United States Court of Appeals for
       the Federal Circuit
                ______________________
  THAI PLASTIC BAGS INDUSTRIES CO., LTD.,
              Plaintiff-Appellant,

                           v.

                  UNITED STATES,
                  Defendant-Appellee,

                         AND

     POLYETHYLENE RETAIL CARRIER BAG
     COMMITTEE, HILEX POLY CO., LLC, AND
         SUPERBAG CORPORATION,
             Defendants-Appellees.
            ______________________

                      2013-1322
                ______________________

   Appeal from the United States Court of International
Trade in Nos. 11-CV-0090 and 11-CV 0086, Chief Judge
Donald C. Pogue.
                 ______________________

               Decided: March 31, 2014
               ______________________
   IRENE H. CHEN, Chen Law Group LLC, of Rockville,
Maryland, argued for plaintiff-appellant.
    RYAN M. MAJERUS, Trial Attorney, Commercial Litiga-
tion Branch, Civil Division, United States Department of
2                                   THAI PLASTIC BAGS   v. US



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 SCOTT D. MCBRIDE, Senior Attor-
ney, Office of the Chief Counsel for Import Administra-
tion, United States Department of Commerce, of
Washington, DC.
    DANIEL L. SCHNEIDERMAN, King & Spalding, of Wash-
ington, DC, argued for defendants-appellees. With him on
the brief was JOSEPH W. DORN.
                 ______________________
    Before PROST, WALLACH, and CHEN, Circuit Judges.
WALLACH, Circuit Judge.
    Appellant Thai Plastic Bags Industries, Co., Ltd.
(“TPBI”) appeals the decision of the United States Court
of International Trade (“CIT”) affirming the United States
Department of Commerce’s (“Commerce”) Final Results of
the Fifth Administrative Review of the Antidumping Duty
Order covering polyethylene retail carrier bags (“PRCBs”
or “subject merchandise”) from Thailand. Appellees are
the United States, Polyethylene Retail Carrier Bag Com-
mittee, Hilex Poly Co., LLC, and Superbag Corporation.
Because the CIT properly found Commerce’s determina-
tions are supported by substantial evidence and in ac-
cordance with law, this court affirms.
                      BACKGROUND
    In September 2009, Commerce initiated the Fifth
Administrative Review of the Antidumping Duty Order
covering TPBI’s subject merchandise during the 2008–
2009 period of review. See Polyethylene Retail Carrier
Bags From Thailand, 76 Fed. Reg. 12,700 (Dep’t of Com-
merce Mar. 8, 2011) (final results of antidumping duty
administrative review) (“Final Results”). The antidump-
THAI PLASTIC BAGS   v. US                                   3



ing statute governs the application of remedial duties to
foreign merchandise sold, or likely to be sold, in the
United States “at less than its fair value.” 19 U.S.C.
§ 1673 (2006).
    During administrative reviews, Commerce strives to
create a fair comparison between the export price (or
constructed export price) of a foreign producer’s sales and
its home market sales (or “normal value”). See id.
§ 1677b(a). Normal value is the price at which the foreign
like product 1 is first sold in the exporting country, “in the
usual commercial quantities and in the ordinary course of
trade and, to the extent practicable, at the same level of
trade as the export price or constructed export price.” Id.
§ 1677b(a)(1)(A), (B)(i). If the price of an item in the home
market (normal value) is higher than the price for the
same item in the United States (export price), then the
comparison produces a positive number, indicating that
dumping has occurred. Id. § 1677(35)(A) (The antidump-
ing duty margin is “the amount by which the normal
value exceeds the export price or constructed export price
of the subject merchandise.”).
    In calculating normal value, if Commerce “has rea-
sonable grounds to believe or suspect that sales of the
foreign like product . . . have been made at prices which
represent less than the [cost of production (“COP”)] of that
product,” Commerce “determine[s] whether, in fact, such
sales were made at less than the [COP].”                 Id.
§ 1677b(b)(1). If so, and if certain other conditions are
met, Commerce may disregard such sales in the determi-
nation of normal value (“the below-cost test”). If no
foreign like product sales remain after conducting the


    1   Foreign like product is merchandise sold in a
comparison market that is identical or similar to the
subject merchandise. 19 U.S.C. § 1677(16).
4                                   THAI PLASTIC BAGS   v. US



below-cost test, Commerce may determine the normal
value based on a constructed value (“CV”) of the foreign
like product. Id. § 1677b(a)(4). “Commerce uses the same
method to calculate ‘costs’ for both COP and CV.” Thai
Plastic Bags Indus. Co. v. United States (Thai Plastic I),
853 F. Supp. 2d 1267, 1270 (Ct. Int’l Trade 2012). At
issue is Commerce’s method of calculating the normal
value of TPBI’s merchandise based on a CV, once Com-
merce determined that the sales in the exporting country
of the foreign like product had been made at prices below
the COP. When calculating the COP (for the below-cost
test) and the CV,
    [c]osts shall normally be calculated based on the
    records of the exporter or producer of the mer-
    chandise, if such records are kept in accordance
    with the generally accepted accounting principles
    [(“GAAP”)] of the exporting country . . . and rea-
    sonably reflect the costs associated with the pro-
    duction and sale of the merchandise.
19 U.S.C. § 1677b(f)(1)(A).
    Here, Commerce “disregarded the below-cost sales of
TPBI” in the previous administrative review. Polyeth-
ylene Retail Carrier Bags from Thailand, 75 Fed. Reg.
53,953–54 (Dep’t of Commerce Sept. 2, 2010) (preliminary
results of antidumping duty administrative review)
(“Preliminary Results”). Thus, Commerce had “reasona-
ble grounds” to suspect “TPBI’s sales of the foreign like
product under consideration for the determination of
normal value in this review may have been made at prices
below the [COP].” Id.; see 19 U.S.C. § 1677b(2)(A)(ii).
Accordingly, Commerce conducted a COP analysis of
TPBI’s sales in Thailand. In its initial questionnaire for
the Fifth Review, Commerce requested that TPBI report
its COP for the subject merchandise, and allocate those
costs across the different products based on the physical
characteristics of the products.
THAI PLASTIC BAGS   v. US                                 5



    In its initial questionnaire response, TPBI reported
its COP for the subject merchandise sold in the United
States and Thailand. In doing so, TPBI assigned each
product a unique control number (“CONNUM”) and
reported a per-unit COP for each CONNUM. TPBI re-
ported the actual costs per job order for most of its in-
curred costs, and it allocated those actual costs on a per-
unit basis by reference to the physical characteristics of
individual CONNUMs.
    For labor and overhead, however, TPBI’s cost-
accounting system calculated a per-kilogram average cost
taken over a three-month period for all CONNUMs.
TPBI’s labor and overhead records reflected only the total
conversion costs. 2 Therefore, TPBI’s financial accounting
system did not record labor and overhead costs (fixed and
variable) on an actual product-specific (i.e., CONNUM-
specific) level. 3



   2    Conversion costs are the direct labor and over-
head costs necessary to convert direct materials into
finished goods. J.A. 4370 n.6.
    3   TPBI describes its system as follows:
   The job order system also records the labor and
   overhead costs (fixed and variable) for the job or-
   der, but not on an actual basis. Instead, it is a
   single per Kg average for all labor and overhead
   for all production, both subject and non-subject
   merchandise, regardless of physical characteris-
   tics or actual costs. (Ink and oil (solvent) are in-
   cluded as consumables in variable overhead.)
   These averaged (i.e., theoretical) labor and over-
   head costs are based on the costs and quantities
   from the previous three months. In other words,
   if a job order is produced in April, the raw materi-
6                                    THAI PLASTIC BAGS   v. US



     Thus, “TPBI did not follow its normal cost-accounting
system for purposes of reporting labor and overhead
costs,” and instead used a method for cost allocation for
labor and overhead costs based on “machine times” (also
referred to as “machine hours”) derived from its account-
ing system. J.A. 5546. This method was created solely
for the purpose of reporting to Commerce.
     Subsequently, Commerce issued supplemental ques-
tionnaires requesting, inter alia, additional information
pertaining to the cost-allocation methodology TPBI em-
ployed in reporting its labor and overhead costs. Com-
merce asked TPBI to report its “standard costs recorded
in TPBI’s normal books and records, adjusted to the
actual costs,” and explain why the reported costs for nine
pairs of CONNUMs that were physically similar were “so
different.” J.A. 4803.
     In response, TPBI claimed that actual costs were
“driven by many variables, and not just physical charac-
teristics.” J.A. 4834. TPBI also explained “disparities in
the production quantities between the compared
CONNUM groupings,” rather than physical characteris-
tics, were “largely responsible for the cost differences.”



    al costs in Baht/Kg will be from April, but the la-
    bor and overhead costs in Baht/Kg will be based
    on a single weighted-average cost[] from January–
    March, regardless of product. Because this single
    simple Baht/Kg average quarterly cost for all la-
    bor and overhead is the same for all products, it
    does not reflect either physical or production (i.e.,
    output) differences associated with each product,
    and thus would distort CONNUM costs by not re-
    flecting any difference in physical characteristics.
J.A. 193 (emphasis added).
THAI PLASTIC BAGS   v. US                                 7



J.A. 4835. TPBI listed some of the variables as “produc-
tion efficiencies and different costs structures at each
factory, as well as the day-to-day requirements of individ-
ual production runs and customer orders.” J.A. 4834.
TPBI proposed another allocation method based on pro-
duction output, which was derived from TPBI’s account-
ing system, and again, was developed solely for the
purpose of reporting to Commerce.
     In September 2010, Commerce published its Prelimi-
nary Results, where it determined that TPBI’s reported
allocation methodology “unreasonably distort[ed]” the cost
of manufacturing for the subject merchandise and the
foreign like product. Preliminary Results, 75 Fed. Reg. at
53,955. Specifically, Commerce found the reported meth-
odologies were “inconsistent with the methodology applied
by TPBI in its books and records,” and “result[ed] in a
large variability in costs that have nothing to do with
physical differences in the merchandise.” Id. Commerce
instead weight-averaged TPBI’s labor and overhead costs
“on a per unit basis” to prevent those significant costs
differences between physically similar merchandise. Id.
Commerce relied on an analysis similar to a “DIFMER”
(“difference in physical characteristics” or “difference-in-
merchandise”) application, even though the terms of the
DIFMER regulation apply to calculating price, not costs. 4
Specifically, Commerce “recalculated [TPBI’s] costs by
averaging them in order to prevent large discrepancies in
costs between merchandise that was physically similar.”
Thai Plastic I, 853 F. Supp. 2d at 1273. Commerce then



   4    Commerce typically uses the DIFMER principle in
its analysis of what constitutes “a reasonable allowance”
for differences in the physical characteristics between
products sold in the United States and those sold in
foreign markets. See 19 C.F.R. § 351.411(b) (2006).
8                                    THAI PLASTIC BAGS   v. US



factored in these adjusted costs in determining the COP
and the CV for the “normal value” of the subject mer-
chandise. After calculating costs, Commerce also applied
a DIFMER adjustment pursuant to the DIFMER regula-
tion, explaining “[b]ecause we assigned the same conver-
sion costs to all models, any DIFMER adjustment[] we
calculate is based solely on the differences in the costs of
materials.” J.A. 5549.
    Commerce published the Final Results on March 8,
2011, in which it continued to reject TPBI’s reported
conversion costs, concluding that TPBI’s methodology did
not reasonably reflect actual costs because it “results in
products with few or minor physical differences having
significantly different [costs of manufacturing] assigned to
them.” J.A. 5545; see Thai Plastic I, 853 F. Supp. at 1271.
As a result, Commerce applied its alternate cost method-
ology, as “facts otherwise available” 5 pursuant to 19
U.S.C. § 1677e(a), and reallocated TPBI’s reported costs
by weight-averaging them across all product lines to
diminish the distortions in TPBI’s reported cost alloca-
tions. Based on its analysis, Commerce found TPBI’s
normal value exceeded its export price to the United




    5   Under 19 U.S.C. § 1677e(1)–(2),
    If—(1) necessary information is not available on
    the record, or (2) an interested party or any other
    person . . . fails to provide such information by the
    deadlines for submission of the information or in
    the form and manner requested, . . . [or] provides
    such information but the information cannot be
    verified . . . , [Commerce] shall . . . use the facts
    otherwise available in reaching the applicable de-
    termination under this subtitle.
THAI PLASTIC BAGS   v. US                               9



States, and it calculated the applicable antidumping duty
margin.
    TPBI challenged the Final Results before the CIT, al-
leging Commerce erroneously rejected its proposed cost-
allocation methodologies on the sole basis that TPBI’s
reported labor and overhead costs were not associated
with the physical characteristics of the merchandise. It
contended Commerce should have used TPBI’s reported
labor and overhead costs to calculate the COP and CV.
TPBI also argued that Commerce should have considered
other quantitative and qualitative factors in determining
the cost drivers, and that by failing to do so, Commerce’s
analysis in the Final Results was neither supported by
substantial evidence nor in accordance with law. TPBI
also made two arguments related to DIFMER: first, that
Commerce “misapplied the DIFMER standard . . . in
improperly weight-averaging conversion cost differences
across all products” and, second, “by calculating the
DIFMER adjustment to normal value based solely on cost
differences in materials.” J.A. 5577–78.
     On June 18, 2012, the CIT affirmed Commerce’s cal-
culation of normal value. Thai Plastic I, 853 F. Supp. 2d
at 1269. It also found that “TPBI did not offer any mean-
ingful evidence to explain why physical differences in the
CONNUM pairs resulted in such large differences in
conversion costs. As cost allocation based on physical
characteristics is a primary factor in Commerce’s analy-
sis, Commerce may adjust a company’s allocation method
to more reasonably reflect costs.” Id. at 1273. However,
the CIT remanded to Commerce for reconsideration of
multiple issues not relevant to this appeal. Commerce
then issued its Remand Results, which the CIT affirmed
on February 11, 2013. Thai Plastic Bags Indus. Co. v.
United States (Thai Plastic II), 895 F. Supp. 2d 1337,
1340, 1346 (Ct. Int’l Trade 2013).
10                                   THAI PLASTIC BAGS   v. US



    TPBI timely appealed the portions of the CIT’s deci-
sion in Thai Plastic I sustaining Commerce’s rejection of
TPBI’s cost-allocation methodologies and Commerce’s
reallocation of TPBI’s conversion costs. This court has
jurisdiction pursuant to 28 U.S.C. § 1295(a)(5) (2012).
                       DISCUSSION
                  I. Standard of Review
    “Congress did not specify a standard of review for this
court in reviewing judgments of the [CIT].” Nippon Steel
Corp. v. United States, 458 F.3d 1345, 1350 (Fed. Cir.
2006). Therefore, this court has adopted the “substantial
evidence” standard prescribed for the CIT at 19 U.S.C. §
1516a(b)(1)(B)(i), which requires upholding Commerce’s
determination unless it is “unsupported by substantial
evidence on the record, or otherwise not in accordance
with law.”
    “Although such review amounts to repeating the work
of the [CIT], we have noted that ‘this court will not ignore
the informed opinion of the [CIT].’” Diamond Sawblades
Mfrs. Coal. v. United States, 612 F.3d 1348, 1356 (Fed.
Cir. 2010) (quoting Suramerica de Aleaciones Laminadas,
C.A. v. United States, 44 F.3d 978, 983 (Fed. Cir. 1994)
(“Although reviewing anew the [International Trade
Commission’s] determination, this court will not ignore
the informed opinion of the [CIT]. That court reviewed
the record in considerable detail. Its opinion deserves due
respect.”)); Cleo Inc. v. United States, 501 F.3d 1291, 1296
(Fed. Cir. 2007) (“When performing a substantial evidence
review, . . . we give great weight to the informed opinion
of the [CIT]. Indeed, it is nearly always the starting point
of our analysis.” (internal quotation marks and citation
omitted)). To the extent a CIT decision is based on a
question of law, such as statutory interpretation, this
court’s review is de novo. F.lli De Cecco Di Filippo Fara
S. Martino S.p.A v. United States, 216 F.3d 1027, 1031
(Fed. Cir. 2000).
THAI PLASTIC BAGS   v. US                                  11



     In determining whether Commerce correctly con-
strued provisions of the antidumping statute, the court is
guided by Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837 (1984). If “Congress
has directly spoken to the precise question at issue . . . the
court, as well as the agency, must give effect to the unam-
biguously expressed intent of Congress.” Id. at 842–43. If
the statute is silent or ambiguous with respect to the
specific issue, the relevant question is whether Com-
merce’s interpretation “is based upon a permissible con-
struction of the statute.” Id. at 843. In other words,
Commerce’s “interpretation governs in the absence of
unambiguous statutory language to the contrary or un-
reasonable resolution of language that is ambiguous.” See
United States v. Eurodif S.A., 555 U.S. 305, 316 (2009)
(citation omitted).
        II. Commerce Was Not Required to Accept
                TPBI’s Reported Costs
    On appeal, TPBI argues Commerce improperly reject-
ed its labor and overhead costs in calculating the COP
and CV. TPBI insists its records “were kept in accordance
with [the] GAAP of Thailand.” Appellant’s Br. 11–12.
These production costs, according to TPBI, were then
allocated to each CONNUM using machine time and
production output as benchmarks. Commerce rejected
these reported costs as unreliable and unreflective of
production costs.
    The relevant statute provides that “[c]osts shall nor-
mally be calculated based on the records of the exporter or
producer of the merchandise, if such records are kept in
accordance with the [GAAP] of the exporting country . . .
and reasonably reflect the costs associated with the pro-
duction and sale of the merchandise.”           19 U.S.C.
§ 1677b(f)(1)(A) (emphasis added). TPBI contends that
under a Chevron prong-one analysis, the statute is unam-
biguous and directs Commerce to use TPBI’s own records,
12                                   THAI PLASTIC BAGS   v. US



which TPBI maintains are consistent with the GAAP of
Thailand. To TPBI, the plain language of the statute
“runs directly contrary to Commerce’s position that cost
differences among products must be supported by corre-
sponding differences in physical characteristics.” Appel-
lant’s Br. 20. Appellees counter that Commerce’s actions
were consistent with the statute and substantial evidence
supported Commerce’s finding that TPBI’s alternative
cost methodologies did not “reasonably reflect” TPBI’s
costs in producing and selling the subject merchandise.
The CIT determined Commerce’s finding that TPBI’s
methodologies produced “‘great variability’ in the costs of
similar items having nothing to do with the physical
aspects of the specific product” was supported by the
record. Thai Plastic I, 853 F. Supp. 2d at 1272.
      Section 1677b(f)(1)(A) does not require Commerce to
accept TPBI’s records. It requires only that reported costs
must “normally” be used if they are “based on the records
. . . kept in accordance with the [GAAP]” and “reasonably
reflect” the costs of producing and selling the merchan-
dise. Id. TPBI’s records met neither criterion. Commerce
reasonably interpreted its statutory obligation, and its
underlying findings are supported by substantial evi-
dence.
    First, there is no evidence that TPBI’s labor and over-
head records were kept in accordance with the GAAP of
Thailand. TPBI provided COP allocations based on
physical characteristics for direct material costs, but
claims that for the fixed and variable labor and overhead
costs there were no records reflecting the CONNUM-level
data Commerce requested since TPBI did not keep such
records. In its normal accounting system, TPBI calculates
a “single per Kg average for all labor and overhead for all
production, both subject and non-subject merchandise,
regardless of physical characteristics or actual costs” over
a three-month period. J.A. 193, 5545. In providing the
information Commerce requested, TPBI departed from its
THAI PLASTIC BAGS   v. US                                13



normal accounting practice because it found the proffered
records reflected neither the physical nor output differ-
ences for each product. TPBI fashioned new methodolo-
gies in response to Commerce’s questionnaires and failed
to demonstrate that the methodologies were in accordance
with the GAAP of Thailand. Indeed, TPBI submitted no
evidence of what constitutes the Thai GAAP. Therefore,
the reported costs were not “based on the records . . . kept
in accordance with the [GAAP],” as the statute requires.
See 19 U.S.C. § 1677b(f)(1)(A).
    Second, Commerce properly found that TPBI’s labor
and overhead costs did not “reasonably reflect” production
costs.   In determining whether production costs are
higher than home market sales, Commerce “calculate[s]
costs consistent with the model matching criteria it devel-
ops [at the] outset of an investigation or review.” See
Antidumping Duties; Countervailing Duties: Notice of
Proposed Rulemaking and Request for Public Comments,
61 Fed. Reg. 7,308, 7,339 (Dep’t of Commerce Feb. 27,
1996) (“Preamble to Proposed Rules”). Congress has also
stated that “costs shall be allocated using a method that
reasonably reflects and accurately captures all of the
actual costs incurred in producing and selling the product
under investigation or review.” Statement of Administra-
tive Action accompanying the Uruguay Round Agree-
ments Act, No. 103-316, at 834–35 (1994) (“Statement of
Administrative Action”), reprinted in 1994 U.S.C.C.A.N.
4040, 4172.
    TPBI argues that because of § 1677b(f)(1)(A)’s lan-
guage that “costs shall normally be calculated based on
the records of the exporter or producer of the merchan-
dise,” Commerce should have accepted its records based
on the machine time and production output benchmarks.
TPBI asserted to Commerce that its reported costs based
on the new methodologies were “directly attributable to
the physical differences of the products.” J.A. 5794.
14                                   THAI PLASTIC BAGS   v. US



    Contrary to this assertion, Commerce discovered that
nine CONNUM pairs were “very similar in terms of
physical characteristics” but had substantial differences
in costs. J.A. 4803. Commerce accordingly asked TPBI to
“explain and demonstrate why the reported costs for these
two models are so different.” Id. Contradicting its own
contention that the reported costs were “directly attribut-
able” to physical differences, TPBI argued that several
variables other than physical characteristics accounted
for the cost differences between the CONNUM pairs,
including whether the CONNUM (1) was produced at a
certain factory (because one factory is more efficient than
the other); (2) generated more or less waste; (3) required
more or less colors, ink, or solvents; (4) was produced in
smaller or larger quantities; (5) was produced off-line or
on-line; and (6) required transparent or colored bags.
TPBI also argued that much of the total production of the
foreign like merchandise and the subject merchandise
was produced at both of its factories, and thus there was
no cost-shifting between the foreign and domestic mar-
kets.
    Commerce agreed “there are many factors that may
influence cost differences between products,” J.A. 5546
n.3, but maintained its position that allocating costs
based on physical characteristics is “most certainly” the
primary factor in a cost analysis. J.A. 5546 n.3. There-
fore, Commerce found the costs reported by TPBI could
not be used because they did not “reasonably reflect the
costs associated with the production and sale of the mer-
chandise.” See 19 U.S.C. § 1677b(f)(1)(A).
    For instance, in CONNUM pair A, “the only difference
in physical characteristics between the two models was
the slight difference in the percentage of color concentrate
contained in each product.” J.A. 5544. Despite this small
difference, the machine hours given for the two products
were significantly different. Commerce properly found it
was unreasonable that the difference in color concentra-
THAI PLASTIC BAGS   v. US                               15



tion would create such divergent results in machine
hours. Additionally, the fact that “most of the CONNUM
pairs were made at the same facility,” Thai Plastic I, 853
F. Supp. 2d at 1272, belied TPBI’s contention that the
factory in which the CONNUM was produced had an
impact on the reported costs.
     Thus, Commerce found TPBI’s methodologies artifi-
cially shifted the conversion costs of the CONNUMs sold
in the home market and in the United States. A method-
ology “that shifts costs unreasonably from U.S. sales to
home-market sales can heavily influence the Depart-
ment’s entire antidumping calculation.” J.A. 5545. “As a
general rule, an agency may . . . reject the records if
accepting them would distort the company’s true costs.”
Thai Pineapple Pub. Co. v. United States, 187 F.3d 1362,
1366 (Fed. Cir. 1999).
    Similarly, TPBI argues that “Commerce, inexplicably,
ignored th[e] record evidence” that differing production
quantities accounted for the discrepancies in price within
the CONNUM pairs. Appellant’s Br. 35. Commerce in
fact acknowledged TPBI’s argument that its conversion
costs varied because of, inter alia, whether a CONNUM
was produced in “larger or smaller quantities,” J.A. 5544,
but properly determined that production quantities were
not physical characteristics that would drive costs.
    Because TPBI departed from its normal accounting
principles and failed to base its costs on physical charac-
teristics, Commerce relied on substantial evidence in
determining the reported conversion costs were distortive
and did not reasonably reflect the actual costs. Commerce
was therefore not required to rely upon those records.
 III. Commerce Reasonably Reallocated the Conversion
                       Costs
   After rejecting TPBI’s reported costs as distortive,
Commerce reallocated the costs by weight-averaging
16                                    THAI PLASTIC BAGS   v. US



conversion costs evenly across all CONNUMs.            The
Statement of Administrative Action provides that if
Commerce determines that costs reported by a respondent
are “shifted away from the production of the subject
merchandise, or the foreign like product,” Commerce has
the authority to “adjust costs appropriately to ensure that
[the costs] are not artificially reduced.” Statement of
Administrative Action at 4172; see also J.A. 5099, 5217.
It was proper for Commerce to exercise its authority to
make adjustments to the distortive costs TPBI reported.
The CIT found that Commerce properly adjusted the
reported costs in order to “ensure that they were not
artificially reduced and distortive of true costs.” Thai
Plastic I, 853 F. Supp. 2d at 1273.
     TPBI contends that “[e]ven if this Court finds some
ambiguity in the statute, under step two of the Chevron
analysis, Commerce’s application of a physical character-
istics test to determine reasonable production costs is an
impermissible statutory interpretation.” Appellant’s Br.
21. Commerce supported its emphasis on physical differ-
ences in part by analogizing to the DIFMER analysis in
19 C.F.R. § 351.411(b).           See also 19 U.S.C.
§ 1677b(a)(6)(C)(ii).    Commerce typically uses the
DIFMER principle in its analysis of what constitutes “a
reasonable allowance” for differences in the physical
characteristics between products sold in the United States
and those sold in foreign markets. See 19 C.F.R. §
351.411. That regulation states, in part:
     In comparing United States sales with foreign
     market sales, the Secretary may determine that
     the merchandise sold in the United States does
     not have the same physical characteristics as the
     merchandise sold in the foreign market, and that
     the difference has an effect on prices. In calculat-
     ing normal value, the Secretary will make a rea-
     sonable allowance for such differences.
THAI PLASTIC BAGS   v. US                                17



Id. § 351.411(a).      TPBI argues Commerce’s use of
DIFMER to differentiate products within the home mar-
ket is inconsistent with this regulatory authority.
    TPBI misconstrues Commerce’s actions.        Though
Commerce focused on physical characteristics, it did not
apply DIFMER as it appears in 19 C.F.R. § 351.411. As
the CIT explained, “Commerce also has a practice of
comparing cost allocations using physical characteristics
of the product in its determination of whether a compa-
ny’s cost allocation strategy reasonably reflects actual
costs.” Thai Plastic I, 853 F. Supp. 2d at 1273. Com-
merce applied this latter practice in reallocating the
conversion costs.
     TPBI argues Commerce’s reliance on physical charac-
teristics is also inconsistent with subsection (b) of the
DIFMER regulation, which states that Commerce, in
determining the DIFMER adjustment, “will consider only
differences in variable costs associated with the physical
differences.” 19 C.F.R. § 351.411(b). To TPBI, the regula-
tion’s statement that Commerce “will not consider differ-
ences in [COP] when compared merchandise has identical
physical characteristics,” id. § 351.411(b), anticipates the
existence of COP differences unrelated to physical differ-
ences and prohibits considering or adjusting for them.
This, TPBI contends, “contradicts Commerce’s position
that it may adjust for cost differences that it finds are
unrelated to physical characteristics.” Appellant’s Br.
24. 6




   6   This argument is inconsistent with TPBI’s earlier
arguments, supra p. 14–15, that Commerce should have
considered TPBI’s machine hours allocation criteria which
are unrelated to physical characteristics.
18                                   THAI PLASTIC BAGS   v. US



    Commerce recognized the intended context of the
DIFMER regulation, and acknowledged it “is an adjust-
ment to price and not costs such that the provision does
not apply directly, as a matter of law, to our analysis of
costs.” J.A. 5546 n.2. Commerce nonetheless explained
that “the necessity of using physical characteristics in
making comparisons is key to both” a DIFMER analysis
under § 351.411(b) as well as the below-cost analysis.
J.A. 5546 n.2. In the Final Results, Commerce stated that
its focus on physical characteristics for costs was “sup-
ported by [19 U.S.C. § 1677b(a)(6)(c)(ii)],” and that “[s]uch
comparison criteria are logical because physical charac-
teristics provide [Commerce] with a dependable, measur-
able means of comparing two different products sold in
two different markets.” J.A. 5546.
    By requiring that conversion costs reflect cost differ-
ences attributable to different physical characteristics,
Commerce “ensure[d] that the product-specific costs . . .
reflect[ed] the costs incurred by [TPBI] to obtain the
corresponding product’s physical characteristics.” J.A.
5546. As explained above, physical differences in prod-
ucts “generally account” for major differences in costs.
See Preamble to Proposed Rules, 61 Fed. Reg. at 7339
(discussing proposed 19 C.F.R. § 351.406). Reliance on
physical characteristics, because of its ability to promote
consistency, is a predictable methodology that is admin-
istrable across all investigations and administrative
reviews.
     Here, as the CIT explained, consideration of physical
characteristics is “a primary factor in Commerce’s analy-
sis.” Thai Plastic I, 853 F. Supp. 2d at 1273. When other
factors influence cost allocation, it is customary for Com-
merce to “adjust a company’s reported allocation method-
ology to reflect costs based solely on physical
characteristics.” J.A. 5098 The relevant statute states
that Commerce must “consider all available evidence on
the proper allocation of costs,” but leaves to Commerce’s
THAI PLASTIC BAGS   v. US                                 19



discretion both the meaning of “proper allocation” and
what factors can drive the assignments of those alloca-
tions. See 19 U.S.C. § 1677b(f)(1)(A).
    “[W]e accord substantial deference to Commerce’s
statutory interpretation, as [Commerce] is the master of
the antidumping laws.” Fujitsu Gen. Ltd. v. United
States, 88 F.3d 1034, 1038 (Fed. Cir. 1996) (internal
quotation marks and citation omitted).        Commerce’s
methodology is “presumptively correct,” and TPBI has not
shown that Commerce lacked authority to adjust costs
based on differences in physical characteristics. See id.
TPBI does not offer any persuasive evidence for the
proposition that Commerce cannot consider physical
characteristics in both a cost analysis and a price analy-
sis. As a practical matter, it would distort the overall
antidumping analysis if the physical characteristics used
for a price analysis did not reflect the same physical
characteristics used in a COP analysis.
    TPBI nonetheless asserts that Commerce’s analysis in
the Final Results is contradicted by the text of 19 C.F.R.
§ 351.407(c), which it contends obligated Commerce to
perform a “comprehensive examination of quantitative
and qualitative production factors before revising or
dismissing a respondent’s cost allocation.” Appellant’s Br.
26. That regulation, however, states only that Commerce
“may take into account production quantities, relative
sales values, and other quantitative and qualitative
factors associated with the manufacture and sales of the
subject merchandise and foreign like product” in deter-
mining the appropriate method for allocating costs among
products. 19 C.F.R. § 351.407(c) (emphasis added). The
language of the regulation makes clear that Commerce
may take factors other than physical characteristics into
account, but is not required to do so. TPBI points to no
statutory or regulatory requirement that Commerce is
obliged to “address all potential cost factors” in its below-
cost analysis. See Thai Plastic I, 853 F. Supp. 2d at 1274.
20                                   THAI PLASTIC BAGS   v. US



    TPBI also contends that Commerce’s reallocation
methodology is unsupported by substantial evidence,
because Commerce “focused on a limited sampling, i.e.,
nine similar pairs of CONNUMs, out of over 100 CON-
NUMs.” Appellant’s Br. 34. TPBI is correct that Com-
merce looked only to nine out of one hundred CONNUM
pairs, however, TPBI does not offer any evidence or
specific argument that this sampling biased or corrupted
Commerce’s analysis. This court has recognized that
“Congress has implicitly delegated authority to Commerce
to determine and apply a model-match methodology
necessary to yield ‘such or similar’ merchandise under the
statute,” which “empowers Commerce to choose the man-
ner in which ‘such or similar’ merchandise shall be select-
ed.” Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209
(Fed. Cir. 1995) (discussing “such or similar merchandise”
under 19 U.S.C. 1677(16) (1988), which is now termed
“foreign like product,” id. § 1677(16) (2006)). Accordingly,
TPBI’s argument is unpersuasive.
    Finally, according to TPBI, Commerce incorrectly re-
lied on three past administrative reviews7 which involved
reallocation of reported costs. Commerce referenced the
three reviews in support of its decision to reject TPBI’s
reported cost-allocation methodologies as distortive “when
such cost differences are attributable to factors beyond
physical characteristics.” J.A. 5547. Relevant to its



     7  Stainless Steel Bar from the United Kingdom, 72
Fed. Reg. 43,598 (Dep’t of Commerce Aug. 6, 2007); Hot-
Rolled Flat-Rolled Carbon-Quality Steel Products from
Japan, 64 Fed. Reg. 24,329 (Dep’t of Commerce May 6,
1999); Small Diameter Circular Seamless Carbon and
Alloy Steel, Standard, Line and Pressure Pipe from Bra-
zil, 60 Fed. Reg. 31,960 (Dep’t of Commerce June 19,
1995).
THAI PLASTIC BAGS   v. US                                21



analysis, Commerce cited the reviews as examples of
cases in which Commerce made adjustments when the
respondent’s reported cost differences were not attributa-
ble to physical characteristics of the merchandise. As the
CIT found, “[d]espite TPBI’s argument that each of the
cited cases is distinguishable, Commerce analyzed TPBI’s
costs in line with the agency practice of considering
whether costs are allocated according to physical charac-
teristics of the product as a primary factor.” Thai Plastic
I, 853 F. Supp. 2d at 1275.
       IV. Commerce Reasonably Applied DIFMER
    When calculating normal value, Commerce utilizes a
DIFMER standard in reviewing what constitutes a rea-
sonable allowance for differences in the physical charac-
teristics of products sold in the United States and in
foreign markets. See 19 C.F.R. § 351.411. Here, after
Commerce reallocated TPBI’s overhead and labor costs, it
also conducted a DIFMER analysis between subject
merchandise in the home market and the export market,
pursuant to 19 C.F.R. § 351.411. In this analysis, Com-
merce determined it would not factor the direct labor and
variable costs into the calculated DIFMER adjustments.
Instead, Commerce calculated DIFMER adjustments
“based solely on differences in the costs of materials.” 8
J.A. 5549. TPBI argues that Commerce not only improp-
erly rejected its conversion costs, it “misapplied the
DIFMER adjustment again when attempting to utilize it
in the proper context,” that is, after calculating COP.


   8    Title 19 U.S.C. § 1677b(e)(1) requires that CV be
calculated in part, from “the cost of materials and fabrica-
tion or other processing of any kind employed in produc-
ing the merchandise, during a period which would
ordinarily permit the production of merchandise in the
ordinary course of business.”
22                                    THAI PLASTIC BAGS   v. US



Appellant’s Br. 30. DIFMER, TPBI contends, is meant to
adjust for all variable costs, not merely the cost of materi-
als. Thus, to TPBI,
     Commerce’s weight-averaging of per-unit direct
     labor, variable overhead and fixed overhead costs
     across all products in calculating conversion costs,
     actually distorted its subsequent DIFMER ad-
     justment to normal value, because Commerce’s
     latter adjustment only accounted for differences in
     cost of materials, not labor and other variable
     costs.
Id. at 32. TPBI essentially argues that by reallocating the
conversion costs evenly across all products, the DIFMER
adjustment would be limited to differences in reported
material among products, effectively distorting the
DIFMER adjustment. Commerce forthrightly acknowl-
edged that “[i]n fact, our reallocation does disregard the
DIFMER adjustment with respect to conversion costs.”
J.A. 5549. Commerce determined that factoring in labor
and variable costs in the DIFMER adjustments was
outweighed by the need to adjust for “grossly disparate”
distortions in TPBI’s proposed allocation methodologies.
J.A. 5549.
    In a Policy Bulletin, Commerce explained that when
reported “cost differences are high but the actual physical
differences appear small,” Commerce should determine
whether the reported differences in cost indicate “condi-
tions unrelated to the physical difference.” Import Ad-
ministration Policy Bulletin, No. 92.2 (Dep’t of Commerce
July 29, 1992). “If the costs of the physical difference
cannot be isolated or it is not reasonably clear that the
differences in production cost are related to the physical
difference, no adjustment should be made.” Id. As dis-
cussed above, TPBI’s reported conversion costs were not
based on physical characteristics, and it was reasonable to
THAI PLASTIC BAGS   v. US                            23



limit the DIFMER adjustment to differences in material
costs.
                            CONCLUSION
   In light of the foregoing, the CIT correctly affirmed
Commerce’s rejection of TPBI’s allocation methodologies
and its reallocation of TPBI’s conversion costs.
                            AFFIRMED
