                          Slip Op. 12 -22

           UNITED STATES COURT OF INTERNATIONAL TRADE

LIBERTY FROZEN FOODS PRIVATE,
LIMITED, et al.,

                 Plaintiffs,

          v.

UNITED STATES,
                                         Before: Donald C. Pogue,
                 Defendant,              Chief Judge

          and
                                         Consol.1 Court No. 10-00231
AD HOC SHRIMP TRADE ACTION
COMMITTEE, AMERICAN SHRIMP
PROCESSORS ASSOCIATION, and
DEVI SEA FOODS LIMITED,

                 Defendant-
Intervenors.


                               OPINION

[Affirming Department of Commerce’s remand redetermination]

                                            Dated: February 21, 2012


     Lizbeth R. Levinson and Ronald M. Wisla, Kutak Rock LLP of
Washington DC, for the Plaintiffs Liberty Frozen Foods Private,
Limited; Devi Marine Food Exports Private, Limited; Kader Exports
Private, Limited; Kader Investment and Trading Company, Private,
Limited; Liberty Oil Mills Limited; Premier Marine Products; and
Universal Cold Storage Private, Limited.

     Joshua E. Kurland, Trial Attorney, Commercial Litigation
Branch, Civil Division, U.S. Department of Justice, of
Washington, DC, for Defendant. With him on the briefs were Tony
West, Assistant Attorney General, Jeanne E. Davidson, Director,

     1
       This action was consolidated with Court No. 10-00237,
which was subsequently dismissed. Order, Mar. 1, 2011, ECF No.
53.
Consol. Court No. 10-00231                                    Page 2

and Patricia M. McCarthy, Assistant Director. Of counsel on the
briefs was Scott D. McBride, Office of the Chief Counsel for
Import Administration, U.S. Department of Commerce, of
Washington, DC.

     Andrew W. Kentz, Jordan C. Kahn, Nathaniel J. Maandig
Rickard, and Kevin M. O’Connor, Picard Kentz & Rowe LLP, of
Washington, DC, for Defendant-Intervenor Ad Hoc Shrimp Trade
Action Committee.

     Terence P. Stewart, Geert M. De Prest and Elizabeth J.
Drake, Stewart and Stewart, of Washington DC, and Edward T.
Hayes, Leake & Andersson, LLP, of New Orleans, LA, for the
Defendant-Intervenor American Shrimp Processors Association.

     Ronald M. Wisla, Kutak Rock LLP, of Washington, DC, for the
Defendant-Intervenor Devi Sea Foods Limited.


     Pogue, Chief Judge: This case returns to court following

remand by Liberty Frozen Foods Pvt., Ltd. v. United States, __

CIT __, 791 F. Supp. 2d 1249 (2011) (“Liberty I”).   In Liberty I,

the Court reviewed the final results of the fourth administrative

review of certain frozen warmwater shrimp from India,2 and

ordered the Department of Commerce (“Commerce” or “the

Department”) to “further explain or amend, its decision to

consider the full amount of [Liberty Frozen Foods’] March 2008

bad debt write-off” in light of the apparently inconsistent

decisions in Saccharin from the People’s Republic of China, 68



     2
       Certain Frozen Warmwater Shrimp from India, 75 Fed. Reg.
41,813 (Dep’t Commerce July 19, 2010) (final results of
antidumping duty administrative review, partial recission of
review, and notice of revocation of order in part) (“Final
Results”), and accompanying Issues & Decision Memorandum, A-533-
840, ARP 08–09 (July 13, 2010), Admin. R. Pub. Doc. 310 (“I & D
Mem.”) (adopted in Final Results, 75 Fed. Reg. at 41,815).
Consol. Court No. 10-00231                                   Page 3

Fed. Reg. 27,530 (Dep’t Commerce May 20, 2003) (notice of final

determination of sales at less than fair value) (“Saccharin from

PRC”)3 and Circular Welded Non-Alloy Steel Pipe from the Republic

of Korea, 75 Fed. Reg. 34,980 (Dep’t Commerce June 21, 2010)

(final results of the antidumping duty administrative review)

(“Pipe from Korea II”).4 Liberty I, __ CIT at __, 791 F. Supp. 2d

at 1256–57.   In the Final Results of Redetermination Pursuant to

Court Remand, ECF No. 86 (“Remand Results”), Commerce reaffirmed

its decision to include the full amount of the bad debt write-off

in the calculation of indirect selling expenses consistent with

its general practice of basing “indirect selling expenses on the

amounts recorded in a company’s books and records during the

period under review.” Remand Results at 4.   Commerce

distinguished Saccharin from PRC and Pipe from Korea II as

exceptions to the general rule applicable to facts not present in

this case. Id. at 6–9.

     As discussed below, the court affirms the Remand Results as

neither arbitrary nor contrary to law because the Department

sufficiently explains why its decision is consistent with

Saccharin from PRC and Pipe from Korea II.


     3
       See also Issues & Decision Memorandum, A-570-878, (May 20,
2003) (“Saccharin from PRC I & D Mem.”) (adopted in Saccharin
from PRC, 68 Fed. Reg. at 27,530).
     4
       See also, Issues & Decision Memorandum, A-580-809, ARP
07–08 (June 14, 2010) (“Pipe from Korea II I & D Mem.”) (adopted
in Pipe from Korea II, 75 Fed. Reg. at 34,981).
Consol. Court No. 10-00231                                    Page 4

     The court has jurisdiction pursuant to 28 U.S.C. § 1581(c)

and § 516A(a)(2) of the Tariff Act of 1930, as amended, 19 U.S.C.

§ 1516a(a)(2) (2006).5



                             BACKGROUND

     The facts necessary to the disposition of the remand are the

following:6

     Liberty Frozen Foods (“LFF”) was chosen as a mandatory

respondent for the fourth administrative review of certain frozen

warmwater shrimp from India. Final Results, 75 Fed. Reg. at

41,813.    The period of review (“POR”) for the fourth

administrative review was February 2008 to January 2009. Id.

During the POR, in March 2008, LFF wrote-off the value of a sale

for which full payment had never been received (the “bad debt

write-off”) as a year-end expense.7 I & D Mem. Cmt. 5 at 17–18.

When calculating LFF’s indirect selling expenses, Commerce

included the full value of this bad debt write-off. Id.

     LFF challenged inclusion of the bad debt write-off’s full

value before Commerce, Id. Cmt. 5 at 20, and then before this



     5
       All subsequent citations to the Tariff Act of 1930, as
amended, are to Title 19 of the U.S. Code, 2006 edition.
     6
         Familiarity with the court’s prior decision is presumed.
     7
       LFF’s 2007–2008 fiscal year ran from February 2007 to
March 2008.
Consol. Court No. 10-00231                                   Page 5

Court, arguing that (1) the bad debt write-off should not be

included in indirect selling expenses because it related to a

transaction that occurred prior to the POR, and (2) if the bad

debt write-off was included it should be prorated because LFF’s

fiscal year and the POR overlapped by only two months. Liberty I,

__ CIT at __, 791 F. Supp. 2d at 1253–57.    The Court affirmed the

Department’s rejection of LFF’s first argument, but, in light of

apparently contradictory practices in Saccharin from PRC and Pipe

from Korea II, remanded the Final Results to Commerce for further

explanation of why the bad debt write-off was not prorated. Id.

at 1255–57.



                        STANDARD OF REVIEW

     “The court will sustain the Department’s determination upon

remand if it complies with the court’s remand order, is supported

by substantial evidence on the record, and is otherwise in

accordance with law.” Jinan Yipin Corp. v. United States, __ CIT

__, 637 F. Supp. 2d 1183, 1185 (2009) (citing 19 U.S.C.

§ 1516a(b)(1)(B)(i)).



                             DISCUSSION

     As recognized in Liberty I, “an unexplained inconsistency in

the application of a methodology is unlawful agency action.”

Liberty I, __ CIT at __, 791 F. Supp. 2d at 1256 (citing SKF USA
Consol. Court No. 10-00231                                    Page 6

Inc. v United States, 263 F.3d 1369, 1382 (Fed. Cir. 2001);

Pakfood Pub. Co. v. United States, __ CIT __, 724 F. Supp. 2d

1327, 1334 (2010)).   Following remand, the issue presented is

whether Commerce has shown that its Remand Results are in

accordance with law by sufficiently explaining the apparent

inconsistencies between its methodology for calculating indirect

selling expenses in this case and the methodologies employed in

Saccharin from PRC and Pipe from Korea II.

     Commerce first argues that its standard methodology for

calculating indirect selling expenses, as exhibited in this case,

is not to parse expenses into POR and non-POR components.

     When determining the total expenses incurred, the
     Department is not concerned with expenses recorded in
     specific months but rather the aggregate amount
     incurred over the POR. Thus, as a general rule, the
     Department does not attempt to split expenses that are
     recorded on a semi-annual or annual basis into monthly
     amounts, nor does it analyze whether the component
     expenses are recorded in the months that the underlying
     activity took place. . . . Just as companies normally
     do not reflect such annual adjustments in quarterly,
     monthly or weekly terms, the Department, as a rule,
     does not attempt to pro-rate such adjustments . . . .

Remand Results at 4–5 (footnote omitted).    Rather, Commerce takes

those expenses “actually recorded in the books and records of the

respondent during the period of review,” aggregates those

expenses, and “then divide[s] those expenses by the total value

of sales during the same period of time.” Def.’s Resp. Pls.’

Comments Regarding Remand Results at 15, ECF No. 97 (“Def.’s
Consol. Court No. 10-00231                                    Page 7

Reply Br.”).   This account accurately describes the methodology

employed by Commerce in this case: (1) LFF recorded the bad debt

write-off within the POR; (2) Commerce aggregated the bad debt

write-off with the other expenses recorded during the POR; and

(3) Commerce then divided the aggregate by the total value of

sales for the POR.8

     However, as Commerce explains in the Remand Results, the

standard methodology is inadequate when the POR is incongruent

with the period over which an expense is realized.    It is this

fact that distinguishes Saccharin from PRC and Pipe from Korea II

as exceptions to the standard methodology.9


     8
       LFF asserts in its Comments on the Remand Results that its
depreciation expenses from the two fiscal years encompassing the
POR were prorated to arrive at one year’s worth of depreciation
expenses in a method similar to that used in Pipe from Korea II,
see infra pp. 10–11. Pl.’s Comments on Remand Results at 10, ECF
No. 88 (“Pl.’s Comments”). However, LFF did not provide a
citation to the relevant records, which would permit the court to
review this claim. Therefore, the court will not consider this
argument.
     9
       The court notes that in cases where an exception does not
apply, such as this one, Commerce’s standard methodology does not
permit it to capture expenses recorded after the POR has ended.
Commerce acknowledged as much in the Remand Results:

     LFF’s fiscal year runs from April through March. Thus,
     any adjusting entries made in March 2008 (at the end of
     the first fiscal year included in the POR) should be
     included in LFF’s costs; any adjusting entries made in
     March 2009 ([at the end of] the [fiscal] year in which
     the remaining portion of the POR is included) should
     not be (and were not) reported.

Remand Results at 5 n.4.     In light of this fact, the court finds
Consol. Court No. 10-00231                                    Page 8

     In Saccharin from PRC, Commerce prorated a bad debt expense

recorded as a year-end expense outside the six-month period of

investigation (“POI”).10    In cases like Saccharin from PRC that

involve a six-month POI/POR year-end expenses may go entirely

uncaptured using the standard methodology for calculating

indirect selling expenses.    This is not because relevant expenses

are recorded outside the POI/POR; rather, it is because the

POI/POR encompasses a span of time that does not overlap with any

year-end recording periods. See Remand Results at 7, 7 n.5.




unpersuasive Commerce’s argument that including the full expense
when it is recorded is necessary to capture expenses relevant to
the POR. Had LFF waited another year, until March 2009, to
write-off its bad debt expense, the expense would not have been
captured because LFF was not chosen as a mandatory respondent in
the fifth administrative review of this Order. See Certain Frozen
Warmwater Shrimp from India, 76 Fed. Reg. 41,203, 41,205 (Dep’t
Commerce July 13, 2011) (final results of antidumping duty
administrative review, partial rescission, and final no shipment
determination). Thus, while it is true on the facts of this case
that “if these expenses are not included in the analysis for the
period under consideration, they would never be captured in the
calculation of LFF’s margin although they clearly pertain,”
Remand Results at 16, Commerce’s chosen methodology is no
guarantee that an expense which pertains to the POR will be
captured during that POR.
     10
          Commerce noted in Saccharin from PRC that,

     Suzhou booked bad debt into its financial statements at the
     end of the fiscal year (outside the POI). However, this
     choice was made solely as a matter of completing the books
     for the year. We will divide these expenses by two and
     attribute half to the POI (the first half of the calendar
     year).

Saccharin from PRC I & D Mem. Cmt. 10 at 20 n.5.
Consol. Court No. 10-00231                                    Page 9

Because a six-month POI/POR may not capture any year-end

expenses, an exception to the standard methodology that permits

inclusion of certain expenses recorded outside the POI/POR is

necessary to prevent a distortive undercounting due to expenses

being “omitted completely from the reported costs ‘solely as a

matter of [when the respondent completed its books for the

year].’” Id. at 7 (alternation in original) (quoting Saccharin

from PRC I & D Mem. Cmt. 10 at 20 n.5).

     A second exception is then necessary to prevent overstating

the value of year-end expenses in calculations involving a

truncated POI/POR, i.e., to prevent including a full year’s

expenses in a six-month POI/POR.   Therefore, the year-end

expenses are properly, and exceptionally, prorated in such cases

to prevent a distortion through overcounting.

     Commerce clearly articulated the Saccharin from PRC

exception in footnote seven of the Remand Results:

     If those companies [that record depreciation expenses
     only at the end of the fiscal year] were investigated
     or reviewed and the POI or POR was less than a year,
     the Department would not include a full year’s worth of
     depreciation expenses in its calculations. Rather, if
     the truncated POI/POR precedes the month in which the
     companies’ year end adjustments were made, the
     Department would attribute, on a pro rata basis, a
     portion of these expenses to the POI/POR because it
     would be distortive to include no depreciation expenses
     in the analysis. Similarly, if the companies’ fiscal
     year ended within a truncated POI/POR, it would be
     distortive to include a full year’s depreciation to
     that truncated POI/POR. In that situation, the
     Department would therefore include only a portion of
Consol. Court No. 10-00231                                 Page 10

     the depreciation expenses.

Id. at 7 n.7.

     LFF reads footnote seven differently, concluding that “[t]he

Department’s argument that it does not parse expenses into POR

and non-POR elements is directly contradicted by its own

examples.” Pl.’s Comments at 4.   LFF’s argument is misguided on

two accounts: (1) LFF reads the exception as the rule, and (2) it

fails to appreciate the significance of the modifier “truncated.”

As discussed above, a truncated POR presents   circumstances that

require exceptions, including both provisions for capturing year-

end expenses to prevent undercounting distortions and prorating

year-end expenses to prevent overcounting distortions.

     Pipe from Korea II presents a distinct but related

difficulty for the standard methodology.   Unlike Saccharin from

PRC, Pipe from Korea II did not involve a truncated POR.   The POR

was one year, but the record contained two years worth of bad

debt expense data.   Thus, as Commerce plainly and accurately

stated in that case, “including the entire allowance of doubtful

accounts from both years would result in overstating the bad debt

allowance.” Pipe from Korea II I & D Mem. Cmt. 4 at 22.    With two

years of bad debt expenses on the record of a one year POR,

Commerce prorated the two years of data to arrive at a non-

distortive amount consistent with the POR — a reasonable
Consol. Court No. 10-00231                                     Page 11

deviation from the standard methodology on these facts.11

       Nor does LFF’s reliance on Certain Preserved Mushrooms from

India, 68 Fed. Reg. 41,303 (Dep’t Commerce July 11, 2003) (final

results of antidumping duty administrative review) (“Mushrooms

from India”),12 undermine Commerce’s reasoned distinctions in

Saccharin from PRC and Pipe from Korea II. See Pl.’s Comments at

4–5.    In Mushrooms from India, a respondent requested that

Commerce offset its financial expenses by the full amount of a

recorded gain from debt restructuring. Mushrooms from India I & D

Mem. Cmt. 13 at 20.   Commerce declined to credit respondent the

entire amount of the gain during the POR at issue, arguing that

       [i]t is the Department’s practice to offset financial
       expenses only with the current portion of gain on debt
       restructure. . . . The benefit of the restructured
       debt covers multiple accounting periods through the
       maturity of the loan. [Respondent’s] reporting


       11
       Commerce also distinguishes Pipe from Korea II from the
instant case on the basis that Pipe from Korea II involved a bad
debt provision, whereas the instant case involves a bad debt
write-off: “[T]here is a meaningful difference between a
provision for bad debt and a one-time write-off. . . . As a set-
aside in anticipation of periodic expenses, rather than a one-
time recognition of a specific expense, a provision is more
appropriate to pro-rate than a direct write-off.” Def.’s Reply
Br. at 11. The court need not decide whether Commerce’s
statement is accurate to resolve the case before it. Rather, it
is sufficient to note that Pipe from Korea II is distinguishable
from the instant case both because it involved a bad debt
provision and because the two years of bad debt expense data
presented a danger of double counting.
       12
       See also the accompanying Issues & Decision Memorandum,
A-533-813, ARP 01–02 (July 11, 2003) (“Mushrooms from India I & D
Mem.”) (adopted in Mushrooms from India, 68 Fed Reg. at 41,303).
Consol. Court No. 10-00231                                    Page 12

        methodology is distortive in that it recognizes the
        entire gain in the year of restructure, when, in fact,
        multiple accounting periods will benefit from the
        restructured debt.

Id. (citations omitted).

        The reasoning in Mushrooms from India is consistent with the

Department’s position articulated in the Remand Results of this

case.    Like Saccharin from PRC and Pipe from Korea II, in

Mushrooms from India the financial data at issue (here a gain

rather than an expense) was not coterminous with the POR.

Because the gain related to a term (“multiple accounting

periods”) that exceeded the POR, Commerce “included as an offset

to the financial expenses the portion of the gain that is current

to this POR.” Id. Cmt. 13 at 20–21.     Contrary to LFF’s argument,

Mushrooms from India provides further support to the Department’s

articulation of its standard methodology and the necessity of

certain exceptions, as also recognized in Saccharin from PRC and

Pipe from Korea II.

        With its standard methodology for calculating indirect

selling expenses, Commerce seeks to capture and aggregate one

year’s worth of such expenses to accurately reflect the one year

length of the POR.    Thus, when year-end expenses are recorded

during the POR, it is reasonable for Commerce to include the full

expense.    However, when the expense is incongruous with the POR,

it is reasonable and consistent for Commerce to avoid distortion
Consol. Court No. 10-00231                                   Page 13

by adjusting its policy to prevent either undercounting or

overcounting.   The Remand Results are consistent with this

reasonable explanation.


                             CONCLUSION

     For all the foregoing reasons, the Department’s Final

Results, 75 Fed. Reg. 41,813, as explained by the Remand Results,

will be affirmed.

     Judgment will be entered accordingly.

     It is SO ORDERED.




                                           /s/ Donald C. Pogue
                                      Donald C. Pogue, Chief Judge


Dated: February 21, 2012
     New York, New York
