  United States Court of Appeals
      for the Federal Circuit
                ______________________

             MICHAELS STORES, INC.,
                Plaintiff-Appellant,

                           v.

                  UNITED STATES,
                  Defendant-Appellee.
                ______________________

                      2014-1051
                ______________________

   Appeal from the United States Court of International
Trade in No. 12-CV-00146, Judge Jane A. Restani.
                 ______________________

              Decided: September 10, 2014
                ______________________

    MATTHEW R. NICELY, Hughes Hubbard & Reed LLP,
of Washington, DC, argued for plaintiff-appellant. With
him on the brief were LYNN G. KAMARCK and ALEXANDRA
B. HESS.

    STEPHEN C. TOSINI, Senior Trial Counsel, Commercial
Litigation Branch, Civil Division, United States Depart-
ment of Justice, of Washington, DC, argued for defendant-
appellee. With him on the brief were STUART F. DELERY,
Assistant Attorney General, JEANNE E. DAVIDSON, Direc-
tor, and PATRICIA M. MCCARTHY, Assistant Director. Of
counsel on the brief was DANIEL J. CALHOUN, Senior
Attorney, Office of the Chief Counsel for Trade Enforce-
2                                    MICHAELS STORES V. US



ment and Compliance, United States Department of
Commerce, of Washington, DC.
               ______________________

Before PROST, Chief Judge, CLEVENGER and CHEN, Circuit
                        Judges.
PROST, Chief Judge.
    American arts and crafts supply retailer Michaels
Stores, Inc. (“Michaels”) appeals from the decision of the
United States Court of International Trade affirming the
Department of Commerce’s (“Commerce”) antidumping
rates assigned to certain cased pencils manufactured and
exported by businesses in the People’s Republic of China
(“PRC”). Commerce assigned Michaels’ exporters a coun-
try-wide antidumping cash deposit rate, as opposed to
lower rates obtained by the pencils’ producers. Michaels
argues it is entitled to the producer rate based on its
reading of 19 C.F.R. § 351.107(b)(2), which states that “if
the Secretary has not established previously a combina-
tion cash deposit rate . . . for the exporter and producer in
question or a noncombination rate for the exporter in
question, the Secretary will apply the cash deposit rate
established for the producer.” Because § 351.107(b)(2) is
informed by § 351.107(d), which establishes an initial
noncombination rate for all producers and exporters in
nonmarket economy countries, we affirm.
                       BACKGROUND
    Commerce has the general authority within certain
parameters to set the cash deposit rates associated with
imported goods in an effort to curb “dumping,” i.e., export-
ing goods far below typical market prices in order to lower
the profits of domestic competitors.            19 U.S.C.
§ 1673e(a)(3). Upon a finding of material injury to a U.S.
industry, Commerce sets antidumping rates for the pro-
ducers and exporters of foreign goods, and it may also
assign special rates for specific American importers.
MICHAELS STORES V. US                                    3



Rates that apply to specific combinations of producers,
exporters, and/or importers are referred to as “combina-
tion” rates. See 19 C.F.R. § 351.107(b)(1)(i). A noncombi-
nation rate, in contrast, is a rate that applies to a
producer or exporter and is not combined with the rate of
another entity. See id.
    Commerce distinguishes between traditional market
economies, where money is exchanged for goods and
services, and “nonmarket economies” (NMEs), such as
barter systems or state-controlled economies. See Final
Determination of Sales at Less Than Fair Value: Spar-
klers From the People’s Republic of China, 56 Fed. Reg.
20,588 (May 6, 1991) (“Sparklers”). The PRC has been
classified as an NME country since as early as 1987.
Tapered Roller Bearings From the People’s Republic of
China: Final Determination of Sales at Less Than Fair
Value, 52 Fed. Reg. 19,7481 (May 27, 1987); see also
Certain Cased Pencils from China: Preliminary Results,
76 Fed. Reg. 2337, 2338–39 (Jan. 13, 2011).
    In NME proceedings, Commerce begins with a rebut-
table presumption that a company operating within a
NME is subject to state control. See id; accord Initiation
of Antidumping and Countervailing Duty Administrative
Reviews, 75 Fed. Reg. 4770, 4771 (Jan. 29, 2010). Com-
merce therefore applies a single country-wide antidump-
ing deposit rate to all NME producers and exporters,
unless the producer, exporter, or another interested party
can prove through an administrative review process
(established by 19 C.F.R. § 351.213(b)) that the exporter
or producer at issue is not subject to government control
and thus eligible for a lower rate. See Initiation of Anti-
dumping and Countervailing Duty Administrative Re-
views, 75 Fed. Reg. at 4771; Policy Bulletin 05.1 at 4
(Dep’t of Commerce Apr. 5 2005), available at
http://enforcement.trade.gov/policy/bull05-1.pdf.
4                                   MICHAELS STORES V. US



    In 1994, the International Trade Commission con-
ducted an investigation in which it found that a U.S.
industry was threatened with material injury by reason of
imports of certain cased pencils from the PRC. See Anti-
dumping Duty Order: Certain Cased Pencils from the
People’s Republic of China, 59 Fed. Reg. 66,909 (Dec. 28,
1994).    Commerce accordingly imposed antidumping
duties and later initiated administrative reviews for the
2008-2009 and 2009-2010 time periods, which are at issue
here.
    During the 2008-2009 period of administrative review,
Michaels imported cased pencils that were manufactured
by three producers in the PRC: China First Pencil Co.,
Ltd. (“China First”), Shanghai Three Star Stationery
Industry Co., Ltd. (“Three Star”), and Shandong Rongxin
Import and Export Co., Ltd. (“Rongxin”). Michaels Stores,
Inc. v. United States, 931 F. Supp. 2d 1308, 1309 (Ct. Int’l
Trade 2013). These producers did not sell to Michaels
directly; rather, Michaels obtained the pencils through
three different PRC exporters: DGI LLC, Ningbo Jinchao
Plastic Products Co., Ltd., and Shanghai Changyang
Industry Co. Ltd.
    The pencil producers all participated in Commerce’s
2008-2009 administrative review process; however, China
First and Three Star withdrew their requests for review,
Certain Cased Pencils from China: Preliminary Results,
76 Fed. Reg. at 2,338, and Rongxin’s review did not in-
clude pencils exported to Michaels. Certain Cased Pencils
from China: Final Results, 76 Fed. Reg. 27,988, 27,989
(May 13, 2011) (“Rongxin did not report entered values for
its U.S. sales.”). During the 2009-2010 period of review,
Rongxin initiated a review, but China First and Three
Star did not. Michaels, 931 F. Supp. 2d at 1311. None of
the Chinese firms responsible for exporting the pencils to
Michaels participated in either administrative review
process. Id. at 1317.
MICHAELS STORES V. US                                     5



    Michaels claims, and Commerce apparently does not
dispute, that the producers’ rates were eventually estab-
lished for the two administrative review periods as 26.32
and 10.41% for China First-manufactured pencils, 2.66%
for Three Star-manufactured pencils (for both periods),
and 11.48 and 3.55% for Rongxin-manufactured pencils.
Nonetheless, it is also undisputed that none of the export-
ers selling the pencils to Michaels qualified for a separate
rate at any time during the periods of review at issue. Id.
    Upon importing the pencils into the United States,
Michaels made its cash deposit to U.S. Customs and
Border Protection (“Customs”) based on the cash rates
then in place for the pencils’ producers. Id. at 1310.
Customs responded by issuing additional bills to Michaels
charging a PRC-wide rate of 114.90% ad valorem for both
administrative review periods. Id. Michaels brought an
action under 28 U.S.C. § 1581 to challenge the rates used
by Customs. Id. 1 The Court of International Trade
upheld Customs’ liquidation rates, and Michaels appeals.
We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).
                   STANDARD OF REVIEW
    We review decisions of the Court of International
Trade without deference, applying the same substantial
evidence standard of review that the court itself applies in
reviewing Commerce’s determinations. Atar S.R.L. v.
United States, 730 F.3d 1320, 1325 (Fed. Cir. 2013). In
addition, we give substantial deference to an agency’s
interpretations of its own regulations, unless they are



   1   A parallel proceeding is currently pending in the
Court of International Trade, Michaels Stores, Inc. v.
United States, No. 12-00145, in which Michaels has
separately challenged the manner in which Customs
implemented the liquidation instructions issued by Com-
merce.
6                                   MICHAELS STORES V. US



plainly erroneous or inconsistent with the regulations.
Torrington Co. v. United States, 156 F.3d 1361, 1364 (Fed.
Cir. 1998) (citing Thomas Jefferson Univ. v. Shalala, 512
U.S. 504, 512 (1994)).
                       DISCUSSION
    This appeal hinges on two subsections of 19 C.F.R.
§ 351.107: subsection (b)(2) and subsection (d). Michaels
argues that it is entitled to use its producers’ rates under
§ 351.107(b)(2), which states:
    In the case of subject merchandise that is export-
    ed to the United States by a company that is not
    the producer of the merchandise, if the Secretary
    has not established previously a combination cash
    deposit rate under paragraph (b)(1)(i) of this sec-
    tion for the exporter and producer in question or a
    noncombination rate for the exporter in question,
    the Secretary will apply the cash deposit rate es-
    tablished for the producer.
    Michaels asserts that, because no previous combina-
tion or noncombination rate was established for its ex-
porters, the Secretary was required under subsection
(b)(2) to apply the cash deposit rates established for the
pencils’ producers instead. Meanwhile, the United States
relies on subsection (d) of the same regulation, which
provides that “in an antidumping proceeding involving
imports from a nonmarket economy country, ‘rates’ may
consist of a single dumping margin applicable to all
exporters and producers.” § 351.107(d).
    Michaels claims that subsection (b)(2) is unambiguous
and controls the outcome of this case, and even goes so far
as to argue that “subsection (d) is irrelevant to the ques-
tion posed in this appeal.” Appellant’s Reply Br. 7.
   We disagree. Given the language of subsection (d)
and its applicability to both exporters and producers in
NME countries, this provision is indeed relevant to an
MICHAELS STORES V. US                                      7



antidumping proceeding such as this one. 2 The discrep-
ancy between the parties stems from an inherent ambigu-
ity in § 351.107, specifically whether the “noncombination
rate” referred to in subsection (b)(2) includes the NME-
wide rate established by subsection (d). Keeping in mind
that we give substantial deference to Commerce’s inter-
pretations of its own regulations unless they are plainly
erroneous or inconsistent with the regulation, see Torring-
ton Co., 156 F.3d at 1364, we turn now to the proper
interpretation of the regulation.
    In crafting § 351.107, Commerce designed a hierarchy
in which the exporter rate is to be used, if it exists, prior
to the producer’s rate. This preference for the exporter
rate over the producer rate is reflected both in the struc-
ture of subsection (b)(2) as well as in preamble language
published in the Federal Register. See Antidumping
Duties; Countervailing Duties, 62 Fed. Reg. 27,296, 27,305
(May 19, 1997) (“[W]e intend to continue calculating
[antidumping] rates for NME export trading companies,
and not the manufacturers supplying the trading compa-



    2   When pressed at oral argument to reconcile the
two subsections, Michaels maintained that subsection (d)
could be read to allow Commerce to adopt a single rate for
all exporters and producers within a NME country, but
that the subsection would not apply unless every exporter
and producer within a country were assigned the same
rate.     See Oral Arg. 10:54–11:50, available at
http://www.cafc.uscourts.gov/oral-argument-
recordings/2014-1051/all. This interpretation is incon-
sistent with Commerce’s longstanding practice of assign-
ing separate rates to companies within an NME country
that can demonstrate independence from state control.
Policy Bulletin 05.1 at 4 (Dep’t of Commerce Apr. 5 2005),
available at http://enforcement.trade.gov/policy/bull05-
1.pdf.
8                                   MICHAELS STORES V. US



nies.”). Commerce recognized that, compared to manufac-
turers, exporters are more likely to control prices for
goods and are more likely to know which goods are des-
tined for the United States. See Michaels, 931 F. Supp.
2d at 1318. Commerce was also concerned that a produc-
er not subject to state control might nonetheless use a
state-controlled exporter in order to dump their goods in
the United States. Id.
    Indeed, it has been Commerce’s policy since 1991 to
apply a country-wide rate to all exporters doing business
in the PRC unless the exporter (not the manufacturer)
establishes de jure and de facto independence from state
control in an administrative review proceeding. Spar-
klers, 56 Fed. Reg. at 20,589. This court has endorsed
this presumption on multiple occasions. See, e.g., Trans-
com, Inc. v. United States, 294 F.3d 1371, 1373 (Fed. Cir.
2002); Sigma Corp. v. United States, 117 F.3d 1401, 1405-
06 (Fed. Cir. 1997).
    We agree with the Court of International Trade that
subsection (d) sheds light on the meaning of subsection
(b)(2) when the provisions are read in conjunction. See
Michaels, 931 F. Supp. 2d at 1316. Specifically, subsec-
tion (d) establishes a default country-wide rate for all
NME exporters and producers; this rate also serves as the
“noncombination rate” referred to in subsection (b)(2).
Michaels has not demonstrated that Commerce’s inter-
pretations of the regulation in practice are plainly errone-
ous or inconsistent with the regulation. Because a
noncombination rate for the exporter was established as
the PRC-wide rate of 114.90%, Michaels could not rely on
its producer rates as a substitute. Were we to conclude
otherwise, Michaels could circumvent its antidumping
obligations by buying pencils from a state-controlled
exporter at a discounted price and then use the antidump-
ing rate associated with its non-state controlled manufac-
turer.
MICHAELS STORES V. US                                    9



     Michaels raises two additional arguments on appeal.
First, Michaels argues that by changing its procedures
without allowing for notice and comment, Commerce
failed to comply with the Administrative Procedure Act
(APA). However, Michaels conceded at oral argument
that if this court agrees that Commerce correctly inter-
preted § 51.107, as we have done, then we need not ad-
dress its argument under the APA. Oral Arg. 6:20.
     Michaels also argues that Commerce’s interpretation
of the regulation is “unfair to importers such as Michaels
who appropriately relied on the plain language of the
applicable regulation in assessing its antidumping liabil-
ity.” Appellant’s Reply Br. 13. However, as discussed
above, Commerce has utilized a default country-wide rate
for NME exporters for decades. Neither the pencils’
producers nor Michaels itself initiated an administrative
review on the exporters’ behalf, even though either could
have qualified as an “interested party” for the purposes of
19 C.F.R. § 351.213(b). See 19 U.S.C. § 1677(9)(A) (“The
term ‘interested party’ means . . . a foreign manufacturer,
producer, or exporter, or the United States importer, of
subject merchandise . . . .”). Michaels had ample notice of
Commerce’s long-standing procedures and the opportuni-
ty to seek a separate exporter rate. Thus, we are not
persuaded by Michaels’ unfairness argument.
                        CONCLUSION
   For the aforementioned reasons, we affirm the judg-
ment of the Court of International Trade.
                        AFFIRMED
