Nagase & Co. v. United States

2023 CIT 46

• Court: United States Court of International Trade
• Decided: April 11, 2023
• Docket: 21-00574
• Status: Published

Opinion

Slip-Op. No. 23-46 UNITED STATES COURT OF INTERNATIONAL TRADE

NAGASE & CO., LTD.,

Plaintiff,

v. Before: Stephen Alexander Vaden, UNITED STATES, Judge Defendant, Court No. 1:21-cv-00574 and

GEO SPECIALTY CHEMICALS, INC.

Defendant-Intervenor.

OPINION

Granting in-part and denying in-part Plaintiff’s Motion for Judgment on the Agency Record.

Dated: April 11, 2023

Neil Ellis, Neil Ellis PLLC, of Washington, DC, for Plaintiff. With him on the brief was Jay C. Campbell, White & Case LLP, of Washington, DC.

Kelly Geddes, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for Defendant United States. With her on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General; Patricia M. McCarthy, Director, Commercial Litigation Branch; Claudia Burke, Assistant Director, Commercial Litigation Branch; and Mykhaylo A. Gryzlov, Of Counsel, U.S. Department of Commerce, Office of the Chief Counsel for Trade Enforcement & Compliance. Court No. 1:21-cv-00574 Page 2

Vaden, Judge: On April 12, 2022, Plaintiff Nagase & Co., Ltd. (Plaintiff or

Nagase) filed a Motion for Judgment on the Agency Record challenging the final

results of the U.S. Department of Commerce’s (Commerce) first administrative

review of the antidumping order on glycine from Japan. Glycine from Japan: Final

Results of Antidumping Duty Administrative Review; 2018–2020, 86 Fed. Reg. 53,

946 (Dep’t of Com. Sept. 29, 2021); Glycine from Japan: Final Results of the

Antidumping Administrative Review; 2018-2020 (Final Results), as corrected in 86

Fed. Reg. 57,127 (Dep’t of Com. Oct. 14, 2021). Nagase argues that Commerce’s

decision to include certain expense items in Nagase’s cost of production was

unsupported by substantial evidence. Plaintiff’s Memo. in Supp. of Its Mot. for J. on

the Agency Record (Pl.’s Br.), ECF No. 34. Nagase further argues that Commerce

abused its discretion by declining to correct an error in Nagase’s assessment rate

that Nagase raised nineteen days after publication of the Final Results. Id. The

United States (Defendant or the Government) and GEO Specialty Chemicals, Inc.

(Defendant-Intervenor or GEO) oppose Nagase’s Motion. See Def.’s Resp. in Opp.

To Pl.’s Mot. for J. upon the Admin. Record (Def.’s Br.), ECF No. 50; Def.-Int.’s

Resp. to Pl.’s Mot. for J. on the Agency Record (Def.-Int.’s Br.), ECF No. 39. For the

reasons that follow, the Court GRANTS IN-PART and DENIES IN-PART

Nagase’s Motion for Judgment on the Agency Record and REMANDS for

reconsideration by the Department of Commerce. Court No. 1:21-cv-00574 Page 3

BACKGROUND

Nagase is a Japanese manufacturer of chemicals, plastics, and related goods.

On August 6, 2020, Commerce began an administrative review of the antidumping

duty order on glycine from Japan. See Initiation of Antidumping and

Countervailing Duty Administrative Reviews, 85 Fed. Reg. 47,731 (Dep’t of Com.

Aug. 6, 2020). Glycine is an amino acid that has broad industrial and chemical

uses. Commerce provided that its order covered:

[G]lycine at any purity level or grade. This includes glycine of all purity levels, which covers all forms of crude or technical glycine including, but not limited to, sodium glycinate, glycine slurry and any other forms of amino acetic acid or glycine . . . Glycine has the Chemical Abstracts Service (CAS) registry number of 56-40-6. Glycine and glycine slurry are classified under Harmonized Tariff Schedule of the United States (HTSUS) subheading 2922.49.43.00. Sodium glycinate is classified in the HTSUS under 2922.49.80.00.

Issues and Decision Memorandum for the Final Results of the Administrative

Review of the Antidumping Duty Order on Glycine from Japan; 2018–2020 (IDM) at

2 (Sept. 22, 2021), J.A. at 2917, ECF No. 45. Commerce’s administrative review

covered the period from October 31, 2018 through May 31, 2020 (the Period of

Review) and included Nagase as one of two mandatory respondents.1

I. The Disputed Administrative Review

After receiving questionnaire responses and comments from Nagase,

Commerce issued its preliminary results on June 30, 2021, and assigned Nagase a

1 During the administrative review at issue, Nagase and its affiliate, Yuki Gosei Kogyo Co., Ltd., submitted joint responses; and Commerce treated them as a single entity. See IDM at 2, J.A. at 2,917, ECF No. 45. Court No. 1:21-cv-00574 Page 4

dumping margin rate of 27.71%. Glycine from Japan: Preliminary Results of

Antidumping Administrative Review; 2018–2020 (Preliminary Results), 86 Fed.

Reg. 36,105 (Dep’t of Com. July 8, 2021); see Decision Memorandum for Preliminary

Results of Antidumping Duty Administrative Review: Glycine from Japan (June 30,

2021) (PDM) at 1–15, J.A. at 2,653–67, ECF No. 45. In addition to assigning

Nagase a dumping margin, Commerce calculated an assessment rate for Nagase’s

constructed export price (CEP) sales. 2 Id. at 7–15; YGK/Nagase Preliminary

Margin Calculation Output at 123, J.A. at 102,781, ECF No. 44.

The dumping margin and the assessment rate are the two most important

numbers calculated in any antidumping review. The dumping margin is “the total

amount by which the price charged for the subject merchandise in the home market

(the ‘normal value’) exceeds the price charged in the United States[.]” Koyo Seiko

Co. v. United States, 258 F.3d 1340, 1342 (Fed. Cir. 2001). It applies prospectively

to future entries of the subject merchandise, which the importer will cover with

cash deposits that are held by U.S. Customs and Border Patrol (Customs) until the

completion of the next administrative review. Id. A “calculational problem” then

arises. Id. Although the dumping margin represents the difference between sales

prices in the producer’s home market and the United States, dumping duties

ultimately need to be imposed on entries of merchandise before they are sold. Id.

2 Constructed export price (CEP) sales are sales made by a United States entity affiliated with the foreign producer to an unaffiliated United States customer. They differ from export price sales, which are made by the foreign producer directly to an unaffiliated United States customer. Commerce distinguishes between the two because CEP sales must undergo certain deductions to compensate for the presence of an affiliate middleman. See AK Steel Corp. v. United States, 226 F.3d 1361, 1364-65 (Fed. Cir. 2000). The assessment rate at issue applied only to Nagase’s CEP sales. Court No. 1:21-cv-00574 Page 5

Because the declared value of merchandise at entry is typically lower than the value

for which it is sold, applying the dumping margin rate to the declared “entered

value” would result in the under-collection of duties. For example, if the dumping

margin is $100,000 on a sales value of $1,000,000, that would yield a dumping

margin rate of 10%. But if the entered value of the merchandise is $800,000,

Customs would collect only $80,000 if it assessed those entries at 10%, short of the

$100,000 of duties owed. See Pl.’s Br. at 34 n. 17, ECF No. 34.

To reconcile the cash deposits with duties owed, Commerce calculates an

assessment rate, which applies retrospectively to entries made during the Period of

Review of the current administrative review. See 19 C.F.R. § 351.212. Commerce

calculates the assessment rate by dividing the dumping margin by the entered

value of the subject merchandise and then applies the resulting rate “uniformly on

all entries each importer made during the [period of review.]” Koyo Seiko, 258 F.3d

at 1343 (quoting Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, from Japan, and Tapered Roller Bearings, Four Inches or Less in

Outside Diameter, and Components Thereof, from Japan: Final Results of

Antidumping Duty Administrative Reviews, 63 Fed. Reg. 63,860, 63,875 (Nov. 17,

1998)) (alteration in original). In the example, Commerce would ensure it collected

the $100,000 dumping margin by dividing that figure by $800,000, yielding an

assessment rate of 12.5% for entries awaiting liquidation.

Commerce determined that entries of glycine sold in CEP transactions during

the Period of Review should be liquidated at many multiples of the dumping margin Court No. 1:21-cv-00574 Page 6

rate and transmitted this proposed assessment rate as part of a 126-page “Margin

Output” of calculations provided to Nagase alongside the Preliminary Results. See

YGK/Nagase Preliminary Margin Calculation Output at 123, J.A. at 102,781, ECF

No. 44. Nagase and Defendant-Intervenor GEO Specialty Chemicals submitted

case briefs to Commerce challenging aspects of the Preliminary Results. Despite

the enormous proposed rate, Nagase’s case brief did not challenge or mention the

assessment rate. See Case Brief of Yuki Gosei Kogyo Co., Ltd. and Nagase & Co.,

Ltd. (Nagase Case Brief) (Aug. 9, 2021), J.A. at 102,804–23, ECF No. 44.

Instead, Nagase disputed the manner in which Commerce calculated

Nagase’s general and administrative (G&A) expenses. Id. In an antidumping

review, Commerce determines the respondent’s cost to produce the subject

merchandise and must include as part of that cost “an amount for selling, general,

and administrative expenses[.]” 19 U.S.C. § 1677b(3)(B). General and

administrative expenses “relate to the activities of the company as a whole rather

than to [the] production process.” LG Chem, Ltd. v. United States, 534 F. Supp. 3d

1386, 1402 (CIT 2021) (quoting U.S. Steel Grp. A Unit of USX Corp. v. United

States, 22 CIT 104, 106 (1998)) (alteration in original). Commerce’s usual practice

is to exclude expenses related to the production of non-subject merchandise from its

calculation of general and administrative expenses if the expenses are allocated

properly in the producer’s normal books and records. Nagase claimed that

Commerce wrongly included two items in its calculation of general and

administrative expenses: (1) certain research and development (R&D) expenses Court No. 1:21-cv-00574 Page 7

and (2) a “compensation for payment” expense that Nagase made to a third party.

Nagase Case Brief, J.A. at 102,808, ECF No. 44. Nagase asserts that, because these

expenses were specific to non-subject merchandise, Commerce should have excluded

them from its general and administrative cost calculations. Id.

Nagase first argued that its normal books and records allocated research and

development costs across three product categories; and because only one category

was related to glycine, costs from the other two categories should have been

excluded from the expense calculation. Id. at 102,817–19. In support of its claim,

Nagase provided internal worksheets that began recording research and

development costs by product category in April 2019. Id. at 102,817; see also

Response of Yuki Gosei Kogyo Co., Ltd. and Nagase & Co., Ltd. to the First

Supplemental Questionnaire (First Supplemental Questionnaire Response) at Ex.

S-20 (Jan. 22, 2021), J.A. at 84,969–73, ECF No. 44. Nagase pointed out that these

worksheets reconciled to its trial balance accounts. Id. at 102,819. For the first two

trial balance periods that Nagase reported — October 2018 through March 2019

and April 2019 through September 2019 — “R&D expenses” only appeared as a

single-line item with no allocation by product category. See Response of Yuki Gosei

Kogyo Co., Ltd. and Nagase & Co., Ltd. to the Section D Questionnaire (Section D

Questionnaire Response) at Ex. D-4 (Nov. 23, 2020), J.A. at 84,035, ECF No. 44.

But for the final trial balance account period, October 2019 through March 2020,

Nagase broke out its research and development expenses into the three product

categories with three separate account totals. Id. Court No. 1:21-cv-00574 Page 8

Nagase also objected to the inclusion of the “compensation for payment”

expense that it argued was related to the production of non-subject merchandise.

Nagase Case Brief, J.A. at 102,809, ECF No. 44. Nagase explained that the expense

was “incurred to compensate a customer that had consigned production of a

pharmaceutical product to [Nagase] for losses due to a delay in the approval of the

pharmaceutical by the relevant governmental entity.” Id. at 102,812 (quoting First

Supplemental Questionnaire Response at 20, J.A. at 84,168, ECF No. 44). More

plainly stated, a pharmaceutical company paid Nagase to produce a drug; 3 but

when Nagase’s production facility failed inspection, Nagase agreed to compensate

the company for its costs and dispose of the product it had already produced. See

Response of Yuki Gosei Kogyo Co., Ltd. and Nagase & Co., Ltd. to the Second

Supplemental Questionnaire (Second Supplemental Questionnaire Response) at Ex.

SS-7 (May 6, 2021), J.A. at 92,781–86, ECF No. 44. To support its contention that

the expense was related to the production of non-subject merchandise, Nagase cited

both a memorandum of understanding signed by the parties to the transaction (the

Compensation Memo) and an invoice issued by the customer. Nagase Case Brief,

J.A. at 102,813–14, ECF No. 44. The Compensation Memo stated that the payment

was to compensate the customer for “cost of materials paid, processing costs for raw

materials . . . processing costs for this product, storage costs and disposal costs.” Id.

The invoice billed Nagase for the same. Id. at 102,814; see also Second

Supplemental Questionnaire Response at Ex. SS-8, J.A. at 92,788–89, ECF No. 44.

3 At oral argument, the parties agreed that the drug in question was not glycine. Oral Arg. Tr. at 6:3–10, ECF No. 54. Court No. 1:21-cv-00574 Page 9

GEO addressed these points in its rebuttal brief, claiming that both the

research and development costs and the “compensation for payment” expense

related to the general operations of the company and were properly included in

Commerce’s expense calculation. See GEO Specialty Chemicals’ Rebuttal Brief at

2–7 (Aug. 16, 2021), J.A. at 102,832–37, ECF No. 44. Nagase submitted its own

rebuttal brief that, like its case brief, made no mention of the assessment rate. See

Glycine From Japan: Rebuttal Brief (Aug. 16, 2021) J.A. at 102,839–102,863, ECF

No. 44. After considering the parties’ arguments, Commerce issued its Final

Results, which continued to find that Nagase’s research and development expenses

and the “compensation for payment” expense were properly included in Nagase’s

general and administrative expense calculation. See Final Results, 86 Fed. Reg.

53,946–47; see also IDM at 1–6, J.A. 2916–22, ECF No. 45.

Commerce first concluded that Nagase did not allocate research and

development costs to specific products and instead recognized these costs as a

general expense. See IDM at 6, J.A. at 2,921, ECF No. 45. Commerce noted its

practice to allocate research and development expenses to specific products if they

are reported that way in the company’s normal books and records. Id. However,

Nagase’s GAAP-compliant, 4 audited financial statements for fiscal years 2018 and

2019 recorded research and development expenses as “selling, general, and

administrative expenses” with no allocation to specific products. See Glycine From

4 “GAAP” stands for generally accepted accounting principles. 19 U.S.C. § 1677b(f)(1)(A) provides that Commerce shall normally calculate general and administrative expenses on the basis of the records of the exporter, as long as those records are kept in accordance with the GAAP of the exporting country. Court No. 1:21-cv-00574 Page 10

Japan: Response to Section A of the Questionnaire (Section A Questionnaire

Response) at Ex. A-19 (Oct. 30, 2020), J.A. at 80,170–71, 80,203, ECF No. 44. These

financial statements collectively covered all but the final two months of the Period

of Review. 5 See Id. Although Nagase provided “trial balance accounts” and

“worksheets” that allocated research and development costs to product categories,

Commerce found that these allocations were made during the Period of Review and

characterized them as “‘after-the-fact’ allocation[s] of company-wide R&D costs to

broad product categories using headcount or hours.” IDM at 6, J.A. at 2,921, ECF

No. 45. Commerce was skeptical that these broad product categories matched non-

subject merchandise, noting that “we do not find that the R&D expense is . . . solely

attributable to [non-subject merchandise] or that an R&D project’s research is of the

type assignable only to a limited category of products.” Id. Finally, Commerce cited

to Nagase’s cost verification report from the original investigation, which Nagase

had included as an exhibit in its Section D questionnaire response during the

administrative review. See Section D Questionnaire Response at Ex. D-4, J.A. at

83,998, ECF No. 44. There, Commerce recounted that “[Nagase] officials further

explained that [Nagase] does not assign R&D expenses to specific products in the

normal course of business because researchers do R&D work as a seed for future

products, and so it is difficult to attach R&D expenses to existing products.” Id. at

84,014. Commerce therefore decided to rely on Nagase’s financial statements,

5Nagase provided two audited financial statements, one for fiscal year 2018 and one for fiscal year 2019. The former covered the period between April 2018 and March 2019; the latter covered the period between April 2019 and March 2020. See Section A Questionnaire Response at Ex. A-19, J.A. at 80,155, 80,190–91, ECF No. 44; see also Pl.’s Br., at 8, ECF No. 34 at 8. Court No. 1:21-cv-00574 Page 11

which recognized the research and development expenses as a general expense.

IDM at 6, J.A. at 2,921, ECF No. 45.

Commerce similarly concluded that the compensation for payment expense

“[did] not relate directly to the production of non-subject merchandise” and

explained that Commerce “allocates expenses of this nature (e.g., penalties,

litigation accruals, fines, etc.) over all products because they do not relate to a

production activity, but to the company as a whole.” Id. at 4. In support of that

conclusion, Commerce cited to a press release that Nagase had issued when

disclosing the payment. See First Supplemental Questionnaire Response at Ex. S-

22 (Press Release) (Feb. 18, 2020) J.A. at 84,977–79, ECF No. 44. The Press

Release reported, in flawed English translation, that:

When a customer’s application for a drug was made to use the raw materials manufactured by the Company, the application was put on hold by the authorities. Accordingly, we have received a request from our customers to pay . . . the consignment processing costs we have already received for the drug.

Id. at 84,979. The Final Results did not discuss or provide an interpretation of the

statements in the Press Release but did observe that “one-time charges like this are

ultimately a cost of doing business for the company.” IDM at 4, J.A. at 2,919, ECF

No. 45.

Because the parties’ case briefs did not raise any issues relating to the

assessment rate, Commerce did not discuss it. See id. at 1–11, ECF No. 45. The

assessment rate remained unchanged, and on September 23, 2021, Commerce

transmitted a Final Results Margin Calculation to Nagase that included the Court No. 1:21-cv-00574 Page 12

calculations and an unchanged triple-digit assessment rate. See Final Results

Margin Calculation for Yuki Gosei Kogyo Co., Ltd./Nagase & Co. Ltd. at 123 (Sept.

22, 2021), J.A at 103,299, ECF No. 44.

At some point in October 2021, Nagase’s counsel discovered that the

assessment rate had been calculated using erroneous data. 6 See Pl.’s Br. at 15, ECF

No. 34. Nagase determined that “the per-unit amounts of regular U.S. duties paid

on Nagase’s imports corresponding with CEP sales were inadvertently duplicated

and reported as the entered values for those sales.” Pl.’s Reply at 15, ECF No. 42.

In other words, Nagase had mistakenly supplied Commerce with the dollar value of

duties it had paid rather than the value of its sales during the Period of Review.

See Pl.’s Reply at 15, ECF No. 42. The value of its sales was more than eighteen

times the value of the duties paid. When Commerce calculated Nagase’s

assessment rate, it did so by using Nagase’s erroneously supplied information. See

id. at 35. Nagase’s error resulted in its receiving a bill for sixteen times the amount

it alleges it owed — a difference amounting to millions of dollars. Id. at 36; see also

Liquidation Instructions for Glycine from Japan: Yuki Gosei Kogyo Co., Ltd. and

Nagase & Co., Ltd. for the Period 10/31/2018 through 5/31/2020 (Liquidation

Instructions) (Nov. 24, 2021), J.A. at 103,307–10, ECF No. 44 (instructing Customs

to liquidate the entries at the contested assessment rate).

Commerce’s regulations provide a five-day window for parties to seek

correction of ministerial errors following disclosure of the final calculations in an

6The record reflects that Neil Ellis of Neil Ellis PLLC was not involved in the case at the agency stage. Court No. 1:21-cv-00574 Page 13

administrative review. See 19 U.S.C. § 1675(h); 19 C.F.R. § 351.224(c). Nagase

missed this last chance to catch its error. On October 18, 2021, nineteen days after

the release of the final calculations, Nagase’s counsel called Dana Mermelstein at

Commerce to alert the agency to the assessment rate error. See Memorandum re:

Final Results of Administrative Review of the Antidumping Duty Order on Glycine

from Japan; 2018–2020; Telephone Conversation with Counsel for Respondent (Oct.

19, 2021), J.A. at 3,068, ECF No. 45. According to Mermelstein’s memorialization of

the call, Commerce explained that “this administrative review is complete, the

record is closed, and there is no mechanism for Commerce to change the results or

the manner of duty assessment.” Id. On November 24, 2021, Commerce instructed

Customs to liquidate Nagase’s CEP entries made during the Period of Review at the

determined assessment rate. See Liquidation Instructions, J.A. at 103,308, ECF

No. 44.

II. The Present Dispute

Nagase filed a complaint contesting the Final Results that same day. See

Compl. ¶ 1, ECF No. 7. The Complaint made three allegations: (1) Commerce’s

decision to include certain research and development expenses in its general and

administrative expense calculations was unsupported by substantial evidence and

otherwise not in accordance with law; (2) Commerce’s decision to include the

“compensation for payment” expense in Nagase’s general and administrative

expenses was unsupported by substantial evidence and otherwise not in accordance

with law; and (3) the assessment rate calculated by Commerce for Nagase’s CEP Court No. 1:21-cv-00574 Page 14

sales was unsupported by substantial evidence and otherwise not in accordance

with law. Id. ¶¶ 28, 33, 36. On April 12, 2022, Nagase moved for judgment on the

agency record with an accompanying brief. See Pl.’s Br., ECF No. 34. Nagase’s

brief differed in an important respect from its Complaint — it changed its theory

regarding the assessment rate and described Commerce’s refusal to correct it as an

“abuse [of] discretion” rather than as unsupported by substantial evidence.

Compare Pl.’s Br. at 6, ECF No. 34 (“Commerce abused its discretion in instructing

CBP to collect duties pursuant to the erroneous and vastly inflated assessment rate

. . . .”), with Compl. ¶ 36, ECF No. 7 (“Accordingly, the assessment rate calculated

by the Department for Nagase’s CEP sales is unsupported by substantial evidence

and is otherwise not in accordance with law.”).

The Government and Defendant-Intervenor filed response briefs on July 1,

2022, and Nagase filed its reply on August 29, 2022. See Def.’s Br., ECF No. 50;

Def.-Int.’s Br., ECF No. 39; Pl.’s Reply, ECF No. 42. Both the Government and

Defendant-Intervenor argue that (1) Commerce properly included all of Nagase’s

research and development costs in its general and administrative expenses; (2)

Commerce properly included Nagase’s compensation for payment expense in its

expense calculations; and (3) Commerce lawfully exercised its discretion when it

refused Nagase’s request to correct the assessment rate. See Def.’s Br. at 6–7, ECF

No. 50; Def.-Int.’s Br. at 6–8, ECF No. 39. Court No. 1:21-cv-00574 Page 15

JURISDICTION AND STANDARD OF REVIEW

The Court has jurisdiction over Plaintiff’s challenge to the Final Results

under 19 U.S.C. § 1516a(a)(2)(B)(i) and 28 U.S.C. § 1581(c), which grant the Court

authority to review actions contesting final determinations in antidumping reviews.

The Court must sustain Commerce’s “determinations, findings, or conclusions”

unless they are “unsupported by substantial evidence on the record, or otherwise

not in accordance with the law[.]” 19 U.S.C. § 1516a(b)(1)(B)(i). If they are

unsupported by substantial evidence or not in accordance with the law, then the

Court must “hold unlawful any determination, finding, or conclusion found[.]” Id.

“[T]he question is not whether the Court would have reached the same decision on

the same record[;] rather, it is whether the administrative record as a whole

permits Commerce’s conclusion.” See New American Keg v. United States, No. 20-

00008, 2021 WL 1206153, at *6 (CIT Mar. 23, 2021).

Reviewing agency determinations, findings, or conclusions for substantial

evidence, the Court assesses whether the agency action is reasonable given the

record as a whole. Nippon Steel Corp. v. United States, 458 F.3d 1345, 1350–51

(Fed. Cir. 2006); see also Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951)

(“The substantiality of evidence must take into account whatever in the record

fairly detracts from its weight.”). The Federal Circuit has described “substantial

evidence” as “such relevant evidence as a reasonable mind might accept as adequate

to support a conclusion.” DuPont Teijin Films USA v. United States, 407 F.3d 1211, Court No. 1:21-cv-00574 Page 16

1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229

(1938)).

DISCUSSION

I. Nagase’s General and Administrative Expense Calculations

A. Legal Framework

The Tariff Act of 1930 requires Commerce to determine whether a foreign

producer is selling merchandise for less than the cost of producing it. 19 U.S.C. §

1677b(b)(1). That requires Commerce to calculate the “cost of production” for the

subject merchandise. Id. § 1677b(b)(3). The statute recognizes that production

costs go beyond the direct expenses of materials and labor and thus directs

Commerce to include “an amount for selling, general, and administrative expenses”

— so-called “G&A” expenses. Id. § 1677b(b)(3)(B). In order to ensure that general

and administrative expenses are reflected in the per-unit cost it calculates for the

subject merchandise, Commerce calculates a “G&A expense ratio.” This ratio

consists of total general and administrative expenses divided by the company-wide

cost of goods sold. See Section D Questionnaire Response at 30, J.A. at 83,980, ECF

No. 44. Commerce then multiplies the G&A expense ratio by the cost to produce

each product tracked in the antidumping proceeding and adds that amount to the

cost of production. As general and administrative expenses increase, the cost of

production for the subject merchandise necessarily will as well, making it more

likely that Commerce will find dumping. Court No. 1:21-cv-00574 Page 17

Unfortunately, “G&A expenses are not defined in the statute[.]” Coal. of Am.

Millwork Producers v. United States, 581 F. Supp. 3d 1295, 1312 (CIT 2022).

General and administrative expenses “are generally understood to mean ‘expenses

which relate to the activities of the company as a whole rather than to the

production process,’” but Commerce ultimately must make specific determinations

about which expenses to count as general and administrative. Torrington Co. v.

United States, 25 CIT 395, 431 (2001) (quoting U.S. Steel Group a Unit of USX

Corp. v. United States, 22 CIT 104, 106 (1998)). The Court affords these

determinations heightened deference because they “involve complex economic and

accounting decisions of a technical nature.” Fujitsu General Ltd. v. United States,

88 F.3d 1034, 1039 (Fed. Cir. 1996). However, that deference is not unlimited.

Statutes guide the inquiry. As with all cost calculations in an antidumping

proceeding, general and administrative expenses “shall normally be calculated

based on the records of the exporter or producer of the merchandise, if such records

are kept in accordance with the generally accepted accounting principles of the

exporting country . . . and reasonably reflect the costs associated with the

production and sale of the merchandise.” 19 U.S.C. § 1677b(f)(1)(A). The statute

further provides that Commerce “shall consider all available evidence on the proper

allocation of costs, including that which is made available by the exporter or

producer on a timely basis, if such allocations have been historically used by the

exporter or producer . . . .” Id. A cost allocation is historical if it has been used prior

to the relevant Period of Review. See Statement of Administrative Action Court No. 1:21-cv-00574 Page 18

Accompanying the Uruguay Round Agreements Act (SAA), H.R. Doc. No. 103-316,

103rd Cong. at 835 (1994) (Commerce “will consider whether the producer

historically used its submitted cost allocation methods to compute the cost of the

subject merchandise prior to the investigation or review and in the normal course of

its business operation.”); see also 19 U.S.C. § 3512(d) (“The statement of

administrative action . . . shall be regarded as an authoritative expression by the

United States concerning the interpretation and application of the Uruguay Round

Agreements and this Act in any judicial proceeding in which a question arises

concerning such interpretation or application.”).

B. Nagase’s Research and Development Expenses

Commerce determined that Nagase’s research and development costs were

“company-wide expenses” and therefore properly included within its general and

administrative expense calculation. IDM at 6, J.A. at 2,921, ECF No. 45. It did so

on the basis of three pieces of evidence from Nagase’s records: the trial balance

accounts and supporting worksheets; the audited financial statements; and the cost

verification report from the original dumping investigation, which Nagase attached

to its Section D Questionnaire Response during the administrative review. See id.

Nagase argues that Commerce’s treatment of this evidence was defective. The

Court disagrees and holds that Commerce’s decision to include research and

development costs in the calculation of Nagase’s general and administrative

expense ratio was supported by substantial evidence on the record. Court No. 1:21-cv-00574 Page 19

Nagase’s theory is that, because its worksheets and trial balance accounts

segmented research and development costs into three product categories, Commerce

was required to reflect that segmentation in its general and administrative expense

calculations and deduct those expenses from product categories unrelated to

glycine. See Pl.’s Br. at 8, ECF No. 34. Instead, Commerce “disregarded its past

practice and included R&D costs specific to non-subject pharmaceutical products in

[Nagase’s] G&A expense ratio for the subject product (glycine).” Id. at 23. In

support of its view of Commerce’s past practice, Nagase cited to Frozen Warmwater

Shrimp from India: Final Results and Partial Rescission of Antidumping Duty

Administrative Review, 72 Fed. Reg. 52,055 (Dep’t of Com. Sept. 12, 2007) and its

accompanying Issues & Decision Memorandum for the proposition that “[i]n

determining whether expenses associated with R&D activities should be included in

the reported costs, we look at whether these expenses relate specifically to

individual products or are general in nature.” Pl.’s Br. at 21, ECF No. 34. In

Nagase’s view, Commerce may only disregard a respondent’s “product-specific R&D

cost records” if it finds that these were either inconsistent with Japanese GAAP or

failed to reasonably reflect Nagase’s costs. Id. at 27–28; see also 19 U.S.C. §

1677b(f)(1)(A) (directing that “[c]osts shall normally be calculated based on the

records of the exporter . . . if such records are kept in accordance with the generally

accepted accounting principles of the exporting country . . . and reasonably reflect

the costs associated with the production and sale of the merchandise.”). Because

Commerce made neither finding, Nagase believes Commerce “must rely on those Court No. 1:21-cv-00574 Page 20

costs as recorded in the normal course of business.” Pl.’s Br. at 27–28; see 19 U.S.C.

§ 1677b(f)(1)(A).

Nagase, however, acknowledges that the other pieces of evidence Commerce

considered — the financial statements and the cost verification report — show

something different. Nagase had “reported a total R&D cost amount in its financial

statements[.]” Pl.’s Br. at 25, ECF No. 34. Indeed, Nagase’s audited and GAAP-

compliant financial statements for fiscal years 2018 and 2019, which collectively

cover all but the final two months of the Period of Review, categorized research and

development expenses as “selling, general, and administrative expenses” with no

segmentation by product category. See Section A Questionnaire Response at Ex. A-

19, J.A. at 80,170–71; 80,203, ECF No. 44. Nagase also noted that its cost

verification report — published on December 18, 2018, as part of the original

dumping investigation — stated that “[Nagase] does not assign R&D expenses to

specific products in the normal course of business because researchers do R&D work

as a seed for future products, and so it is difficult to attach R&D expenses to

existing products.” Pl.’s Br. at 26, ECF No. 34.

The record, taken together, tells a story. Before the Period of Review, Nagase

had never associated research and development expenses with specific products

because its research functioned “as a seed for future products” rather than existing

ones. See Section D Questionnaire Response at Ex. D-4, J.A. at 84,014, ECF No. 44.

Its accounting reflected that, treating research and development expenses as a

single, general expense — until about two-thirds of the way through the Period of Court No. 1:21-cv-00574 Page 21

Review. At that point, Nagase switched its accounting method. See id. at Ex. D-11,

J.A. at 84,035. It began reporting research and development expenses under three

“research themes,” relying on worksheets that used researcher headcount and hours

worked to derive a monthly amount spent on each theme. See First Supplemental

Questionnaire Response at Ex. S-20, J.A. at 84,969–73, ECF No. 44. Because the

nature of its research had not actually changed, Nagase remained unable to

associate research and development costs with specific products. Further, although

the new research and development worksheets reported data from April 2019

onward, the accounting shift took place too late during the Period of Review to be

reflected in Nagase’s financial statements, which continued to account for research

and development costs as a single, general expense. See Section A Questionnaire

Response at Ex. A-19, J.A. at 80,170–71; 80,203, ECF No. 44.

That story, clear in the record, was also reflected in Commerce’s

determination. Commerce agreed that its normal practice “has been to allocate

R&D expenses to products consistent with the company’s normal books and

records[.]” IDM at 6, J.A. at 2,921, ECF No. 45. It further agreed that, during the

Period of Review, “[Nagase] allocated its total R&D costs to ‘product categories’” and

that “[t]he record demonstrates that [Nagase] has separate trial balance accounts

for R&D.” Id. But Commerce quoted the cost verification report, in which Nagase

explained that its research and development costs were not attributable to specific

products. Id. Commerce then found two problems with the trial balance accounts

and their supporting worksheets. First, the worksheets failed to demonstrate that Court No. 1:21-cv-00574 Page 22

costs were incurred on a product-specific basis and instead assigned costs only to

“broad product categories.” Id.

Second, Commerce took issue with the timing of the product-category

allocations. It found that the separate product-category trial balance accounts and

worksheets represented “an ‘after the fact’ allocation of company-wide R&D costs”

that only came into being during the Period of Review. Id. Such a finding was

significant because the antidumping statute permits Commerce to consider an

exporter’s evidence on cost allocation only “if such allocations have been historically

used by the exporter or producer . . . .” 19 U.S.C. § 1677b(f)(1)(A). In order for an

allocation to qualify as “historically used,” it must have been in place before the

Period of Review. See SAA at 835 (Commerce “will consider whether the producer

historically used its submitted cost allocation methods to compute the cost of the

subject merchandise prior to the investigation or review and in the normal course of

its business operation.”). By its own admission, Nagase did not begin allocating

research and development expenses to product categories until April 2019, several

months into the Period of Review. See Pl.’s Reply at 9, ECF No. 42 (“[Nagase] began

recording R&D expenses by project and by product category in April 2019 (i.e., for

12 of the 19 months of the POR[.])”). Its allocations therefore could not meet the

statutory requirement of historical use. See 19 U.S.C. § 1677b(f)(1)(A). Commerce

thus appropriately concluded that Nagase did not “allocate R&D expenses on a

product-specific basis . . . in its normal books in records [sic].” IDM at 6, J.A. at

2,921, ECF No. 45. Commerce instead chose to rely on Nagase’s GAAP-compliant Court No. 1:21-cv-00574 Page 23

financial statements, which reported research and development expenses as a

single, general expense. Id.

Nagase suggests that, under the antidumping statute, the trial balance

accounts and supporting worksheets must be credited absent a specific finding that

they were either inconsistent with Japanese GAAP or that they failed to reasonably

reflect Nagase’s costs. See Pl.’s Br. at 27–28, ECF No. 34; 19 U.S.C. §

1677b(f)(1)(A). But Commerce complied with the statute, which provides that

“[c]osts shall normally be calculated based on the records of the exporter or producer

of the merchandise, if such records are kept in accordance with the generally

accepted accounting principles of the exporting country . . . and reasonably reflect

the costs associated with the production and sale of the merchandise.” 19 U.S.C. §

1677b(f)(1)(A). Commerce calculated Nagase’s general and administrative costs on

the basis of its audited, GAAP-compliant financial statements — which are, of

course, “the records of the exporter or producer of the merchandise.” Id. Nagase’s

argument forgets the statutory requirement that, in order to merit Commerce’s

consideration, cost allocation records must be historical, meaning they must predate

the Period of Review. See SAA at 835. Nagase’s preferred records did not. That

ends the matter.

Commerce’s decision took place in the context of the cost verification report,

which recorded Nagase’s statement to Commerce that its research and development

activities were not tied to existing products. Nagase attempts to cordon off this

report from the rest of the administrative review, arguing that it constituted Court No. 1:21-cv-00574 Page 24

“obsolete evidence from a prior proceeding (the original investigation)” and reflected

only its “R&D cost recording practices . . . for the period of investigation (2017) – not

the evidence of [Nagase’s] R&D cost accounting practice during the fiscal year

covered by the current Period of Review (April 2019 to March 2020).” Pl.’s Br. at 19,

25, ECF No. 34. In fact, it was entirely proper to consider the cost verification

report during the administrative review. Nagase itself placed the report on the

record by attaching the report to its questionnaire response. See Section D

Questionnaire Response at Ex. D-4, J.A. at 83,998, ECF No. 44; see also IDM at 6,

J.A. at 2,921, ECF No. 45. Further, the report did not merely discuss Nagase’s

former cost accounting method, as Nagase claims. Rather, it quoted Nagase

officials making categorical statements about the nature of their research practices,

specifically that “researchers do R&D work as a seed for future products, and so it is

difficult to attach R&D expenses to existing products.” Section D Questionnaire

Response at Ex. D-4, J.A. at 84,014, ECF No. 44; see also IDM at 6, J.A. at 2,921,

ECF No. 45. Nagase supplied no evidence that this statement stopped being true,

which entitled Commerce to look askance at Nagase’s mid-Period-of-Review shift in

accounting method and characterize it as “after the fact.” IDM at 6, J.A. at 2,921,

ECF No. 45. Nagase may not add a document to the record and then fault

Commerce for considering its contents when they bear on the question before the

agency. See Butte Cnty., Cal. v. Hogen, 613 F.3d 190, 194 (D.C. Cir. 2010) (noting

that an agency cannot “refus[e] to consider evidence bearing on the issue before it”). Court No. 1:21-cv-00574 Page 25

Nagase’s records that segmented research and development costs by product

category were appropriately discounted by Commerce. They did not conform to 19

U.S.C. § 1677b(f)(1)(A)’s requirement that such records reflect historical cost

allocations. Those records that did comply with the statute did not segment

research and development costs. Commerce’s determination that Nagase treated its

research and development costs as a general expense in the normal course of

business, rather than attributing them to specific products, was thus supported by

substantial evidence on the record.

C. Nagase’s “Compensation for Payment” Expense

The same cannot be said for Commerce’s decision to include Nagase’s

“compensation for payment” expense in the general and administrative cost

calculations. In a brief paragraph that was shorter than the agency’s recitation of

the parties’ contrasting arguments, Commerce found that the compensation for

payment expense related to the general operations of the company and was properly

included as a general and administrative expense. IDM at 4, J.A. at 2,919, ECF No.

45. In support, Commerce cited to a single document from the record, the Press

Release, claiming without any analysis that it demonstrated “the fact that the

expenses relate to the company as a whole[.]” Id. The Court holds that this

minimal explanation does not suffice.

In its brief, Nagase argued that Commerce “labeled” and “classified” the

expense but did not actually “explain how that expense related to [Nagase’s] general

operations.” Pl.’s Br. at 29–30, ECF No. 34. Rather, Nagase contended the record Court No. 1:21-cv-00574 Page 26

demonstrated that the expense was directly related to the production of non-subject

merchandise. Citing to its response to Commerce’s Second Supplemental

Questionnaire, Nagase reported that the expense stemmed from a contract with a

non-glycine customer that consigned production of a non-glycine pharmaceutical

product to Nagase. Id. at 30. Nagase began production of the product, but two

years later, Nagase was forced to halt production and dispose of the already

produced inventory. Id. Nagase signed the Compensation Memo with its customer,

agreeing to pay an invoice the customer issued for the “cost of materials paid,

processing costs for raw materials . . . storage costs and disposal costs[.]” Id. at 31.

Nagase argues that this record evidence demonstrates that the compensation for

payment expense was “directly related to the provision of a non-subject service (i.e.,

[Nagase’s] production of a non-subject pharmaceutical product),” and that

Commerce failed to address this evidence. Id. at 30.

The substantial evidence standard requires that Commerce “articulate [a]

rational connection between the facts found and the choice made.” Burlington

Truck Lines v. United States, 371 U.S. 156, 168 (1962). Further, “[t]he

substantiality of the evidence must take into account whatever in the record fairly

detracts from its weight.” Universal Camera Corp., 340 U.S. at 488. Commerce

must provide a reasonable explanation for its actions and address information on

the record that significantly detracts from its conclusion.

Here, Commerce’s determination amounted to three statements. First, it

found that “the record indicates that the ‘compensation for payment’ expenses do Court No. 1:21-cv-00574 Page 27

not relate directly to the production of non-subject merchandise, but rather, relate

indirectly to the general operation of the company.” IDM at 4, J.A. at 2,919, ECF

No. 45. Commerce then analogized the expense to “penalties, litigation accruals,

fines, etc.,” which similarly do not relate to a production activity. Id. Commerce

concluded by observing that “one-time charges,” such as the compensation for

payment expense, “are ultimately a cost of doing business for the company.” Id.

Commerce’s sole support in the record for these findings was the Press Release.

Although Commerce did not quote from or discuss the contents of the Press Release,

it states that:

When a customer’s application for a drug was made to use the raw materials manufactured by the Company, the application was put on hold by the authorities. Accordingly, we have received a request from our customers to pay . . . the consignment processing costs we have already received for the drug.

Press Release, J.A. at 84,979, ECF No. 44. Each of Commerce’s findings is

conclusory and contradicted by record evidence that it failed to address.

First, it is unclear how Commerce determined that the expense “do[es] not

relate directly to the production of non-subject merchandise” from the Press Release

alone. IDM at 4, J.A. at 2,919, ECF No. 45. That document reports that a

pharmaceutical company sought to use “raw materials manufactured by [Nagase],”

but Nagase ultimately had to reimburse the company for the “processing costs we

have already received for the drug.” Press Release, J.A. at 84,979, ECF No. 44.

When asked directly at oral argument, Government counsel did not dispute that the

product in question was not glycine. See Oral Argument Transcript at 6:1–7, ECF Court No. 1:21-cv-00574 Page 28

No. 54 (The Court: “Is there any dispute that the customer in question . . . was not a

glycine customer of Nagase’s?” Ms. Geddes: “No, Your Honor.”); see also Second

Supplemental Questionnaire Response at 6, J.A. at 92,718, ECF No. 44 (identifying

the product in question as other than glycine). The Press Release therefore

provided facial support for Nagase’s contention that the compensation for payment

expense related directly to the production of non-subject merchandise. Other

information on the record — the Compensation Memo and Nagase’s Second

Supplemental Questionnaire Response — corroborated Nagase’s claim that the

payment related to a non-glycine product. See Second Supplemental Questionnaire

Response at 6, J.A. at 92,718, ECF No. 44; see also id. at 92,785. Commerce ignored

both in its decision. Commerce declined to address evidence that “fairly detract[ed]”

from its conclusion and failed to “articulate[] [a] rational connection” between what

the Press Release said and the choice Commerce made. Universal Camera Corp.,

340 U.S. at 488 (first quote); Burlington Truck Lines, 371 U.S. at 168 (second

quote). Instead, Commerce stated its legal conclusion, declared that the Press

Release supported it, and moved on.

Commerce did attempt to explain that it “allocates expenses of this nature

(e.g., penalties, litigation accruals, fines, etc.) over all products because they do not

relate to a production activity, but to the company as a whole[.]” IDM at 4, J.A. at

2,919, ECF No. 45. Its sole support for this statement was — again — a citation to

the Press Release. One can squint and see similarities between the compensation

for payment expense and these other kinds of expenses, as the triggering event for Court No. 1:21-cv-00574 Page 29

Nagase’s payment was a negative regulatory finding that rendered Nagase’s

promised services to its client impossible. Yet the compensation payment was not a

regulatory penalty, nor a litigation accrual, nor a fine. It could be covered by

Commerce’s convenient “etc.” at the end of that list, but one cannot know because

Commerce did not explain why it believed the compensation for payment expense

shared a “nature” with the listed expenses or why the Press Release “demonstrated”

such a fact. See id. Indeed, Commerce offered no fact or reason — such as the

existence of pending litigation — to support its classification and instead treated it

as self-evident. That oversight was legally significant because the record evidence

Commerce cited suggests that the compensation for payment expense did in fact

“relate to a production activity.” See, e.g., Press Release, J.A. at 84,979, ECF No. 44

(explaining that Nagase was reimbursing “processing costs” it received for

manufacturing a client’s product). Commerce needed to explain why the

compensation payment was a member of a class of expenses that did not relate to

production. Instead, Commerce merely “labeled” and “classified” without explaining

its conclusion or addressing important evidence that cut against it. See Pl.’s Br. at

29–30, ECF No. 34.

The Government offered a rationale for Commerce’s finding that the expense

did not relate to a production activity; namely, that the drug Nagase tried to

produce never generated any revenue. In its brief, the Government explained that

Commerce generally excludes expenses from the general and administrative

category if they are tied to the production of non-subject merchandise. Def.’s Br. at Court No. 1:21-cv-00574 Page 30

14, ECF No. 50. However, if the non-subject product does not create a revenue

stream, its expenses must necessarily be paid out of the company’s general

revenues; and the expense ceases to be specific to non-subject merchandise. Id. The

Government asserts that, because the compensation payment in question was made

before Nagase’s drug generated any revenue, the payment must have been made

out of Nagase’s general revenues and thus was properly included in the general and

administrative expenses. Id.

This is an interesting explanation. Unfortunately, it is not Commerce’s. The

agency made none of these arguments in its final determination, and “[t]he courts

may not accept appellate counsel’s post hoc rationalizations for agency action.”

Compare IDM at 4, J.A. at 2,919, ECF No. 45, with Burlington Truck Lines, 371

U.S. at 168. Perhaps Commerce declined to do so because the record in this case did

not support it. In its reply brief, Nagase cited to the record and demonstrated that,

although consigned production of this particular drug ceased, custom

manufacturing of pharmaceutical products remained an active business line during

the Period of Review — a fact to which all parties agreed at oral argument. See Pl.’s

Reply at 12, ECF No. 42; see also Section A Questionnaire Response at Ex. A-29,

J.A. at 80,375, 80,378, ECF No. 44; Oral Arg. Tr. 6:11–18, ECF No. 54. Therefore,

Nagase argued, the other merchandise produced by its custom manufacturing

business could cover the compensation for payment expense. Pl.’s Reply at 13, ECF

No. 42. Whether that was true as an accounting matter was not established. But

the fact that custom manufacturing was a normal business activity that Nagase Court No. 1:21-cv-00574 Page 31

maintained during the Period of Review undercuts the Government’s post hoc

assertion that the expense was “not a production cost tied to the ongoing production

of any revenue-generating non-subject merchandise.” Def.’s Br. at 18, ECF No. 50.

Commerce will have an opportunity to reconsider the issue on remand.

There, it should reconsider the entire record of evidence regarding the compensation

for payment expense; allow Nagase an opportunity to respond to the arguments

Commerce makes; and then make a final, informed decision linking the facts found

to the choice made. See Burlington Truck Lines, 371 U.S. at 168. The current

record before the Court and Commerce’s lack of an explanation of the competing

evidence in that record do not support its finding that the expense should be

categorized as a general and administrative expense. Similarly, the Court may not

credit the Department of Justice’s late attempt to craft an acceptable rationale

supporting Commerce’s determination because post hoc rationalizations are not

permitted. Id. The Court therefore must GRANT Nagase’s Motion for Judgment

on the Agency Record and REMAND the issue of the categorization of the

compensation for payment expense to Commerce for further consideration.

II. Nagase’s Assessment Rate

The Court must finally decide if Commerce acted lawfully when it declined

Nagase’s untimely request to correct its assessment rate. Nagase argues that

Commerce abused its discretion by instructing Customs to liquidate its sales at a

triple-digit assessment rate because this rate “incorporated an enormous error, Court No. 1:21-cv-00574 Page 32

which, if not corrected, will result in the over-collection of . . . millions of dollars of

dumping duties.” Pl.’s Br. at 32, ECF No. 34.

However, Nagase admits that the enormous error in question stemmed from

its own submission of an inaccurate entered-value figure for its CEP sales. See Pl.’s

Reply at 15, ECF No. 42. Although the error was detectable starting at the latest

from the issuance of Commerce’s Preliminary Results, Nagase further admits that

it did not seek correction of the error until nineteen days after the publication of the

Final Results and fourteen days after the five-day window for ministerial error

comments had closed. Compare 19 C.F.R. § 351.224(c)(2) (requiring comments

concerning ministerial errors, including calculation errors, to be filed within five

days of the disclosure of the final results of an administrative review), with Final

Results, 86 Fed. Reg. 53,946 (published Sept. 29, 2021), and Pl.’s Br. at 15, ECF No.

34 (“Nagase’s counsel discovered the error in the Department’s Margin Output in

mid-October 2021 . . . . They promptly contacted the Department personnel, and

discussed the issue by telephone on October 18, 2021.”). Nagase nonetheless

maintains that it was an abuse of Commerce’s discretion to direct liquidation at the

uncorrected rate. Despite acknowledging “issues of the finality of administrative

decisions and timeliness of objections,” Nagase believes that these concerns are

outweighed by the error’s impact; its clerical nature; its apparentness on the face of

Commerce’s calculations; and the fact that it is, in Nagase’s view, correctible using

information already on the record. Pl.’s Br. at 38, ECF No. 34. Although the correct

figure for the entered value of CEP sales is not part of the record, Nagase argues Court No. 1:21-cv-00574 Page 33

that Commerce could instead calculate a per-kilogram assessment rate or

alternatively “reverse engineer” the entered value by dividing Nagase’s erroneous

entered value figure by the ordinary customs duty rate for glycine. Pl.’s Br. at 36–

37, ECF No. 34. Under these circumstances, Nagase argues that “it would be highly

punitive — contrary to the ‘remedial’ nature of the [antidumping] law — for the

error to go uncorrected and for Nagase to be compelled to pay . . . millions of dollars

in excess duties.” Id. at 38–39. The Court disagrees and holds that Commerce did

not exceed its lawful discretion by denying Nagase’s untimely request to correct the

assessment rate error.

Commerce “certainly has the authority to act to correct ministerial errors in

the course of judicial review of the final results of its determinations[.]” Dorbest

Ltd. v. United States, 604 F.3d 1363, 1376 (Fed. Cir. 2010). Indeed, Commerce’s

discretionary power to correct ministerial errors ends only “after judicial review is

completed.” Id. That is not the question before the Court. Rather, the question is

whether the Court may force Commerce to correct an error after it has refused a

party’s untimely request to do so. Such a decision by Commerce is evaluated under

an abuse of discretion standard. See id. (“[T]here is no dispute here that Commerce

has discretion to fix the error; instead, the question is whether Commerce’s failure

to fix the error is an abuse of that discretion.”). Nagase did not discuss the legal

standard for abuse of discretion in its brief, choosing instead to remind the Court of

its equitable powers. See Pl.’s Br. at 39, ECF No. 34; see also 28 U.S.C. § 1585 (“The

Court of International Trade shall possess all the powers in law and equity of, or as Court No. 1:21-cv-00574 Page 34

conferred by statute upon, a district court of the United States.”). Yet courts

evaluating Commerce’s rejection of requests for ministerial error correction have

done so under an abuse of discretion standard by asking whether Commerce

appropriately balanced “’the desirability of finality, on the one hand, and the public

interest in reaching what, ultimately, appears to be the right result on the other.”

NTN Bearing Corp. v. United States, 74 F.3d 1204, 1208 (Fed. Cir. 1995) (quoting

Civil Aeronautics Bd. v. Delta Air Lines, Inc., 367 U.S. 316, 321 (1961)).

Neither this Court nor the Court of Appeals for the Federal Circuit has ever

found an abuse of discretion where Commerce has declined to correct a ministerial

error that was detectable during the original proceedings but was not raised until

after publication of the final results and the closure of the five-day window for

ministerial error comments. See Dorbest, 604 F.3d at 1377. The error that gave

rise to Nagase’s assessment rate became discoverable at the latest on June 30, 2021,

when Commerce issued the Preliminary Results. See YGK/Nagase Preliminary

Margin Calculation Output at 123, J.A. at 102,781, ECF No. 44; see also Oral Arg

Tr. 59:8–15, ECF No. 54 (Plaintiff counsel’s agreement that the assessment rate

was published to Nagase as part of the Preliminary Results). Nagase subsequently

submitted a case brief challenging aspects of the Preliminary Results but not the

assessment rate despite 19 C.F.R. § 351.309(c)(2)’s requirement that “[t]he case

brief must present all arguments that continue in the submitter’s view to be

relevant to the Secretary’s final determination[.]” The assessment rate therefore

remained unchanged in the Final Results, and Nagase failed to file any comment Court No. 1:21-cv-00574 Page 35

alerting Commerce to ministerial errors in its determination within the five-day

window provided by 19 C.F.R. § 351.224(c)(2). Despite multiple opportunities,

Nagase missed every chance to flag the error — an error originally caused by and

then compounded by Nagase’s inattention to the data it submitted and the

calculations that resulted. In such circumstances, the Court may not force

Commerce to disturb the finality of the administrative decision. See Chengde

Malleable Iron General Factory v. United States, 31 CIT 1253, 1260 (2007)

(“[B]ecause Chengde delayed requesting correction until after [Commerce] had

issued the Final Results, the requirement of administrative finality necessarily

outweighed its belated concern for correctness.”).

Nagase cites no authority to the contrary. Although courts have found that

Commerce may abuse its discretion by denying a party’s request to correct a

ministerial error, these errors were all raised within the appropriate deadline. In

NTN Bearing, the respondent raised clerical errors following Commerce’s

preliminary determination and before publication of the final determination. 74

F.3d at 1208. The same is true of the clerical errors at issue in Tehnoimportexport

v. United States, 15 CIT 250, 258 (1991), which the respondent raised “eleven days

prior to the issuance of the final determinations.” Lastly, in Koyo Seiko Co., Ltd. v.

United States, 14 CIT 680, 681 (1990), Commerce used its discretion to grant all

parties an extra two weeks following the publication of the final results to submit

error correction requests after it “became apparent . . . that the determination was

tainted by numerous ministerial errors.” Commerce provided that, following these Court No. 1:21-cv-00574 Page 36

submissions, “an amended determination would be published,” and the respondent

raised all errors within Commerce’s deadline. Id. These cases recognize a principle

stated clearly in Alloy Piping Products, Inc. v. Kanzen Tetsu Sdn. Bhd., 334 F.3d

1284, 1292–93 (Fed. Cir. 2003): Commerce is required to correct a respondent’s

error that is apparent on the face of the final determination only where the

respondent has exhausted its administrative remedies. “Under the regulation, this

means applying to Commerce to correct the error within five days of the release of

the final calculations or, if an extension is granted, within five days after the

publication of the final determination.” Id. at 1293. This Nagase did not do.

Nagase proffers work-around methodologies that it claims Commerce can use

to derive the correct figure for entered value despite that figure’s absence from the

record. See Pl.’s Br. at 36–37, ECF No. 34. But without that figure, the Court has

no way of determining whether Commerce can do what Nagase claims. The record

does not contain the target at which Commerce should be aiming, and this Court is

limited to facts on the record when it reviews Commerce’s determinations. See 19

U.S.C. §§ 1516a(b)(1)–(2). “The burden of creating an adequate record lies with the

interested parties and not with Commerce.” Qingdao Sea-Line Trading Co., Ltd. v.

United States, 766 F.3d 1378, 1386 (Fed. Cir. 2014) (citing QVD Food Co., Ltd. v.

United States, 658 F.3d 1318, 1324 (Fed. Cir. 2011)). Nor is the adequacy of

Nagase’s alternative methodologies a stipulated fact — the other interested parties

do not accede to Nagase’s understanding of the correct entered value total or to Court No. 1:21-cv-00574 Page 37

Commerce’s use of nonstandard means to derive it. 7 See Oral Arg. Tr. 76:7–13, ECF

No. 54 (Defendant-Intervenor: “I want to make this assertion that [Nagase’s entered

value figure] is something they made in the brief totally post-hoc and [they] say if

you look at the duty rate, you can reverse engineer the total enter[ed] value, which

Commerce never had a chance to even review and we never . . . got a chance to

comment or object to it.”). The Court is therefore powerless to consider Nagase’s

argument that the error can be corrected with information already on the record.

Nagase’s last refuge is its argument that the Court may require Commerce to

correct the assessment rate when remanding its determination on a separate issue

in the case. See Pl.’s Reply at 22, ECF No. 42 (citing Jinan Yipin Corp. v. United

States, 33 CIT 934, 951–52 (2009)). Nagase’s argument assumes this Court has a

free-floating power to command Commerce to alter its Final Results on remand

without a finding of legal error. Such a power does not exist. Courts may only set

aside unlawful agency action. See In re Clean Water Act Rulemaking, 60 F.4th 583,

594 (9th Cir. 2023) (interpreting the Administrative Procedure Act to “foreclos[e]

any authority of courts to vacate agency actions not first held unlawful.”). Compare

5 U.S.C. § 706(2)(A) (directing a reviewing court to set aside agency action, findings,

and conclusions “found to be arbitrary, capricious, an abuse of discretion or

otherwise not in accordance with law”), with 19 U.S.C. § 1516a(b)(1)(B)(i) (directing

the same in an antidumping review “for any determination, finding, or conclusion

found . . . to be unsupported by substantial evidence on the record, or otherwise not

7 Nagase, applying its alternative methodology, describes the resulting rate as “a far more realistic figure” but noticeably does not call it the correct figure. Pl.’s Br. at 37, ECF No. 34. Court No. 1:21-cv-00574 Page 38

in accordance with law”). Nor, for that matter, does such a power reside in equity.

In re Clean Water Act, 60 F.4th at 594 (finding no authority “suggesting that courts

of equity were empowered to vacate an executive action not first held to violate the

law[.]”). Equity “aids the vigilant, not those who slumber on their rights.” Cornetta

v. United States, 851 F.2d 1372, 1375 (Fed. Cir. 1988). Because Nagase has not

shown that Commerce acted unlawfully, this Court cannot order the agency to make

a different decision.

Despite its failure to exhaust its administrative remedies, Nagase is not

wholly without remedy. It can take action against the employees who were

responsible for the error, or it can pursue a malpractice claim against the attorneys

who failed to notice one of two crucial numbers that Commerce issues in every

antidumping review: the assessment rate. Nagase may even continue to request

that Commerce correct the assessment rate, as Commerce retains the discretionary

power to do so until after judicial review is completed. See Dorbest, 604 F.3d at

1376. What Nagase cannot do is commit an error, fail to exhaust its remedies, and

then ask the Court to force a correction.

CONCLUSION

Nagase brings three errors of differing dimensions before the Court.

Commerce’s decision to use the GAAP-compliant research and development cost

records in place of trial balances that were not used historically is supported by

both the law and substantial evidence. Its conclusory determination that the

compensation for payment expense is properly categorized as a general and Court No. 1:21-cv-00574 Page 39

administrative expense is not and must be remanded for further analysis and

consideration. Finally, Nagase waited too late in discovering its own error

regarding the assessment rate to invoke the Court’s power to force a correction from

Commerce. The Court therefore GRANTS IN-PART and DENIES IN-PART

Nagase’s Motion for Judgment on the Agency Record and REMANDS Commerce’s

determination for additional proceedings consistent with this opinion.

Commerce shall file its Remand Redetermination with the Court within 120

days of today’s date. Defendant shall supplement the administrative record with all

documents considered by Commerce in reaching its decision in the Remand

Redetermination. Plaintiff shall have thirty days from the filing of the Remand

Redetermination to submit comments to the Court; and Defendant shall have

fifteen days from the date of Plaintiff’s filing of comments to submit a reply.

Defendant-Intervenor shall then have fifteen days from the date of Defendant’s

filing of comments to submit its reply.

SO ORDERED.

/s/ Stephen Alexander Vaden Judge

Dated: April 11, 2023 New York, New York