND TOWER TRADE COALITION,
Defendant-Intervenor.
OPINION
[Commerce’s Results of Redetermination in antidumping duty investigation sustained.]
Dated: May 11, 2015
Bruce M. Mitchell, Andrew B. Schroth, Ned H. Marshak, Dharmendra N. Choudhary, and Kavita Mohan, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, LLP, of New York, NY, and Washington, DC, for the plaintiffs.
Joshua E. Kurland, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for the defendant. With him on the brief were Benjamin C. Mizer, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief was Lisa W. Wang, Attorney, Office of the Chief Counsel for Trade Compliance and Enforcement, U.S. Department of Commerce, of Washington, DC.
Robert E. DeFrancesco, III, Alan H. Price, and Daniel B. Pickard, Wiley Rein, LLP, of Washington, DC, for the defendant-intervenor.
Restani, Judge: Currently before the court is the U.S. Department of Commerce’s
(“Commerce”) Final Redetermination Pursuant to Court Order, ECF No. 82 (“Second Remand
Results”). The court remanded to Commerce for reconsideration or further explanation of its Court No. 13-00102 Page 2
calculation of the surrogate financial ratios used in determining the antidumping (“AD”) duty
margin for plaintiffs CS Wind Vietnam Co., Ltd. and CS Wind Corporation (collectively “CS
Wind”). CS Wind Vietnam Co. v. United States, Slip Op. 14-128, 2014 Ct. Int’l Trade LEXIS
129 (CIT Nov. 3, 2014) (“CS Wind II”). Commerce’s revised calculations are supported by
substantial evidence, and the Second Remand Results are sustained.
BACKGROUND
Following a petition by defendant-intervenor Wind Tower Trade Coalition (“WTTC”),
Commerce conducted an AD investigation into certain wind towers from Vietnam. CS Wind
Vietnam Co. v. United States, 971 F. Supp. 2d 1271, 1275 (CIT 2014) (“CS Wind I”). Because
Vietnam is a non-market economy, in determining the proper AD duty margin, Commerce was
required to calculate a normal value for the wind towers based on surrogate data from a country
that is a significant producer of comparable products and similar economic development (the
“surrogate country”). 19 U.S.C § 1677b(c)(4) (2012). In this context, calculating normal value
essentially estimates the cost of producing the product were the producer to hypothetically
operate in a market economy and involves calculating the factors of production for the subject
merchandise, such as labor, raw materials, energy, and the cost of capital. Id. § 1677b(c)(3); see
also Guangdong Chems. Imp. & Exp. Corp. v. United States, 30 CIT 1412, 1422, 460 F. Supp.
2d 1365, 1373 (2006); Hebei Metals & Minerals Imp. & Exp. Corp. v. United States, 29 CIT
288, 303 n.7, 366 F. Supp. 2d 1264, 1277 n.7 (2005). The governing statute, 19 U.S.C.
§ 1677b(c)(1)(B), also requires that normal value include amounts for “general expenses and
profit” in addition to the cost of the surrogate values for the factors of production. Guangdong
Chems., 30 CIT at 1422, 460 F. Supp. 2d at 1373; Hebei Metals, 29 CIT at 303 n.7, 366 F. Supp.
2d at 1277 n.7. Court No. 13-00102 Page 3
In calculating the “general expenses and profit” to be included in normal value,
Commerce generally uses Selling, General, and Administrative (“SG&A”) and overhead expense
ratios as well as profit ratios (collectively “surrogate financial ratios”). See Guangdong Chems.,
30 CIT at 1422, 460 F. Supp. 2d at 1373; Hebei Metals, 29 CIT at 303 n.7, 366 F. Supp. 2d at
1277 n.7. The surrogate financial ratios are derived from the financial statements of one or more
surrogate companies that produce comparable merchandise in the surrogate country. See Hebei
Metals, 29 CIT at 303 n.7, 366 F. Supp. 2d at 1277 n.7. The SG&A ratio is calculated by
dividing the surrogate company’s SG&A costs by the total cost of manufacturing, the overhead
ratio is calculated by dividing total manufacturing overhead expenses by total direct
manufacturing expenses, and the profit ratio is calculated by dividing the before-tax profit of the
surrogate company by the sum of direct expenses, manufacturing overhead, and SG&A
expenses. Id. The surrogate financial ratios are then applied to the factors of production values
and the result is added to the factor of production value to determine normal value. See
Guangdong Chems., 30 CIT at 1422, 460 F. Supp. 2d at 1373; Hebei Metals, 29 CIT at 303 n.7,
366 F. Supp. 2d at 1277 n.7.
Based on its calculations of CS Wind’s normal value, Commerce subsequently assigned
CS Wind a weighted-average dumping margin of 51.50%. Utility Scale Wind Towers from the
Socialist Republic of Vietnam: Final Determination of Sales at Less than Fair Value, 77 Fed.
Reg. 75,984, 75,988 (Dep’t Commerce Dec. 26, 2012) (“Final Determination”); Issues and
Decision Memorandum for the Final Determination in the Antidumping Duty Investigation of
Utility Scale Wind Towers from the Socialist Republic of Vietnam, A-552-814 (Dec. 17, 2012),
available at http://enforcement.trade.gov/frn/summary/vietnam/2012-30944-1.pdf (last visited
Apr. 28, 2015) (“I&D Memo”). CS Wind challenged Commerce’s Final Determination on six Court No. 13-00102 Page 4
grounds; relevant to the remand determination currently before the court is CS Wind’s argument
that Commerce improperly calculated the surrogate financial ratios, specifically overhead
expenses, using Ganges Internationale Private Limited’s (“Ganges”) April 1, 2010–March 31,
2011 financial statement.1 In calculating the surrogate financial ratios, Commerce is limited in
its ability to look beyond the face of the financial statements because it cannot compel
information from the surrogate companies, as those companies are not parties to the
investigation. See Thai Plastic Bags Indus. Co. v. United States, 949 F. Supp. 2d 1298, 1305–08
(CIT 2013).
In the Final Determination, Commerce treated the line item “Jobwork Charges (including
Erection and Civil Expenses)” as part of overhead expenses in calculating the surrogate financial
ratios. I&D Memo at 26. Commerce argued this was proper because jobwork charges are third-
party expenses and it is Commerce’s practice to include such miscellaneous expenses in
overhead when direct labor and energy expenses are listed separately in the financial statement.2
Id. Jobwork expenses normally refer to the costs paid to third parties to whom raw materials are
sent to manufacture finished goods and thus do not include the cost of raw materials (which are
captured elsewhere) or direct labor (which is not utilized because the third party’s labor is used).
See Pls.’ Cmts. in Resp. to the Dep’t of Commerce’s Final Results of Second Remand
1 Prior to the Final Determination, CS Wind advocated for the use of Ganges as the surrogate company for surrogate financial ratio purposes. Commerce accepted CS Wind’s argument and the parties have not challenged the use of Ganges’ financial statement, although it is apparent from the complex and technical nature of the dispute about the surrogate financial ratios that Ganges’ financial statement is not a perfect fit. See CS Wind I, 971 F. Supp. 2d at 1285–87. 2 By including jobwork charges in overhead expenses, Commerce rejected CS Wind’s argument that they be included as labor expenses, because, according to Commerce, treating them as labor would have resulted in double counting. I&D Memo at 26. Court No. 13-00102 Page 5
Redetermination 13, ECF No. 84 (“Pls.’ Cmts.”). The dispute in this case centered on the
inclusion of erection and civil expenses within jobwork charges, because it is unclear whether
those expenses are also third-party expenses which would be properly included in overhead, and
what offsets are applicable. When Commerce includes overhead expenses, it typically offsets
those expenses with related income line items. Here, although Commerce offset “Jobwork
Charges (including Erection and Civil Expenses)” with “Sales of Jobwork,” it did not offset them
with “Erection Income” and “Civil Income.”3 See CS Wind I, 971 F. Supp. 2d at 1285; Results
of Redetermination Pursuant to Court Order 15, ECF No. 57 (“First Remand Results”).
Offsetting “Erection Income” and “Civil Income” against jobwork charges would have
reduced overall overhead expenses, reduced the overhead ratio, and ultimately resulted in a
lower normal value, and thus, a lower AD duty margin. Without the offsets, the resulting
surrogate financial ratios for overhead and SG&A expenses were 21.71% and 10.42%,
respectively, and the AD duty margin was set at 51.50%. Final Determination, 77 Fed. Reg. at
75,988; First Remand Results at 17–18. The profit ratio was 0.58% and has remained unchanged
throughout the remand proceedings. First Remand Results at 18; Second Remand Results at 7;
Final Surrogate Value Memorandum, Ex. 6 Financial Ratios Calculation, bar code 3111181-01
(Dec. 17, 2012). The court held that Commerce’s apparent disparate treatment of jobwork,
erection, and civil expenses and jobwork, erection, and civil income warranted a remand. CS
Wind I, 971 F. Supp. 2d at 1287. The court reasoned that the similarity of the language between
3 CS Wind filed a ministerial error allegation claiming that this was a calculation error. Commerce denied the ministerial error allegation, claiming that it intentionally did not offset jobwork charges with “Erection Income” and “Civil Income” because erection and civil income did not meet the definition of “miscellaneous income items,” which are the only line items Commerce typically offsets against overhead expenses. See CS Wind I, 971 F. Supp. 2d at 1285–86. Court No. 13-00102 Page 6
the expense and income line items rendered Commerce’s decision to offset “Jobwork Charges
(including Erection and Civil Expenses)” with only “Sales of Jobwork,” but not with “Erection
Income” or “Civil Income,” unsupported by substantial evidence. Id.
In its first remand redetermination, Commerce decided not to rely on its original
methodology. Rather, Commerce reconsidered and revised its calculations. Commerce
continued not to offset “Erection Income” and “Civil Income” against overhead expenses. First
Remand Results at 16. Instead, Commerce attempted to include in overhead expenses only the
portion of “Jobwork Charges (including Erection and Civil Expenses)” not associated with
erection and civil income activities. See id. at 16–18. Under Commerce’s rationale, if the
portion of jobwork charges associated with erection and civil expenses were excluded from
overhead expenses, there would be no reason to offset overhead expenses with “Erection
Income” and “Civil Income.” Commerce thus would have complied with the court’s directive to
treat income and related expense line items similarly or explain why they should not be treated
similarly. See CS Wind I, 971 F. Supp. 2d at 1287. Unfortunately, Ganges’ financial statement
did not specify the amount of “Jobwork Charges (including Erection and Civil Expenses)”
associated with only erection and civil expenses. Accordingly, Commerce derived that portion
of the expense by calculating a ratio of erection and civil income to the total income associated
with jobwork (hereinafter “erection/civil income ratio”). First Remand Results at 17.
Commerce assumed that the ratio, based on the income side of the financial statement, would be
the same on the expense side of the financial statement. The parties have not specifically
challenged that assumption. Commerce then multiplied “Jobwork Charges (including Erection
and Civil Expenses)” by the erection/civil income ratio to determine the portion of “Jobwork
Charges (including Erection and Civil Expenses)” to be excluded from overhead expenses. Id. Court No. 13-00102 Page 7
In calculating the total income associated with jobwork (as a substitute for expenses),
Commerce aggregated “Sales of Jobwork,” “Erection Income,” “Civil Income,” “Sale of
Finished Goods,” “Scrap,” “Miscellaneous Income,” and “Services income from TSP activities.”
See CS Wind II, 2014 Ct. Int’l Trade LEXIS 129, at *17–18. Based on these changes, the
overhead and SG&A expense ratios changed from 21.71% and 10.42% to 20.22% and 10.50%,
respectively.4 First Remand Results at 18. Based on all of the changes made in the First
Remand Results, the AD duty margin was reduced to 17.07%. First Remand Results at 37. The
court determined that although Commerce’s revised methodology might be “a reasonable
approach in theory,” Commerce failed to provide adequate explanation in support of its
calculation, specifically, how and why it included certain line items in calculating the total
income associated with jobwork. CS Wind II, 2014 Ct. Int’l Trade LEXIS 129, at *16–20. The
court remanded the issue for reconsideration or further explanation once again. Id. at *20.
In its second remand determination, Commerce continues to utilize the same
methodology for calculating overhead expenses, but rather than merely explaining that
methodology, further refines its calculation. Commerce continues to include “Sales of
Jobwork,” “Erection Income,” “Civil Income,” “Sales of Finished Goods,” and “Scrap” in the
denominator of the erection/civil income ratio, as it asserts those line items are associated with
jobwork.5 Second Remand Results at 5–6. Commerce also revises the erection/civil income
4 The parties do not challenge the methodology for making changes to the SG&A ratio corresponding to the changes to the overhead ratio.
5 Commerce now excludes “Services Income from TSP Activities” and “Miscellaneous Income” from the calculation because Ganges’ financial statement does not provide evidence as to whether these income line items relate to jobwork. Second Remand Results at 5. (continued…) Court No. 13-00102 Page 8
ratio to exclude the portion of revenues from “Sales of Finished Goods,” “Scrap,” “Erection
Income,” and “Civil Income” related to raw materials and direct labor. Id. at 7–8, 12–13. In
doing so, Commerce calculates a ratio of the sum of raw materials and direct labor expenses to
the sum of raw materials, direct labor, energy, and overhead expenses (hereinafter “raw
materials/direct labor ratio”),6 and applies the resulting ratio to “Sales of Finished Goods,”
“Scrap,” “Erection Income,” and “Civil Income” in the denominator, and to “Erection Income”
and “Civil Income” in the numerator of the erection/civil income ratio.7 Id.; Pls.’ Cmts. at 8.
(continued…) Neither CS Wind nor WTTC objects to these exclusions. The unadjusted erection/civil income ratio is thus: ܫܧ ܫܥ ܽൌ ܱܵ ܹܬ ܫܧ ܫܥ ܱܵ ܩܨ ܵܿܽݎ
Where EI=Erection Income, CI=Civil Income, SOJW=Sales of Jobwork, and SOFG=Sales of Finished Goods. 6 The raw materials/direct labor ratio is thus:
ܴ ܯ ܮܦ ܾൌ ܴ ܯ ܮܦ ܧ ܱ
Where RM=raw materials, DL=direct labor, E=energy, and O=overhead. The resulting ratio is 82.03%. Second Remand Results at 13. 7 Although Commerce does not state that it also applied the raw materials/direct labor ratio to the numerator of the erection and civil income ratio in its Second Remand Results, it is apparent from the calculation. The result is the following:
ܾ ܫܧ כ ܾܫ כ ܥ ܽሺ݆ܽ݀݀݁ݐݏݑሻ ൌ ܱܵ ܹܬ ܾ ܫܧ כ ܾ ܫܥ כ ܾ ܩܨܱܵ כ ܾ ܽݎܿܵ כ
Where b is the raw materials/direct labor ratio calculated above. The resulting ratio is 8.62%. Second Remand Results at 13. This ratio is applied to the jobwork charges line item and the result is then used to reduce the jobwork charges line item, substituting for a partial direct offset to this overhead item. Court No. 13-00102 Page 9
Due to the revisions adopted in the Second Remand Results, the overhead and SG&A expense
ratios changed from 20.22% and 10.50% to 20.16% and 10.51%, respectively, and the AD duty
margin was further reduced from 17.07% to 17.02%. Second Remand Results at 7–8.
Both CS Wind and WTTC contest Commerce’s Second Remand Results and argue that
Commerce should exclude “Sales of Finished Goods” and “Scrap” from the calculation of the
erection/civil income ratio. See Pls.’ Cmts. at 9–11; Def.-Intvnr.’s Cmts. on Final
Redetermination Pursuant to Court Order 3–5, ECF No. 85 (“Def.-Intvnr.’s Cmts.”). They also
both argue that Commerce should not employ the raw materials/direct labor ratio, albeit for
different reasons. See Pls.’ Cmts. at 11–15; Def.-Intvnr.’s Cmts. at 3–5.
CS Wind argues that Commerce’s analysis is circular and confusing because Commerce
has misinterpreted the scope of erection and civil income. Pls.’ Cmts. at 9–12. CS Wind
reasserts its argument that Commerce’s entire methodology is unnecessary and could be avoided
by simply including the entire value of “Jobwork Charges (including Erection and Civil
Expenses)” in overhead and offsetting that value with “Sales of Jobwork,” “Erection Income,”
and “Civil Income.” Id. at 16–17. Alternatively, if the court accepts Commerce’s methodology,
CS Wind claims that “Sales of Jobwork” encompasses all jobwork income and thus Commerce’s
methodology unreasonably broadens the concept of jobwork income. Id. at 10–11. As for the
inclusion of “Sales of Finished Goods” and “Scrap” as income associated with jobwork, CS
Wind argues that Commerce has failed to appreciate the nuance that Ganges incurs jobwork
expense, rather than receives jobwork income, when it produces finished goods via third parties
on a jobwork basis. Id. at 9–10, 13. Thus CS Wind argues that Commerce should exclude those
two line items from the denominator of the erection/civil income ratio. Id. at 16. Court No. 13-00102 Page 10
Relative to the raw materials/direct labor ratio, CS Wind challenges Commerce’s
decision to adjust “Sales of Finished Goods,” “Scrap,” “Erection Income,” and “Civil Income”
for raw materials and direct labor but not for energy, overhead expenses, SG&A expenses, and
profit. Id. at 12. CS Wind further claims that because erection and civil expenses are associated
with jobwork charges, the corresponding income line items also relate only to jobwork income
and are thus exclusive of raw materials and direct labor. Id. at 13. Therefore, there would be no
need to apply the raw materials/direct labor ratio to those line items. Because CS Wind also
argues that “Sales of Finished Goods” and “Scrap” should be excluded from the erection/civil
income ratio, according to CS wind, the entire raw materials/direct labor ratio is unnecessary.
See id. at 12–13.
WTTC argues that Commerce should revert to its decision in the Final Determination.
Def.-Intvr.’s Cmts. at 5. WTTC contends that because jobwork charges are third-party expenses,
the only offsets Commerce should allow against jobwork charges are those relating to third-party
services generating income. Id. at 1. WTTC does not agree with CS Wind that because the
language “Sales of Jobwork,” “Erection Income,” and “Civil Income” is similar to that of
“Jobwork Charges (including Erection and Civil Expenses),” that those line items automatically
should be offset. Id. at 1, 4. Rather, WTTC argues those line items incorporate more than third-
party services generating income and thus should not be offset. Id. It argues alternatively that if
the court determines that those three line items are sufficiently related to jobwork, “Sales of
Finished Goods” and “Scrap” should not be included in calculating the total revenue associated
with jobwork because they also do not involve third-party services income, but rather involve the
generation of third-party expenses. Id. at 3–5. WTTC also argues against using a one-to-one
offset of “Erection Income” and “Civil Income” because those income line items include raw Court No. 13-00102 Page 11
materials and labor, but jobwork charges include only third-party labor services. Id. at 4–5.
WTTC does not present specific arguments for how Commerce should exclude income derived
from raw materials and direct labor.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to 28 U.S.C. § 1581(c). The court will uphold
Commerce’s redetermination in an AD investigation unless it is “unsupported by substantial
evidence on the record, or otherwise not in accordance with law.” 19 U.S.C. §1516a(b)(1)(B)(i).
DISCUSSION
I. Inclusion of “Sales of Finished Goods” and “Scrap”8
CS Wind argues that the inclusion of “Sales of Finished Goods” and “Scrap” as income
line items associated with jobwork is erroneous because Ganges incurred jobwork expenses as
opposed to receiving jobwork income when it produced a portion of its finished goods through
jobwork by a third party. Pls.’ Cmts. at 9–11. Therefore, according to CS Wind, Commerce’s
inclusion of “Sales of Finished Goods” and “Scrap” as income associated with jobwork is
incorrect and unwarranted. Id. WTTC similarly argues that Commerce should exclude “Sales of
Finished Goods” and “Scrap” from the calculation because Ganges’ financial statement provides
no evidence that they are associated with third-party services income such as jobwork. Def.-
Intvnr.’s Cmts. at 3–5.
To support the inclusion of “Sales of Finished Goods,” Commerce reasons that because
Ganges’ financial statement states that the finished goods manufactured by Ganges include
“production done by 3rd parties on a jobwork basis,” it is reasonable to include “Sales of
8 Putting aside the parties’ more general objections, neither party specifically challenges Commerce’s inclusion of “Sales of Jobwork,” “Erection Income,” and “Civil Income” as income associated with jobwork in the denominator of the erection/civil income ratio. Court No. 13-00102 Page 12
Finished Goods” in the total revenue associated with jobwork. Second Remand Results at 5–6;
see also CS Wind Post-Preliminary Surrogate Value Submission Ex. 2A Ganges Internationale
Financial Statement Schedule 21, item 14(a), bar code 3096954-01 (Sept. 14, 2012) (“Ganges’
Financial Statement”). As for “Scrap,” Commerce argues that because Ganges does not list
scrap as a raw material input, but instead includes scrap as inventoried items (“stocks”), scrap
sold must have been generated during the manufacturing of finished goods. Second Remand
Results at 6; see also Ganges’ Financial Statement Schedule 21, item 14(a), (b). Thus, according
to Commerce, because the company’s manufacturing process includes jobwork done by third
parties, revenue derived from scrap generated during that process is similarly associated with
jobwork. Second Remand Results at 6.
Commerce is attempting to derive reasonable surrogate financial ratios from the financial
statement CS Wind selected. Commerce is afforded wide discretion in calculating normal value
and in applying the guidelines of 19 U.S.C. § 1677b(c), particularly with respect to calculating
overhead expenses. See Nation Ford Chem. Co. v. United States, 166 F.3d 1373, 1377 (Fed. Cir.
1999); Peer Bearing Co. v. United States, 25 CIT 1199, 1216, 182 F. Supp. 2d 1285, 1306 (2001)
(holding that “[a]lthough the Court could certainly question the perfection of Commerce’s
approach, . . . Commerce attempted to capture . . . the surrogate company’s experience in
incurring overhead and SG&A expenses, and created a reasonably internally consistent ratio that,
as imperfect as it might be, does not violate the boundaries set by 19 U.S.C. § 1677b(c)”);
Timken Co. v. United States, 25 CIT 939, 954–55, 166 F. Supp. 2d 608, 625 (2001) (holding that
as long as Commerce’s surrogate overhead and SG&A ratios are “reasonabl[y] internally
consistent,” they can be supported by substantial evidence). Because of the imperfect fit and Court No. 13-00102 Page 13
ambiguities in the financial statement, Commerce has reasonably acted to derive a surrogate
financial ratio that is supported by the record.
CS Wind is correct in saying that Ganges incurs jobwork expenses when it produces a
portion of finished goods (as well as scrap) through jobwork done by third parties, the amount of
which is likely captured by “Jobwork Charges (including Erection and Civil Expenses).” CS
Wind, however, overlooks the fact that Ganges also receives income from the sale of finished
goods and scrap and that a portion of that income is derived from jobwork. According to CS
Wind, this income is included under “Sales of Jobwork,” which encompasses all income
accruing from jobwork. Pls.’ Cmts. at 10–11. CS Wind’s argument, however, is untenable
because CS Wind also acknowledges that Ganges’ jobwork income arises when it expends its
own labor to process raw materials received from outside parties. Id. at 10. Ganges’ financial
statement does not specify what is captured in “Sales of Jobwork” and, as indicated, Commerce
is not equipped to look beyond the face of the financial statement.
Logically, there is substantial evidence to support Commerce’s determination. It is a
reasonable inference that the label—“Sales of Jobwork”—refers to revenue from jobwork
performed by Ganges for outside parties, but not, as CS Wind argues, any income associated
with jobwork, including revenues from the sale of finished goods and scrap produced through
jobwork by third parties. The revenue accruing from the sale of finished goods and scrap is thus
associated with jobwork, but is not captured in “Sales of Jobwork.” Therefore, Commerce’s
inclusion of “Sales of Finished Goods” and “Scrap” in the total income associated with jobwork
is supported by substantial evidence.
Commerce’s methodology and calculations are arguably imperfect. Had Commerce
drawn other inferences about the ambiguous term in the financial statement, a much simpler Court No. 13-00102 Page 14
solution might have been simply to offset “Jobwork Charges (including Erection and Civil
Expenses)” with “Sales of Jobwork,” “Erection Income,” and “Civil Income.” Commerce’s
inclusion of “Sales of Finished Goods” and “Scrap” in the calculation of the erection/civil
income ratio ultimately, however, was proper, and Commerce’s inferences are supported by
substantial evidence, as indicated. See Nation Ford, 166 F.3d at 1377; Peer Bearing, 25 CIT at
1216, 182 F. Supp. 2d at 1306.
II. Raw Materials/Direct Labor Ratio
CS Wind also opposes Commerce’s calculation and application of the raw
materials/direct labor ratio to four line items (“Sales of Finished Goods,” “Scrap,” “Erection
Income,” and “Civil Income”) in the calculation of the erection/civil income ratio. Pls.’ Cmts. at
11–15. CS Wind challenges the calculation of the ratio employed by Commerce with respect to
“Sales of Finished Goods” and “Scrap” because the ratio addresses only direct labor and raw
materials, but not other relevant factors, such as overhead and SG&A expenses, and profit,
without any explanation. Id. at 11–12. Relative to the ratio’s application to “Erection Income”
and “Civil Income,” CS Wind argues these line items in the financial statement should be
interpreted to include only the cost of labor charges paid to third parties such that any revised
raw materials/direct labor ratio need not be applied to those two line items. Id. at 13–15. CS
Wind argues that because “Sales of Jobwork” should be interpreted to include only third-party
labor costs, given the association of jobwork charges with erection and civil expenses, “Erection
Income” and “Civil Income” should be interpreted in the same manner as “Sales of Jobwork.”
Id. Accordingly, because CS Wind contends that “Sales of Finished Goods” and “Scrap” should
be excluded from the erection/civil income ratio and the raw materials/direct labor ratio does not
apply to “Erection Income” and “Civil Income,” CS Wind essentially argues that the raw Court No. 13-00102 Page 15
materials/direct labor ratio is completely unnecessary. See Pls.’ Cmt. at 9–16. WTTC, for its
part, argues that Commerce should revert to its Final Determination and not offset any line
items,9 but alternatively argues against a one-to-one offset of “Erection Income” and “Civil
Income” against jobwork charges. Def.-Intvnr.’s Cmts. at 4–5; see also CS Wind I, 971 F. Supp.
2d at 1285–87.
The problem with Ganges’ financial statement for these purposes is that it does not
identify the value of each income line item attributable to jobwork. Commerce thus needed to
devise a methodology to distill the income related solely to jobwork. Accordingly, in its Second
Remand Results, Commerce calculates a ratio of raw materials and direct labor expenses to the
sum of raw materials, direct labor, energy, and overhead expenses. Second Remand Results at
7–8, 12–13. Commerce argues that it seeks to exclude only raw materials and direct labor
because the other expenses suggested by CS Wind (energy, overhead, SG&A, and profit) are
associated with total jobwork expenses. Def.’s Resp. to Cmts. on Second Redetermination
Pursuant to Ct. Remand 10–11, ECF No. 90 (Def.’s Resp.). Presumably, jobwork expenses do
not include direct labor because in incurring jobwork expenses, raw materials are provided to
third parties who perform the labor and thus no direct labor is utilized. Raw materials are
reasonably excluded from jobwork expenses because the raw materials are provided to the third
party who performs the labor and the raw material costs are separately accounted for elsewhere
as a factor of production such that including them in jobwork expenses would result in double
counting. Merely because jobwork is exclusive of raw materials and direct labor costs does not
9 Commerce decided after the court remanded the issue in CS Wind I not to explain its Final Determination more fully, but instead adopted a new methodology, which WTTC must now address. See First Remand Results at 14–18; see generally Second Remand Results. WTTC has failed to adequately challenge Commerce’s revised methodology. Court No. 13-00102 Page 16
mean, however, that other expenses are not incurred. For example, administrative services might
be used in organizing and managing the jobwork, and presumably some energy is necessary to
maintain a suitable work environment. CS Wind’s argument that other expenses should be
included in the raw materials/direct labor ratio, essentially eliminating the ratio by making it
equivalent to one, are unpersuasive as those other costs are reasonably associated with total
jobwork expenses. Accordingly, Commerce’s decision to adjust for only raw materials and
direct labor is supported by substantial evidence, and Commerce’s calculation of the raw
materials/direct labor ratio is supported by substantial evidence. See Nation Ford, 166 F.3d at
1377; Peer Bearing, 25 CIT at 1216, 182 F. Supp. 2d at 1306.
Relative to the application of the raw materials/direct labor ratio, in its Second Remand
Results, Commerce applies the ratio to all variables in the erection/civil income ratio, other than
“Sales of Jobwork.” Second Remand Results at 13. Commerce reasonably interprets this line
item as expressly including only jobwork income. Id. Although CS Wind alleges that
Commerce does not explain why Commerce applied the ratio to “Erection Income” and “Civil
Income,” Commerce specified that it was treating “Erection Income” and “Civil Income”
differently from “Sales of Jobwork” because they were listed separately from “Sales of Jobwork”
on the income side of the financial statements. Pls.’ Cmts. at 11–12; Def.’s Resp. at 11. Thus,
according to Commerce, they could not be presumed to be exclusive of direct labor and raw
materials. Def.’s Resp. at 11. This inference is supported by substantial evidence, as there is no
indication that “Erection Income” and “Civil Income” are not produced through direct labor or
do not utilize raw materials, and Commerce’s rationale that the distinct treatment on the income
side of the financial statement warranted disparate treatment is reasonable. Accordingly,
although arguably imperfect, Commerce’s calculation and application of the raw materials/direct Court No. 13-00102 Page 17
labor ratio is supported by substantial evidence. See Nation Ford, 166 F.3d at 1377; Peer
Bearing, 25 CIT at 1216, 182 F. Supp. 2d at 1306.
CONCLUSION
Given the necessity of using non-party surrogate financial statements that are not subject
to in-depth investigation, Commerce has arrived at an overhead ratio that is a reasonable attempt
to fulfill the statutory directive to calculate a complete normal value based on surrogate data.
Commerce used the ambiguous financial statement proposed by CS Wind and drew adequately
supported and internally consistent inferences about the ambiguities. That it might have drawn
other inferences and thus used other methodologies does not undermine the result. Therefore,
Commerce’s Second Remand Results are sustained and judgment will issue accordingly.
/s/ Jane A. Restani Jane A. Restani Judge
Dated: May 11, 2015 New York, New York