                                     Slip Op. 05 - 157

              UNITED STATES COURT OF INTERNATIONAL TRADE

__________________________________________
POLYETHYLENE RETAIL CARRIER                :
BAG COMMITTEE, et al.,
                                           :
                  Plaintiffs and
                  Defendant-Intervenors,   :

GLOPACK, INC., et al.,                           :

                   Plaintiffs and                :
                   Defendant-Intervenors
                                                 :
GUANGDONG ESQUEL TEXTILES CO.,
                                                 :
                   Plaintiff-Intervenor,
                                                 :
      v.                                                 Before: Judge Judith M. Barzilay
                                                 :       Consol. Ct. No. 04-00319
UNITED STATES,
                                                 :       Public Version
                   Defendant,
                                                 :

HANG LUNG PLASTIC MANUFACTORY, LTD.,:

                   Defendant-Intervenor,         :

                                                 :
NANTONG HUASHENG PLASTIC
PRODUCTS CO.,                                    :

                  Defendant-Intervenor.    :
__________________________________________
Consol. Ct. No. 04-00319                                                                 Page 2



                                           OPINION

[Upon Plaintiffs’ USCIT R. 56.2 Motion for Judgment upon an Agency Record, Commerce’s
determinations are affirmed except for one issue, and the case is remanded to the United States
Department of Commerce.]

                                                                    Decided: December 13, 2005


        King & Spalding, (Stephen A. Jones), Joseph W. Dorn, Jeffrey B. Denning, for the
plaintiffs and defendant-intervenors Polyethylene Retail Carrier Bag Committee, et al.

       Garvey Schubert Barer, William E. Perry, (Ronald M. Wisla), for the plaintiffs and
defendant-intervenors Glopack, Inc., et al. and Hang Lung Plastic Manufactory Ltd.

       DeKieffer & Horgan, Gregory Stephen Menegaz, for the plaintiff-intervenor Guangdong
Esquel Textiles Co.

        Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; Patricia M.
McCarthy, Assistant Director; Civil Division, Commercial Litigation Branch, U.S. Department
of Justice Stefan Shaibani, (Sameer Yerawadekar), Marisa Beth Goldstein, Peter J. Kaldes,
Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of
counsel, for the defendant.

       White & Case, LLP, Adams Chi-Peng Lee, Frank H. Morgan, Kelly Alice Slater, Walter
J. Spak, for the defendant-intervenor Nantong Hausheng Plastic Products Co.


       BARZILAY, JUDGE:              In this consolidated action, the plaintiffs and defendant-

intervenors filed USCIT R. 56.2 Motion for Judgment upon an Agency Record, challenging

certain aspects of the final determination of the U.S. Department of Commerce (“Commerce”) in

the antidumping investigation Final Determination of Sales at Less Than Fair Value:

Polyethylene Retail Carrier Bags from the People’s Republic of China, 69 Fed. Reg. 34,125

(June 18, 2004) (P.R. 505) (“Final Determination”), amended, 69 Fed. Reg. 42,419 (July 15,

2004) (P.R. 530) (“Amended Final Determination”). Plaintiffs Polyethylene Carrier Bag
Consol. Ct. No. 04-00319                                                                   Page 3



Committee, and its individual members, Vanguard Plastics, Inc., Hilex Poly Co., LLC, and

Superbag Corp. (collectively “PRCB Committee Plaintiffs”) are domestic manufacturers.

Plaintiffs Glopack, Inc. (“Glopack”), Elkay Plastics Co., CPI Packaging, Inc., and PDI Saneck

International are importers of polyethylene retail carrier bags from China to the United States;

Plaintiffs Sea Lake Polyethylene Enterprise, Ltd. (“Sea Lake”) and Rally Plastics Co. (“Rally”)

are Chinese producers and exporters to the United States of polyethylene retail carrier bags,

(collectively “Glopack Plaintiffs”). Before the court are four issues raised by the PRCB

Committee Plaintiffs and two issues raised by the Glopack Plaintiffs. For the reasons outlined

below, the court AFFIRMS Commerce’s determination regarding five challenges and remands

the case on Commerce’s calculations of Hang Lung’s electricity usage as a factor of production.

                                        I. BACKGROUND

       This action challenges Commerce’s determination of sales at less than fair value in the

underlying investigation on polyethylene retail carrier bags (“PRCBs”) from the People’s

Republic of China (“PRC”), covering the period of review from October 1, 2002 to March 31,

2003 (“POR”). Specifically, the subject merchandise included t-shirt sacks, merchandise bags,

grocery bags, and checkout bags. See Final Determination, 69 Fed. Reg. at 34,125. In the Final

Determination, Commerce determined that PRCBs from PRC were or likely were sold in the

United States at less than fair value as provided in section 735 of the Tariff Act of 1930. See

Final Determination, 69 Fed. Reg. at 34,125. See Issues and Decision Mem. for the

Administrative Review of Certain Stainless Steel Bar from India (July 5, 2002) (“Issues and

Decision Mem.”) (containing explanations for Commerce’s determinations).
Consol. Ct. No. 04-00319                                                                  Page 4



       The PRCB Committee Plaintiffs contest the following aspects of Commerce’s

antidumping duty determination: 1) Commerce’s selection of facts otherwise available with

respect to Hang Lung Plastic Manufactury Ltd. (“Hang Lung”), a Chinese manufacturer and

exporter to the United States of the PRCBs and a mandatory respondent in the underlying

investigation and defendant-intervenor in this case; 2) Commerce’s acceptance of certain prices

for polyethylene resin reported by Nantong Huasheng Plastic Products Co. (“Nantong”), a

PRCBs exporter and mandatory respondent in the underlying investigation and defendant-

intervenor in this case; 3) Commerce’s decision to accept Nantong’s reported factors of

production data; and 4) Commerce’s selection of a surrogate value for cardboard inserts

consumed in the production of PRCBs.

       In the amended preliminary determination, the Department calculated a dumping margin

of 0.12 percent for Hang Lung. See Notice of Amended Preliminary Determination of Sales at

Less Than Fair Value: Polyethylene Retail Carrier Bags from the PRC, 69 Fed. Reg. 7908, 7909

(Feb. 20, 2004) (“Amended Preliminary Determination”). The final margin assigned to Hang

Lung was 0.24 percent. See Final Determination, 69 Fed. Reg. at 42420. Since Hang Lung’s

margin was less than the 2.0 percent de minimis threshold, Hang Lung’s customs entries of the

subject merchandise were excluded from antidumping duties.

       Commerce’s preliminary determination for Nantong was based on neutral “facts

otherwise available” pursuant to 19 U.S.C. § 1677e(a) because the respondent did not report its

factors of production information on a product-specific basis. See Preliminary Determination,

69 Fed. Reg. at 3549. Nantong’s preliminarily determined margin was 18.43 %. Preliminary
Consol. Ct. No. 04-00319                                                                  Page 5



Determination, 69 Fed. Reg. at 3549. Commerce ultimately verified Nantong’s questionnaire

responses and did not apply facts otherwise available in calculating the final margin. Issues and

Decision Mem., at 77-80. Nantong’s final margin was 0.01 %. See Final Determination, 69 Fed.

Reg. at 42420.

       The Glopack Plaintiffs challenge the following aspects of the final determination:

1) Commerce’s use of average unit values calculated from Indian basket category import

statistics for certain black and color printing ink types to value Sea Lake and Rally’s reported

color-specific flexographic and gravure printing inks used in the manufacture of the subject

merchandise and 2) Commerce’s use of surrogate values rather than the prices reported paid for

certain raw material inputs purchased from a Hong Kong trading company. Glopack Pls Br. at 2-

3.

       Plaintiffs Glopack, Inc., Sea Lake, and Rally participated in the investigation and

submitted detailed responses to the Department’s information requests. Plaintiff Sea Lake

submitted responses covering two production plants: Shanghai Glopack Packing Ltd. (“Shanghai

Glopack”)1 and Sea Lake. Commerce calculated a margin of 19.79 % for Shanghai Glopack and

Sea Lake. Final Determination, 69 Fed. Reg. at 42420; Antidumping Duty Order: Polyethylene

Retail Carrier Bags from the People’s Republic of China, 69 Fed. Reg. 48,201. Rally’s final

margin was determined to be 23.85 %. Amended Final Determination, 69 Fed. Reg. at 42420. In


       1
         Shanghai Glopack, an exporter with no PRC ownership, was found to be affiliated with
Sea Lake, a Hong Kong-based company with no PRC ownership. See Notice of Preliminary
Determination of Sales at Less Than Fair Value and Postponement of Final Determination:
PRCBs from PRC, 69 Fed. Reg. 3533, 3547. Because of these circumstances, Commerce did not
engage in a separate-rate analysis for Glopack. See id.
Consol. Ct. No. 04-00319                                                                   Page 6



the preliminary determination, the Department calculated a dumping margin of 18.56 % for

Rally. Amended Preliminary Determination, 69 Fed. Reg. at 7909.

       The six issues contested in this action concern different sets of facts Commerce relied on

in the administrative record. The relevant facts will be set forth separately in the discussion

section for each separate challenge.

               II.     JURISDICTION AND STANDARD OF REVIEW

       The court exercises its jurisdiction over this case pursuant to 28 U.S.C. § 1581(c) (2004).

The court “must sustain ‘any determination, finding or conclusion found’ by Commerce unless it

is ‘unsupported by substantial evidence on the record, or otherwise not in accordance with the

law.’” Fujitsu Gen. Ltd. v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996) (quoting 19

U.S.C. § 1516a(b)(1)(B)). “Substantial evidence is more than a mere scintilla. It means such

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

Consol. Edison Co. of New York v. NLRB, 305 U.S. 197, 229 (1938). “[T]he possibility of

drawing two inconsistent conclusions from the evidence does not prevent an administrative

agency's finding from being supported by substantial evidence.” Matsushita Elec. Indus. Co. v.

United States, 750 F.2d 927, 933 (Fed. Cir. 1984) (quoting Consolo v. Fed. Mar. Comm'n, 383

U.S. 607, 619-20 (1966)). When the court applies this standard, it affirms the agency's factual

determinations “so long as they are reasonable and supported by the record as a whole, even if

there is some evidence that detracts from the agency’s conclusions.” Olympia Indus., Inc. v.

United States, 22 CIT 387, 389, 7 F. Supp. 2d 997, 1000 (1998) (citing Atlantic Sugar, Ltd. v.

United States, 744 F.2d 1556, 1563 (Fed. Cir. 1984)); see Granges Metallverken AB v. United
Consol. Ct. No. 04-00319                                                                  Page 7



States, 13 CIT 471, 474, 716 F. Supp. 17, 21 (1989) (The court may not reweigh the evidence or

substitute its own judgment for that of the agency.).

       The court reviews Commerce’s surrogate value determinations for reasonableness.

Coalition for the Preservation of Am. Brake Drum & Rotor Aftermarket Mfrs. v. United States,

23 CIT 88, 44 F. Supp. 2d 229, 258 (1999) (“Commerce need not prove that its methodology was

the only way or even the best way to calculate surrogate values for factors of production as long

as it was a reasonable way.”).

                                         III. DISCUSSION

       1.      Commerce’s Application of Adverse Facts Available by Allocating Hang
               Lung’s Total Electricity Usage Rate


       The factors of production methodology used in nonmarket economy (“NME”) cases

requires Commerce to “determine the normal value of the subject merchandise on the basis of the

value of the factors of production utilized in producing the merchandise . . . based on the best

available information regarding the values of such factors in a market economy country or

countries considered to be appropriate.” 19 U.S.C. § 1677b(c). Factors of production include

“(A) hours of labor required, (B) quantities of raw materials employed, (C) amounts of energy

and other utilities consumed, and (D) representative capital cost.” 19 U.S.C. § 1677b(c).

Respondents in such cases have to report on a model-specific basis the precise quantity of each

factor required for production of one unit of merchandise. When Commerce “determines that it

is unable to verify the respondent’s submission, it may substitute for the information submitted

by the respondents, facts otherwise available.” Chia Far Industrial Factory Co. v. United States,
Consol. Ct. No. 04-00319                                                                    Page 8



28 CIT __, 343 F. Supp. 2d 1344, 1363 (2004) (“Chia Far”) (citing 19 U.S.C. § 1677e(a)(2)(A),

(D)). If Commerce finds that “the failure to fully respond is the result of the respondent’s lack of

cooperation in . . . failing to put forth its maximum efforts to investigate and obtain the requested

information from its records[,]” the agency is authorized to adopt an adverse inference when

selecting facts otherwise available, pursuant to 19 U.S.C. § 1677e(b)2. Nippon Steel Corp. v.

United States, 337 F.3d 1373, 1383-84 (Fed. Cir. 2003) (“Nippon Steel”); F.LLI De Cecco Di

Filippo Fara S. Martino S.p.A. v. United States, 216 F.3d 1027, 1032 (Fed. Cir. 2000).

       In its Final Determination, Commerce applied an adverse inference to determine the value

of the electricity usage related to the production of PRCBs. Commerce explained that it “was

able to verify the usage amounts that were listed on model-specific usage worksheets for the

individual models that [it] examined, but the per-unit amounts [it] verified did not appear in

Hang Lung’s FOP database for most of the models examined.” Issues and Decision Mem. at 64.

Finding that Hang Lung did not act to the best of its ability in reporting usage rates, Commerce


       2
        Section 1677e(b) provides:
       If the administering authority or the Commission (as the case may be) finds that
       an interested party has failed to cooperate by not acting to the best of its ability to
       comply with a request for information from the administering authority or the
       Commission, the administering authority or the Commission (as the case may be),
       in reaching the applicable determination under this subtitle, may use an inference
       that is adverse to the interests of that party in selecting from among the facts
       otherwise available. Such adverse inference may include reliance on information
       derived from--
       (1) the petition,
       (2) a final determination in the investigation under this subtitle,
       (3) any previous review under section 1675 of this title or determination under
       section 1675b of this title, or (4) any other information placed on the record.
19 U.S.C. § 1677e(b).
Consol. Ct. No. 04-00319                                                                   Page 9



decided to use adverse inferences in restating these usage rates. Issues and Decision Mem. at 64.

However, Commerce concluded that because it was “able to verify the total electricity used by

Hang Lung during the POI for subject merchandise[,]” it “allocated Hang Lung’s total electricity

usage that [it] verified to its reported U.S. sales.” Issues and Decision Mem. at 64. Commerce

further explained that it “allocated electricity based on the total amount of extruded resin and

concentrate reported by Hang Lung in its United Stats factors-of-production database. In

addition, [it] only allocated printing electricity to printed bags and [it] only allocated handwork

electricity to handworked bags.” Analysis for the Final Determination of PRCBs from PRC:

Hang Lung Manufactory Ltd., June 9, 2004, at 2.

       During the oral argument and in its motion for leave to clarify its calculation, Commerce,

however, evidenced an inconsistent position, claiming that “Commerce actually allocated the

total electricity used in Hang Lung’s production of all plastic bags, regardless of destination, to

its United States sales.” Def. Mot. Leave Clarify Commerce’s Electricity Calculations for Hang

Lung, at 2. In support, Commerce references Hang Lung Verification Exhibit 11 that showed: 1)

the amounts of electricity used by Hang Lung for each month of the period of investigation for

each department involved in its bag-producing activities (extrusion, printing, gusseting, cutting,

and handwork), calculating the total electricity used for each department during the period of

investigation by adding these monthly amounts, and 2) Hang Lung’s reported electricity usage

for each bag-producing and non-bag producing activity in December 2002. Verification Hang

Lung’s U.S. Sales and Factors-of-Production Data, Mar. 11, 2004, Ex. 11. Commerce explained

that Exhibit 11 demonstrates that Hang Lung calculated total electricity used to produce all
Consol. Ct. No. 04-00319                                                                 Page 10



merchandise by subtracting “overhead electricity” from the expenses it incurred in the monthly

electricity bills. Def. Mot. Leave to Clarify Commerce’s Electricity Calculations for Hang

Lung, at 2. These numbers, Commerce now argues, are not broken down by country of

destination.

       While this reading of Exhibit 11supports Commerce’s explanation of its final calculations

of the electricity usage in Issues and Decision Memorandum, at 64, it is inconsistent with

Commerce’s explanation in Analysis of the Final Determination for Hang Lung, where

Commerce stated that it allocated the total electricity “based on the total amount of extruded

resin and concentrate reported by Hang Lung in its United States factors-of-production database.”

See Analysis Final Determination PRCBs from PRC: Hang Lung Manufactory Ltd., June 9,

2004, at 2.

       On appeal, the PRCB Committee Plaintiffs do not contest the application of adverse facts

available, but challenge Commerce’s calculations as based on neutral, non-adverse facts.

Plaintiffs maintain that Commerce recalculated Hang Lung’s electricity consumption based on “a

precise, multi-step allocation methodology and then restricted the amount to be allocated to the

total verified electricity usage associated with production of subject merchandise during the

POI.” PRCB Committee Br. at 15. Plaintiffs suggest that Commerce did not adhere to its

decision to use adverse facts, instead calculating the electricity usage in a neutral way. PRCB

Committee Br. at 16. Thus, Plaintiffs claim that the methodology adopted by the Department in

the final results is contrary to law and must be reversed. See 19 U.S.C. 1516a(b)(1)(B)(i). They

demand that the court remand this issue, instructing the Department to select as adverse facts
Consol. Ct. No. 04-00319                                                                   Page 11



available, the highest reported and verified electricity usage rate on the record. PRCB Committee

Br. at 20. In response and opposition to Commerce’s motion for leave to clarify its calculation,

the PRCB Committee Plaintiffs argued that the government attempted to “completely change its

position” by claiming that Commerce allocated the electricity used by Hang Lung to produce

plastic bags, regardless of the type of bag or destination of shipment. PRCB Committee Resp. in

Opp’n Def. Mot. Leave Clarify, at 3.

       The court must evaluate whether Commerce’s selection of partial adverse facts available

was supported by substantial evidence in the administrative record. See Fujitsu,88 F.3d at 1038.

In this case, Commerce claims that it decided to take the total electricity usage calculated for

each department involved in the productions of subject merchandise, less the overhead electricity

usage, and to allocate it to the United States sales. Commerce’s final determination specifically

cited to 19 U.S.C. § 1677m(e), which provides:

       [Commerce] shall not decline to consider information that is submitted by an
       interested party and is necessary to the determination but does not meet all the
       applicable requirements established by the administering authority or the
       Commission, if –
       (1) the information is submitted by the deadline established for its submission,
       (2) the information can be verified,
       (3) the information is not so incomplete that it cannot serve as a reliable basis for
       reaching the applicable determination,
       (4) the interested party has demonstrated that it acted to the best of its ability in
       providing the information and meeting the requirements established by the
       administering authority or the Commission with respect to the information, and
       (5) the information can be used without undue difficulties.

Commerce explained that it verified Hang Lung’s reported total electricity usage rate, and

nothing in the record indicates that this information was unusable or incomplete. In applying

facts adverse to a party’s interest, Commerce’s goal is to “encourage compliance while
Consol. Ct. No. 04-00319                                                                     Page 12



determining current margins as accurately as possible.” Nat’l Steel Corp. v. United States, 20

CIT 100, 103, 913 F. Supp. 593, 596 (1996). Simultaneously, Commerce must select non-

aberrant facts rationally related to what they are used to calculate. See id. In this case, the court

finds that using the total electricity consumed during the period of review in producing all bags,

regardless of destination, was neither unreasonable nor aberrant. However, Commerce took

inconsistent positions in explaining how it allocated that verified value. In the Hang Lung

Analysis for the Final Determination, Commerce stated that it “allocated that value based on the

total amount of extruded resin and concentrate reported by Hang Lung in its factors of production

database.” Analysis for the Final Determination of PRCBs from PRC: Hang Lung Manufactory

Ltd., June 9, 2004, at 2. In its motion to clarify, the government insisted that it allocated the total

electricity usage to Hang Lung’s reported United States sales, not conditioned on any other

factor. The record does not furnish any more information for the court to ascertain how

Commerce allocated the value. Lacking this information, the court cannot determine whether

Commerce’s methodology in this instance was contrary to law or unsupported by substantial

evidence in the record. Therefore, the court remands this issue, instructing the government to

explain its calculation. Commerce must address the seeming inconsistency between the Hang

Lung Analysis for the Final Determination and the information in Commerce’s motion to clarify

and to reconcile this information.

       2.      Use of the Price Nantong Paid to Market Economy Suppliers for Certain
               Raw Material Inputs

       During the investigation, Nantong reported that it bought certain raw material inputs from

market economy suppliers. Nantong Questionnaire Response, Oct. 1, 2003. Upon verification
Consol. Ct. No. 04-00319                                                                   Page 13



of the reported information, Commerce examined the invoices for each raw material input,

including invoices for inputs from market economy suppliers. See Nantong Verification Report,

April 15, 2004, at 8. The record shows that Nantong reported low prices for polyethylene resin

purchased from a supplier located in Hong Kong. Plaintiffs point out that Nantong’s reported

prices for resin were [a certain range]3 percent below contemporaneous price indices published

by commodities exchanges and the verified prices reported by all other respondents participating

in the investigation. In this case, Nantong was required to report any relationship with its

supplier of polyethylene resin, [      ]. Nantong disclosed its relationship with [the supplier]

during verification, claiming that it was able to negotiate the low resin prices because of a “long-

established relationship” with [that supplier], and because its arrangements with [the supplier]

were subject to certain minimum purchase requirements. Nantong Verification Report, Apr. 15,

2004, at 8. In addition, Nantong reported the following facts regarding its relationship with [the

supplier]:

       1) In the nine months preceding the POI, Nantong sold PRCBs to [the supplier] as a

downstream product valued at more than $ [        ].

       2) Nantong and [the supplier] had a joint customer - [            ].

       3) The [        ] dollars in sales to [the supplier] in the months immediately preceding the

POI involved merchandise identical to the merchandise sold to [the joint customer], and all the

merchandise sold to [the supplier] was resold to [the joint customer].



       3
        Confidential business information has been redacted in this public version of the
opinion.
Consol. Ct. No. 04-00319                                                                   Page 14



       4) Nantong granted preferential prices to [the supplier]. Specifically, the prices charged

to [the supplier] were up to [    ] percent less than the prices charged to [the joint customer] for

identical merchandise.

       Commerce was satisfied with Nantong’s reported prices and found no discrepancies

between the information reported by Nantong in its questionnaire and the results of the

administrative verification. See Nantong Verification Report, Apr. 15, 2004, at 8. Commerce

concluded that it could use the prices paid by Nantong to its Hong Kong supplier instead of

surrogate values, because Nantong purchased the inputs in arm’s length transactions from a

market economy supplier.

       Plaintiffs challenge Commerce’s use of these reported prices in the final margin

calculations, which resulted in a de minimus margin for Nantong. The PRCB Committee argued

on the administrative level that prices reported by Nantong for key material inputs such as

polyethylene resin4 (“PE resin”) were unacceptable because they were significantly lower than

prices reflected in published price indices or prices reported by all other respondents. Plaintiffs

further argued that the Department was obligated by law to investigate whether the relationship

between Nantong and its supplier distorted prices paid by Nantong to its supplier.

       Plaintiffs presented evidence that the reported prices were [a certain range] percent lower

than contemporaneous prices published by the London Metals Exchange or Independent

Commodity Information Service - London Oil Report (“ICIS-LOR”) and that prices reported by



       4
      Three types of PE Resin were involved in this investigation: high density polyethylene
(“HDPE”), low density polyethylene (“LDPE”), and linear low density polyethylene (“LLDPE”).
Consol. Ct. No. 04-00319                                                                   Page 15



other respondents were tightly clustered (within 5 and 6 percent of the mean, respectively, for

both HDPE and LLDPE), as would be expected form a commodity like PE Resin.

       Plaintiffs argue that because PE Resin is a commodity, and Commerce has recognized

that commodity purchasers base their purchasing decisions primarily on price and availability,

there exists little price variability in a given market at a given time. For example, in one case

Commerce stated that products traded as commodities are “price sensitive and sales are thus

often made or lost based on relatively small differences in price.” Notice of Final Determination

of Sales at Less Than Fair Value: Stainless Steel Plate in Coils from Taiwan, 64 Fed. Reg.

15,493, 15,504 (Dep’t Commerce, Mar. 31, 1999), app’d on other grounds, Allegheny Ludlum

Corp. v. United States, 24 CIT 1424, 215 F. Supp. 2d 1322 (2000). In contrast, significant

differences appear between the prices reported by Nantong and other respondents, who reported

PE Resin purchases from market economy suppliers. Plaintiffs also claim that Nantong failed to

disclose facts surrounding its relationship with its market economy supplier of polyethylene bags.

Finally, Plaintiffs maintain that Commerce’s failure to thoroughly investigate Nantong’s reported

prices was contrary to law and its acceptance of those prices unsupported by substantial evidence.

       Commerce claims that it adequately investigated how Nantong negotiated the price for

resin. Commerce accepted Nantong’s explanation that it relied on a website for market prices,

which it used to negotiate the price, per metric ton, that it would pay its market economy

supplier. Nantong Verification Report, Apr. 15, 2004, CR 176. Commerce also concluded that

the prices that Nantong paid arose through market-driven, arm’s length negotiations. Commerce

maintains that there is nothing unusual in the discounted prices that Nantong’s market economy
Consol. Ct. No. 04-00319                                                                    Page 16


supplier provided to Nantong, a long-standing customer. The government argues that a long-

standing relationship between Nantong and its supplier and Nantong’s sales of its products back

to the supplier do not indicate the type of an affiliation between Nantong and its supplier that

would make transactions between the two distorted. Importantly, there is evidence in the record

that Nantong and [the supplier] competed against each other for customers in the United States.

See Nantong Verification Report, Apr. 15, 2004, at 9.

       During an investigation, Commerce aims to determine whether a relationship exists

between respondents and their suppliers that would distort the reported prices. Commerce has

the authority to value raw material inputs used to determine normal value in NME cases using

the actual market prices paid by respondents (“ME inputs”) instead of surrogate values.

Commerce’s relevant regulation states that “where a factor is purchased from a market economy

supplier and paid for in a market economy currency, the Secretary normally will use the price

paid to the market economy supplier.” 19 C.F.R. § 351.408(c)(1). Before Commerce can use

reported ME input prices, the record must show that such prices are “market determined.”

Shakeproof Assembly Components v. United States, 268 F.3d 1376, 1382 (Fed. Cir. 2001). The

Preamble to the Department’s regulation notes that although the Federal Circuit upheld

Commerce’s practice of using prices paid to market economy suppliers, it “do[es] not view this

decision as permitting us to use distorted (i.e., non-arm’s length) prices.” Antidumping Duties;

Countervailing Duties: Final Rule, 62 Fed. Reg. 27,296, 27,366 (Dep’t Commerce, May 19,

1997). In non-market economy cases, the statute authorizes Commerce to disregard prices paid

to affiliated suppliers if the price “does not fairly reflect” market prices, 19 U.S.C. § 1677b(f)(2),
Consol. Ct. No. 04-00319                                                                    Page 17


or if the suppliers sell major raw material inputs at “less than the cost of production.” 19 U.S.C.

§ 1677b(f)(3).

       In this case, the record evidence supports Commerce’s position because, even though

Nantong reported prices that were lower than the prices reported by other respondents in the

investigation, Nantong provided sufficient explanation on how it negotiated lower prices in the

normal course of its business. Commerce verified that the transactions between Nantong and its

supplier were at arm’s length. Plaintiffs’ comparison of Nantong’s prices to other respondents’

reported prices and to contemporaneous prices published by the London Metals Exchange or

ICIS-LOR does not evidence market price distortion. Commerce did investigate the validity of

the market prices that Nantong reported and determined that they were the “best available

information” for valuing market economy inputs. See Lasko Metal Prods. v. United States, 43

F.3d 1442, 1446 (Fed. Cir. 1994) (finding that the best available information on what the

supplies used by the Chinese manufacturers would cost in a market economy country was the

price charged for those supplies on the international market). Commerce is not required to

scrutinize the reported prices other than satisfactorily verify them. The record supports

Commerce’s conclusion that the prices accurately reflected market prices in accordance with 19

U.S.C. § 1677b(c)(1) and 19 C.F.R. § 351.408(c)(1). See Luoyang Bearing Factory v. United

States, 26 CIT 1156, 1187, 240 F. Supp. 2d 1268, 1298 (2002) (refusing to apply plaintiff’s mode

of examination that required determining “whether the price paid by a PRC bearing manufacturer

to a market-economy supplier was market-driven or representative of market-prices.”).
Consol. Ct. No. 04-00319                                                                    Page 18


       3.       Commerce’s Decision to Accept Nantong’s Reported Factors of Production

       A. Commerce’s Acceptance of Nantong’s Allocation Methodology for HDPE and
       LLDPE Resin

       In its Preliminary Determination, Commerce applied “facts otherwise available” under 19

U.S.C. § 1677e(a) to value all of Nantong’s reported sales. Preliminary Determination, 69 Fed.

Reg. at 3548-49. Nantong explained that because of its usual business practices, it could not

allocate its use of different inputs to the production of its different products. Id. (citing Nantong

Letter to Commerce, Jan. 12, 2004, at 2). Commerce preliminarily determined that Nantong’s

data, as provided, distorted the amount of raw material inputs consumed in production and that

Commerce would have to use facts otherwise available to value the inputs. Preliminary

Determination, 69 Fed. Reg. at 3529.

       Specifically, Nantong reported the same factor usage rate for all five inputs reported for

each of the 94 individual products exported to the United States during the POI. Then Nantong

submitted a revised factors database, which included four sets of material input factors and usage

rates for 95 individual products. Nantong reported four different costs of production and normal

values for 95 unique bag types. In the preliminary determination, Commerce declined to use any

of Nantong’s factors data and based its entire margin on neutral facts available, because it found

the factor information distorting. Preliminary Determination, 69 Fed. Reg. at 3549.

       In its final determination, the Department reversed itself and used Nantong’s data to

calculate Nantong’s de minimis final dumping margin. Issues and Decision Mem., Comment 23;

Amended Final Determination, 69 Fed. Reg. at 42420. Commerce explained that it verified

Nantong’s assertion that its business practices prevented it from reporting an allocation of its
Consol. Ct. No. 04-00319                                                                  Page 19


factors of production on a product-specific basis. See Nantong Verification Report, at 12 (Def.

Tab 16). Commerce verified Nantong’s reported factors of production of resin, ink, and scrap.

Nantong advised the Department that the bag production involved mixing resin with scrap and

pigment in accordance with a specified recipe stated on “production order slips.” Nantong

Verification Report, at 3. The verifiers examined the production order slips, which included

production codes for each model ordered, the number of cartons and pieces per carton for each

model ordered, resin percentage instructions for each model, and total raw material inputs

required to produce the order (whether new or recycled). Nantong Verification Report, at 6.

Nantong used only two types of resin: HDPE and LLDPE. Commerce found that Nantong’s

allocation methodology for these raw material inputs per kilogram of finished product, based on

the total consumption of raw materials in the POI and the total production of finished goods in

that period was satisfactory. Nantong explained to the verifiers that the company did not “follow

the production order consumption ratios exactly because it need[ed] to take into account recycle

scrap in its mixture of resin . . . which can vary between 10 to 20 percent and can go as high as

50 percent.” Nantong Verification Report, at 6-7. “Nantong officials explained that they are

unable to provide the Department with more specific information because they do not keep track

of that type of information in the accounting system.” Nantong Verification Report, at 12.

Nantong also explained that it could provide the actual amount of scrap in inventory by using its

end-of-month scrap inventory ledger, but it could not tell how much scrap was consumed for

each production run. Nantong Verification Report, at 12. Commerce found no discrepancies

resulting from this generalized methodology. It supported its decision by concluding that there
Consol. Ct. No. 04-00319                                                                  Page 20


was “no evidence that Nantong did not act to the best of its ability in providing the necessary

information to calculate a dumping margin.” Issues and Decision Mem., at 78. As a

consequence of using Nantong’s reported data, Nantong received a de minimus margin, and was,

pursuant to 19 C.F.R. § 351.204(e), excluded from the order. See Amended Final, 69 Fed. Reg.

at 42,420 (Tab 3).

       Plaintiffs claim that Nantong’s reported factors were not accurate, alleging that Nantong

falsely stated that it did not keep business records that would allow a more detailed allocation of

product-specific costs. Nantong’s Resp. at 13. Plaintiffs claim that Commerce’s reversal of its

approach in the final determination was not warranted by any enhanced data accuracy. They

maintain that the varied amount of scrap reported on the order slips does not make the slips

unreliable because it is ordinary for PRCB producers to recycle scrap. Plaintiffs argue that

Commerce should have used the data based on the “specific recipes” stated in the order slips.

Instead, Nantong based its reported factors of production on average resin consumption ratios

reported to Chinese customs officials for purposes of claiming import tax exemptions on

imported PE Resins consumed in production of exported products: 75 % HDPE and 25 %

LLDPE; 5 % HDPE and 95 % LLDPE. Nantong Verification Report, at 7, 12. These ratios are

supported by a letter dated August 5, 2001, more than a full year before the October 1, 2002,

beginning of the POI. Nantong Verification Report, Ex. 16. Plaintiffs argue that Commerce

failed to discuss or acknowledge the basis of Nantong’s reporting in the published notice of final

determination. Issues and Decision Mem., Comment 23.
Consol. Ct. No. 04-00319                                                                  Page 21


       Plaintiffs’ central argument is that Nantong maintained records in the normal course of

business that would have allowed preparation of considerably more accurate factors of

production data. Because Commerce accepted less accurate factors of production, its final

determination was not supported by substantial evidence and was contrary to law. 19 U.S.C. §

1516a(b)(1)(B).

       To show that Nantong produced imprecise factors of production, Plaintiffs cite the data

reported by other respondents in the investigation. While Nantong reported only five raw

material input factors for its production of t-shirt bags, other respondents reported no fewer than

15 and as many as 29 raw material inputs for exactly the same type product. Additionally, other

respondents reported a broad range of normal values among the various sizes, colors, and

printings of t-shirt bags sold in the United States. Nantong reported 4 normal values for the 95

products it exported. PRCB Committee Br. at 38-39. Plaintiffs argue that because Nantong had

more accurate data, such as production order slips, Nantong’s reporting of factors of production

data presents a concrete example of a respondent “failing to put forth its maximum efforts to

investigate and obtain the requested information from its records.” Nippon Steel, 337 F.3d at

1384. Plaintiffs claim that Commerce’s decision to disregard the existence of more accurate data

resulted in a calculation unsupported by substantial evidence in the record.

       Nantong claimed that its resin allocation methodology “in actuality increases its factors-

of-production cost.” Nantong Verification Report, Apr. 15, 2004, at 7. It explained that HDPE

resin costs more than LLDPE, so that by over-reporting its HDPE consumption, Nantong used a

conservative methodology for reporting resin consumption. Nantong Verification Report April
Consol. Ct. No. 04-00319                                                                   Page 22


15, 2004, at 7. In addition, Nantong argues that the HDPE/LLDPE percentages listed in the

production order slips exist only in narrow bands, differing no more than five percentage points.

Nantong’s Br. at 12. Thus, Nantong calculates that using Nantong’s market-economy purchase

prices, the difference in constructed value using the 75 % HDPE / 25 % LLDPE ratio versus a 70

% HDPE / 30 % LLDPE ratio would yield only a minimal per unit change of [             ]. Nantong’s

Br. at 12. Nantong’s calculation of [      ] reflects the most extreme range of difference in the

production order slip ratios. Nantong presents other calculations to illustrate that because it

always reported the highest percentage for the more expensive HDPE resin in its factors,

Plaintiffs’ proposed allocation methodology based on the order slips could only reduce

Nantong’s constructed value.

       Nantong also claims that Plaintiffs have not offered evidence demonstrating that its

production order slips would yield a more accurate calculation of the constructed value. At

verification, Nantong’s officials said that they could not provide “the amount of actual resin,

pigment, or ink consumption by day, production order or model because the mixing workshop

does not record amounts inputted during the mixing process.” Nantong Verification Report, at

12. In addition, Nantong did not follow its recipes reflected on the production order slips:

“[B]ecause the recipes . . . do not vary substantially, the employee who mixes the resin will

regularly mix multiple production orders at the same time.” Nantong Verification Report, at 3.

The production order slips provide only a guide to the mixing of HDPE and LLDPE resins,

supporting Commerce’s finding that the company did not maintain records of the actual amount
Consol. Ct. No. 04-00319                                                                       Page 23


of resin consumed in the production process by model, production run, or other basis. See

Nantong Verification Report, at 6.

       Regarding the use of scrap resin, Nantong explains that

       although the production order slips have specific percentages, in reality, Nantong
       does not follow the production order consumption ratios exactly because it needs
       to take into account recycle scrap in its mixture of resin. . . . [T]he production
       order slip . . . does not take scrap into account and therefore the percentages
       reported on the slip do not reflect the actual percentages produced.

Nantong Verification Report, at 6. Nantong explains that even if the production order slips were

followed with respect to virgin resin consumption, the high scrap percentage would reduce the

accuracy of the production order slips. Plaintiffs concede that the presence of scrap renders any

allocation methodology less accurate. See PRCB Committee Br., at 40.

       Commerce maintains that it had discretion to accept Nantong’s factors of production

responses. Section 1677e of the antidumping statute provides that Commerce apply “facts

otherwise available” on the record if, among other things, necessary information is not available

on the record. 19 U.S.C. § 1677e(a). Furthermore, section 1677m(e) provides that Commerce

       shall not decline to consider information that is submitted by an interested party
       and is necessary to the determination but does not meet all the applicable
       requirements established by the administrative authority . . . if –
       (1) the information is submitted by the deadline established for its submission,
       (2) the information can be verified,
       (3) the information is not so incomplete that it cannot serve as a reliable basis for
       reaching the applicable determination,
       (4) the interested party has demonstrated that it acted to the best of its ability in
       providing the information and meeting the requirements established by the
       administering authority or the Commission with respect to the information, and
Consol. Ct. No. 04-00319                                                                  Page 24


       (5) the information can be used without undue difficulties.

19 U.S.C. § 1677m(e).

       Commerce is charged with “determining current margins as accurately as possible.”

Rhone-Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990); Shakeproof, 268

F.3d at 1382. When factors of production are identified, the statute directs the Department to use

the “best available information” to value each one. 19 U.S.C § 1677b(c)(4). “In determining the

valuation of the factors of production, the critical question is whether the methodology used by

Commerce is based on the best available information and establishes antidumping margins as

accurately as possible.” Shakeproof, 268 F.3d at 1382.

       Plaintiffs cite to other cases where the Department requested product-specific cost data,

requiring reasonable cost allocations among various products under investigation if the

respondent’s normal accounting records did not contain product-specific cost information. See,

e.g., Certain Cold-Rolled Flat-Rolled Carbon Quality Steel Products from Turkey, 65 Fed. Reg.

15123 (Dep’t Commerce, Mar. 21, 2000) (noting that frequently respondents’ normal cost

accounting systems do not differentiate among products or provide product-specific costs and

that Commerce’s “consistent practice” is to require reasonable allocation methodologies to

achieve product-specific costs.”).

        In reviewing whether Commerce’s decision is supported by substantial evidence on the

record, the court “tak[es] into account the entire record, including whatever fairly detracts from

the substantiality of the evidence.” Atlantic Sugar, Ltd. v. United States, 744 F.2d 1556, 1562

(Fed. Cir. 1984). The court “will find a determination unlawful where Commerce . . . relied on
Consol. Ct. No. 04-00319                                                                   Page 25


inadequate facts or reasoning, or failed to provide an adequate basis for its conclusions.” Rhone-

Poulenc, Inc., 20 CIT 573, 575, 927 F. Supp. 451, 454 (1996) (citations omitted).

       In this case, Commerce accepted the average non-model-specific ratios provided by

Nantong. Commerce specifically verified Nantong’s reported factors of production of resin, ink,

and scrap and found Nantong’s methodology of allocating raw material inputs per kilogram of

finished product, based upon the total consumption of raw materials in the POI and the total

production of finished goods in that period, reliable. It also found “no evidence that Nantong did

not act to the best of its ability in providing the necessary information to calculate a dumping

margin.” Issues and Decision Mem., at 78. Commerce did not find the production order slips

more accurate or reliable because verification revealed that the slips were not strictly followed in

production. Commerce found that Nantong did not keep any production or accounting records

that tracked costs on a model-specific basis. See Nantong Verification Report, at 12; Issues and

Decision Mem., at 77-80. As a general rule, Commerce has the discretion and “authority to

determine the extent of investigation and information it needs.” PPG Indus., Inc. v. United

States, 978 F.2d 1232, 1238 (Fed. Cir. 1992). In this case, Commerce’s conclusion was

supported by substantial evidence in the record, and the court will not re-weigh the evidence.

       B. Nantong’s Allocation of Ink Consumption

       Plaintiffs argue that Commerce also improperly accepted Nantong’s ink consumption

data. The record shows that Nantong produced [       ] styles of bags that contained printing, that

the print images varied in total print area, and that Nantong reported using red, blue, green,

yellow, and black ink. Commerce accepted Nantong’s two consumption ratios for ink; one of the
Consol. Ct. No. 04-00319                                                                  Page 26


values was zero. The Department examined the size of bags and the number of colors used in

printing and found that these factors “are not necessarily an accurate indicator of ink

consumption.” Issues and Decision Mem., at 80. Commerce also found no “correlation between

bag size, the number of printed sizes, and ink consumption.” Id. It concluded “that the size of

the bag and the number of colors are not necessarily an accurate indicator of ink consumption.”

Final Determination Mem., Comment 23.

       Plaintiffs argue that Commerce had model-specific image design and color information

for each product and that Nantong could have developed a model-specific allocation

methodology for black and color inks. For instance, Nantong could have reported more precise

factors of production based on information maintained in the normal course of business, such as

the production order slips. Plaintiffs argue that Nantong failed “to put forth its maximum efforts

to investigate and obtain the requested information from its records,” and Commerce is thus

authorized to adopt adverse inferences when selecting facts available, pursuant to 19 U.S.C. §

1677e(b).

       The Department’s task is to “articulate a satisfactory explanation for its action including a

‘rational connection between the facts found and the choice made.’” Motor Vehicle Mrfs. Ass’n

of United States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting Burlington

Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962)). In this case, the Department found

no correlation among size, the number of printed sides, and the number of colors, and concluded

that there was no basis to allocate ink consumption to various bag types. Lacking a basis for

allocation, Nantong could only assign a single ink consumption amount to printed bags.
Consol. Ct. No. 04-00319                                                                   Page 27


Although there were variations among Nantong’s printed bags, Commerce found Nantong’s

allocation methodology reasonable given the information that the company kept in its normal

course of business. Plaintiffs have not demonstrated a more discernable pattern for a different

allocation. Commerce’s conclusion cannot be disturbed unless unsupported by substantial

evidence or contrary to law. Fujitsu, 88 F.3d at 1038.

         4.    Commerce’s Application of Adverse Facts Available to Hang Lung

       In the final determination, Commerce applied a surrogate value for cardboard inserts

using the weighted-average unit value of cardboard inserts imported into India during the POI.

Issues and Decision Mem., at 97, 100-01. When providing Commerce with information

regarding the cardboard inserts, Glopack explained that “certain companies use untreated

cardboard” inserts while others “use treated cardboard” ones. See Surrogate Value Submission,

Nov. 20, 2003, at 6. The investigation respondents did not specify which type they used in their

production. Commerce therefore relied on a combination of HTS subheading 4810.29.00

(treated cardboard) and 4805.80.09 and 4805.70.09 (untreated cardboard) to value all inserts.

The PRCB Committee argues that Commerce failed to analyze and explain its conclusion that

HTS 4810.29.00 is the correct tariff classification for valuing coated cardboard inserts and

maintains that HTS 4810.39.09, which includes lower-quality treated inserts, might be more

appropriate. PRCB Committee Br. at 47. Specifically, Plaintiffs argue that the Department failed

to make a reasonable connection between the facts on the record and its conclusion, and,

therefore, its selection of the surrogate value for cardboard inserts was contrary to law and

unsupported by substantial evidence. PRCB Committee Br. at 47.
Consol. Ct. No. 04-00319                                                                    Page 28


       During the investigation, Commerce instructed participating respondents to “describe

each type and grade of material used in the production process.” Rally replied that the cardboard

inserts were “low grade, recycled cardboard inserts.” See, e.g., Rally’s Section D Response, Oct.

2, 2003, at 6. Later, Glopack, Rally, and Hang Lung provided different information, stating that

“the treated cardboard inserts . . . [are] higher quality cardboard that can be used for graphic

purpose, but [they are] used by the respondents for inserts.” Surrogate Value Submission, Nov.

20, 2003, at 6. The respondents further provided certain Indian import data showing that “[t]he

treated cardboard inserts used by respondents are classified under US HTS [sic] item

4810.29.10.00.” Surrogate Value Submission, Nov. 20, 2003, at 6.

       The PRCB Committee Plaintiffs requested that Commerce use the value for HTS

subheading 4810.39.09, rather than HTS subheading 4810.29.00, as the proper surrogate value

for treated cardboard inserts, claiming that HTS subheading 4810.29.00 included higher quality

inserts than those included under HTS subheading 4810.39.09, and that inconsistent statements

made Glopack’s assertion that it used higher quality inserts incredible. In its final determination,

Commerce did not address this inconsistency in the respondents’ responses. However,

Commerce explained that “[b]ecause none of the respondents specified what type of cardboard

insert (treated or untreated) it used in the production of subject merchandise, [it] applied our

methodology . . . valu[ing] cardboard inserts using the weighted-average of the surrogate values

for treated and untreated cardboard inserts.” Issues and Decision Mem., at 100. As a result, for

most respondents, Commerce used “the weighted average of the values . . . for HTS subheadings

4810.29.00, 4805.70.09, and 4805.80.09.” Issues and Decision Mem., at 100. Commerce did
Consol. Ct. No. 04-00319                                                                  Page 29


not explain, however, why the selection of subheading 4810.29.00 over subheading 4810.39.09

was more appropriate, stating that petitioners “have not demonstrated that the use of HTS

subheading 4810.29.00 is inappropriate or that the use of HTS subheading 4810.39.09 is more

appropriate.” Issues and Decision Mem., at 100.

       The PRCB Committee argues that the Department failed to address the official

descriptions of the competing tariff headings. Heading 4810 is defined as: “Paper and

paperboard, coated on one or both sides with kaolin (China clay) or other inorganic substances.”

The heading is further divided into the following relevant divisions: 1) subheadings 4810.21 and

4810.29 encompasses “Paper and paperboard of a kind used for writing, printing or other graphic

purposes, of which more than 10 percent by weight of the total fiber content consists of fibers

obtained by a mechanical process” and 2) subheadings 4810.31, 4810.32 and 4810.39 cover

“Kraft paper and paperboard, other than that of a kind used for writing, printing, or other graphic

purposes.” See Surrogate Value Submission, Mar. 22, 2004 (citing to Chapter 48 of the

Harmonized Tariff Schedule of the United States, which is harmonized to the six-digit level with

the Indian HTS.).

        In rebuttal, the government argues that the PRCB Committee Plaintiffs did not

demonstrate how subheading 4810.39.09 is more appropriate for valuing treated cardboard

inserts. The Department explains that the respondents did not provide specific detail regarding

whether the cardboard inserts they used were “treated” or “unreated,” let alone specific types of

inserts they used. Commerce therefore selected a weighted average of the HTS categories for

both treated and untreated cardboard inserts as the “best available information” for cardboard
Consol. Ct. No. 04-00319                                                                   Page 30


inserts. See 19 U.S.C. § 1677b(c)(1). However, as accurately pointed out by the PRCB

Committee Plaintiffs, the record shows that the description of the treated cardboard supplied by

the respondents during the investigation changed, and Commerce did not specifically address that

change in its final analysis. While Commerce has the authority to use “best information

available” when it finds petitioners’ submissions incomplete or inconsistent, see 19 U.S.C. §

1677e, it also must, “to the extent practicable, provide [petitioners] with an opportunity to

remedy and explain the deficiency.” 19 U.S.C. § 1677m(d). Plaintiffs do not claim that they

lacked an opportunity to show Commerce that the use of subheading 4810.39.09 was more

appropriate. In addition, although the detailed submission by Glopack, Rally, and Hang Lung,

which stated that the treated cardboard inserts respondents used were classified under subheading

4810.29.10.00 differed from Rally’s earlier response, it was not unreasonable for Commerce to

rely on a more detailed explanation, especially since Commerce had to use “the best information

available.” See Surrogate Value Submission, Nov. 20, 2003, at 6. Commerce chose one among

several HTS categories to value treated cardboard inserts, and the respondents’ submission

supported that choice. Thus, the PRCB Committee Plaintiffs did not show that record evidence

did not support Commerce’s methodology.

       5.      Selection of the Surrogate Value for Black and Color Inks

       In response to Commerce’s request that the respondents provide publicly available

information for valuing their factors of production, Glopack offered a list of average prices for

flexographic and gravure inks, in black and other colors, from Hindustan Inks and Resins, Ltd.

(“Hindustan”), an individual Indian manufacturer. Glopack Surrogate Value Submission 1 (Nov.
Consol. Ct. No. 04-00319                                                                  Page 31


20, 2003). Glopack argued that these prices should be used as surrogate values for ink because

they included only those inks used in printing on polyethylene retail carrier bags, namely

flexographic and gravure inks, and because they were color-specific. Id. at 3-5. Commerce

noted that the proposed prices were not accompanied by source documentation.

       In the preliminary determination, Commerce concluded that India represented the

appropriate surrogate for the PRC and relied on publicly available Indian import statistics for

valuing black and color inks. See Preliminary Determination, 69 Fed. Reg. at 3549. In the

Factor Valuation Memorandum, Commerce explained that it used cumulative Indian import

statistics as surrogate values for each material input. Commerce also explained why it did not

use the surrogate value data submitted by Glopack to value the ink. Commerce explained that

the Indian import statistics were “reliable” because they were “based on the sum of all imports

into India during the POI.” Commerce did not accept the Hindustan data, finding that it was

derived from only one producer and varied greatly from the import statistics. Factor Valuation

Mem., at 3.

       Following the preliminary determination, Glopack submitted U.S. import statistics of

gravure and flexographic printing inks, price lists for United States sales from one of Glopack’s

own importers for gravure and flexographic printing inks used to print plastic bags, and a price

list from a Malaysian company for sales to Vietnam of gravure printing inks used to print plastic

bags. Glopack Submission, Mar. 22, 2004, at 3-5. Another respondent in the investigation

provided worldwide average data from the United Nations. Using these various data, Glopack

contended that the Indian import statistics that Commerce used were less accurate than the
Consol. Ct. No. 04-00319                                                                    Page 32


Hindustan data.

       In the Final Determination, Commerce continued to value ink inputs using the publicly

available import statistics that it used in the preliminary determination. It determined that the

Indian import statistics presented the best available surrogate value because they were 1)

sufficiently product-specific, 2) country-wide, 3) tax and export exclusive, and 4)

contemporaneous with the period of investigation. Commerce did not find the Hindustan data

more accurate or representative than the Indian import statistics. Id.

       The basket category tariff provisions Commerce used were based on the Indian HTS

items 3215.11.90 (“Other black printing ink”) and 3215.19.90 (“Other printing ink & printing

colors”). These broad basket provisions include a large number of products Plaintiffs did not

use to produce the subject merchandise. In addition to the flexographic and gravure printing

inks, they include: 1) all types of printing inks other than newspaper inks, rotary inks, and screen

and lithographic printing inks; and 2) gravure and flexographic printing inks used in applications

other than printing on polyethylene bags, including more costly applications of printing on paper,

coated paper, and cardboard; 3) printing inks of higher quality than necessary for printing on

polyethylene bags; 4) printing inks of different concentrations, such as printing ink jellies and

paste, necessarily more expensive on a per-unit basis; and 5) for color inks a single combined

value for all distinct colors, regardless of the relative value of each individual color.

       1. Glopack’s Arguments

       Glopack argues that the Department’s selection of surrogate values for the color-specific

factors of production for flexographic and gravure printing inks used by Plaintiffs Sea Lake and
Consol. Ct. No. 04-00319                                                                   Page 33


Rally to manufacture the subject merchandise did not meet the statutory test for two reasons: (1)

the surrogate prices selected by the Department were derived from basket category tariff

provisions not specific to the ink type used to produce the subject merchandise and 2) the

Department rejected alternative surrogate values Plaintiffs submitted that consisted of the

average unit values based on actual Indian sales of color-specific flexographic and gravure

printing inks used to manufacture polyethylene bags.

       Regarding the specificity of the data Commerce used, Glopack argues that the basket

tariff provisions were overly broad in several respects. First, as a residual basket category, the

data for printing types included all types of specialty and computer printing inks (in addition to

the gravure and flexographic) valued substantially higher than gravure and flexographic printing

inks used to print polyethylene bags. Plaintiff argues that the import statistics also used both

liquid printing inks of normal concentrations used by Plaintiffs to print plastic bags and more

highly concentrated inks in jelly and paste forms used in other applications. The record shows

that ink’s per unit value necessarily increases as the ink concentration of the product increases,

thus making the data used inaccurate. Finally, the basket import statistics for color ink fail to

account for the different colors of the printing inks. The cost of red, violet, and pink tone

printing inks substantially exceeds those of blue, yellow and green tone.

       Glopack pinpoints a significant discrepancy between the alternative surrogate values: the

Hindustan data showed black ink valued at $1.96/kg and the most expensive color ink at $ 4.27

per kg, whereas the basket categories had values of $7.63/kg for black ink and $12.47/kg for all

color ink. In addition, Glopack asked Commerce to compare the Hindustan data with U.S.
Consol. Ct. No. 04-00319                                                                    Page 34


import statistics for calendar years 2000, 2001, 2002, and 2003 (HTSUS 3215.11.00.20, black

flexographic; 3215.11.00.20, black gravure; 3215.19.00.20, color flexographic; and

3215.19.00.30, color gravure). Pub. Doc. # 424 (Tab 7). Plaintiffs argue that, unlike the Indian

tariff provisions, these U.S. tariff provisions are not basket categories, but are limited to gravure

and flexographic printing inks, the types of ink specifically used in production of the subject

merchandise. Specifically, Glopack argues that the U.S. import statistics for calendar years 2002

and 2003 that it provided in its surrogate value submission, showed U.S. import prices

substantially closer to the Hindustan prices than to the basket category import prices. For

example, Plaintiffs calculated that the calendar year 2003 combined average unit value of U.S.

import statistics for black flexographic and black gravure inks came to $3.74/kg. The Hindustan

data provided $1.96/kg for black flexographic and gravure inks and the Department’s surrogate

value for black gravure and flexographic ink was $7.63/kg.

       Glopack also submitted a signed price list from a Malaysian exporter of gravure inks to

Vietnamese producers of polyethylene bags. The price list included the sale of white, red, and

blue gravure inks ranging from $2.00/kg to $2.25/kg. Glopack calculated that the average

Hindustan price reported for red ink was $2.47/kg, for blue ink $2.88/kg and for white ink

$2.10/kg. In comparison, the average unit value for color inks for the basket category Indian

tariff provision was $ 10.22 higher than the highest priced color ink offered by the Malaysian

producer. Consequently, Glopack maintains that the Malaysian price list corroborates the color-

specific average sales prices reported by Hindustan and confirms aberration of the basket

category import statistics and does not reflect commercial prices of flexographic and gravure
Consol. Ct. No. 04-00319                                                                    Page 35


printing inks. Such data also shows that Commerce used distorted data that includes all other

types, qualities, and concentrations of printing inks in addition to flexographic and gravure

printing inks.

       Glopack argues that Commerce erroneously cited to the U.N. data to support the

reliability of the basket category import statistics because Commerce’s analysis focused on the

U.N. data for India derived from official Indian statistics and was “comparable [to the official

Indian import statistics] . . . with regard to both black and color ink.” Issues and Decision Mem.,

at 48. While engaging in this circular reasoning, Commerce completely ignored the reason why

the respondent submitted the data – to highlight the great disparity between the average unit

Indian values and the weighted-average global unit average import price of black and color

flexographic inks.

       In this case, the color-specific average Indian prices for flexographic and gravure printing

inks reported by Hindustan constituted the most specific surrogate value information for

flexographic and gravure printing inks because the data provided surrogate values on a color-

specific basis and included the types of ink used in production of the subject merchandise.

Issues and Decision Mem., Comment 9, at 46. Glopack argues that the administrative record

indicated that a significant price differential existed between different colored inks. In fact, the

record shows color inks more expensive than black ink, and certain color inks are significantly

more expensive than others. Average ink prices ranged from 94.35 rupees per kg for black ink to

205.12 rupees per kg for purple ink. Likewise, a significant price differential among color inks

was evident in the two U.S. ink price lists and the Malaysian price list the respondents submitted.
Consol. Ct. No. 04-00319                                                                   Page 36


       In the final determination, Commerce concluded that while “Hindustan’s pricing data is

more specific to black and color inks, the data is less preferable in terms of the other factors we

considered because the data is not contemporaneous, the pricing data is based on an experience

by a single Indian producer of ink, and, therefore, not completely representative of the cost of this

input, and the pricing data has little or no supporting documentation.” Issues and Decision

Mem., at 46-47. The import data Commerce used is more contemporaneous than the Hindustan

data. The POI in this case spans from October 1, 2002 to March 31, 2003. The Hindustan data

covers the six-month period immediately after the POI, April 1, 2003 to September 30, 2003. Id.

In response, Plaintiffs maintain that the specificity of the Hindustan data takes precedence over

other factors, such as contemporaneity. In addition, Glopack argues that the Hindustan data is

reasonably contemporaneous and covers the six-month period immediately after the POI.

       Plaintiffs make one appealing argument. They claim that indexing the reported prices to

the period of review – an adjustment routinely made in surrogate value calculations – can remedy

any concerns about the contemporaneity of the data. Glopack argues that even so, to calculate

certain surrogate value factors, Commerce applied inflation adjustments by using the Indian

wholesale price index (“WPI”) data reported in the International Financial Statistics published by

the International Monetary Fund. Glopack Br. at 24. In addition, the Hindustan data post-dates

the period of review, and therefore, any WPI adjustment necessary to account for inflation would

reduce, not increase, the prices Hindustan reported. Glopack Br. at 24. The unadjusted

Hindustan data possibly overstates the relevant ink prices. Glopack argues that when weighing

the contemporaneity factor against the specificity of import statistics, the balance should tip
Consol. Ct. No. 04-00319                                                                    Page 37


toward the specificity factor because Commerce’s ability to index the data can mend the modest

shortcomings in the Hindustan data’s contemporaneity. The Department therefore should have

chosen the Hindustan data as superior in product-specificity. Based on this reasoning, Glopack

claims that the Department’s choice of data is not supported by substantial evidence on the

record.

          Glopack also argues that Commerce incorrectly characterized the color-specific

Hindustan data as a series of prices quotes. Commerce explained that it considered the

Hindustan data deficient because it did not reflect “numerous transactions between many buyers

and sellers because the experience of a single producer is less representative of the cost of an

input in a surrogate country.” Issues and Decision Mem., at 46. Glopack points out that the

Hindustan data concerned average unit prices of sales based on actual sales transactions of

flexographic and gravure printing inks for the printing on plastic bags in India from April 2003 to

September 2004.

          The record shows that the Hindustan data was derived from actual sales transactions

widely applicable throughout India. According to a Hindustan official, Hindustan sold those

products throughout India, and its sales accounted for approximately 30% of the Indian market.

The Hindustan data was derived as follows: the company reviewed all sales of flexographic and

gravure printing inks made to home market customers who purchased ink for the purpose of

printing on polyethylene bags during the April 2003 - September 2003 period; then on a color-

by-color basis, the company aggregated the total sales quantity of each ink color (in kilograms)

and the total sales value of each ink color (in rupees); then the total sales value of each color ink
Consol. Ct. No. 04-00319                                                                    Page 38


was divided by the total sales quantity of that color ink. The total average sales price formed a

weighted average rupee per kilogram rate derived from the total sales value of all color inks

(including black) divided by the sales quantity of all color inks (including black).

       Glopack also notes that nothing in the record addresses the size of the Indian market for

printing inks. There was no basis for Commerce to conclude that the small quantity of ink

imports constituted a reliable domestic price for printing inks in India. Plaintiffs request that the

court take judicial notice of new information relating to the size of the Indian market for printing

inks, obtained from the website of the All India Printing Ink Manufacturers Association, Ltd.,

reporting that the annual domestic Indian market for flexographic and gravure printing inks is

approximately 32,100 metric tons. Based on this new information, Glopack argues that even if

all imports in the basket category Commerce used were flexographic and gravure printing inks,

these imports constitute only 3.64 % of the Indian market for gravure and printing inks.

Meanwhile, Glopack states that Hindustan’s sales accounted for 30% of the Indian market.

Consequently, the Department’s determination that the basket category import statistics better

represented the Indian prices than the color-specific average unit prices derived from actual sales

transactions of flexographic and gravure printing inks in India, as reported by the largest Indian

printing inks seller, is not supported by substantial evidence in the administrative record.

       In addition, Glopack argues that the import statistics used by Commerce are unreliable

because they are inconsistent over time. Specifically, “when viewed over time, the basket

category import statistics, being of relatively small volume and covering numerous types of

printing inks of varying concentrations and quality, are highly volatile and are not representative
Consol. Ct. No. 04-00319                                                                   Page 39


of domestic Indian ink pricing.” Glopack Br., at 29.

       In support, Glopack presents new information, not considered on the administrative level,

of quarterly import statistics for basket tariff provisions for each quarter from January 1999 to

June 2004 obtained from the official Indian import statistics and reported by Global Trade Atlas.

Having calculated quarterly average unit values for each provision, Glopack argues that its

analysis exposes the unrepresentative nature of the basket category import statistics of the Indian

pricing for gravure and flexographic printing inks and demonstrates that the import statistics for

any particular period are unrepresentative of import pricing over time. As a general matter,

Glopack maintains that due to the volatility of import statistics over time, they are too inaccurate

to provide a reliable basis for the calculation of surrogate values in this case.

       Finally, Glopack points out that the petitioners on the administrative level declined to

furnish the prices that they paid for the flexographic and gravure printing inks that they used in

printing on the polyethylene bags in their U.S. or foreign facilities. The absence of such readily

available information further confirms that the average unit values of the basket category import

statistics greatly overstated the actual commercial prices of flexographic and gravure printing

inks used to produce the subject merchandise.

       2. Government’s Arguments

       Commerce explained in its final determination that it chose the Indian import statistics

because they were more “reliable,” as they were “based on the sum of all imports into India

during the POI”. Factor Valuation Mem., at 3. Commerce found the Hindustan data unreliable

because it was “not completely representative of the cost of this input” and “the experience of a
Consol. Ct. No. 04-00319                                                                  Page 40


single producer is less representative of the cost of an input in a surrogate country.” Issues and

Decision Mem., at 46-47.

       Commerce argues that while more product-specific, the Hindustan data was not

contemporaneous with the PIO and represented the experience of only a single Indian producer,

and had little or no supporting documentation. Issues and Decision Mem., at 46-47. Therefore,

Commerce’s determination that the Indian import statistics presented the best available

information for use as a surrogate value for black and color ink is based on substantial evidence,

consistent with the anti-dumping statute and Commerce’s practice, and is in accordance with

law.

       In cases involving nonmarket economies such as the PRC, Commerce looks to surrogate

value sources from market economy countries at the same level of economic development for the

value of the factors of production. See 19 U.S.C. § 1677b(c)(1). Commerce needed to find

surrogate sources for the values of black and color ink. Commerce solicited comments from all

interested parties on possible sources for surrogate values. In response to Commerce’s

solicitation, Glopack contended that Commerce should use data that it provided from a single

Indian producer, Hindustan.

       Commerce considered the submissions by Glopack and other respondents and found that

they did not support use of the Hindustan data over the Indian import statistics. Issues and

Decision Mem., at 39-40, 46-49. Commerce found that while Indian prices were higher than the

worldwide average, the statutory mandate required it to determine surrogate values based on data

from a country at the same level of economic development as the PRC, despite an inconsistency
Consol. Ct. No. 04-00319                                                                      Page 41


with worldwide average import prices. Issues and Decision Mem., at 48. Commerce found it

could not use the other data Glopack submitted because the data came from individual producers,

was derived from importing countries not economically comparable to the PRC, and was not

publicly available. Issues and Decision Mem., at 47. Commerce concluded that the United

States import statistics confirmed that the Indian import statistics were not distorted for

combining several colors within a single import category because the United States import prices

for ink specific categories did not substantially differ from the import prices for basket categories

that included several ink types. Issues and Decision Mem., at 47-48. Commerce criticized the

Malaysian data for not being contemporaneous with the POI and for not following Commerce’s

preference for publicly available data since it was based on a single producer’s experience.

       3. Analysis

       The court decides whether Commerce’s choice of the surrogate value was supported by

substantial evidence and is in accordance with law. “In determining the valuation of the factors

of production, the critical question is whether the methodology used by Commerce is based on

the best available information and establishes antidumping margins as accurately as possible.”

Shakeproof, 268 F.3d at 1382. The statute requires that the Department’s “valuation of the

factors of production shall be based on the best available information regarding the values of

such factors.” 19 U.S.C. § 1677b(c)(1). “While § 1677b(c) provides guidelines to assist

Commerce in this process, this section also accords Commerce wide discretion in the valuation

of factors of production in the application of those guidelines.” Nation Ford Chem. Co. v.

United States, 166 F.3d 1373, 1377 (Fed. Cir. 1999); see also Anshan Iron & Steel Co. v. United
Consol. Ct. No. 04-00319                                                                    Page 42


States, 2003 WL 22018898, at *3 (CIT, July 16, 2003); Timken Co. v. United States, 25 CIT 939,

166 F. Supp. 2d 608, 616 (2001).

       When assessing which particular surrogate represents the “best available information” for

the factors of production reported to Commerce, the Department relies on surrogate values which

are: 1) non-export average values, 2) most contemporaneous with the period of investigation, 3)

product-specific, and 4) tax exclusive. Issues and Decision Mem., at 46. Commerce uses

product-specific surrogate values, seeking surrogates most comparable in terms of design or

materials to the actual input consumed by the Chinese respondents in production of the subject

merchandise. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Bicycles

from China, 61 Fed. Reg. 19026, 19030 (Dep’t of Commerce, Apr. 30, 1996); Certain Helical

Spring Lock Washers from China; Final Results of Antidumping Admin. Review, 61 Fed. Reg.

41994, 41996-7 (Dep’t of Commerce, Aug. 13, 1996) (it is Commerce’s practice to seek

surrogate prices that most closely reflect the specific grade and physical characteristics of the

input used).

       Plaintiffs cite to certain cases, involving activated carbon as a raw material input, where

Commerce rejected the use of average unit values obtained from Indian import statistics as the

appropriate surrogate because Indian import statistics broadly covered all grades and types of

activated carbon. Commerce instead relied on an alternative surrogate value which more closely

corresponded to the activated carbon incorporated into the subject merchandise. See, e.g., Notice

of Final Determination of Sales at Less Than Fair Value and Negative Final Determination of

Critical Circumstances: Certain Television Receivers from China, 69 Fed. Reg. 20594 (Dep’t of
Consol. Ct. No. 04-00319                                                                    Page 43


Commerce, Apr. 16, 2004); Notice of Final Determination of Sales at Less Than Fair Value:

Polyvinyl Alcohol from China, 68 Fed. Reg. 47538 (Dep’t of Commerce, Aug. 11, 2003).

       This Court has affirmed the Department’s selection of a surrogate value more specific

than the average price in the Indian index numbers. See Kerr-McGee Chem. Corp. v. United

States, 985 F. Supp. 1166, 1176 (1997) (affirming Commerce’s decision to use a surrogate value

of the type of manganese with the ore content “‘more comparable to the ore used by the Chinese

producers than the [surrogate price for] ore with the higher manganese content’” (internal citation

omitted)). In previous cases, Commerce recognized that import statistics based on a basket tariff

category are inappropriate if a more representative alternate surrogate is available. See, e.g.,

Notice of Preliminary Determination of Sales at Less Than Fair Value: Tetrahydrofurfuryl

Alcohol from China, 69 Fed. Reg. 3887, 3892 (Dep’t of Commerce, Jan. 27, 2004); Freshwater

Crawfish Tailmeat from China; Final Results of New Shipper Review, 64 Fed. Reg. 27961,

27962 (Dep’t of Commerce, May 24, 1999) (“[I]mport data from basket categories can be too

broad to be reliable.”). This Court has ruled that Commerce can rely on Indian import statistics

as the basis for a surrogate value only “after concluding that they [the import statistics] are based

on commercially and statistically significant quantities.” Shanghai Foreign Trade Enter. Co. v.

United States, 28 CIT __, 318 F. Supp. 2d 1339, 1352-53 (2004) (rejecting Commerce’s reliance

on Indian import statistics for pig iron as surrogate value because import volume constituted only

1,132 metric tons of product, a quantity determined to be too small to reliably represent India

market value).
Consol. Ct. No. 04-00319                                                                   Page 44


        In this case, Commerce chose to use the Indian import statistics in accordance with its

preference to use “countrywide data” when available. Issues and Decision Mem., Comment 2.

Commerce considered the experience of one company, Hindustan, less representative of the cost

of an input in an entire surrogate country. Issues and Decision Mem., at 46. The record shows

that while the Hindustan data is more product-specific as it provides values for those input

products valued in this case, it represents only 30% of the Indian sales of those products.

Glopack moved to submit new information in support of its argument that the Indian import

statistics account for even a smaller percentage of the sales of the relevant inks. However, the

new information presented by Glopack relating to the size of the Indian printing inks market

from the All India Printing Ink Manufacturers Association, Ltd.’s website was not supplied

during the administrative review, and the court will not consider this evidence. See Atcor, Inc. v.

United States, 11 CIT 148, 154, 658 F. Supp. 295, 300 (1987) (“In reviewing agency action, the

Court must base its decision upon the administrative record. New evidence may not be

received.”); see also PPG Indus., Inc. v. United States, 5 CIT 282, 284 (1983) (“Thus, any data

or memoranda not presented to, obtained by, considered or relied upon by [the agency] . . . [is]

not part of the record.”).

        Commerce also found that the Hindustan data was not supported by sufficient

documentation. Issues and Decision Mem., at 46-47. While Glopack presented several factors

that detract from Commerce’s finding that the Indian import statistics were more accurate, those

factors pertain only to the data’s product specificity. This court cannot substitute its own
Consol. Ct. No. 04-00319                                                                  Page 45


evidentiary evaluation for Commerce’s. Finally, Glopack has not shown that based on prior

cases that Commerce acted contrary to the law when using the Indian imports statistics.

          6.     Use of Surrogate Values for Sea Lake’s and Glopack’s Purchases of Inputs
                 from a Hong Kong Trading Company.

          Sea Lake provided Commerce detailed listings of its market economy purchases of raw

material inputs used to produce the subject merchandise. The listings included purchases of raw

material inputs from Hong Kong suppliers, including color concentrate, color ink, and cardboard

inserts, bought with Hong Kong or U.S. dollars. In the preliminary determination, Commerce

valued Sea Lake’s factors of production for these inputs using Sea Lake’s reported Hong Kong

prices.

          During its verification of Sea Lake’s responses, Commerce found that a substantial

volume of Sea Lake’s total market economy purchases of ink and color concentrate from Hong

Kong suppliers was of Chinese origin. In the final determination, Commerce reversed its

position and valued Sea Lake’s factors of production for inks, colorants, and cardboard inserts

using surrogate values. Issues and Decision Mem., Comment 4. Commerce determined that its

regulation requiring the valuation of reported factors of production with the market economy

purchase prices of those inputs did not apply to inputs produced in China.

          Plaintiffs argue that the administrative record shows that Sea Lake purchased the

Chinese-origin inputs in Hong Kong and had them shipped from Hong Kong to their factory in

Shenzhen. Glopack argues that Sea Lake’s market economy purchases were not intra-China

transfers transacted in Hong Kong dollars, but were transactions that left the NME stream of

commerce, and were physically moved from China to Hong Kong and then re-exported back to
Consol. Ct. No. 04-00319                                                                  Page 46


China. Sea Lake owns a “processing” factory in Shenzhen, Sea Lake Shenzhen, which has a

permit to import materials for processing and re-export. Issues and Decision Mem., at 4-5. Sea

Lake Shenzhen

       is just a factory and is allowed to process imported materials only. The raw
       materials are purchased by the [sic] Sea Lake Hong Kong and the processed goods
       are sent to Sea Lake Hong Kong. The factory does not have any sales revenue and
       makes only processing fees to cover the labor wages and rent and utility expenses.


Sea Lake Dec. 22, 2003 Supp. Response, at SA-3.

       Sea Lake provided Commerce with the information that its purchase of domestic Chinese

raw material inputs for use in its production was limited. By operation of law, the factory is

required to import most of its raw material inputs, in this case from Hong Kong, and then export

the finished products back to Sea Lake in Hong Kong. Sea Lake Hong Kong, and not its Chinese

factory, was responsible for the purchase of raw materials, including inks and color concentrate.

Sea Lake Verification Report, at 4, Pub. Doc. # 447.

       In the pending appeal, Glopack argues that Commerce’s determination is contrary to law

because the agency’s own regulation and longstanding administrative practice require the

Department to use actual import prices to value reported factors of production if the inputs were

purchased in a market economy country with market economy currency, without regard to the

country of origin of the imported merchandise.

       Commerce’s regulation provides “where a factor is purchased from a market economy

supplier and paid for in a market economy currency, the Secretary normally will use the price

paid to the market economy supplier.” 19 C.F.R. § 351.408(c)(1). The preamble to the

regulation provides that “where the NME producer purchases inputs from a market economy
Consol. Ct. No. 04-00319                                                                  Page 47


producer and these inputs are paid for in a market economy currency, we would use the price

paid by the NME producer to value that input.” Antidumping Duties; Countervailing Duties:

Final Rule, 62 Fed. Reg. 27,296, 27,366 (Dep’t Commerce, May 19, 1997).

       In its final decision, Commerce cited the preamble of 19 C.F.R. § 351.408(c)(1) and

interpreted it as applying the regulation “to those inputs which were produced in a market

economy country.” Issues and Decision Mem., at 26. Commerce concluded that, given the

language in the preamble, the regulation did not require the use of the actual prices paid for

inputs that were produced in a nonmarket economy. Issues and Decision Mem., at 25-26

(“[P]rices of products that originate in a NME country should not be used because of the inherent

distortions involved in an economy that is not controlled by market forces.”).

       “‘[A]n agency’s interpretation of its own regulation[s] is entitled to deference’ when the

language of the regulation is ambiguous or the regulation is silent about the issue at hand.”

Timken Co., 25 CIT at 943 n.2, 166 F. Supp. 2d at 615 n.2 (citing Christensen v. Harris County,

529 U.S. 576, 588 (2000)). In this case, the regulation’s plain language provides that where the

input is “purchased” in a market economy country with market economy currency from a market

economy “supplier,” the purchase price is used to value the reported factor of production. See 19

C.F.R. § 351.408(c)(1). The term “supplier,” however, is open to interpretation because it

arguably could either mean “vendor” or “producer.” See Def. Br. at 29.

       In past cases, Commerce has interpreted 19 C.F.R. § 351.408(c)(1) as not disqualifying

transactions based on the goods’ country of origin. See Issues and Decision Mem. for the

Antidumping Duty Investigation of Certain Color Television Receivers from the People’s

Republic of China, Comment 8, at 39 (Dep’t Commerce, Apr. 16, 2004) (“We agree with the
Consol. Ct. No. 04-00319                                                                    Page 48


respondents that we should not reject prices of goods purchased in Hong Kong based on the

country of origin of the goods.”); Issues and Decision Mem. for the Antidumping Duty

Administrative and New Shipper Reviews on Certain Preserved Mushrooms from China, 88

ITADOC 31204, Comment 7 (Dep’t of Commerce, June 11, 2001) (stating that 19 C.F.R. §

351.408(c)(1) “does not require that the nonmarket economy respondent establish in which

particular country the factor of production was produced, only that it was obtained from a market

economy supplier.”). As a rule of thumb, agencies are required to interpret and apply regulations

consistently from case to case. See Fort Stewart Sch. v. Fed. Labor Relations Auth., 495 U.S.

641, 654 (1990); Torrington Co. v. United States, 82 F.3d 1039, 1049 (Fed. Cir. 1996); China

Steel Corp. v. United States 27 CIT __, 264 F. Supp. 2d 1339, 1354 (2003). Commerce may

reach different determinations in separate administrative reviews, but it must either employ the

same methodology or give reasons for changing its practice. Cinsa, S.A. de C.V. v. United States,

21 CIT 341, 349, 966 F. Supp. 1230, 1238 (1997) (involving challenge to Commerce’s method

of calculation for cost of production and constructed value); Hussey Cooper, Ltd. v. United

States, 17 CIT 993, 997, 834 F. Supp. 413, 418 (1993) (citations omitted) (“It is ‘a general rule

that an agency must either conform itself to its prior decisions or explain the reasons for its

departure. . . . .’”). When Commerce departs from its prior decision, it must provide a reasoned

explanation for its departure in order for the court to judge the consistency of the administrative

action. Hussey Cooper, Ltd., 17 CIT at 998, 834 F. Supp. at 419; see RHP Bearings Ltd. v.

United States, 24 CIT 1218, 120 F. Supp. 2d 1116, 1124 (2000), aff’d in part and vacated in
Consol. Ct. No. 04-00319                                                                    Page 49


part, 288 F. 3d 1334, 1337 (Fed. Cir. 2002) (vacating the CIT decision sustaining Commerce’s

calculation of profit component of constructed value and remanding case for further

proceedings).

       In this case, Commerce explained why it reinterpreted its regulation:

       Unlike in [Color Television Receivers], in this case we have been presented with
       arguments as to why we should not use market-economy prices for inputs
       produced in a NME country. Based on our review of those comments, we have
       determined that prices of products that originate in a NME country should not be
       used because of the inherent distortions involved in an economy that is not
       controlled by market forces.
       ....
       [W]e have strong concerns that, were we to use the prices of inputs that were
       produced in a NME country, our methodology for valuing the factors of
       production would become easily open to manipulation. This is particularly
       worrisome where, as here, the inputs may never have left the stream of the NME
       commerce. It would not be difficult for a firm to open a paper company in Hong
       Kong (or other market-economy countries) and route “sales” through this
       company in order to take advantage of our market-economy-input methodology.
       For these reasons, our practice is not to use the prices of inputs that originated in a
       NME country even if the input is sourced from a market-economy supplier.


Issues and Decision Mem., Comment 4, at 25-26. Commerce further distinguished this case from

Certain Color Television Receivers from China, 69 Fed. Reg. 20594 and Certain Preserved

Mushrooms from China, 66 Fed. Reg. 31204. In Color Televisions Receivers, the determination

did not indicate whether the inputs purchased from the Hong Kong suppliers ever left China, and

in Certain Preserved Mushroom from China, Commerce did not find evidence that the inputs

were not produced in a market economy.

       Glopack argues that Commerce’s conclusion that the inputs never left the stream of NME

commerce is not supported by the record, citing to Sea Lake’s response that Sea Lake, a Hong

Kong company, purchased the Chinese-origin inputs in Hong Kong and shipped them from Hong
Consol. Ct. No. 04-00319                                                                    Page 50


Kong to its factory in Shenzhen. See Sea Lake Dec. 22, 2003 Supp. Response, at SA-3. Glopack

argues that Sea Lake’s market economy purchases were not intra-China transfers transacted in

Hong Kong dollars, but were transactions that left the NME stream of commerce and were

physically moved from China to Hong Kong and re-exported back to China.

       Commerce argues that it used surrogate values rather than the actual prices paid by Sea

Lake and Glopack for raw material inputs manufactured in the PRC but purchased from a Hong

Kong trading company to avoid using distorted prices for factors of production. Commerce

found that to avoid using prices influenced by the distortions inherent in the PRC’s nonmarket

economy, it must disregard prices of inputs produced there, regardless of where the purchase

took place. Commerce argues that this interpretation is consistent with its practice not to use

prices distorted by nonmarket forces in its calculation.

       Where Commerce has reason to believe or suspect that actual prices are subsidized, the

court will “look at the facts of [the] record to determine whether Commerce has sufficient

reasons to suspect that actual prices are distorted such that the substitution of actual prices with

surrogate values is warranted.” China Nat’l Mach. Imp. & Exp. Corp. v. United States, 27 CIT

__, 293 F. Supp. 2d 1334, 1336 (2003), aff’d, 104 Fed. Appx. 183 (Fed. Cir. 2004).

The court finds that Commerce provided sufficient explanation of why it applied its regulation

differently in this case from some prior cases. Furthermore, Commerce’s decision was based on

record evidence showing that Sea Lake purchased products produced in the PRC from its Hong

Kong trading company, and that those goods may not have left the country on the way to Sea

Lake. As a result, Commerce’s valuation of this factor is supported by substantial evidence and

in accordance with the law.
Consol. Ct. No. 04-00319                                                                Page 51


                                          CONCLUSION

       In conclusion, Commerce’s determinations in this case are AFFIRMED with the

exception of its calculation of Hang Lung’s electricity usage. This issue is remanded to the

Department of Commerce for further proceedings consistent with this opinion.




      December 13, 2005                                           /s/ Judith M. Barzilay
_____________________________                               ______________________________
      New York, NY                                              Judith M. Barzilay, Judge
