                                          Slip Op. No. 18-176

                UNITED STATES COURT OF INTERNATIONAL TRADE


QINGDAO QIHANG TYRE CO., LTD.,
et al.,

                            Plaintiffs,
                                                    Before: Timothy C. Stanceu, Chief Judge
                v.
                                                    Consol. Court No. 16-00075
UNITED STATES,

                           Defendant.


                                              OPINION

[Sustaining decisions in a determination issued in response to court order in a review of an
antidumping duty order on off-the-road tires from the People’s Republic of China]

                                                                    Dated:December , 2018

       Ned H. Marshak, Grunfeld Desiderio Lebowitz Silverman & Klestadt, LLP, of
Washington, D.C., for plaintiffs Qingdao Qihang Tyre Co., Ltd. and Qingdao Free Trade Zone
Full-World International Trading Co., Ltd. With him on the brief were Brandon M. Petelin and
Jordan C. Kahn.

       Richard P. Ferrin, Drinker Biddle & Reath, LLP, of Washington, D.C., for plaintiffs
Trelleborg Wheel Systems (Xingtai) Co., Ltd., Xuzhou Xugong Tyres Co., Ltd., Xuzhou
Hanbang Tyre Co., Ltd., and Armour Rubber Co. Ltd. With him on the brief was Douglas J.
Heffner.

      R. Kevin Williams, Clark Hill PLC, of Chicago, Ill., for plaintiff Weihai Zhongwei
Rubber Co., Ltd.

       John J. Todor, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, D.C., for defendant. With him on the brief were Chad A.
Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E.
White, Jr., Assistant Director. Of counsel on the brief was Paul K. Keith, Attorney, Office of the
Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce.

       Stanceu, Chief Judge: Plaintiffs contested an administrative determination the

International Trade Administration, U.S. Department of Commerce (“Commerce” or the
Consol. Court No. 16-00075                                                                Page 2


“Department”), issued to conclude a periodic review of an antidumping duty order on off-the-

road (“OTR”) tires from the People’s Republic of China (“China” or the “PRC”).1

       Before the court is the determination (the “Remand Redetermination”) Commerce issued

in response to this court’s opinion and order in Qingdao Qihang Tyre Co. v. United States,

42 CIT __, 308 F. Supp. 3d 1329 (2018) (“Qingdao Qihang”). See Final Results of Redeterm.

Pursuant to Court Remand (July 24, 2018), ECF No. 74 (“Remand Redeterm.”). The Remand

Redetermination: (1) under protest, recalculates export price (“EP”) and constructed export price

(“CEP”) for the mandatory respondents to eliminate its previous downward adjustments for

Chinese irrecoverable value-added tax (“VAT”); (2) redetermines a surrogate value for inputs of

reclaimed rubber production inputs; and (3) recalculates the surrogate value for foreign inland

freight. Remand Redeterm. 2. It then recalculates the margins for the two mandatory

respondents and the reviewed, but not individually examined, “separate rate respondents.” Id.

at 21. The court sustains the three decisions, and the redetermined margins, to which no party

objects.

                                        I. BACKGROUND

       The background of this consolidated action is set forth in the court’s prior Opinion and

Order, which is summarized and supplemented herein. See Qingdao Qihang, 42 CIT at __,

308 F. Supp. 3d at 1333-34.




       1
        Consolidated under the lead case, Qingdao Qihang Tyre Co. v. United States, Court No.
16-00075, are Qingdao Free Trade Zone Full-World Int’l Trading Co. v. United States, Court
No. 16-00076; Trelleborg Wheel Systems (Xingtai) Co. v. United States, Court No. 16-00077;
Xuzhou Xugong Tyres Co. v. United States, Court No. 16-00079; and Weihai Zhongwei Rubber
Co. v. United States, Court No. 16-00084. See Order (Aug. 31, 2016), ECF No. 24.
Consol. Court No. 16-00075                                                                         Page 3


                                            A. The Agency Decision Contested in this Litigation

              The contested administrative decision (“Final Results”), which concluded the sixth

periodic administrative review of certain pneumatic off-the-road tires from China, was published

as Certain New Pneumatic Off-the-Road Tires From the People’s Republic of China: Final

Results of Antidumping Duty Administrative Review; 2013-2014, 81 Fed. Reg. 23,272 (Int’l

Trade Admin. Apr. 20, 2016) (“Final Results”). Incorporated by reference in the Final Results is

a final “Issues and Decision Memorandum” containing explanatory discussion. Issues and

Decision Memorandum for Final Results of Antidumping Duty Administrative Review: Certain

New Pneumatic Off-the-Road Tires from the People’s Republic of China; 2013-2014 (Int’l Trade

Admin. Apr. 12, 2016) (P.R. Doc. 334), available at

https://enforcement.trade.gov/frn/summary/prc/2016-09165-1.pdf (last visited Dec. 18, 2018)

(“Final I&D Mem.”).

                                                        B. The Parties in this Consolidated Case

              The plaintiffs in this litigation include the two mandatory respondents in the sixth review,

Xuzhou Xugong Tyres Co., Ltd., Armour Rubber Co. Ltd., and Xuzhou Hanbang Tyre Co., Ltd.

(collectively, “Xugong”), which Commerce treated as a single entity for purposes of the review,

and Qingdao Qihang Tyre Co., Ltd. (“Qihang”). The other plaintiffs are the following reviewed,

but not individually examined, separate rate respondents: Qingdao Free Trade Zone Full-World

International Trading Co., Ltd., Trelleborg Wheel Systems (Xingtai) Co., Ltd., and Weihai

Zhongwei Rubber Co., Ltd.2



              2
        Titan Tire Corporation and United Steel, Paper and Forestry, Rubber, Manufacturing,
Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC were
defendant-intervenors in this litigation, see Order (May 31, 2016), ECF No. 18, but withdrew on
September 29, 2017. See Order (Sept. 29, 2017), ECF No. 66.
Consol. Court No. 16-00075                                                                Page 4


                                      C. Procedural History

       Commerce issued an antidumping duty order (the “Order”) on certain off-the-road tires

from China (the “subject merchandise”) in 2008. Certain New Pneumatic Off-the-Road Tires

From the People’s Republic of China: Notice of Amended Final Affirmative Determination of

Sales at Less Than Fair Value and Antidumping Duty Order, 73 Fed. Reg. 51,624 (Int’l Trade

Admin. Sept. 4, 2008). Commerce initiated the review at issue in this litigation, which was the

sixth administrative review of the Order, on October 30, 2014. Initiation of Antidumping and

Countervailing Duty Administrative Reviews, 79 Fed. Reg. 64,565 (Int’l Trade Admin. Oct. 30,

2014). The sixth administrative review pertained to entries of subject merchandise made during

the period of review of September 1, 2013 through August 31, 2014. Final Results, 81 Fed. Reg.

at 23,272.

       Commerce published the Final Results on April 20, 2016. Id. In the Final Results,

Commerce assigned individually-determined weighted-average dumping margins to Xugong and

Qihang. Id. at 23,273. Having selected these exporters/producers of OTR tires as “mandatory”

respondents, i.e., respondents it intended to examine individually, Commerce assigned a

weighted-average dumping margin of 65.33% to Xugong and a weighted-average dumping

margin of 79.86% to Qihang in the Final Results. Id. Commerce assigned a weighted average of

these two margins, 70.55%, to respondents that it did not select for individual examination but

that Commerce found to have qualified for a “separate rate” based on demonstrated

independence from the government of China. Id.

       The Department submitted the Remand Redetermination to the court on July 24, 2018.

Remand Redeterm. Plaintiffs collectively filed comments on the Remand Redetermination on

August 10, 2018. All Plaintiffs’ Comments on Remand Redetermination (Aug. 10, 2018), ECF
Consol. Court No. 16-00075                                                                        Page 5


No. 76 (“Pls.’ Comments”). The United States filed a reply to plaintiffs’ comments on August

24, 2018. Defendant’s Response to Comments on Remand Redetermination (Aug. 24, 2018),

ECF No. 78 (“Def.’s Reply”). The plaintiffs in this litigation submitted a single set of comments

in support of the decisions made in the Remand Redetermination. Pls.’ Comments 1. Defendant

United States also supports the Remand Redetermination. Def.’s Reply 1.

                                                                    II. DISCUSSION

                                                         A. Jurisdiction and Standard of Review

              The court exercises jurisdiction under section 201 of the Customs Courts Act of 1980,

28 U.S.C. § 1581(c) (2012),3 pursuant to which the court reviews actions commenced under

section 516A of the Tariff Act of 1930 (the “Tariff Act”), as amended 19 U.S.C. § 1516a,

including an action contesting a final determination that Commerce issues to conclude an

antidumping duty administrative review. In reviewing a final determination, 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).

                                                     B. The Court’s Rulings in Qingdao Qihang

              In Qingdao Qihang, the court directed Commerce to submit a redetermination that

addresses the following three decisions in the Final Results, each of which the court held

unlawful: (1) downward adjustments Commerce made to the prices of Xugong and Qihang that

are used to determine EP and CEP, to account for Chinese irrecoverable VAT, Qingdao Qihang,

42 CIT at __, 308 F. Supp. 3d at 1335-47; (2) the surrogate value for the reclaimed rubber

manufacturing input, which Commerce based on Global Trade Atlas import data from Thailand,


              3
                  Citations to the United States Code are to the 2012 edition.
Consol. Court No. 16-00075                                                                   Page 6


id., 42 CIT at __, 308 F. Supp. 3d at 1347-49; and (3) the surrogate value Commerce obtained

from the World Bank’s Doing Business 2015: Thailand report for valuing foreign inland freight,

id., 42 CIT at __, 308 F. Supp. 3d at 1349-52.

                          C. The Department’s Remand Redetermination

       In the Remand Redetermination, Commerce, under protest, recalculated EP and CEP for

Xugong’s and Qihang’s sales without making downward adjustments for Chinese irrecoverable

VAT. Remand Redeterm. 8. As a justification for its protest, Commerce stated that “[w]e

respectfully disagree with the Court’s finding that Commerce impermissibly construed section

772(c)(2)(B) of the Act [19 U.S.C. § 1677a(c)(2)(B)] with respect to irrevocable [sic] VAT, and

maintain that our current practice, as described supra, is consistent with the statute and thus in

accordance with law.” Id. As part of the description of the current practice, Commerce stated

that “[i]n the Final Results, we determined that adjusting for irrecoverable VAT, which equates

to an export tax, is consistent with section 772(c)(2)(B) of the Act, as it reduces the gross U.S.

price charged to the customer (which would otherwise include the unrefunded VAT in the

amount charged to the U.S. customer) to a net price received.” Id. at 5. Commerce added that

“[m]oreover, this deduction is consistent with Commerce’s longstanding policy that dumping

margin calculations be tax-neutral.” Id.

       The court sustains the Department’s decision to correct its calculations of EP and CEP by

removing its downward adjustments for “irrecoverable VAT.” While sustaining this decision,

the court does not sustain or otherwise approve the reasoning Commerce included in the Remand

Redetermination in an attempt to convince the court that the decision on VAT in Qingdao

Qihang was incorrect.
Consol. Court No. 16-00075                                                                    Page 7
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          As Qingdao Qihang explained, the VAT at issue in this case is not the type of tax

described by 19 U.S.C. § 1677a(c)(2)(B), which addresses an “export tax, duty, or other charge

imposed by the exporting country on the exportation of the subject merchandise to the United

States.” The record in this case does not support the notion that China imposed an export tax, or

anything resembling one, on the subject merchandise.

          The tax at issue here is a domestic value-added tax that, as Commerce itself does not

dispute, is included in the prices of certain materials used in producing subject merchandise. See

Final I&D Mem. at 22. This “input” VAT is included in the price of materials used to make

OTR tires, and the record does not demonstrate that it is incurred only on production for export

sales. See Qingdao Qihang, 42 CIT at __, 308 F. Supp. 3d at 1337 (“The questionnaire

responses of both mandatory respondents constitute record evidence that the VAT incurred by

these respondents resulted from purchases of some of the material inputs used in OTR tire

production.” (citations omitted)). That some of this value-added tax might not be fully refunded

upon subsequent exportation of the finished good does not convert this value-added tax to an

export tax, duty, or other charge imposed on the exportation of the good. There is no evidentiary

support in the record for the proposition that irrecoverable VAT does not occur on domestic

sales. Nevertheless, Commerce appears to presume, without evidentiary support, that Chinese

irrecoverable VAT “amounts to an export tax, duty, or other charge imposed on exported

merchandise that is not imposed on domestic sales.” Id., 42 CIT at __, 308 F. Supp. 3d at 1343

n.8 (emphasis in Qingdao Qihang) (quoting Final I&D Mem. at 22); see Jiangsu Senmao

Bamboo and Wood Indus. Co., Ltd. v. United States, 42 CIT __, __, 322 F. Supp. 3d 1308, 1344

(2018).
Consol. Court No. 16-00075                                                                Page 8
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       As Qingdao Qihang also explained, Congress was familiar with the concepts of

recoverable VAT and, necessarily, of irrecoverable VAT, and addressed them in provisions of

the Tariff Act other than 19 U.S.C. § 1677a(c)(2)(B). Simply stated, recoverable VAT, in certain

circumstances (not present here), may reduce a dumping margin. But Congress did not intend

that VAT, whether or not recoverable, would ever increase a dumping margin. In

§ 1677a(c)(2)(B), Congress addressed export taxes, duties, and other charges imposed on the

exportation of the good, not value-added taxes, which Congress addressed elsewhere in the

statute, using distinctly different language. Further, Qingdao Qihang explained why the

Department’s “tax-neutral” rationale is misguided. See Qingdao Qihang, 42 CIT at __, 308 F.

Supp. 3d at 1342-44.

       Reconsidering its surrogate values for reclaimed rubber, Commerce determined that

Romanian import price data, obtained from the Global Trade Atlas, constituted the best available

information. Id. at 11-13. Commerce also redetermined its surrogate value for foreign inland

freight, using the World Bank’s Doing Business 2016: Thailand report in place of the 2015

version of that report that Commerce used in the Final Results. Id. at 17-20.

       The changes made from the Final Results lowered Qihang’s dumping margin from

79.86% to 13.93% and Xugong’s dumping margin from 65.33% to 23.45%. Id. at 21. Because

the margin in the Final Results for separate rate respondents not individually examined was the

weighted average of the dumping margins calculated for Qihang and Xugong, the Department

recalculated that margin in the Remand Redetermination to 20.03%. Id. These decisions comply

with the court’s decision in Qingdao Qihang, are supported by the record evidence, and are in

accordance with law.
Consol. Court No. 16-00075                                                               Page 9


                                      III. CONCLUSION

       For the reasons discussed above, the court sustains the Remand Redetermination.

Judgment will enter accordingly.

                                                  /s/Timothy C. Stanceu
                                                  Timothy C. Stanceu, Chief Judge
Dated: December 21, 2018
      New York, New York
