                                       SLIP OP . 03-169

                      UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE : RICHARD K. EATON , JUDGE
____________________________________
                                         :
FUYAO GLASS INDUSTRY GROUP CO ., LTD .,  :
GREENVILLE GLASS INDUSTRIES, INC.,       :
SHENZHEN BENXUN AUTOMOTIVE GLASS         :
CO ., LTD ., TCG INTERNATIONAL, INC.,    :
CHANGCHUN PILKINGTON SAFETY GLASS        :
CO ., LTD ., GUILIN PILKINGTON SAFETY    :
GLASS CO ., LTD ., WUHAN YAOHUA          :
PILKINGTON SAFETY GLASS CO ., LTD ., AND :
XINYI AUTOMOTIVE GLASS (SHENZHEN)        :
CO ., LTD .,                             :
                                         :
                     PLAINTIFFS ,        :
                                         :
       V.                                :                CONSOL. COURT NO . 02-00282
                                         :
UNITED STATES ,                          :
                                         :
                                         :
                     DEFENDANT,          :
                                         :
             AND                         :
                                         :
PPG INDUSTRIES, INC., SAFELITE GLASS     :
CORPORATION , AND VIRACON /CURVLITE, A :
SUBSIDIARY OF APOGEE ENTERPRISES, INC ., :
                                         :
                     DEF.-INTERVENO RS. :
____________________________________:


[Commerce’s Final Determination on windshields from the P.R.C., sustained in part and
remanded in part]

                                                          Decided: December 18, 2003

      Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, LLP (Bruce M. Mitchell, Jeffrey S.
Grimson, and Mark E. Pardo), for plaintiffs Fuyao Glass Industry Group Co., Ltd., and
Greenville Glass Industries, Inc.
CONSOL. COURT NO . 02-00282                                                                   PAGE 2

      Garvey, Schubert & Barer (William E. Perry and John C. Kalitka), for plaintiffs
Shenzhen Benxun Automotive Glass Co., Ltd., and TCG International, Inc.

       Pepper Hamilton, LLP (Gregory C. Dorris), for plaintiffs Changchun Pilkington Safety
Glass Co., Ltd., Guilin Pilkington Safety Glass Co., Ltd., and Wuhan Yaohua Pilkington Safety
Glass Co., Ltd.

       White & Case (William J. Clinton and Adams C. Lee), for plaintiff Xinyi Automotive
Glass (Shenzhen) Co., Ltd.

        Peter D. Keisler, Assistant Attorney General, Civil Division, United States Department of
Justice; David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States
Department of Justice (Stephen C. Tosini), for defendant United States.

       Stewart & Stewart (Terence P. Stewart, Eric P. Salonen, and Sarah V. Stewart), for
defendant-intervenors PPG Industries, Inc., Safelite Glass Corporation, and Viracon/Curvlite, a
subsidiary of Apogee Enterprises, Inc.



                                      OPINION AND ORDER

EATON , Judge: This matter is before the court, in this consolidated action, on motions for

judgment upon the agency record filed by plaintiffs Fuyao Glass Industry Group Co., Ltd., and

Greenville Glass Industries, Inc. (collectively, “Fuyao”), Xinyi Automotive Glass (Shenzen) Co.,

Ltd. (“Xinyi”), Changchun Pilkington Safety Glass Co., Ltd., Guilin Pilkington Safety Glass Co.,

Ltd., and Wuhan Yaohua Pilkington Safety Glass Co., Ltd. (collectively, “the Changchun

Plaintiffs”), and defendant-intervenors PPG Industries, Inc., Safelite Glass Corporation, and

Viracon/Curvlite, a subsidiary of Apogee Enterprises, Inc. (collectively, “PPG”). By their

motions the parties contest certain aspects of the United States Department of Commerce’s

(“Commerce”) final determination concerning the antidumping duty order covering automotive
CONSOL. COURT NO . 02-00282                                                                PAGE 3

replacement glass windshields (“Windshields”) from the People’s Republic of China (“PRC”).1

See Certain Automotive Replacement Glass Windshields From The P.R.C., 67 Fed. Reg. 6482

(ITA Feb. 12, 2002) (final determination) (“Final Determination”), amended by Certain

Automotive Replacement Glass Windshields from the P.R.C., 67 Fed. Reg. 11,670 (ITA Mar. 15,

2002) (“Am. Final Determination”). The court has jurisdiction over this matter pursuant to 28

U.S.C. § 1581(c) (2000) and 19 U.S.C. § 1516a(a)(2)(B)(iii) (2000). For the following reasons

this matter is remanded to Commerce with instructions to conduct further proceedings in

conformity with this opinion.2



                                      STANDARD OF REVIEW

       The court “shall hold unlawful any determination, finding, or conclusion found . . . to be

unsupported by substantial evidence on the record, or otherwise not in accordance with law. . . .”

19 U.S.C. § 1516a(b)(1)(B)(i); Huaiyin Foreign Trade Corp. (30) v. United States, 322 F.3d

1369, 1374 (Fed. Cir. 2003) (quoting 19 U.S.C. § 1516a(b)(1)(B)(i) (2000)). “Substantial

evidence is ‘such relevant evidence as a reasonable mind might accept as adequate to support a

conclusion.’” Huaiyin, 322 F.3d at 1374 (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197,

229 (1938)). The existence of substantial evidence is determined “by considering the record as a


       1
                All plaintiffs, as well as defendant-intervenors PPG, have filed memoranda in
support of their motions for judgment upon the agency record. See Fuyao’s Mem. Supp. Mot. J.
                                                                                       .
Agency R. (“Fuyao Mem.”); Xinyi’s Mem. Supp. Mot. J. Agency R. (“Xinyi Mem.”);
Changchun’s Mem. Supp. Mot. J. Agency R. (“Changchun Mem.”); and PPG’s Mem. Supp.
Mot. J. Agency R. (“PPG Mem.”). The Government filed a consolidated response to all (“Gov’t
Brief”).
       2
                For information regarding the float glass production process, see
http://ajzonca.tripod.com/glassprocess.html (last visited Dec. 16, 2003).
CONSOL. COURT NO . 02-00282                                                                   PAGE 4

whole, including evidence that supports as well as evidence that ‘fairly detracts from the

substantiality of the evidence.’” Id. (citing Atl. Sugar, Ltd. v. United States, 744 F.2d 1556, 1562

(Fed. Cir. 1984)). “In reviewing the Department’s construction of a statute it administers, [the

court defers] to the agency’s reasonable interpretation of the antidumping statutes if not contrary

to an unambiguous legislative intent as expressed in the words of the statute.” Id. at 1374–75

(citing Timex V.I., Inc. v. United States, 157 F.3d 879, 881–82 (Fed. Cir. 1998)); see also

Pesquera Mares Australes Ltda. v. United States, 266 F.3d 1372, 1382 (Fed. Cir. 2001) (“[W]e

conclude . . . that statutory interpretations articulated by Commerce during its antidumping

proceedings are entitled to judicial deference under Chevron.”) (citing Chevron U.S.A. Inc. v.

Natural Res. Def. Council, Inc., 467 U.S. 837 (1984)). Furthermore, “[a]s long as the agency’s

methodology and procedures are reasonable means of effectuating the statutory purpose, and

there is substantial evidence in the record supporting the agency’s conclusions, the court will not

impose its own views as to the sufficiency of the agency’s investigation or question the agency’s

methodology.” Ceramica Regiomontana, S.A. v. United States, 10 CIT 399, 404–05, 636 F.

Supp. 961, 966 (1986), aff’d 810 F.2d 1137 (Fed. Cir. 1987) (citing Chevron, 467 U.S. at 843;

Abbott v. Donovan, 6 CIT 92, 97, 570 F. Supp. 41, 46–47 (1983)).



                                          BACKGROUND

       Commerce initiated its investigation of the Windshields from the PRC in March 2001, in

response to a petition filed by PPG. See Certain Automotive Replacement Glass Windshields

From the P.R.C., 66 Fed. Reg. 48,233 (ITA Sept. 19, 2001) (prelim. determination) (“Prelim.

Determination”). The period of investigation for the subject merchandise was July 1, 2000,
CONSOL. COURT NO . 02-00282                                                                PAGE 5

through December 31, 2000. See Final Determination, 67 Fed. Reg. at 6483. As in previous

investigations, Commerce treated the PRC as a nonmarket economy (“NME”) country. 3 See id.

In investigating imports from NME countries, Commerce is directed, under certain

circumstances, to value the factors of production based on surrogate data from an appropriate

market economy country or countries.4 See 19 U.S.C. § 1677b(c)(1). For PRC cases, Commerce

has often selected India as the surrogate country of comparable economic development if it is a

significant producer of comparable merchandise. See Prelim. Determination, 66 Fed. Reg. at

48,238. In this case, Commerce selected India as the surrogate country for the PRC because

Commerce found it to be a significant producer of Windshields. See id.



       On April 17, 2001, the United States International Trade Commission (“ITC”) issued its

affirmative preliminary determination that there existed a reasonable indication that an industry

in the United States was materially injured by reason of imports of the subject merchandise from

the PRC. See Automotive Replacement Glass Windshields From China, 66 Fed. Reg. 20,682



       3
                A “nonmarket economy” country is defined as “any foreign country that the
administering authority determines does not operate on market principles of cost or pricing
structures, so that sales of merchandise in such country do not reflect the fair value of the
merchandise.” 19 U.S.C. § 1677(18)(A). “Any determination that a foreign country is a
nonmarket economy country shall remain in effect until revoked by the administering authority.”
19 U.S.C. § 1677(18)(C)(i).
       4
                In valuing factors of production for merchandise exported from an NME country,
when appropriate, Commerce is directed to use “the best available information regarding the
values of such factors in a market economy country or countries considered to be appropriate by
the administering authority.” 19 U.S.C. § 1677b(c)(1). To the extent possible, Commerce is
directed to select market economy countries that (1) are at a level of economic development
comparable to that of the NME country; and (2) are significant producers of comparable
merchandise. 19 U.S.C. § 1677b(c)(4). See Prelim. Determination, 66 Fed. Reg. at 48,238.
CONSOL. COURT NO . 02-00282                                                                PAGE 6

(ITC Apr. 24, 2001) (prelim. determination). Commerce then sent antidumping questionnaires to

a number of known producers of the subject merchandise,5 responses to which were timely filed.

Because these producers were numerous, Commerce selected Fuyao and Xinyi as mandatory

respondents,6 as they were the two largest cooperative exporters, accounting for the majority of

all exports of Windshields from the PRC during the period of investigation.7



       Commerce published the preliminary results of its investigation on September 19, 2001.

It determined that certain Windshields from the PRC were being, or were likely to be, sold in the

United States at less than fair value. Relying on information submitted by Fuyao, Xinyi, and the

Changchun Plaintiffs, Commerce found that each company demonstrated an absence of



       5
               Those producers were Fuyao; Xinyi; the Changchun Plaintiffs; Benxun;
Dongguan Kongwan Automobile Glass; Guandong Lunjiao Autoglass Co.; Jieyang Jiantong
Automobile Glass Co., Ltd.; Shanghai Yanfeng Automotive Trim Co.; Shanghai Fu Hua Glass
Co., Ltd.; Tianjin Riban Glass Co., Ltd.; Luoyang Float Glass Group Import & Export Corp.;
Hebei Tong Yong Glass Industry Limited Co.; Yantai Yanhua Glass Products Co., Ltd.; and
Hangzhou Safety Glass Co., Ltd. Commerce also identified for the Embassy of the PRC a large
number of other potential producers/exporters designated in PPG’s petition for which Commerce
did not have addresses, and notified the PRC government that it was responsible for ensuring that
volume and value information for those companies was provided to Commerce. See Prelim.
Determination, 66 Fed. Reg. at 48,233.
       6
             Fuyao and Xinyi were selected by Commerce for full investigation. While the
Changchun Plaintiffs cooperated by timely filing responses to Commerce’s questionnaires,
Commerce did not conduct a full investigation of these companies. All other producers received
the PRC-wide rate (the “PRC-wide entity”).
       7
                The Changchun Plaintiffs’ final antidumping duty margins are based on the final
antidumping duty margins, as amended, of mandatory respondents Fuyao and Xinyi, both of
which are challenging Commerce’s Final Determination and Amended Final Determination in
this action. See 19 U.S.C. § 1673d(c)(5). Should Fuyao and/or Xinyi be successful in reducing
their respective antidumping duty margins, the Changchun Plaintiffs seek to have their respective
antidumping duty margins recalculated accordingly. See Changchun Mem. at 3.
CONSOL. COURT NO . 02-00282                                                                 PAGE 7

government control, both in law and in fact.8 See Prelim. Determination, 66 Fed. Reg. at 48,236.

Therefore, Commerce granted separate antidumping duty deposit rates to each company and

issued an antidumping duty order pursuant to which Fuyao and Xinyi received company-specific

antidumping duty margins of 9.79% and .05%,9 respectively. See id. at 48,242. The Changchun

Plaintiffs were each assigned an “all others” antidumping duty margin10 equal to the weighted

average of all the calculated margins (in this case, Fuyao’s margin of 9.79% and Xinyi’s margin

of .05%), excluding any zero or de minimis margins (Xinyi’s margin of .05%). Id. at 48,242; see

also Serampore Indus. Pvt. Ltd. v. United States, 12 CIT 825, 826, 696 F. Supp. 665, 667 (1988)

(“Commerce indicates [that] it is a long standing practice to exclude firms that receive zero or de

minimis margins.”). Thus, the Changchun Plaintiffs’ antidumping duty margin was 9.79%, i.e.,

the same as Fuyao’s antidumping duty margin, since Xinyi’s de minimis margin was excluded



       8
                In an NME situation, it is Commerce’s policy to assign all exporters of the subject
merchandise a single antidumping duty rate, unless an exporter can demonstrate that it is
sufficiently independent of government control so as to be entitled to a separate rate.
Commerce’s test for whether a company is eligible for a separate rate focuses on control over
investment, pricing, and the output decision-making process at the individual firm. See Prelim.
Determination, 66 Fed. Reg. at 48,235. For a complete discussion of the de jure and de facto
factors Commerce considers in such determinations, see Certain Cut-to-Length Carbon Steel
Plate from Ukraine, 62 Fed. Reg. 61,754, 61,758–59 (ITA Nov. 19, 1997) (final determination).
       9
              This rate is considered de minimis. A weighted-average dumping rate is de
minimis if Commerce determines that it is less than 2% ad valorem. See 19 U.S.C. §
1673b(b)(3).
       10
                The Changchun Plaintiffs submitted responses to Commerce’s questionnaire
seeking volume and value of U.S. sales information, but were not selected to be investigated.
Thus, they were assigned the “all others” antidumping duty margin based on the margins
calculated for those producers/exporters that were selected for investigation. See Prelim.
Determination, 66 Fed. Reg. at 48,241. Those exporters who failed to respond to Commerce’s
initial questionnaire were assigned the PRC-wide margin in accordance with Commerce’s long-
standing practice. See Sigma Corp. v. United States, 117 F.3d 1401, 1411 (Fed. Cir. 1997).
CONSOL. COURT NO . 02-00282                                                                PAGE 8

from the weighted average. Id.



       On September 21, 2001, Fuyao and PPG timely filed allegations that Commerce had

made ministerial errors in its Preliminary Determination. See Automotive Replacement Glass

From the P.R.C., 66 Fed. Reg. 53,776, 53,776 (ITA Oct. 24, 2001) (am. prelim. determination).

After reviewing the allegations, Commerce corrected several ministerial errors and reduced

Fuyao’s margin to 3.04%. See id. at 53,778.



       In November 2001, Commerce conducted sales and factors of production verifications for

Fuyao and Xinyi. See Final Determination, 67 Fed. Reg. at 6483–84. Based on its findings at

verification and its analysis of comments received, Commerce made adjustments to the

methodology used to calculate the final antidumping duty margins for Fuyao and Xinyi and made

changes to the surrogate country values. See id. at 6484. Final antidumping duty margins were

calculated as follows: 9.67% for Fuyao; 3.70% for Xinyi; 8.22% for the Changchun Plaintiffs;

and 124.50% for the PRC-wide entity. See id.



       On February 14, 2002, Fuyao, Xinyi, and PPG timely filed allegations that Commerce

made ministerial errors in its Final Determination. See Am. Final Determination, 67 Fed. Reg. at

11,670. After reviewing the allegations, Commerce revised the final determination of the

antidumping duty margins for Fuyao, Xinyi, and the Changchun Plaintiffs as follows: Fuyao,

11.80%; Xinyi, 3.71%; and the Changchun Plaintiffs, 9.84%. See id. at 11,673. The

antidumping duty margin for the PRC-wide entity remained unchanged at 124.50%. See id.
CONSOL. COURT NO . 02-00282                                                                   PAGE 9



       In this action, Fuyao, Xinyi, and the Changchun Plaintiffs, as well as PPG, challenge

certain aspects of Commerce’s Amended Final Determination regarding the antidumping duty

margins assigned to Fuyao and Xinyi. In particular, Fuyao challenges six aspects of Commerce’s

Final Determination; Xinyi joins Fuyao on the first three: (1) whether Commerce erred in

disregarding Fuyao’s and Xinyi’s market economy purchases of float glass; (2) whether

Commerce’s treatment of water as a direct material resulted in double counting; and (3) whether

Commerce’s exclusion of the cost of “stores and spare parts” in its calculation of the factory

overhead ratio resulted in double counting. Fuyao alone further challenges 1) whether

Commerce erred in excluding the “St. Gobain” financial data from its calculation of the surrogate

profit ratio; 2) whether Commerce improperly excluded St. Gobain’s “purchase of traded goods”

from its calculation of the selling, general, and administrative expenses (“SG&A”) ratio; and 3)

whether Commerce incorrectly rejected Fuyao’s actual market prices paid for ocean freight in

favor of a surrogate value. For its part, PPG challenges Commerce’s methodology for

calculating ocean freight, its selection of a surrogate value for electricity, and its methodology for

calculating SG&A, factory overhead (“FOH”), and profit.
CONSOL. COURT NO . 02-00282                                                                 PAGE 10

                                            DISCUSSION

I.     Commerce’s Determination With Regard to Market Economy Purchases of Float Glass11

       A.      Commerce’s Decision to Avoid Subsidized Prices

       First, Fuyao challenges Commerce’s finding that substantial evidence on the record

provided Commerce with a reason to believe or suspect that prices paid by Fuyao for the factor of

production “float glass” from the market economy countries of Korea, Thailand, and Indonesia

may have been distorted by broadly available subsidies in those countries. See Prelim.

Determination, 66 Fed. Reg. at 48,238. Fuyao argues that the legislative history Commerce

relied upon in disregarding Fuyao’s float glass purchases is not applicable to market economy

purchases. See Fuyao Mem. at 10–11.



       Fuyao begins by stating that “there is no dispute that [Fuyao] made ‘market economy

purchases’ of float glass. That is to say, Fuyao purchased float glass from suppliers located in

market economy countries . . . and paid for these purchases in a market economy currency.”

Fuyao Mem. at 7. Fuyao further states that “[i]t is also undisputed that Commerce has a long-

standing policy in NME cases of using such market economy purchases to value a respondent’s

inputs in lieu of resorting to a surrogate value.” Id. (citing 19 C.F.R. § 351.408(c)(1) (2000)).

Fuyao argues that

               [d]espite this recognized distinction between the use of surrogate
               values and actual market economy prices, Commerce disregarded
               Fuyao’s market economy purchases of float glass by claiming that


       11
               Xinyi also disputes Commerce’s determination with regard to this issue. Because
Xinyi’s arguments are substantially the same as Fuyao’s, they are not addressed separately in the
court’s analysis.
CONSOL. COURT NO . 02-00282                                                                   PAGE 11

               the price of these purchases may have been distorted by subsidies.
               As authority for this decision, Commerce stated that “[t]he
               legislative history and recent Department determinations support
               the principal [sic] that we should disregard prices we have reason
               to believe or suspect are distorted by subsidies.”

Id. at 9 (bracketing in original) (citing Issues and Decision Mem. for the Final Results of

Antidumping Investigation of Automotive Replacement Glass Windshields From the P.R.C.,

Conf. R. Doc. 119 at 10, reprinted in 67 Fed Reg. 6482 (“Issues and Decision Mem.”).



       With respect to its decision to disregard prices that it believes or suspects to be distorted

by subsidies, Commerce states:

               In the underlying investigation, Commerce was guided by
               Congress’s instruction in the legislative history of the Omnibus
               Trade and Competitiveness Act of 1988, to avoid using prices in
               valuing factors that Commerce has reason to believe or suspect
               may be distorted by subsidies.

Gov’t Brief at 22.



       The legislative history relied upon by Commerce concerns the use of surrogate values for

factors of production in NME cases, pursuant to 19 U.S.C. § 1677b(c)(4).12 The legislative


       12
               Title 19 U.S.C. § 1677b(c)(4) states:

               The administering authority, in valuing factors of production under
               paragraph (1) [i.e., with respect to surrogate values], shall utilize,
               to the extent possible, the prices or costs of factors of production in
               one or more market economy countries that are—

               (A) at a level of economic development comparable to that of the
               nonmarket economy country, and

               (B) significant producers of comparable merchandise.
CONSOL. COURT NO . 02-00282                                                             PAGE 12

history states in relevant part:

                The factors [of production for the merchandise subject to
                investigation] would be valued from the best available evidence in
                a market economy country (or countries) that is at a comparable
                level of economic development as the country subject to
                investigation and is a significant producer of the comparable
                merchandise. . . . In valuing such factors, Commerce shall avoid
                using any prices which it has reason to believe or suspect may be
                dumped or subsidized prices.

Omnibus Trade and Competitiveness Act of 1988, Conference Report to Accompany H.R.3,

H.R. Rep. No. 576, 100th Cong., 2nd Sess., at 590–91 (1988) (“Conf. Rep.”) (emphasis added).



        Fuyao contends that Congress’s directive to Commerce to avoid using prices believed or

suspected to be dumped or subsidized applies to surrogate prices only. Thus, Fuyao argues, since

the values at issue here are based on market economy purchases, and “market economy purchases

are not used pursuant to the surrogate value methodology,” these market economy purchases are

not limited by the Conference Report’s counsel relating to surrogate values. Fuyao Mem. at 13.

Fuyao states:

                In sum, the legislative history that Commerce relied upon discusses
                guidelines for the selection of surrogate values. These criteria were
                never intended to restrict Commerce’s use of actual market
                economy purchase prices, which the courts have repeatedly stated
                provide a far more accurate calculation of normal value.

Id.



        On this point, Commerce claims that



19 U.S.C. § 1677b(c)(4)(A)-(B).
CONSOL. COURT NO . 02-00282                                                              PAGE 13

               [c]ontrary to [Fuyao’s] argument, a distinction between a market
               economy purchase price and a surrogate price to value factors in a
               NME case does not lead to a finding that Congress’s instruction to
               avoid subsidized prices is not applicable to the market economy
               purchase values.

Gov’t Brief at 23.



       Fuyao further relies on Lasko Metal Products, Inc. v. United States, 43 F.3d 1442 (Fed.

Cir. 1994), and Timken Co. v. United States, 26 CIT __, 201 F. Supp. 2d 1316 (2002), for the

proposition that surrogate value provisions of 19 U.S.C. § 1677b(c)(4) are not applicable to

purchases from market economy suppliers. It argues:

               [In Lasko], the appellate court found that Commerce could use
               some surrogate values pursuant to the nonmarket economy
               methodology [described in Section 19 U.S.C. § 1677b(c)(4)
               (selected based on the criteria discussed in the statute and the
               legislative history)] and use some market economy purchases
               pursuant to the “normal” market economy provision for calculating
               constructed value. This court decision confirms that market
               economy purchases are not governed by the restrictions applicable
               to surrogate value selections, which means that they should not be
               disregarded even if there is reason to believe suspect that they may
               be subsidized.

               [In Timken,] Timken claimed in part that Commerce was required
               [by 19 U.S.C. § 1677b(c)(4)] to use surrogate values if possible
               and “[n]owhere in its final determination does [Commerce] explain
               that it was not ‘possible’ to use Indian or other surrogate values
               according to the expressed statutory requirements. . . . This Court
               rejected Timken’s argument, stating that it “disagrees with Timken
               that Commerce is required to value [factors of production]
               pursuant to § 1677[b](c)(4) prior to resorting to a PRC trading
               company’s import prices paid to a market-economy supplier to
               value material costs for . . . inputs.”

Fuyao Mem. at 12–13 (internal citations omitted) (emphasis in original).
CONSOL. COURT NO . 02-00282                                                              PAGE 14

       Fuyao’s reliance on Lasko and Timken is misplaced. Although both the Lasko and

Timken courts state that the surrogate value provisions of 19 U.S.C. § 1677b(c)(4) do not apply to

purchases from market economy suppliers, this does not, in turn, mean that Congress’s

instructions regarding those guidelines (i.e., that Commerce “shall avoid using any prices which

it has reason to believe or suspect may be dumped or subsidized prices,” Conf. Rep. at 590)

cannot be used by Commerce when constructing its methodology with respect to market

economy purchases. Indeed, Commerce is fully justified in relying on those instructions to

establish the reasonableness of its methodology in an NME situation. “[T]he goals of accuracy,

fairness, and predictability should apply whether a country’s economy is market or nonmarket

oriented.” Tianjin Mach. Imp. & Exp. Corp. v. United States, 16 CIT 931, 941, 806 F. Supp.

1008, 1018 (1992). These goals would also be pertinent whenever market values are involved.

As the Court explained in China National Machinery Imp. & Exp. Corp. v. United States, 27

CIT __, __, 264 F. Supp. 2d 1229, 1237–38 (2003),

               [i]t is true . . . that the “reason to believe or suspect” standard
               articulated in the House Report explicitly refers only to a selection
               among surrogate prices, as opposed to a choice between surrogate
               and market values. . . . However, if Commerce had “reason to
               believe or suspect” that [the subject market economy purchases]
               were subsidized, Commerce may employ surrogate values where it
               determines that they are the best information under the statute.

Id. (emphasis omitted); see also Peer Bearing Co. v. United States, 27 CIT __, __, slip op. 03-

160 at 13 (Dec. 12, 2003) (“[W]hen Commerce has reason to believe or suspect that a market-

economy supplier’s prices are subsidized, Commerce may reject market prices paid to the

supplier in favor of surrogate prices for its calculation of [normal value].”).
CONSOL. COURT NO . 02-00282                                                                     PAGE 15

       Furthermore, this Court and the Court of Appeals for the Federal Circuit have repeatedly

upheld Commerce’s broad discretion in valuing factors of production. See Lasko, 43 F.3d at

1446; see also Sigma, 117 F.3d at 1405 (“Commerce . . . has broad authority to interpret the

antidumping statute . . . .”). In valuing such factors, “the critical question is whether the

methodology used by Commerce is based on the best available information and establishes

antidumping duty margins as accurately as possible.” Shakeproof Assembly Components, Div. of

Ill. Tool Works, Inc. v. United States, 268 F.3d 1376, 1382 (Fed. Cir. 2001). Moreover, “the

statute grants to Commerce broad discretion to determine the ‘best available information’ in a

reasonable manner on a case-by-case basis.” Timken, 26 CIT at __, 201 F. Supp. 2d at 1321

(citing Lasko, 43 F.3d at 1446 (noting that the statute “simply does not say—anywhere—that the

factors of production must be ascertained in a single fashion.”). Because “Congress has

explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency

to elucidate a specific provision of the statute by regulation. Such legislative regulations are

given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the

statute.” Chevron, 467 U.S. at 843–44. Finally, it is settled that “statutory interpretations

articulated by Commerce during its antidumping proceedings are entitled to judicial deference

under Chevron.” Pesquera Mares, 266 F.3d at 1382; see also Chevron, 467 U.S. at 843 (“[I]f the

statute is silent or ambiguous with respect to the specific issue, the question for the court is

whether the agency’s answer is based on a permissible construction of the statute.”). In light of

Commerce’s broad discretion in selecting values for factors of production, its statutory directive

to determine antidumping duty margins as accurately as possible, and the deference that its

statutory interpretations are to be afforded under Pesquera Mares, the court finds that
CONSOL. COURT NO . 02-00282                                                              PAGE 16

Commerce’s decision to avoid subsidized prices is reasonable and, accordingly, defers to it.

China National Machinery is again instructive:

               [G]iven that the overarching purpose of the antidumping and
               countervailing duty law is to counteract dumping and subsidies, the
               court cannot conclude that Congress would condone the use of any
               value where there is “reason to believe or suspect” that it reflects
               dumping or subsidies. . . . [I]f Commerce had “reason to believe or
               suspect” that the [market purchases plaintiff made in this case]
               were subsidized, Commerce may employ surrogate values where it
               determines that they are the best information under the statute.

China Nat’l Mach., 264 F. Supp. 2d at 1238.



       B.      Commerce’s Reliance on the “Reason to Believe or Suspect” Standard

       Fuyao further argues that, even if the statute allows Commerce to avoid subsidized

values, Commerce’s determination to reject certain purchases of float glass was improper

because substantial evidence does not support its conclusion that there was reason to believe or

suspect Fuyao’s purchases were, in fact, subsidized.13 Fuyao Mem. at 14. Substantial evidence

is relevant evidence that “a reasonable mind might accept as adequate to support a conclusion.”

Consol. Edison Co., 305 U.S. at 229. It is “something less than the weight of the evidence, and

the possibility of drawing two inconsistent conclusions from the evidence does not prevent an

administrative agency’s finding from being supported by substantial evidence.” Consolo v. Fed.

Mar. Comm’n, 383 U.S. 607, 620 (1966).




       13
                “Normally, to construct [normal value] for the final product, Commerce uses
actual market prices which an NME producer pays for the input from a market economy country
since actual prices are the best approximation of the input’s value.” China Nat’l Mach., 264 F.
Supp. 2d at 1232 (citing 19 C.F.R. § 351.408(c)(1)).
CONSOL. COURT NO . 02-00282                                                                   PAGE 17

       In its Final Determination, Commerce concluded that “this particular and objective

evidence (that all exporters from these countries can benefit from these broadly available

subsidies) supports a reason to believe or suspect that prices of the inputs purchased from these

countries are subsidized.”14 Issues and Decision Mem. at 12.



       Commerce’s use of the “reason to believe or suspect” standard is based on the legislative

history for 19 U.S.C. § 1677b(c)(4): “Commerce “shall avoid using any prices which it has

reason to believe or suspect may be dumped or subsidized prices.” Conf. Rep. at 590. Regarding

interpretation of the “reason to believe or suspect” standard, this Court has said:

               In attempting to define a similar phrase, “reasonable grounds to
               believe or suspect,” which appears in 19 U.S.C. § 1677b(b)(1)
               (1999), this Court observed that “in order for reasonable suspicion
               to exist there must be ‘a particularized and objective basis for
               suspecting’ the existence of certain proscribed behavior, taking
               into account the totality of the circumstances, the whole picture.”
               Therefore, the “reason to believe or suspect” standard at issue here
               must be predicated on particular, specific, and objective evidence.

China Nat’l Mach., 264 F. Supp. 2d at 1239 (internal citations omitted).


       14
                In developing its methodology for selecting values for factors of production in
NME situations, Commerce appears to have established a higher standard than would necessarily
be required. “The legislative history and recent Department determinations support the principal
[sic] that we should disregard prices we have reason to believe or suspect are distorted by
subsidies.” Issues and Decision Mem. at 10 (emphasis added). When reaching its findings with
respect to subsidization, Commerce stated that the evidence supports the conclusion: (1) that “it
is reasonable to infer that all exports to all countries are subsidized,” Id. at 11, and (2) that there
is “particular and objective evidence to support a reason to believe or suspect that prices of the
inputs from that country are subsidized.” Id. The legislative history relied upon to establish the
reasonableness of its methodology, however, instructs Commerce to avoid prices “which it has
reason to believe or suspect may . . . be subsidized.” Conf. Rep. at 590 (emphasis added.)
Commerce apparently has concluded it should be held to this higher standard, and there is
nothing to indicate that this decision is unreasonable. That being the case, the court’s analysis
will be in accordance with the standard evident in Commerce’s selected methodology.
CONSOL. COURT NO . 02-00282                                                                PAGE 18

       Thus, “merging the two standards [the “reason to believe or suspect” standard used by

Commerce with this Court’s “substantial evidence” standard of review] . . . the court will

accordingly affirm Commerce’s actions if, given the entire record as a whole, there is substantial,

specific, and objective evidence which could reasonably be interpreted to support a suspicion that

the prices [Fuyao] paid to its market economy supplier were distorted.” Id. at 1240. “[T]his

court may not reweigh the evidence or substitute its own judgment for that of the agency. . . .

[T]he agency is presumed to have considered all of the evidence in the record, and the burden is

on the plaintiff to prove otherwise.” Id. (internal citations omitted).



       Commerce relies on evidence placed on the record by PPG to support its conclusion that

there is “reason to believe or suspect” that prices from Korea, Thailand, and Indonesia were

subsidized. The evidence concerning Korea includes various countervailing duty determinations

stemming from subsidy programs in Korea; an excerpt from the U.S. Trade Representative’s

2001 National Trade Estimate Report on Foreign Trade Barriers (“NTE Report”) concerning

Korea’s export subsidy practices; excerpts from the World Trade Organization (“WTO”) Trade

Policy Review for Korea; and PPG’s analysis of the foregoing evidence, purporting to show that

prices for float glass imported into the PRC from Korea “are likely” subsidized. See Petitioners’

Fact Submission Accompanying Petitioners’ Factors Data, Conf. R. Doc. 92.



       For Thailand, Commerce cites the foregoing documentation (albeit with respect to

Thailand, not Korea), as well as news articles concerning a projected oversupply of glass in

Thailand and tariff increases by Thailand’s trading partners; a copy of an antidumping
CONSOL. COURT NO . 02-00282                                                                PAGE 19

investigation in New Zealand concerning float glass from Thailand; reports downloaded from the

Thailand Board of Investment (“BOI”) Web site concerning incentives that are provided to BOI

Promoted Companies; a report referring to existing preferential tax arrangements for glass

makers; and WTO documents showing that South Africa and Australia maintain antidumping

duties on imports of float glass from Thailand.



       For Indonesia, the evidence of subsidies includes four non-industry specific

countervailable export subsidies; an excerpt from the NTE Report for Indonesia; excerpts from

the 1998 WTO Trade Policy Review for dealing with Indonesian export subsidy practices; and

notifications by Thailand of duties in place for float glass from Indonesia.



       In the Issues and Decision Memorandum, Commerce stated:

               We found that, where the facts developed in U.S. or third-country
               CVD findings include subsidies that appear to be used generally (in
               particular, broadly available, non-industry specific export
               subsidies), it is reasonable to infer that all exports to all markets
               from the investigated country are subsidized. As we argued
               [previously] in the [tapered roller bearings] proceedings,15 these
               prior CVD findings may provide the basis for the Department to
               also consider that it has particular and objective evidence to
               support a reason to believe or suspect that prices of the inputs from
               that country are subsidized.

Issues and Decision Mem. at 11. Thus, Commerce insists that the record evidence supports two

findings: (1) that all exports from Korea, Thailand, and Indonesia are subsidized, and (2) that in



       15
             The tapered roller bearings proceedings were appealed in China National
Machinery Import & Export Corp. v. United States, 27 CIT __, __, 264 F. Supp. 2d 1229,
1237–38 (2003).
CONSOL. COURT NO . 02-00282                                                                    PAGE 20

particular, all exports of float glass from these countries are subsidized.16 Apparently, Commerce

believes that either finding supports its decision to resort to the use of surrogate values.



       The court is not convinced that the various determinations and reports cited by Commerce

support either conclusion. First, none of the more than 80 countervailing duty determinations

cited by Commerce concerning Korean subsidies involved float glass, the product at issue in this

case, nor for that matter did any of the countervailing duty determinations involve glass of any

kind. Petitioners’ Factors Data, Conf. R. Doc. 92, Ex. 1. See, e.g., Luoyang Bearing Factory v.

United States, 27 CIT __, __, 259 F. Supp. 2d 1357, 1364 (2003) (emphasis in original)

(remanding on the grounds that, inter alia, “the various countervailing duty determinations relied

upon by Commerce do not include the hot-rolled bearing quality steel bar, the steel product at

issue in this case.”). The WTO report for Korea indicates only that “Korea has aggressively

promoted exports though a variety of policy tools,” but does not indicate which exporters benefit

from such tools. Id. Ex. 2. Similarly, the NTE Report discusses several export loan and credit

programs, but does not indicate which sectors, producers, or products are eligible for such aid.

Id. Ex. 3. This evidence, therefore, supports neither Commerce’s conclusion that all Korean

exports are subsidized, nor its conclusion that float glass exports in particular are subsidized.



       16
                 In its Final Determination, Commerce established a higher standard (i.e., that it
should disregard prices it has reason to believe or suspect are distorted by subsidies) than that
contemplated in the legislative history (that Commerce should disregard prices that may be
subsidized). See supra n.14. In its brief, Commerce appears to recognize this, arguing that it “is
not, in fact, determining from this evidence that the prices are subsidized as it would in a
countervailing duty investigation, but rather that the information indicates that the prices may be
subsidized.” Gov’t Brief at 32 (emphasis added). However, the Government may not now
abandon the standard it adopted in the Final Determination for a lesser one.
CONSOL. COURT NO . 02-00282                                                                   PAGE 21

       In like manner, none of the more than 170 countervailing duty determinations cited by

Commerce for Thailand concern any kind of glass. Petitioners’ Factors Data, Conf. R. Doc. 92,

Ex. 5. As to the other documentation for Thailand, the NTE Report indicates only that

“Thailand’s programs to support trade in certain manufactured products . . . may constitute

export subsidies.” Id. Ex. 6. Likewise, the WTO report for Thailand lists several financing

schemes for exporters, but does not provide information as to restrictions on or qualifications for

receiving such assistance. Id. Ex. 7. The antidumping duty investigation in New Zealand

concludes that “some of the goods under investigation from Indonesia are being dumped, but the

volume of dumped imports from Indonesia is negligible.” Id. Ex. 9. As to the Thailand BOI

incentives, they are available for several “priority areas” such as agriculture and public utilities,

as well as for “targeted industries.” However, none of the targeted industries listed appear to

include the manufacture of float glass. Id. Ex. 14.



       Finally, a report entitled, “Thailand: Construction Plans for $120,000,000 Glass Plant,

Siam Cement Group (Thailand)” states that “existing preferential tax arrangements for glass

makers are such that they must export 50% of their production output and, as a result[,] there is a

product shortage.” Id. Ex. 15. The report is dated 1995. The period of review for this

investigation, however, is July 1, 2000, through December 31, 2000, and there is nothing to

indicate that these tax arrangements were still in place at the time of this investigation. As with

Korea, this evidence supports neither of Commerce’s conclusions.



       As to Indonesia, one of the countervailing duty determinations cited by Commerce
CONSOL. COURT NO . 02-00282                                                                   PAGE 22

concerns extruded rubber thread, and all of the others concern apparel and textiles (luggage,

handbags, gloves, and the like). Not one of the determinations concerns float glass. Moreover,

most of the final determinations indicate that the investigation was terminated, or that the subsidy

program at issue was not used by the producer under investigation. Id. Ex. 24. The NTE Report

for Indonesia indicates that the export subsidies for “special exporters” (a term which is not

defined) lapsed in 1999. Id. Ex. 25. Finally, the WTO report for Indonesia, which reviews

exports subsidies and other promotion policies in that country, was completed in 1999, one year

before the period of review for this investigation. Id. Ex. 17. Therefore, for Indonesia, too, the

evidence supports neither of Commerce’s findings.



       In accordance with the standards established by its methodology, Commerce “must

demonstrate particular, specific, and objective evidence to uphold its reason to believe or suspect

that the prices [the plaintiff] paid the supplier for the inputs were subsidized.” China Nat’l

Mach., 264 F. Supp. 2d at 1243. Here, none of the record evidence for Korea, Thailand, or

Indonesia indicates whether the subsidy programs cited by Commerce are available to all

exporters, or to float glass producers in particular, in the supplier countries. For example,

evidence placed on the record by PPG regarding a Thai subsidy indicates that “each company

must apply to the Board of Investment for a Certificate of Promotion (license), which specifies

goods to be produced, production and export requirements, and benefits allowed. These

license(s) are granted at the discretion of the Board. . . . ” Id. Ex. 5. A similar Indonesian

subsidy is also discretionary: “To whom and at what interest rates such [working capital export]

credits are granted is at the discretion of the lending institution.” Id. Ex. 24 (citing Certain
CONSOL. COURT NO . 02-00282                                                                PAGE 23

Textile Mill Prods. and Apparel From Indonesia, 49 Fed. Reg. 49,672, 49,674 (ITA Dec. 21,

1984) (prelim. determination)). Moreover, much of the evidence is outdated or simply

inapplicable to the float glass industry (e.g., over 200 countervailing duty determinations for

Korea and Thailand concerning products other than float glass). This case is similar to China

National Machinery, in which the court noted that Commerce failed to provide information as to

whether the subsidy program

               is offered across the board to all [producers] in the country, to
               those of a certain size, to those which manufacture a certain
               product or set of products, to those in a specific geographical area
               or so on . . . [or as to] who could benefit from the program or
               whether the companies may choose not to participate (for example,
               because the program comes with certain obligations).

China Nat’l Mach., 264 F. Supp. 2d at 1241 (ordering Commerce, upon remand, to review

and augment the administrative record and to explain its determinations).



       The legislative history, which Commerce relies upon as a basis for the reasonableness of

its methodology, indicates that Congress “[did] not intend for Commerce to conduct a formal

investigation to ensure that such prices are not dumped or subsidized, but rather intend[ed] that

Commerce base its decision on information generally available to it at that time.” Conf. Rep. at

590–91. Nonetheless, using the standard Commerce has established, it must “point to particular

and specific evidence” from which it would be reasonable to infer that subsidies were available

to the float glass industry in Korea, Thailand, and Indonesia, and that “particular and specific

evidence” supports a reason to believe or suspect that the float glass purchased by Fuyao was

subsidized. Luoyang Bearing Factory, 259 F. Supp. 2d at 1364. Thus, on remand, Commerce
CONSOL. COURT NO . 02-00282                                                                   PAGE 24

shall revisit this issue and, if it continues to find that (1) all exports from Korea, Thailand, and

Indonesia are subsidized, or (2) that, in particular, exports of float glass from these countries are

subsidized, it must provide specific and objective evidence to support these findings.

Submission of such evidence “is consistent with the remedial, not punitive, purpose of the

antidumping duty laws.” China Nat’l Mach., 264 F. Supp. 2d at 1242.



       In addition, in reaching its findings Commerce must take into account Fuyao’s claim that

“every non-specific export subsidy program cited by [PPG] was found by Commerce either to be

not in use or to confer only a de minimis benefit.”17 See Fuyao Mem. at 6. Fuyao further states

that “[a]lthough Commerce did not dispute [Fuyao’s] findings,” id., regarding the de minimis

nature of the subsidy programs, it nonetheless determined that there was reason to believe or

suspect that Fuyao’s purchase prices from Korea, Thailand and Indonesia were subsidized. For

its part, Commerce maintains that “the level of subsidization in a CVD finding on a certain

product and certain exporters, whether de minimis or not, is irrelevant.” Gov’t Brief at 36 (citing

Issues and Decision Mem. at 12). While Commerce may adopt any reasonable methodology to

effect the purposes of the statute, it must articulate its reasons for the choices it makes. On

remand, Commerce shall fully and completely explain why it would be reasonable to resort to

surrogate values, rather than actual amounts paid, where any subsidization—even de minimis


       17
                The de minimis doctrine is applicable to all countervailing duty cases. See
Carlisle Tire & Rubber Co. v. United States, 1 CIT 352, 354, 517 F. Supp. 704, 706 (1981). A
weighted-average antidumping duty margin is de minimis if Commerce determines that it is less
than 2% ad valorem. See 19 U.S.C. § 1673b(b)(3). Because “a de minimis benefit is, by
definition, of no significance whatever,” Carlisle Tire & Rubber, 1 CIT at 354, 517 F. Supp. at
706, companies with de minimis dumping margins are considered to have a dumping margin of
zero.
CONSOL. COURT NO . 02-00282                                                                 PAGE 25

subsidization—is present. In particular, Commerce shall explain how, if a subsidy is found to be

de minimis, that subsidy would nevertheless rise to the level of a distortion18 in prices that would

justify Commerce’s decision to depart from actual input prices. See China Nat’l Mach., 264 F.

Supp. 2d at 1241.



       C.      Commerce’s Determinations With Regard to Water as a Direct Input and “Stores
               and Spare Parts”

               1.      Water as a Direct Input

       Based on its observations during the verification process, Commerce determined that “[i]t

is clear from the production process for windshields that water usage is significant and vital for

cleaning the windshields prior to the ‘sandwiching’ of PVB [polyvinyl butyrl] in between the two

panes of glass.” Issues and Decision Mem. at 59. Citing past determinations in which it had

assigned a separate surrogate value for water where its use was significant, Commerce assigned

separate surrogate values for Fuyao’s and Xinyi’s water usage. Id.; see also Sebacic Acid From

the P.R.C., 65 Fed. Reg. 49,537 (ITA Aug. 14, 2000) (final results); see also Freshwater

Crawfish Tail Meat from the P.R.C., 66 Fed. Reg. 20,634 (ITA Apr. 24, 2001) (final results) and

accompanying Issues and Decision Mem. at Comment 7 (valuing water as a factor of production

because it is used in large quantities and for more than incidental purposes).



       Fuyao argues that Commerce’s decision to value water as a separate factor of production,



       18
                 “The legislative history and recent Department determinations support the
principal [sic] that we should disregard prices we have reason to believe or suspect are distorted
by subsidies.” Issues and Decision Mem. at 10 (emphasis added).
CONSOL. COURT NO . 02-00282                                                                  PAGE 26

rather than as part of factory overhead, was in error, since the financial statement of the Indian

company Commerce chose as the surrogate, Saint-Gobain Sekurit (“St. Gobain”),19 “must include

water in its factory overhead. . . . There is no record evidence to support a finding that the St.

Gobain financial statement does not include a cost for water. Therefore, it is only reasonable to

accept that water was not separated out from St. Gobain’s overhead costs.” Fuyao Mem. at

30–31. Fuyao argues that

                [t]o avoid double counting, when water is already included in
                factory overhead, the Department has a long-standing practice of
                either 1) not adding a separate value for water, or 2) excluding
                water costs from factory overhead. . . . [T]he record in this case
                indicates that the Saint Gobain annual report includes water in its
                factory overhead costs. Commerce has failed to provide a
                reasonable explanation of where it believes the St. Gobain
                financial [statement] includes water costs if they are not part of
                factory overhead.

Id. at 31–32.



       Commerce responds that there was no potential to double-count water, because it “valued

the overhead using only the line-items ‘depreciation’, ‘stores and spares consumed’, and ‘repairs

and maintenance’ from St. Gobain’s annual report. None of these line items would include the

input water.” Gov’t Brief at 47 (internal citation omitted). Commerce explained:

                “Depreciation” is defined as “the accounting process of allocating
                the cost of tangible assets to expense in a systematic and rational
                manner to those periods expected to benefit from the use of these
                assets.” Also, Commerce has explained in other cases that the
                “stores and spare parts consumed” line-item in an Indian financial
                statement generally includes indirect materials, and not direct
                materials. And “repairs” are defined as “expenditures made to


       19
                No party disputes the use of St. Gobain as a source of surrogate values.
CONSOL. COURT NO . 02-00282                                                                  PAGE 27

                maintain plant assets in operating condition. . . . Replacement of
                minor parts, lubricating and adjusting of equipment, repainting,
                and cleaning are examples of maintenance charges that occur
                regularly and are treated as ordinary operating expenses.

Id. (internal citations omitted).



        Although the court finds it reasonable that water would not be included under

“depreciation” or “repairs” as defined, the same cannot be said for the line item “stores and spare

parts.” Commerce argues that the “stores and spare parts” line item “generally includes indirect

materials, and not direct materials,” and that, since water is a direct material, it would not be

included under this line item. Gov’t Brief at 47. This reasoning, however, does not constitute

substantial evidence that water is not already included in factory overhead. First, the amount

allocated to “stores and spare parts” is sufficiently large to accommodate a significant input such

as water.20 Second, only “stores and spare parts” could arguably include water, since it is

improbable that water would be included under “depreciation” or “repairs” as those line items

have been defined.



        In constructing normal value, “Commerce must capture all of the costs of production no

matter how characterized.” Yantai Oriental Juice Co. v. United States, 27 CIT __, __, slip op.

03-150 at 14 (Nov. 20, 2003). Since Fuyao is correct that there is no evidence that the St. Gobain

financial statement did not capture water as part of factory overhead, Commerce is directed, on

remand, to demonstrate that its decision to value water as a separate factor of production, rather


        20
               The line item “stores and spare parts” constitutes over one-quarter (26%) of total
factory overhead.
CONSOL. COURT NO . 02-00282                                                                PAGE 28

than as part of factory overhead, does not result in impermissible double counting.



               2.      “Stores and Spare Parts”21

       Next, Fuyao objects to Commerce’s inclusion of “stores and spare parts” in factory

overhead. Fuyao argues that, since the St. Gobain financial statement’s line item “Cost of

Materials Consumed” accounted only for the two main raw materials, float glass and PVB, “it is

obvious from the St. Gobain financial statements that other raw materials [such as mirror

buttons, antenna wires, nails, and screws] are included in ‘stores and spare parts.’” Fuyao Mem.

at 40–41. Fuyao argues:

               When calculating the factory overhead ratio, the Department
               divided Saint Gobain’s overhead costs (Depreciation + Stores and
               Spare Parts + Repairs and Maintenance) by Total Material Costs
               (Materials + Energy + Labor). . . . However, . . . the overhead
               costs included other raw materials while the cost of materials only
               included the cots [sic] for PVB and float glass. Accordingly, the
               Department divided an inflated total overhead cost (inclusive of
               other raw materials) by an understated total cost of materials
               (exclusive of the other raw materials), resulting in an artificially
               higher factory overhead ratio.

Id. at 41 (emphasis in original).



       In the Issues and Decision Memorandum, Commerce stated that “[w]hile [Fuyao] does

demonstrate that the direct material costs in direct materials only includes float glass and PVB,

there is no evidence on the record that these other direct materials are included under stores and



       21
               Xinyi also disputes Commerce’s determination with regard to this issue. Because
Xinyi’s arguments are substantially the same as Fuyao’s, they are not addressed separately in the
court’s analysis.
CONSOL. COURT NO . 02-00282                                                                  PAGE 29

spare parts.” Issues and Decision Mem. at 55. Here again, Commerce argues that overhead

represents the indirect manufacturing costs that a company incurs, and that “the ‘stores and spare

parts consumed’ line item on a financial statement is included as a miscellaneous part of

overhead, and generally includes indirect materials, and not direct materials consumed in the

production process.” Gov’t Brief at 65 (internal citation omitted). Thus, Commerce argues that

the additional materials used to make the Windshields could not be included in “stores and spare

parts,” since that line item contains only indirect materials, not direct materials such as the

additional materials at issue here.



        In support of its argument, Fuyao cites several cases in which Commerce determined that

raw materials, not included in direct materials, were part of factory overhead. In Certain

Preserved Mushrooms from the P.R.C., 63 Fed. Reg. 72,255, 72,265 (Dec. 31, 1998) (final

determination), Commerce concluded that since the raw materials used in the production of

canned mushrooms, such as salt, water, chlorine, and ascorbic acid, were not included under

“raw materials” along with the two main raw materials (mushroom growing costs and cans), “we

are including the valuation of all factors other than mushrooms and containers in factory

overhead.” Id. Commerce has cited Mushrooms from the P.R.C. for this reasoning in other

cases as well:

                 [I]n Mushrooms from the PRC, we found that the factory overhead
                 ratio calculated using the surrogate’s financial statement appeared
                 to include the costs for several raw materials included in the
                 category “consumables.” Because these materials were already
                 included as part of factory overhead, in that case the Department
                 did not value these materials separately, thereby avoiding double-
                 counting.
CONSOL. COURT NO . 02-00282                                                                PAGE 30

Solid Agricultural Grade Ammonium Nitrate from Ukraine, 66 Fed. Reg. 38,632 (July 25, 2001)

(final determination) (Issues and Decision Mem. at Comment 6).



       With respect to the St. Gobain financial statement, Fuyao argues that because the

additional materials are not included under “raw materials” along with float glass and PVB film,

the only rational place for these materials to be included is within factory overhead, under the

line item stores and spare parts. See Fuyao Mem. at 40–41. As with its arguments with respect

to water as a direct input supra, Commerce argues that the stores and spare parts line item on a

financial statement “generally includes indirect materials, and not direct materials consumed in

the production process.” Gov’t Brief at 65 (citing Indus. Nitrocellulose From the P.R.C., 62 Fed.

Reg. 65,667, 65,671–72 (ITA Dec. 15, 1997) (final results) (emphasis added)). Thus, Commerce

argues that it was reasonable for it to conclude that the “stores and spare parts consumed” line

item included only indirect materials, “consistent with its normal practice.” Gov’t Brief at 65.

Having thus concluded, Commerce argues that its decision to include “stores and spare parts” in

its calculation of factory overhead was also reasonable. Id. at 67.



       By this argument, Commerce acknowledges that the additional materials used in the

production of the Windshields are in fact direct materials. The record supports the finding that

only float glass and PVB film—and none of the additional direct materials, such as mirror

buttons, antenna wires, nails, or screws—are included under “raw materials.” It is therefore

reasonable to conclude that the additional raw material expenses are included elsewhere in the St.

Gobain financial statement.
CONSOL. COURT NO . 02-00282                                                                     PAGE 31

        Here, Commerce has simply failed to demonstrate that the St. Gobain financial statement

did not capture all of the factors of production; i.e., that these financials did not, in fact, represent

the entire cost of producing the product and that therefore they must be added in. It is not

sufficient for Commerce to conclude, without more, that since the stores and spare parts line item

generally includes indirect materials, it may not also include the additional direct materials at

issue here. This is particularly the case given Commerce’s history of inconsistent application of

this reasoning. Accordingly, Commerce is instructed, upon remand, to provide an explanation as

to where these additional materials are valued in St. Gobain’s financial statement, if they are not

part of stores and spare parts.



        D.      Commerce’s Determination With Regard to the St. Gobain Profit Figures

        Title 19 U.S.C. § 1677b(c)(1) directs Commerce to “determine the normal value of the

subject merchandise on the basis of the value of the factors of production . . . to which shall be

added an amount for general expenses and profit plus the cost of containers, coverings, and other

expenses.” Id. To calculate the profit ratio22 in this case, Commerce included only positive

profit figures, disregarding any negative profit figures. Thus, Commerce disregarded the

financial data from the Indian surrogate, St. Gobain, since that company had a negative profit,

and instead used the financial data from another surrogate, Asahi India Safety Glass, Ltd.

(“Asahi”).



        22
               The profit ratio is determined by dividing profit by cost of production or
manufacture (“COP”). The value for profit is arrived at by multiplying the profit ratio by the
sum of the cost of manufacture and SG&A expenses. See Titanium Sponge From the Russian
Federation, 64 Fed. Reg. 1599, 1601 (ITA Jan. 11, 1999) (final results).
CONSOL. COURT NO . 02-00282                                                                  PAGE 32

       In doing so, Commerce relied upon language contained in the Statement of

Administrative Action, accompanying the Uruguay Round Agreements Act, H.R. Rep. No. 103-

826(I), at 839–40 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4175 (“SAA”).23 The SAA

states: “Unlike current practice, under section 1677b(e)(2)(A) [relating to calculating constructed

value], in most cases Commerce would use profitable sales as the basis for calculating profit for

purposes of constructed value.” Id. at 840.



       Fuyao objects to Commerce’s reliance on language from the SAA on the grounds that it

applies only to the new provisions under the URAA for calculating constructed value (“CV”) in

market economy cases, and that this methodology is “solely . . . the ‘preferred’ CV profit

methodology codified under 19 U.S.C. § 1677b(e)(2)(A).”24 Fuyao Mem. at 27. Because China


       23
                The SAA is “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.” 19 U.S.C.
§ 3512(d) (2000).
       24
              When calculating CV for imported merchandise, where actual data is available, 19
U.S.C. § 1677b(e)(2)(A) directs Commerce to use:

               (1) the cost of materials and fabrication or other processing of any
               kind employed in producing the merchandise, during a period
               which would ordinarily permit the production of the merchandise
               in the ordinary course of business; [or]

               (2) the actual amounts incurred and realized by the specific
               exporter or producer being examined in the investigation or review
               for selling, general, and administrative expenses, and for profits, in
               connection with the production and sale of a foreign like product,
               in the ordinary course of trade, for consumption in the foreign
               country . . . .

19 U.S.C. § 1677b(e)(2)(A).
CONSOL. COURT NO . 02-00282                                                                 PAGE 33

is an NME country, however, Fuyao argues that Commerce’s methodology in the instant case is

“completely irrelevant to this proceeding since the profit ratio is not being calculated using

[Fuyao’s] own home market sales,” but rather the sales of the Indian surrogate(s). Id.



       Because the statute refers only to “an amount” for profit and is silent with respect to how

it should be calculated, the court will review Commerce’s interpretation for reasonableness. See,

e.g., Rhodia, Inc. v. United States, 26 CIT __, __, 240 F. Supp. 2d 1247, 1252 (2002) (“Because

the statute is ambiguous, we review Commerce’s interpretation to determine whether it is

reasonable.”).



       This Court has noted that “Commerce has been excluding zero profits in market economy

cases since 1997 . . . and slowly began to apply this methodology to nonmarket economies.”

Rhodia, 27 CIT at __, 240 F. Supp. 2d at 1253. The court in Rhodia explained:

                 In making [a] profit calculation, the SAA allows Commerce to
                 “ignore sales that it disregards as a basis for normal value, such as
                 those disregarded because they are made at below-cost prices.” As
                 the SAA explains, “in most cases Commerce would use profitable
                 sales as the basis for calculating profit for purposes of constructed
                 value.” Furthermore, “sales at a loss are consistently rejected, both
                 as a basis for normal value (19 U.S.C. § 1677b(b)) and as a basis
                 for constructed value. (19 U.S.C. § 1677b(e)).”

Id. at 1254 (internal citations omitted).



       In Certain Fresh Cut Flowers From Ecuador, 64 Fed. Reg. 18,878 (ITA Apr. 16, 1999)

(prelim. results) (“Flowers From Ecuador”), Commerce disregarded the financial statements of
CONSOL. COURT NO . 02-00282                                                                 PAGE 34

producers that incurred losses in order to derive an “element of profit” as contemplated by the

SAA. This determination—that the SAA clearly contemplates that normal value includes an

element of profit—was applied again in Silicomanganese from Brazil, 62 Fed. Reg. 37,869 (July

15, 1997) (final results). There, Commerce stated that “[t]he presumption that normal value

includes an element of profit is so strong that the post-URAA statute directs us to use one above-

cost home market sale as the basis for normal value, even if hundreds of other sales have below-

cost prices.” Id. at 37,877.



       In Steel Concrete Reinforcing Bars From the P.R.C., 66 Fed. Reg. 33,522 (ITA June 22,

2001) (final determination), Commerce explained that it found it appropriate to extend the

practice of excluding losses in the calculation of profit for market economy producers to

nonmarket economy producers. In the Issues and Decision Memorandum accompanying that

determination, Commerce stated:

               Although in some past cases we have averaged in a loss as zero
               profit, we believe a better approach is found in [Flowers From
               Ecuador], which disregards financial statements showing a loss for
               purposes of calculating the profit component of constructed value
               under Section 773(e)(2) of the Act in market economy cases. The
               same principles applied in Flowers From Ecuador are reasonably
               applied in a nonmarket economy case.

Issues and Decision Mem. at Comment 8 (emphasis added).



       Based on the foregoing, the court finds reasonable Commerce’s interpretation of the term

“profit” to include only positive amounts. The court agrees with the reasoning in Rhodia, that

sales made below cost may be disregarded when calculating profit:
CONSOL. COURT NO . 02-00282                                                              PAGE 35

               Because negative losses are often rejected and ignored for normal
               value, based on the clear expression of legislative intent contained
               within the SAA, Commerce’s decision to exclude them from the
               profit ratio is a reasonable extension of this policy.

Rhodia, 240 F. Supp. 2d at 1254; see also Pesquera Mares, 266 F.3d at 1382 (“[S]tatutory

interpretations articulated by Commerce during its antidumping proceedings are entitled to

judicial deference under Chevron.”); Chevron, 467 U.S. at 844 (“[A] court may not substitute its

own construction of a statutory provision for a reasonable interpretation made by the

administrator of an agency.”).



       Having concluded that Commerce was reasonable in including only positive profits in its

calculations, the court turns to Fuyao’s next two claims. Noting that “Commerce believes that

the calculation of profit ratios in NME cases should be guided by the principles established under

the CV profit provisions,” Fuyao advances two alternative arguments based on the language of

19 U.S.C. § 1677b(e)(2)(B).25 Fuyao Mem. at 28. Fuyao first argues that the third alternative


       25
              Title 19 U.S.C. § 1677b(e)(2) states that the constructed value of imported
merchandise shall be an amount equal to the sum of:

               (A) the actual amounts incurred and realized by the specific
               exporter or producer being examined in the investigation or review
               for selling, general, and administrative expenses, and for profits, in
               connection with the production and sale of a foreign like product,
               in the ordinary course of trade, for consumption in the foreign
               country, or

               (B) [i]f actual data are not available with respect to the amounts
               described in subparagraph (A), then [the CV of imported
               merchandise shall include amounts equal to]—

                      (i) the actual amounts incurred and realized by the
                      specific exporter or producer being examined in the
CONSOL. COURT NO . 02-00282                                                              PAGE 36

method for determining the CV, found in 19 U.S.C. § 1677b(e)(2)(B)(iii), which permits

Commerce to calculate CV profit “based on any other reasonable method,” does not require that

profit be calculated only on sales “in the ordinary course of trade.” Fuyao Mem. at 28. Fuyao

states:

              This [ordinary course of trade] criterion is specified for the second
              alternative CV profit method, but it is not required of the first or
              third alternative methods. Thus, this [third] provision does not
              support Commerce’s decision to disregard the St. Gobain’s profit
              figure on the assumption that the sales are outside the ordinary
              course of trade.


                      investigation or review for selling, general, and
                      administrative expenses, and for profits, in
                      connection with the production and sale, for
                      consumption in the foreign country, of merchandise
                      that is in the same general category of products as
                      the subject merchandise,

                      (ii) the weighted average of the actual amounts
                      incurred and realized by exporters or producers that
                      are subject to the investigation or review (other than
                      the exporter or producer described in clause (i)) for
                      selling, general, and administrative expenses, and
                      for profits, in connection with the production and
                      sale of a foreign like product, in the ordinary course
                      of trade, for consumption in the foreign country, or

                      (iii) the amounts incurred and realized for selling,
                      general, and administrative expenses, and for
                      profits, based on any other reasonable method,
                      except that the amount allowed for profit may not
                      exceed the amount normally realized by exporters or
                      producers (other than the exporter or producer
                      described in clause (i)) in connection with the sale,
                      for consumption in the foreign country, of
                      merchandise that is in the same general category of
                      products as the subject merchandise . . . .

19 U.S.C. § 1677b(e)(2)(A)–(B).
CONSOL. COURT NO . 02-00282                                                               PAGE 37

Id.



       Fuyao is correct that Commerce is not statutorily required to use only sales made in the

ordinary course of trade in its calculations. Because the court has determined that Commerce’s

decision to disregard negative profit amounts was a reasonable interpretation of the language of

the statute in light of the language of the SAA, however, it necessarily follows that Fuyao’s

argument must fail.



       Fuyao next argues that under this third alternative method for calculating the CV profit,

the amount of such profit “may not exceed the amount normally realized” by other producers and

exporters. Fuyao Mem. at 28 (citing 19 U.S.C. § 1677b(e)(2)(B)(iii)). Thus, Fuyao reasons that

because the Asahi profit was the highest profit amount of any Indian company on the record, as

Commerce acknowledges, “the use of the Asahi profit figure alone would be in direct violation

of the statute’s guidelines.” Id.



        As previously noted, the court defers to Commerce’s reasonable interpretation of the

term “profit” as used in 19 U.S.C. § 1677b(e)(2)(A). The court is not convinced, however, that

in developing its methodology Commerce took fully into consideration the direction in 19 U.S.C.

§ 1677b(e)(2)(B)(iii), that the constructed value of imported merchandise

               shall be a sum equal to the amounts incurred and realized for
               selling, general, and administrative expenses, and for profits, based
               on any other reasonable method, except that the amount allowed
               for profit may not exceed the amount normally realized by
               exporters or producers (other than the exporter or producer
CONSOL. COURT NO . 02-00282                                                              PAGE 38

               described in clause (i)) in connection with the sale, for
               consumption in the foreign country, of merchandise that is in the
               same general category of products as the subject merchandise . . . .

19 U.S.C. § 1677b(e)(2)(B)(iii) (emphasis added).



       On remand, Commerce shall fully explain how its chosen methodology complies with the

statute. In particular, Commerce shall explain why, given that the Asahi profit amount was the

highest profit amount of any Indian company on the record, the use of the Asahi profit figure

alone complies with the statute’s provisions.



       E.      Commerce’s Determination With Regard to the “Purchase of Traded Goods” in
               the Denominator for the SG&A Ratio

               1.     Fuyao

       “Traded goods” are products that are purchased and then resold by a company. See

Timken Co. v. United States, 23 CIT __, __, 59 F. Supp. 2d 1371, 1379 (1999). Here, Commerce

calculated Fuyao’s normal value

               by totaling the sums of COM [cost of manufacture], overhead,
               profit and packing, and SG&A. In calculating SG&A, Commerce
               included, inter alia, manufacturing, administrative, and selling
               expenses less energy and labor costs. Because the record of this
               review lacked adequate information regarding whether the traded
               goods purchased by St. Gobain affected the cost of manufacture,
               Commerce properly excluded St. Gobain’s “purchase of traded
               goods” from the SG&A ratio.26


       26
               SG&A are the general expenses related to the cost of manufacturing. Magnesium
Corp. of Am. v. United States, 20 CIT 1092, 1104, 938 F. Supp. 885, 898 (1996). SG&A
includes labor, materials, factory overhead, and energy costs. See FMC Corp. v. United States,
27 CIT __, __, slip. op. 03-15 at 4 (Feb. 11, 2003). The SG&A ratio is multiplied by the cost of
manufacture in order to obtain the amount of SG&A expenses. See Titanium Sponge From the
CONSOL. COURT NO . 02-00282                                                              PAGE 39

Gov’t Brief at 67 (internal citations omitted).



        At the administrative level, Fuyao acknowledged that the costs associated with the

purchase of these goods should not be included in the denominator for the factory overhead ratio

because “the purchase of traded goods is not relevant to St. Gobain’s production operations.”

Fuyao Mem. at 33 (emphasis in original). However, Fuyao reasoned that

               the purchase and resale of traded goods generates selling and
               administrative expenses that have already been included in the
               numerator of the SG&A calculation. Therefore, Commerce would
               overstate the SG&A ratio if it failed to include the cost of acquiring
               these traded goods as part of the SG&A denominator.

Id. (emphasis added). With respect to these expenses, Fuyao states:

               [U]sing selling and administrative expenses that the record
               indicates include expenses for the purchase and resale of traded
               goods as part of the SG&A ratio numerator without including the
               acquisition cost of these same traded goods in the denominator
               plainly distorts the resulting SG&A ratio.

Id. at 34.



        For its part, Commerce maintains that

               [a]lthough [Fuyao] seemingly acknowledges Commerce’s above-
               cited conclusion [that St. Gobain’s financial statements do not
               provide evidence as to the location of expenses associated with the
               purchase of traded goods], [Fuyao] repeatedly argues that “record
               evidence supports the conclusion” that costs associated with the
               purchase of traded goods are part of St. Gobain’s reported SG&A
               amount. . . . However, Commerce cannot find, nor has [Fuyao]
               specifically pointed to[,] any such “record evidence.”



Russian Federation, 64 Fed. Reg. at 1601.
CONSOL. COURT NO . 02-00282                                                                 PAGE 40

Gov’t Brief at 68.



       Fuyao disputes Commerce’s conclusion that there is no evidence that the selling and

administrative expenses associated with “purchase of traded goods” are included in the SG&A

expenses listed in the St. Gobain financial statement. Fuyao states:

               Nowhere does Commerce allege that the purchase and resale of
               traded goods does not incur selling and administrative costs. Thus,
               Commerce implicitly acknowledges that the selling and
               administrative expenses related to the purchase and resale of traded
               goods must be included in the financial statement somewhere.
               Since there is no indication that these other selling and
               administrative expenses have been separately reported in the
               financial statement (e.g., a separate line item described as
               “administrative expenses for traded goods”), record evidence
               supports the conclusion that expenses related to the purchase and
               resale of traded goods are part of the company’s reported SG&A
               amount.

Fuyao Mem. at 34 (emphasis in original).



       This Court has consistently rejected determinations by Commerce that include the costs

related to the purchase and resale of traded goods in the denominator of the SG&A ratio when

Commerce could not show how expenses related to these goods affected production of the

subject merchandise. See, e.g., Rhodia, 185 F. Supp. 2d at 1357 (granting Commerce’s request

for a voluntary remand to remove expenses related to traded goods from the denominator for the

calculation of the overhead ratio); see also Timken, 23 CIT at __, 59 F. Supp. 2d at 1379

(remanding to Commerce to exclude purchases of traded goods from SG&A, since it “failed to

demonstrate how these already manufactured goods constitute a material cost incurred in
CONSOL. COURT NO . 02-00282                                                                PAGE 41

manufacturing the subject merchandise.”); Luoyang Bearing Factory v. United States, 26 CIT __,

__, 240 F. Supp. 2d 1268, 1305 (remanding to Commerce to “exclude ‘consumption of traded

goods’ from Commerce’s overhead, SG & A and profit rate calculations and to recalculate the

dumping margins accordingly . . . .”). In like manner, any amount of selling and administrative

costs related to such goods should be excluded from the ratio’s numerator.



       Here, both Commerce and Fuyao acknowledge that there is insufficient evidence to

determine where expenses associated with the purchase of traded goods are accounted for in St.

Gobain’s financial statement. See Fuyao Mem. at 34; Gov’t Brief at 67. On remand, Commerce

shall correct the calculation of the SG&A ratio by either (1) eliminating expenses relating to the

purchase of traded goods from the numerator, (2) including costs relating to the purchase of

traded goods in the denominator, or (3) developing some other reasonable method for taking

traded goods into account.



               2.      PPG

       PPG complains that Commerce’s calculations of the SG&A, FOH, and profit values were

flawed by using ratios derived from the actual costs found in the financial statements of two

Indian producers27 and applied “to the values assigned to the Chinese respondents’ Factors of

Production (FOP) . . . .” PPG Mem. at 4. PPG’s argument is essentially one of apples and

oranges. That is, PPG insists that the values must be distorted if they purport to accurately



       27
               The two Indian producers were St. Gobain and Asahi. The former’s financials
were used to calculate SG&A and FOH; the latter’s were used to calculate profit.
CONSOL. COURT NO . 02-00282                                                              PAGE 42

represent the values for SG&A, FOH, and profit since they are calculated using ratios derived

from the Indian producers’ actual experience that were applied to FOP values for float glass and

PVB developed by Commerce. In order to correct this distortion

               [i]n the underlying investigation, [PPG] had proposed a
               methodology that would have permitted [Commerce] to calculate
               values for overhead, SG&A[,] and profit by allocating the Indian
               producer’s overhead and SG&A expenses to the consumption of its
               two key raw materials – float glass and PVB. This approach would
               have produced fixed, quantity-based rates for FOH and SG&A in
               terms of dollars per square meter of float glass and PVB consumed.
               [Commerce] could have then applied those rates to the Chinese
               producers’ consumption of float glass and PVB.

Id. at 39–40. Commerce declined to adopt this approach reasoning:

               Petitioners’ proposed methodology would only factor in the raw
               material usage of float glass and PVB. While the Department
               recognizes that these two inputs constitute the majority of the raw
               materials consumed to manufacture [W]indshields, other direct
               inputs cannot be ignored. Direct inputs other than float glass and
               PVB are almost always included in [W]indshields (ink, mirror
               buttons, etc). The Department finds it is better to calculate ratios
               based on all direct costs, as opposed to Petitioners’ methodology,
               which takes into account only quantities of float glass and PVB.

Issues and Decision Mem. at 38–39



       Having failed to convince Commerce to adopt its proposed methodology in the

underlying investigation, PPG, for the first time, proposes another approach:

               [PPG does] not contest the use of the Indian producer’s annual
               report as the starting point to derive values for FOH, SG&A and
               profit, or even using ratios. What Plaintiffs contest is
               [Commerce’s] failure to adjust the ratios to account for certain
               identifiable differences [which it claims it has identified, between
               the actual experience of the Indian producers and the values for the
               factors of production developed by Commerce]. Considering the
CONSOL. COURT NO . 02-00282                                                               PAGE 43

               FOP values selected by [Commerce], a more representative ratio
               that still would have reflected the Indian producer’s actual FOH
               and SG&A experience, as mandated by the statute . . . [Under
               PPG’s new proposal] the numerator for the ratio, which comes
               from the [St. Gobain] annual report, continues to reflect the actual
               FOH and SG&A experience of the surrogate Indian producer
               during the period covered by the report. The denominator is
               adjusted to account for identifiable differences in materials, energy
               and labor in the values selected by [Commerce] for the Chinese
               FOP.

PPG Mem. at 37–38.



       PPG believes that it is entitled to present this methodology to the court, without having

advanced it to Commerce at the administrative level because Commerce, in rejecting its proposed

methodology in the underlying investigation, did not adequately address its distortion argument.

PPG Mem. at 42 (“While [Commerce] provided an explanation for why it did not use the

methodology proposed by Plaintiffs, nowhere does [Commerce] address the underlying issue of

the distortions caused by using cost-based ratios for FOH, SG&A and profit, even though the

question was plainly raised by Plaintiffs.”) (emphasis in original).



       The situation here is similar to Timken Co. v. United States, 25 CIT __, __, 166 F. Supp.

2d 608, 625 (2001), where the Court said:

               “Commerce attempted to capture in its rate calculation the
               surrogate company’s experience in incurring overhead and SG&A
               expenses,” and created a reasonable internally consistent ratio that
               does not violate the boundaries set by 19 U.S.C. § 1677b(c) (1994).
               The fact that one of the actual parameters is likely to be higher
               while the other one is likely to be lower than the corresponding
               data derived from the records of [the subject producer] means that
               neither Commerce’s methodology shall be deprived of this Court’s
CONSOL. COURT NO . 02-00282                                                                PAGE 44

                deference, nor does it constitute sufficient grounds for the Court to
                uphold Timken’s suggestion as a more palatable alternative.

Id. (citing Am. Spring Wire Corp. v. United States, 8 CIT 20, 22, 590 F. Supp. 1273, 1276

(1984)); Am. Spring Wire, 8 CIT at 22, 590 F. Supp. at 1276 (“The court may not substitute its

judgment for that of the [agency] when the choice is ‘between two fairly conflicting views, even

though the court would justifiably have made a different choice had the matter been before it de

novo . . . .’” (internal citations omitted)).



        While having some attraction for its apparent consistency, PPG’s argument must fail.

First, while complaining of Commerce’s methodology, PPG has failed to demonstrate that

applying the ratios to the Indian producer’s actual costs will provide a more accurate picture than

applying the ratio to the FOPs found by Commerce. This is particularly relevant because the goal

is to establish the costs for each individual Chinese company. The FOPs established by

Commerce are designed to be surrogates for these costs. Thus, it is difficult to see how PPG’s

applying the ratios to St. Gobain’s and Asahi’s actual costs would be a more accurate reflection

of these values. In addition, by failing to offer their methodology to Commerce at the

administrative level, PPG cannot raise it for the first time here. “The exhaustion doctrine

requires a party to presents its claims to the relevant administrative agency for the agency’s

consideration before raising these claims to the Court.” Fabrique de Fer de Charleroi S.A. v.

United States, 25 CIT __, __, 155 F. Supp. 2d 801, 805 (2001) (citing Unemployment Comp.

Comm’n of Alaska v. Aragon, 329 U.S. 143, 155 (1946)); Unemployment Comp. Comm’n of

Alaska, 329 U.S. at 155 (“A reviewing court usurps the agency’s function when it sets aside the
CONSOL. COURT NO . 02-00282                                                                  PAGE 45

administrative determination upon a ground not theretofore presented and deprives the [agency]

of an opportunity to consider the matter, make its ruling, and state the reasons for its action.”).



       As in Timken, PPG has simply not demonstrated that its proposed resolution is any more

accurate than the usual method used by Commerce. That being the case, the court defers to

Commerce’s selection of methodology.



       F.      Commerce’s Determination With Regard to Ocean Freight Averages

       Fuyao used both NME and market economy freight carriers to ship its Windshields to the

United States. In order to allow Commerce to use the cost of the market economy freight carriers

even when Fuyao used NME carriers, Fuyao calculated a weighted-average freight cost to each

U.S. delivery destination using only those market economy shipments that approximated the

NME carrier shipments by region, state, city, or zip code. See Fuyao Mem. at 35.



       Commerce, however, decided to use these weighted-average prices only when the average

market economy price exactly matched the zip code of the NME shipment destination. Where

the zip codes did not match, Commerce used a surrogate value for shipments to that area. See

Issues and Decision Mem. at 45.



         Fuyao argues that Commerce should apply the freight rates Fuyao paid to market

economy shippers to all of Fuyao’s NME shippers, regardless of destination. See Fuyao Mem. at

37. Fuyao argues that under Shakeproof, the actual price paid for any input is the best available
CONSOL. COURT NO . 02-00282                                                                   PAGE 46

information to value that factor of production. See Shakeproof, 268 F.3d at 1382 (“Where we

can determine that a [non-market economy] producer’s input prices are market determined,

accuracy, fairness, and predictability are enhanced by using those prices.”) (citing Lasko, 43 F.3d

at 1446). Fuyao further argues that in Peer Bearing Co. v. United States, 25 CIT __, 182 F.

Supp. 2d 1285 (2001), the court determined that Commerce acted reasonably in “utilizing actual

prices paid in market economy currencies to market economy suppliers to value the entire FOP”

and that Commerce “has applied this practice consistently in recent years.” Id. at 1314, 1312.



       Commerce has broad authority to interpret the antidumping statute. Sigma, 117 F.3d at

1405. “The critical question is whether the methodology used by Commerce . . . establishes

antidumping duty margins as accurately as possible.” Shakeproof, 268 F.3d at 1382. Here,

Commerce chose not to use Fuyao’s market economy freight costs to value NME carrier

shipments because those shipments to non-matching zip codes did not reflect the distance

involved in the shipment. Because distance affects the cost of freight, Commerce determined

that using freight purchases that were not based on distance would result in inaccurate values for

the freight costs. See Gov’t Brief at 40 (“The fact that distance affects the cost of freight is also

evidenced by actual freight providers’ rate schedules which are set by distance and weight.”)

(citing FOP Valuation Mem. for Final Determination, Pub. R. Doc. 282).



       Fuyao relies on past Commerce determinations to support its argument that Commerce

utilizes market economy carrier rates for all ocean freight shipments. See, e.g., Heavy Forged

Hand Tools From the P.R.C., 67 Fed. Reg. 57,789, 57,792 (ITA Sept. 12, 2002) (final results);
CONSOL. COURT NO . 02-00282                                                                 PAGE 47

see also Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the P.R.C.,

66 Fed. Reg. 35,937, 35,940 (ITA July 10, 2001) (prelim. results) (“[W]hen some or all of a

specific company’s ocean freight was provided directly by market economy companies . . . we

used the reported market economy ocean freight values for all U.S. sales made by that

company.”). The cases Fuyao cites, however, do not address the issue of valuing NME carrier

destinations with different market carrier destination rates.28 For example, record evidence

indicates that price variances occur when shipping from a port to different zip codes within a

state. See FOP Valuation Mem. for Final Determination, Conf. Rec. Doc. 121. Therefore,

Commerce’s decision to value carrier shipments by destination-specific values was reasonable,

given that ocean freight costs are influenced by distance. See, e.g., Shakeproof Assembly

Components, Div. of Ill. Tool Works, Inc. v. United States, 23 CIT __, __, 59 F. Supp. 2d 1354,

1358 (1999) (“Whether Commerce’s use of imported prices to value an entire factor of

production is reasonable is inextricably linked to whether the methodology promotes accuracy.”)

(internal citation omitted).




       28
               Rather, Fuyao argues that

               [i]n no other case has the Department required that the surrogate
               ocean freight match “exactly” the NME destination. On the
               contrary, the surrogate ocean freight rates are averages or rough
               approximates because the Department generally uses an average
               surrogate rate for the East Coast and the West Coast. If the
               Department is concerned about an exact match in terms of
               destination, specificity and contemporaneity, [Fuyao’s] significant
               market-economy shipment rates are unquestionably far superior in
               all respects than the surrogate used by the Department.

Fuyao Mem. at 39 (emphasis in original).
CONSOL. COURT NO . 02-00282                                                               PAGE 48

        For its part, PPG does not challenge Commerce’s decision to use surrogate values for

NME ocean freight. Rather, PPG argues that Commerce used the wrong shipping rate in its

calculations with respect to Fuyao. Specifically, PPG contends that instead of using the Maersk

Sealand ocean freight rates that were contemporaneous with the period of investigation,

Commerce erred by using a rate from a 1997 Federal Maritime Commission report. See PPG

Mem. at 8.



        However, the values urged by PPG appear to have been tainted by the inclusion of

charges for “PRC Arbitraries.” See Petitioners’ Surrogate Data, Pub. R. Doc. 332, Ex. 19. These

“PRC Arbitraries” appear to be non-market shippers who transport cargo for a portion of the trip

from Fuzhao, China to the United States. See id. As such, a part of each rate quoted by Maersk

Sealand represents shipping performed by a non-market provider at non-market rates. As a

result, Commerce had sound reason for preferring the Federal Maritime Commission rates to

those proposed by PPG. See Nation Ford Chem. Co. v. United States, 21 CIT 1371, 1374, 985 F.

Supp. 133, 135 (1997) (Commerce should “avoid surrogate values tainted by nonmarket

forces.”).



        G.     Commerce’s Determination With Regard to the Surrogate Value of Electricity

        PPG argues that Commerce should have used, as a surrogate value, the average electricity

rate from the financials of three producers29 of Windshields, rather than the aggregate country-



        29
               PPG notes that St. Gobain, Asahi, and a third producer, Atul Glass Industries Ltd.,
accounted for nearly 70% of the total Indian auto glass market. PPG Mem. at 27.
CONSOL. COURT NO . 02-00282                                                                  PAGE 49

wide rate that Commerce alternatively employed. PPG claims that use of these rates “that are

more specific to the industry in the surrogate country actually producing the subject merchandise

will yield more accurate dumping margins than will country-wide aggregate rates that reflect

usage by a range of industries, most of which are completely unrelated to the subject

merchandise.” PPG Mem. at 27. As an initial matter PPG makes no showing tending to suggest

that electric rates are somehow industry-specific in India. In addition, as PPG concedes, it is

normal practice for Commerce to use the country-wide electricity rate as a surrogate. See PPG

Mem. at 25 (“[Commerce] has typically used country-wide values to value energy inputs such as

electricity in NME cases . . . .”). PPG claims, however, that the situation here is similar to that in

Certain Preserved Mushrooms from the P.R.C., 65 Fed. Reg. 66,703 (ITA Nov. 7, 2000) (prelim.

results of first new shipper review and first antidumping duty administrative review), where

Commerce used the average rate of electricity costs of mushroom producers. In the Preliminary

Results Valuation Memorandum, Commerce said:

               We have selected the average rate of the above-named mushroom
               producers rather than the Aggregate Methodology rate because the
               former rate is specific to the industry producing the subject
               merchandise and more contemporaneous to the POR than the
               Aggregate Methodology rate, which relies on data from 1995
               through 1997. Based on our knowledge of the Indian preserved
               mushroom industry through our conduct of the concurrent
               antidumping proceeding on preserved mushrooms from India, we
               have determined that there are 12 known producers of preserved
               mushrooms in India. The four companies for which we calculated
               an electricity rate thus account for a substantial segment of the
               industry. Further, preserved mushrooms production occurs in only
               a few areas in India. This situation differs from that in other recent
               cases in which the Aggregate Methodology was applied, where the
               size and location of the Indian industry was not known to the same
               extent.
CONSOL. COURT NO . 02-00282                                                                   PAGE 50

Prelim. Results Valuation Mem., Pub R. Doc. 259 at 8 (emphasis added).



       Commerce, however, distinguished the situation here from that in Certain Preserved

Mushrooms. “The Department established a practice of using a simple average of country-wide

Indian state electricity rates as a surrogate value for Chinese electricity rates unless a party has

shown that a company can be located only in a specific state . . . .” Tapered Roller Bearings and

Parts Thereof, Finished and Unfinished, From the P.R.C., 63 Fed. Reg. 63,842, 63,856 (ITA

Nov. 17, 1998) (final results) (“Tapered Roller Bearings”) (citing Manganese Metal From the

P.R.C., 63 Fed. Reg. 12,440, 12,446 (ITA Mar. 13, 1998) (final results); Polyvinyl Alcohol

From the P.R.C., 61 Fed. Reg. 14,057, 14,062 (ITA Mar. 29, 1996) (final determination);

Sulfanilic Acid From the P.R.C., 62 Fed. Reg. 25,917, 25,919 (ITA May 12, 1997) (prelim.

results); and Chrome-Plated Lug Nuts From the P.R.C., 63 Fed. Reg. 31,719, 31,722 (ITA June

10, 1998) (prelim. results). In Tapered Roller Bearings, Commerce noted:

               Electricity prices are subject to a number of influences specific to
               the location of the plant. These include: local market conditions,
               state intervention, methods of transmission, distribution of power
               generation and privatization. Simply put, there are more variables
               to consider and weigh than the location of the industry because of
               the nature of the electricity industry in India. Thus, it is fair and
               reasonable to use a simple average for large industries in all Indian
               states as a surrogate value for electricity rates.

63 Fed. Reg. at 63,856–57.



       The court agrees that PPG has failed to show a compelling reason for Commerce to have

deviated from its usual practice of using the country-wide electricity rate. This is particularly the
CONSOL. COURT NO . 02-00282                                                                   PAGE 51

case because, unlike Certain Preserved Mushrooms, there is no evidence that Indian float glass

producers are concentrated in one geographical area. Thus, because Commerce used its usual

methodology, and because there is no evidence to suggest that the experience of the Indian glass

producers was somehow unique with respect to electricity, or that their actual costs should be

preferred over the country-wide cost, Commerce’s decision is sustained.



                                           CONCLUSION

       On remand, Commerce shall revisit the evidence cited for its various findings and satisfy

its obligations with specific reference to the evidence it claims supports its conclusions and

adequate explanations of its findings based on this evidence. The ITC shall also address the

record evidence which “fairly detracts” from the weight of the evidence supporting the ITC’s

determination. Remand results are due within ninety days of the date of this opinion, comments

are due thirty days thereafter, and replies to such comments eleven days from their filing.




                                                                /s/ Richard K. Eaton
                                                               Richard K. Eaton, Judge


Dated: December 18, 2003
       New York, New York
                                           ERRATA



Fuyao Glass Industry Group Co., Ltd., et al. v. United States, Slip Op. 03-169, Consol. Court
No. 02-00282, dated December 18, 2003.


Page 23:      In line 13, replace “264 F. Supp. 2d at 1240” with “264 F. Supp. 2d at 1240–41”.

Page 28:      In line 13, replace “included other” with “included the other”.

Page 33:      In line 11, replace “27 CIT” with “26 CIT”.

Page 35:      In line 5, replace “Rhodia, 240 F. Supp. 2d at 1254” with “Rhodia, 26 CIT at __,
              240 F. Supp. 2d at 1254”.

Page 40:      In line 21, replace “Rhodia, 185 F. Supp. 2d at 1357" with “Rhodia, Inc. v. United
              States, 25 CIT __, __, 185 F. Supp. 2d 1343, 1357 (2001)”.

Page 42:      In line 7, replace “to” with “over”.

Page 49:      In line 20, replace “mushroom” with “mushrooms”.

Page 51:      In line 9, replace “The ITC” with “Commerce”. In line 10, replace “the ITC’s”
              with “Commerce’s”.



December 22, 2003
