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                                    Slip Op. 17-24

               UNITED STATES COURT OF INTERNATIONAL TRADE

SHANGHAI WELLS HANGER CO., LTD.,

                  Plaintiff,

         v.                                            Before: Leo M. Gordon, Judge

                                                       Consol. Court No. 15-00103
UNITED STATES,

                 Defendant.


                                OPINION and ORDER

[Commerce’s final results remanded.]

                                                                  Dated: March 2, 2017

       Jonathan M. Freed, Trade Pacific PLLC of Washington, DC, for Plaintiffs Shanghai
Wells Hanger Co., Ltd., Hong Kong Wells Ltd., Hong Kong Wells Ltd. (USA), and
Fabriclean Supply, Inc.

       Courtney D. Enlow, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice of Washington, DC, for Defendant United States. With her on
the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E.
Davidson, Director, Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief
was Henry J. Loyer, Attorney, Office of the Chief Counsel for Trade Enforcement and
Compliance of Washington, DC.

      Gordon, Judge: This action involves the fifth administrative review conducted by

the U.S. Department of Commerce (“Commerce”) of the antidumping duty order covering

steel wire garment hangers from the People’s Republic of China (“PRC”). See Steel Wire

Garment Hangers from the PRC, 79 Fed. Reg. 65,616 (Dep’t Commerce Nov. 5, 2014)

(prelim. results admin. rev.) (“Preliminary Results”) and accompanying Decision Mem. for

the Prelim. Results of the 2012-2013 Antidumping Duty Admin. Rev., A–570–918,
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Consol. Court No. 15-00103                                                              Page 2

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(Oct. 31, 2014), PD 1781 at bar code 3238876-01, ECF No. 21 (“Preliminary Decision

Memo”); see also Steel Wire Garment Hangers from the PRC, 80 Fed. Reg. 13,332

(Dep’t Commerce Mar. 13, 2015) (final results admin. rev.) (“Final Results”) and

accompanying Issues and Decision Mem. for Steel Wire Garment Hangers from the PRC,

A–570–918, (Mar. 6, 2015), PD 197 at bar code 32631490-01, ECF No. 21

(“Final Decision Memo”).

              Before the court is the USCIT Rule 56.2 motion for judgment on the agency record

of Plaintiffs Shanghai Wells Hanger Co., Ltd., Hong Kong Wells Ltd., Hong Kong Wells

Ltd. (USA), and Fabriclean Supply, Inc. (collectively, “Plaintiffs” or “Shanghai Wells”).

See Rule 56.2 Mem. Supp. Mot. J. Agency R. of Pls. Shanghai Wells Hanger Co., Ltd.,

Hong Kong Wells Ltd., Hong Kong Wells Ltd. (USA), and Fabriclean Supply, Inc.,

ECF No. 41 (“Pls.’ Br.”); see also Def.’s Mem. Opp’n Pls.’ Rule 56.2 Mot. J. Agency R.,

ECF No. 49 (“Def.’s Opp’n”); Pls.’ Reply Def.’s Opp’n, ECF No. 54 (“Pls.’ Reply”).

The court has jurisdiction pursuant to Section 516A(a)(2)(B)(iii) of the Tariff Act of 1930,

as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2012),2 and 28 U.S.C. § 1581(c) (2012).

              Plaintiffs challenge (1) Commerce’s selection of Thailand as the primary surrogate

country, (2) Commerce’s valuation of Shanghai Wells’ labor factor of production (“FOP”);

(3) Commerce’s calculation of surrogate financial ratios, (4) Commerce’s valuation of



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1
 “PD” refers to a document contained in the public administrative record.
2
 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2012 edition.

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Consol. Court No. 15-00103                                                        Page 3

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Shanghai Wells’ corrugated paperboard input; and (5) Commerce’s valuation of Shanghai

Wells’ brokerage and handling costs. For the reasons that follow, the court remands this

matter to Commerce to reconsider its surrogate country selection. The court reserves

judgment on the remaining issues, which may become moot.

                                 I. Standard of Review

      The court sustains Commerce’s “determinations, findings, or conclusions” unless

they are “unsupported by substantial evidence on the record, or otherwise not in

accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). More specifically, when reviewing

agency determinations, findings, or conclusions for substantial evidence, the court

assesses whether the agency action is reasonable given the record as a whole.

Nippon Steel Corp. v. United States, 458 F.3d 1345, 1350-51 (Fed. Cir. 2006); see also

Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951) (“The substantiality of

evidence must take into account whatever in the record fairly detracts from its weight.”).

Substantial evidence has been described as “such relevant evidence as a reasonable

mind might accept as adequate to support a conclusion.” DuPont Teijin Films USA v.

United States, 407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v.

NLRB, 305 U.S. 197, 229 (1938)). Substantial evidence has also been described as

“something less than the weight of the evidence, and the possibility of drawing two

inconsistent conclusions from the evidence does not prevent an administrative agency’s

finding from being supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n,

383 U.S. 607, 620 (1966). Fundamentally, though, “substantial evidence” is best


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Consol. Court No. 15-00103                                                            Page 4

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understood as a word formula connoting reasonableness review. 3 Charles H. Koch, Jr.,

Administrative Law and Practice § 9.24[1] (3d ed. 2016). Therefore, when addressing a

substantial evidence issue raised by a party, the court analyzes whether the challenged

agency action “was reasonable given the circumstances presented by the whole record.”

8A West’s Fed. Forms, National Courts § 3.6 (5th ed. 2016).

                                          II. Discussion

       In an antidumping duty administrative review, Commerce determines whether

subject merchandise is being, or is likely to be, sold at less than fair value in the United

States by comparing the export price and the normal value of the merchandise. 19 U.S.C.

§§ 1675(a)(2)(A), 1677b(a). In the non-market economy (“NME”) context, Commerce

calculates normal value using data from surrogate countries to value respondents’ FOPs.

19 U.S.C. § 1677b(c)(1)(B). Commerce must use the “best available information” in

selecting surrogate data from “one or more” surrogate market economy countries.

19 U.S.C. § 1677b(c)(1)(B), (4). The surrogate data must “to the extent possible” be from

a market economy country or countries that are (1) “at a level of economic development

comparable to that of the [NME] country” and (2) “significant producers of comparable

merchandise.” 19 U.S.C. § 1677b(c)(4). Commerce has a stated regulatory preference to

“normally . . . value all factors in a single surrogate country.” 19 C.F.R. § 351.408(c)(2)

(2013). Commerce utilizes a four-step process to select a surrogate country:

       (1) the Office of Policy . . . assembles a list of potential surrogate countries
       that are at a comparable level of economic development to the NME
       country; (2) Commerce identifies countries from the list with producers of
       comparable merchandise; (3) Commerce determines whether any of the
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Consol. Court No. 15-00103                                                          Page 5

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       countries which produce comparable merchandise are significant producers
       of that comparable merchandise; and (4) if more than one country satisfies
       steps (1)–(3), Commerce will select the country with the best factors data.

Vinh Hoan Corp. v. United States, 39 CIT ___, ___, 49 F. Supp. 3d 1285, 1292 (2015)

(internal quotation marks omitted) (quoting Import Admin., U.S. Dep't of Commerce,

Non-Market Economy Surrogate Country Selection Process, Policy Bulletin 04.1 (2004)

(“Policy   Bulletin”),   available   at   http://enforcement.trade.gov/policy/bull04–1.html

(last visited this date)). See also 19 C.F.R. § 351.408(c)(2); Policy Bulletin at 4 (“[D]ata

quality is a critical consideration affecting surrogate country selection.”). When choosing

the “best available” surrogate data on the record, Commerce, to the extent practicable,

seeks data that are publicly available, product-specific, reflective of a broad market

average, and contemporaneous with the period of review. Qingdao Sea–Line Trading Co.

v. United States, 766 F.3d 1378, 1386 (Fed. Cir. 2014).

       Here, Commerce issued a non-exhaustive list of potential surrogate countries.

See Letter Regarding Deadlines for Surrogate Country and Surrogate Value Comments,

Attach. 1, PD 14 at bar code 3175386-01 (Jan. 23, 2014). Commerce identified six

potential surrogate countries that were at a level of economic development comparable

to the PRC and were significant producers of comparable merchandise. Id. Commerce’s

surrogate country determination therefore turned on the issue of data quality, i.e., which

country had the best available data. The choice soon narrowed from among six to

between two, Thailand and the Philippines. Commerce appeared to address the relative

quality of Thai and Philippine import data, labor data, and financial statements to


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Consol. Court No. 15-00103                                                           Page 6

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determine which country provided the “best available” information. See Final Decision

Memo at 12 (Comment 2, “Selection of Surrogate Country”). For import and labor data,

Commerce determined that Thailand had the better quality data. Id. at 10-11.

       For the financial statements, however, Commerce did not compare the available

Philippine and Thai statements. Commerce simply concluded that the Thai financial

statements were “usable” and relied on a regulatory preference to value all factors of

production in a single country. Id. at 15 (“[B]ecause we have useable financial statements

from Thailand, the primary surrogate country in this review, and because it is the

Department’s preference to stay within the primary surrogate country, we are not

considering the Philippine financial statements.”).

       The problem here is straightforward.       Plaintiffs argue that Commerce never

compared the Philippine and Thai financial statements to determine which was best, and

that by sidestepping this comparison (one Commerce made for import and labor data),

Commerce failed to apply its surrogate country selection criteria reasonably. See Pls.’

Br. 13-14. The court agrees. Implicit in Commerce’s “finding” that the Thai financial

statements are merely “usable” is a tacit concession that the Philippine financial

statements are actually superior, a fact borne out by the record. Plaintiffs explain that the

four Philippine surrogate companies “produced comparable merchandise by drawing wire

rod to wire and making various wire products,” id. at 13-14, which closely resembles

Shanghai Wells’ production process. Id. at 21. Plaintiffs contrast the Thai financial

statements, noting that the two of the three Thai companies – Sahasilp and Monkgol


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Consol. Court No. 15-00103                                                          Page 7

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Fasteners – did not produce comparable merchandise and did not draw wire from wire

rod in the production process. Id. 21-22. According to its public financial statements,

Sahasilp manufactured and sold “all kinds of nuts, rivets, screws, pressed components of

shoe[] decoration and related accessories,” and its web site described the following

product categories: “Furniture Part, Automotive Part, Machines, Springs, Standard

Stainless Steel Chemical Elements, and Cold Forming Carbon Steel,” which, Plaintiffs

note, are not comparable to garment hangers. Id. 21 (quoting M&B Metal Prods. Co.’s

Surrogate Value Submission, Ex. 1, P.D. 170 at barcode 3232295-01 (Oct. 1, 2014) &

Ex. 3, P.D. 172 at barcode 3232295-03 (Oct. 1, 2014)). Plaintiffs also note that the record

shows that Mongkol Fastener produced fasteners for “various applications such as

construction part, machinery part, automobile part, electrical appliance part, [and] medical

implant part,” using over fifteen types of machinery, none of which included wire drawing

machinery. Id. 22 (“Nothing in this record indicated that Mongkol Fastener engage[d] in

drawing wire from steel wire rod, but the record contains abundant evidence regarding its

forging and die-casting operations for manufactured products dissimilar to steel wire

garment hangers.”). Defendant and Defendant-Intervenor do not offer a compelling or

persuasive response to Plaintiffs’ analysis of the record.

       Given the importance of wire drawing for the production of the subject

merchandise, and the relative weakness of the Thai companies on this characteristic

when compared to those of the Philippines, the court cannot understand how a

reasonable mind would conclude that the Thai financial statements are superior to the


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Consol. Court No. 15-00103                                                        Page 8

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Philippine financial statements. Rather than acknowledge the apparent superiority of the

Philippine financial statements, and incorporate that fact into its surrogate country

selection analysis, Commerce instead settled for “usable” Thai statements because it

preferred to “stay within the primary surrogate country.” Id. at 15. That though puts the

proverbial cart before the horse. Commerce may not select Thailand as the surrogate

country by ignoring a step in its process. It must first reasonably evaluate the available

data sets, which includes an acknowledgment that on this record a reasonable mind

would not select the Thai financial statements as better than the Philippine statements.

       Be aware, however, that this does not mean that the Philippines must, and

Thailand cannot, be the surrogate country. It simply means that Commerce’s process of

selecting Thailand was unreasonable. The court expresses no opinion on whether either

country may constitute a reasonable choice on this administrative record. It may be that

the import and labor data carry more weight in the margin calculation for wire hangers.

It may be that the financial statements are the relatively more important factor. It may

even be that this is a case where sourcing surrogate data from more than one country

(despite the attendant headaches and difficulty that entails) yields the most accurate

dumping margin. Commerce and the parties will have to sort that out on remand.

                                      III. Conclusion

       For the foregoing reasons, it is hereby

       ORDERED that the Final Results are remanded to Commerce to reconsider its

selection of Thailand as the primary surrogate country; it is further


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Consol. Court No. 15-00103                                                     Page 9

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       ORDERED that Commerce shall file its remand results on or before May 2, 2017;

and it is further

       ORDERED that, if applicable, the parties shall file a proposed scheduling order

with page limits for comments on the remand results no later than seven days after

Commerce files its remand results with the court.



                                                         /s/ Leo M. Gordon
                                                       Judge Leo M. Gordon


Dated: March 2, 2017
       New York, NY




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