                         Slip Op. 08-122

            UNITED STATES COURT OF   INTERNATIONAL TRADE
______________________________
                               :
ASSOCIATION OF AMERICAN        :
SCHOOL PAPER SUPPLIERS,        :
                               :
                Plaintiff,     :
                               :
          v.                   :     Before: Richard K. Eaton, Judge
                               :
UNITED STATES,                 :     Consol. Court No. 06-00395
                               :
                Defendant,     :     Public Version
                               :
     and                       :
                               :
KEJRIWAL PAPER LIMITED,        :
                               :
                Deft.-Int.     :
______________________________:
                               :
KEJRIWAL PAPER LIMITED,        :
                               :
                Plaintiff,     :
                               :
          v.                   :
                               :
UNITED STATES,                 :
                               :
                Defendant,     :
                               :
     and                       :
                               :
ASSOCIATION OF AMERICAN        :
SCHOOL PAPER SUPPLIERS,        :
                               :
                Deft.-Int.     :
______________________________:

                        OPINION AND ORDER

[United States Department of Commerce’s final results of
administrative review on certain lined paper products from India
are sustained in part and remanded.]


                                           Dated: November 17, 2008
Consol. Court No. 06-00395                                Page 2

     Wiley Rein LLP (Alan H. Price, Timothy C. Brightbill and
Maureen E. Thorson), for plaintiff/defendant-intervenor
Association of American School Paper Suppliers.

     Gregory G. Katsas, Assistant Attorney General; Jeanne E.
Davidson, Director, Patricia M. McCarthy, Assistant Director,
Commercial Litigation Branch, Civil Division, United States
Department of Justice (John J. Tudor); Office of Chief Counsel
for Import Administration, United States Department of Commerce
(Natasha Camille Robinson), of counsel, for defendant United
States.

     deKieffer & Horgan (J. Kevin Horgan and Gregory S. Menegaz),
for plaintiff/defendant-intervenor Kejriwal Paper Limited.


     Eaton, Judge:   This consolidated action1 is before the court

on the motions of plaintiff/defendant-intervenor Association of

American School Paper Suppliers (the “Association”) and

plaintiff/defendant-intervenor Kejriwal Paper Limited

(“Kejriwal”) for judgment upon the agency record pursuant to

USCIT Rule 56.2, and defendant the United States’ opposition

thereto.   See Association’s Mot. J. Agency R. (“Ass’n Br.”);

Brief. Supp. Mot. J. Agency R. Kejriwal (“Kejriwal’s Br.”);

Def.’s Opp. Pls.’ and Deft.-Ints.’ Mots. J. Agency R. (“Def.’s

Br.”).

     By their motions, the Association and Kejriwal each

challenge certain aspects of the United States Department of

Commerce’s (“Commerce” or the “Department”) final results in its



     1
        This action includes court numbers 06-00395 and 06-00399.
See Ass’n of Am. School Paper Suppliers v. United States, Consol.
Ct. No. 06-00395 (Feb. 26, 2007) (order granting consent motion
to consolidate cases).
Consol. Court No. 06-00395                               Page 3

administrative review of certain lined paper products (“CLPP”)

from India, covering the period of review (“POR”) July 1, 2004,

through June 30, 2005.    See CLPP from India, 71 Fed. Reg. 45,012

(Dep’t of Commerce Aug. 8, 2006) (notice of final determination

of sales at less than fair value) (the “Final Results”).    The

Final Results expressly adopted the Issues and Decisions

Memorandum for the Final Determination in the Antidumping

Investigation of CLPP from India (Dep’t of Commerce July 31,

2006) (the “I&D Memo”).   Jurisdiction is had pursuant to 28

U.S.C. § 1581(c) (2000) and 19 U.S.C. § 1516a(a)(2)(B)(i).

     For the reasons set forth below, Commerce’s Final Results

are sustained in part and remanded.



                             BACKGROUND

     In September 2005, the Association, an “ad hoc trade

organization” acting on behalf of the domestic paper industry,2

filed a petition with Commerce and the International Trade

Commission (“ITC”) seeking the imposition of antidumping and

countervailing duties on imports of CLPP3 from India.   See Ass’n


     2
        The Association consists of MeadWestvaco Corporation,
Norcom, Inc., and Top Flight, Inc. Ass’n Br. 2.
     3
        CLPP refers to, and thus the scope of Commerce’s
investigation included, “[paper] products . . . [such] as single-
and multi-subject notebooks, composition books, wireless
notebooks, looseleaf or glued filler paper, graph paper, and
laboratory notebooks . . . .” CLPP From India, 71 Fed. Reg.
                                                   (continued...)
Consol. Court No. 06-00395                                    Page 4

Br. 2.       In response, Commerce initiated an antidumping

investigation in early October 2005.       CLPP From India, Indonesia,

and the People’s Republic of China, 70 Fed. Reg. 58,374 (Dep’t of

Commerce Oct. 6, 2005) (notice of initiation of antidumping duty

investigations).

     Commerce published its preliminary determination in April

2006.       See CLPP From India, 71 Fed. Reg. 19,706 (Dep’t of

Commerce Apr. 17, 2006) (notice of preliminary determination of

sales at less than fair value) (the “Preliminary Determination”).

The Preliminary Determination found that two of the three

respondents in the investigation, Navneet Publications (India)

Ltd. (“Navneet”) and Aero Exports (“Aero”), provided incomplete

information in their cost of production questionnaire responses

and that the information in their responses could neither be

verified nor reasonably relied upon to calculate dumping margins.

See id. at 19,709.      As a result, the Department concluded that

Navneet and Aero “impeded [Commerce’s] investigation” and “failed

to cooperate to the best of their ability.”         Id. at 19,709-10.

Based upon these findings, Commerce assigned Navneet and Aero

each an adverse facts available4 (“AFA”) dumping rate of 110.43


        3
      (...continued)
19,706, 19,707 (Dep’t of Commerce Apr. 17, 2006) (notice of
preliminary determination of sales at less than fair value)
(footnotes omitted).
        4
            Pursuant to 19 U.S.C. § 1677e(a), if:
                                                          (continued...)
Consol. Court No. 06-00395                                   Page 5

percent.     See id.   This rate was the highest transaction-specific

margin found in the proceeding, i.e., a rate from a single

Kejriwal transaction.      Id.

     Shortly after it issued the Preliminary Determination,

Commerce conducted an on-site verification of Kejriwal.        See



     4
         (...continued)
             (1) necessary information is not available on
             the record, or

             (2) an interested party or any other person——

                  (A) withholds information that has
                  been requested by the administering
                  authority or the Commission under
                  this subtitle,

                  (B) fails to provide such
                  information by the deadlines for
                  submission of the information or in
                  the form and manner requested
                  . . . ,

                  (C) significantly impedes a
                  proceeding under this subtitle, or

                  (D) provides such information but
                  the information cannot be verified
                  . . . . ,

     the administering authority and the Commission shall,
     subject to section 1677m(d) of this title, use the
     facts otherwise available in reaching the applicable
     determination under this subtitle.

     If Commerce determines that the above criteria are met, and
makes the separate subjective determination that the respondent
has “failed to cooperate by not acting to the best of its ability
to comply with a request for information,” then, under 19 U.S.C.
§ 1677e(b), the agency “may use an inference that is adverse to
the interests of that party in selecting from among the facts
otherwise available.” 19 U.S.C. § 1677e(b).
Consol. Court No. 06-00395                               Page 6

Final Results, 71 Fed. Reg. at 45,012.   Commerce’s verification

analyzed the company’s business and determined that its primary

business was not producing and exporting the subject CLPP, but

rather trading newsprint.    See Def.’s Br. 4; I&D Memo, Comm. 2 at

6.   Commerce’s verification report “explained that Kejriwal finds

suppliers and purchasers of newsprint in the domestic market, and

negotiates purchase and sale prices with the manufacturers and

purchasers of newsprint.”    Def.’s Br. 4-5 (citing Memorandum to

File from Laurens van Houten re: Verification of the Cost

Response of Kejriwal Paper Limited in the Antidumping

Investigation of Lined Paper from India at 4-5 (Dep’t of Commerce

June 13, 2006) (the “Verification Report”)).

     The Department concluded that Kejriwal incurred “significant

expenses” in financing and conducting the aforementioned

transactions, but that, as a strategic business decision, it did

not take title to or possession of the newsprint involved in

these transactions in order “to take advantage of a 16 percent

tax exemption offered by the Government of India if newsprint ‘is

supplied directly from the manufacturer to the end consumers.’”

Def.’s Br. 5 (quoting Verification Report at 8).

     Commerce issued its Final Results in August 2006.   Final

Results, 71 Fed. Reg. at 45,012.   These Final Results deviated

from the Preliminary Determination in one significant respect.

Commerce determined that the AFA rate assigned to Navneet and
Consol. Court No. 06-00395                                Page 7

Aero, which was based upon Kejriwal’s highest transaction-

specific dumping margin, “was aberrational because it stemmed

from a single sale of a quantity that was significantly less than

the size of the average sales quantity.”   Def.’s Br. 5-6 (citing

I&D Memo, Comm. 15).   As a result, in the Final Results, Commerce

assigned Navneet and Aero the rate of 23.12 percent, the second

highest margin calculated for Kejriwal during the proceeding.

See Final Results, 71 Fed. Reg. at 45,103.   This rate was a

significant decrease from the preliminary rate of 110.43 percent.

In doing so, the Department reasoned that, unlike the higher

rate, the 23.17 percent rate was both “not aberrational and

sufficiently higher than Kejriwal’s calculated rate to induce

respondents to cooperate fully with Commerce’s requests.”     Def.’s

Br. 6 (citation omitted).

      In addition to assigning this AFA rate, the Department made

other determinations in the Final Results.   With regard to

Kejriwal, Commerce granted it both a scrap offset and an excise

tax rebate offset, and also “revised the calculations from the

Preliminary Determination to take into account its findings at

verification and comments received from the parties.”     See Def.’s

Br. 5.   Commerce thus included the cost of newsprint turnover in

the calculations of Kejriwal’s financial expense ratio.    Def.’s

Br. 6.   In addition, the Department allocated a proportionate

share of general and administrative (“G&A”) expenses to
Consol. Court No. 06-00395                              Page 8

Kejriwal’s newsprint business.   The Final Results provided

Kejriwal a final weighted-average dumping margin of 3.91 percent.

See Final Results, 71 Fed. Reg. 45,014.



                       STANDARD OF REVIEW

     The court reviews the Final Results under the substantial

evidence and in accordance with law standard set forth in 19

U.S.C. § 1516a(b)(1)(B)(i) (“The court shall hold unlawful

any determination, finding, or conclusion found . . . to be

unsupported by substantial evidence on the record, or otherwise

not in accordance with law . . . .”).   “Substantial evidence is

such relevant evidence as a reasonable mind might accept as

adequate to support a conclusion.”   Huaiyin Foreign Trade Corp.

(30) v. United States, 322 F.3d 1369, 1374 (Fed. Cir. 2003)

(quotation omitted).

     Further, the court must “review verification procedures

employed by Commerce in an investigation for abuse of discretion

rather than against previously-set standards.”   Micron Tech.,

Inc. v. United States, 117 F.3d 1386, 1396 (Fed. Cir. 1997) (“By

requiring that Commerce report, on a case-by-case basis, the

methods and procedures used to verify submitted information,

Congress has implicitly delegated to Commerce the latitude to

derive verification procedures ad hoc.”) (citations and footnotes

omitted).
Consol. Court No. 06-00395                               Page 9

                             DISCUSSION

I.   Commerce’s Selection of an AFA Rate for Navneet and Aero

      The Association takes issue with Commerce’s reduction of the

AFA rate assigned to Navneet and Aero from the rate found in the

Preliminary Determination (110.43 percent), to that in the Final

Results (23.17 percent).   It maintains that Commerce’s 23.17

percent AFA rate is unlawful because it “is not relevant to the

uncooperative respondents [Navneet and Aero], does not reflect

the likely rate for [them] had they cooperated . . . , and is not

sufficiently high so as to discourage [their] noncompliance in

future proceedings.”   Ass’n Br. 5.

      In support of its arguments, the Association claims that

Commerce improperly relied on Kejriwal’s data in calculating the

AFA rate without explaining the relevance of this data to Navneet

and Aero.   Furthermore, the Association insists that there is no

record evidence demonstrating that the AFA rate assigned to

Navneet and Aero reflects a rate that would have been calculated

for them had they cooperated (including “a built-in increase as a

deterrent to noncompliance”).   Ass’n Br. 11.   To support its

position, the Association analyzed the data actually submitted by

Navneet and Aero (but rejected by Commerce), and urges that even

“a cursory analysis of the data . . . suggests that an [AFA] rate

based on what their margins would have [been] in the event of

their cooperation, would differ substantially from the rate
Consol. Court No. 06-00395                                Page 10

selected by the Department.”5   Ass’n Br. 11.

     In its papers, Commerce maintains that its selection of the

23.17 percent rate was lawful and supported by substantial

evidence.   Def.’s Br. 19.   Commerce argues that the higher 110.43

percent rate was aberrational and thus it properly selected a

different, albeit lower, rate that was “based on corroborated,

verified, and reliable record information.”     Def.’s Br. 10.

Further, Commerce insists that the rate selected was “indicative

of the respondents’ customary selling practices and . . .

rationally related to the transactions to which the adverse facts

available are being applied.”   Def.’s Br. 15 (quotation omitted).

     As to the Association’s analysis of the data submitted by

Navneet and Aero, Commerce argues that it is inherently flawed

because it relies upon data rejected by the Department as

incomplete and unverifiable.    For Commerce, information that was

found unreliable for calculating an actual rate cannot be

considered “substantial evidence” for purposes of questioning the

assigned rate.   See Def.’s Br. 16.   Finally, Commerce asserts

that it acted within its discretion in selecting the AFA rate and

     5
        For example, analyzing Navneet’s data and assuming the
validity of the information reported, the Association claims to
have calculated a margin slightly higher than the 23.17 percent
rate assigned. The Association insists that this proposed rate,
which it describes as “extremely conservative,” does not include
any built-in increase to deter future noncompliance. Ass’n Br.
11-12. Accordingly, for the Association, the 23.17 percent rate
assigned was not high enough to encourage future cooperation in
antidumping investigations. Ass’n Br. 12.
Consol. Court No. 06-00395                                   Page 11

determining that it was sufficiently high to deter noncompliance

in the future.

     Here, no party is challenging Commerce’s decision to use an

AFA rate.6    Rather, the Association faults Commerce’s manner of

selecting the rate.     “Commerce has broad, but not unrestricted,

discretion in determining what would be an accurate and

reasonable dumping margin where a respondent has been found

uncooperative.”     Reiner Brach GmbH & Co. KG v. United States, 26

CIT 549, 565, 206 F. Supp. 2d 1323, 1339 (2002) (“Reiner”).       When

applying an adverse inference, Commerce may rely on information

from the petition, the final determination, previous reviews or

determinations, and any other information placed on the record.

See F.lli De Cecco Di Filippo Fara S. Martino S.p.A. v. United



     6
        The Preliminary Determination explains why the
application of AFA was warranted:

             Throughout [the investigative] process, there
             has been a consistent pattern of
             non-responsiveness and confusing, incomplete,
             and inconsistent information provided by Aero
             and Navneet. As a result of numerous,
             serious deficiencies, we are unable to
             adequately determine whether the cost
             information contained in [their] responses
             reasonably and accurately reflects the costs
             incurred by these companies to produce the
             subject merchandise. Without this
             information, we cannot accurately calculate
             LTFV [less than fair value] margins for these
             companies.

Preliminary Determination, 71 Fed. Reg. at 19,709-10.
Consol. Court No. 06-00395                                Page 12

States, 216 F.3d 1027, 1029-32 (Fed. Cir. 2000) (“De Cecco”) (“In

the case of uncooperative respondents, the discretion granted by

the statute . . . allow[s] Commerce to select among an

enumeration of secondary sources as a basis for its adverse

factual inferences.”) (citing 19 U.S.C. § 1677e).

     An AFA rate must “be a reasonably accurate estimate of the .

. . actual rate, albeit with some built-in increase as a

deterrent to non-compliance.”    Ta Chen Stainless Steel Pipe, Inc.

v. United States, 298 F.3d 1330, 1340 (Fed. Cir. 2004) (citing De

Cecco, 216 F.3d at 1032).    Therefore, “[a]n AFA rate must be both

reliable and bear a rational relationship to the respondent.”

See Shandong Huarong Gen. Group Corp. v. United States, 31 CIT

__, __, Slip Op. 07-4 at 9 (Jan. 9, 2007) (not reported in the

Federal Supplement) (citations omitted).

     Because this case concerns an investigation, rather than an

administrative review, under 19 U.S.C. § 1677e(b)(3), Commerce

could not rely on the results of a previous review of Aero and

Navneet’s behavior, as is common in AFA determinations.     See,

e.g., Shandong Huarong Mach. Co. v. United States, 31 CIT __, __,

Slip Op. 07-169 at 10-11 (Nov. 20, 2007) (not reported in the

Federal Supplement).   Furthermore, Commerce determined that the

margins included in the petition “greatly exceeded the ranges of

rates calculated during the investigation” and, therefore, lacked

probative value.   See Def.’s Br. 14 (citations omitted).   Thus,
Consol. Court No. 06-00395                               Page 13

Commerce turned to record data from the investigation obtained

from Kejriwal.

     The court finds Commerce’s 23.17 percent rate was

reasonable.   In assigning this rate, Commerce was exercising its

discretion as permitted by the statute, and was attempting to

“balance the statutory objectives of finding an accurate dumping

margin and inducing compliance, rather than creat[e] an overly

punitive result.”   Timken Co. v. United States, 354 F.3d 1334,

1335 (Fed. Cir. 2004) (citing De Cecco, 216 F.3d at 1032).     As

Commerce correctly points out, relying upon Navneet and Aero’s

rejected data would ignore the deficiencies in their responses

that render them unreliable and thus not a source of substantial

evidence.   Any rate employing Navneet and Aero’s rejected

data——both as the basis of calculating an actual rate or for

purposes of comparison——would therefore be invalid.   See Shanghai

Taoen Int’l Trading Co. v. United States, 29 CIT 189, 199, 360 F.

Supp. 2d 1339, 1349 (2005) (finding that a preliminary margin

relying upon data that was rejected and lacked credibility “has

no validity”).

     For Commerce, the rate it selected, although not calculated

using Navneet and Aero’s data, “is indicative of the respondents’

customary selling practices and is rationally related to the

transactions to which the [AFA] rates are being applied” because

it was calculated in the POR for a company in the same business.
Consol. Court No. 06-00395                                  Page 14

See I&D Memo, Comm. 15 at 38.    That is, Commerce selected a rate

it perceived to be “within the mainstream of Kejriwal’s

transactions (i.e., transactions that reflect sales of products

that are representative of the broader range of models used to

determine [normal value]).”     I&D Memo, Comm. 15 at 38.   Further,

having concluded that the 110.43 percent rate was aberrational

because it was “from a single sale with a sales quantity that is

less than two percent of the average sales quantity,” Commerce

determined that “the second highest margin is not aberrational

because its quantity . . . is within one standard deviation of

the mean [quantity of merchandise in Kejriwal’s reported

transactions] . . . [and] it was a sale of notebooks.”      See

Memorandum from Christopher Hargett to File re: Final

Determination in the Antidumping Investigation of CLPP from

India: Selection of Total AFA Rate” at 2 (Dep’t of Commerce July

31, 2006).

     Thus, here, though Commerce was not relying on Navneet and

Aero’s data, it did seek to ensure that its determination related

to the companies to the greatest extent possible under the

circumstances.   That is, it (1) relied on verified data from

another producer and exporter of CLPP in India during the same

time period, (2) used a transaction that was of an adequate

quantity of subject merchandise, and (3) confirmed that the

quantity was appropriate with standard deviation analysis.
Consol. Court No. 06-00395                                 Page 15

     This Court’s decision in Shanghai Taoen International

Trading Co. v. United States, 29 CIT 189, 360 F. Supp. 2d 1339

(2005) (“Shanghai Taoen”), is instructive.   In Shanghai Taoen,

plaintiff challenged Commerce’s final results of an

administrative review of an antidumping duty order on crawfish

tail meat from the People’s Republic of China (“PRC”).     Among

other things, the plaintiff challenged the AFA rate assigned to

it by Commerce.   Commerce had assigned plaintiff a rate

calculated for a different respondent from a prior administrative

review.

     In upholding Commerce’s AFA rate, the Shanghai Taoen Court

observed that: (1) “Commerce had no probative alternatives” to

the assigned margin; (2) this was the plaintiff’s first

administrative review on exports of subject merchandise so that

there was no prior antidumping margin for Commerce to select;

and, as referenced above, (3) proposed rates calculated with

deficient data “[have] no validity after Commerce’s credibility

conclusion” (which led it to apply AFA in the first place).

Shanghai Taoen, 29 CIT at 199, 360 F. Supp. 2d at 1348.     Thus,

the Court found that Commerce’s selected AFA rate was “rationally

related” to the plaintiff “because (1) the rate reflects recent

commercial activity by a crawfish tail meat exporter from the

PRC, and (2) [the plaintiff’s] failure to accurately respond to

Commerce’s producer questions has resulted in an egregious lack
Consol. Court No. 06-00395                                Page 16

of evidence on the record to suggest an alternative rate.”     Id.

at 199, 360 F. Supp. 2d at 1348.

     The logic of Shanghai Taoen is equally applicable here.

Although Shanghai Taoen involved an administrative review and

this case involves an investigation, the theory of the case is

useful because Shanghai Taoen involved the first administrative

review in which the plaintiff participated.    Thus, in both cases,

no prior rates for the plaintiffs were available and Commerce

could not rely on the plaintiffs’ own deficient data to determine

a rate.   Therefore, here, it was reasonable for Commerce to look

to Kejriwal’s data because: (1) it “reflects recent commercial

activity” by an exporter of subject merchandise from India, and

(2) it was Aero and Navneet’s reporting deficiencies that

resulted in the lack of evidence on the record for Commerce to

select an alternative rate.     See id. at 199, 360 F. Supp. 2d at

1348.   Accordingly, Commerce selected, based upon the verified

information available to it in the record, a rate that was

reliable and relevant to Navneet and Aero.    The court finds that

Commerce acted reasonably.    See NSK, Ltd. v. United States, 28

CIT 1535, 1562, 346 F. Supp. 2d 1312, 1336 (2004) (stating that

“Commerce has leeway in calculating the applicable AFA rate” for

an uncooperative respondent).

     As to whether the rate was high enough to encourage future

compliance, Commerce reasoned that the AFA rate “selected [23.17
Consol. Court No. 06-00395                                Page 17

percent rate] is sufficiently higher than the calculated [3.91

percent] rate of the cooperative respondent [Kejriwal] in this

investigation to induce respondents [Navneet and Aero] to

cooperate fully with the Department’s requests for accurate,

complete and timely data.”    I&D Memo, Comm. 15 at 38.   Given the

record before it, it cannot be said that Commerce was

unreasonable in finding that the 23.17 percent AFA rate, which is

nearly 600 percent greater than Kejriwal’s rate, would encourage

Navneet and Aero to comply fully in future reviews and

investigations.     See De Cecco, 216 F.3d at 1032 (“Particularly in

the case of an uncooperative respondent, Commerce is in the best

position, based on its expert knowledge of the market and the

individual respondent, to select adverse facts that will create

the proper deterrent to non-cooperation with its investigations

and assure a reasonable margin.”); Ta Chen Stainless Steel Pipe,

Inc., 298 F.3d at 1340 (“While Commerce may have chosen the [AFA]

rate with an eye toward deterrence, Commerce acts within its

discretion so long as the rate chosen has a relationship to the

actual sales information available.”).

     Accordingly, the court sustains as lawful and supported by

substantial evidence Commerce’s selection of an AFA rate for

Navneet and Aero.
Consol. Court No. 06-00395                                  Page 18

II.   Commerce’s Grant of a Scrap Offset to Kejriwal

      Commerce generally will only grant an offset to normal

value,7 for sales of scrap generated during the production of the

subject merchandise, if the respondent can demonstrate that the

scrap is either resold or has commercial value and re-enters the

respondent’s production process.    See Shandong Huarong Mach. Co.

v. United States, 29 CIT 484, 487, Slip Op. 05-54 at 6 (2005)

(not reported in the Federal Supplement).     The Association argues

that Kejriwal claimed a scrap offset to the cost of manufacturing

CLPP, but that the company “neither reintroduced into the

production process nor sold [the scrap] during the period of

investigation [(‘POI’)].”    Ass’n Br. 20.   Therefore, the

Association complains that Commerce erred in granting the offset.

      The Association’s primary objection to Commerce’s decision

to grant the offset to Kejriwal is that, even if the scrap had a

value, the “value was not realized during the [POI].”      Ass’n Br.

21.   Thus, the Association maintains that Commerce’s decision “to


      7
          Normal value or home market value is defined as

            the price at which the foreign like product
            is first sold (or, in the absence of a sale,
            offered for sale) for consumption in the
            exporting country, in the usual commercial
            quantities and in the ordinary course of
            trade and, to the extent practicable, at the
            same level of trade as the export price or
            constructed export price . . . .

19 U.S.C. § 1677b(a)(1)(B)(i).
Consol. Court No. 06-00395                                  Page 19

offset period costs with revenue generated afterwards . . .

distort[s] the actual costs that Kejriwal faced during the

relevant time period.”   Ass’n Br. 24.   Accordingly, it claims

that Kejriwal did not meet its burden of demonstrating that an

offset was warranted.    See Ass’n Br. 24-25.

     Commerce, for its part, maintains that it properly granted

Kejriwal a scrap offset because the scrap was “directly related

to subject merchandise produced during the [POI],” and was

recorded in Kejriwal’s books during the POI in accordance with

the accrual method of accounting.   Def.’s Br. 20.     Commerce

points to the “reasoned explanation” contained in its Issues and

Decisions Memorandum to counter the Association’s assertion that

its decision to grant the offset was inadequately explained.

Def.’s Br. 20 (citing I&D Memo, Comm. 4).    By way of explanation,

Commerce states that, although Kejriwal neither sold nor

reintroduced the scrap during the POI, it did account for the

scrap’s estimated value on its books and that this treatment is

consistent with Commerce’s past practice.       See Def.’s Br. 20-21

(citation omitted) (reasoning that because “the scrap offset was

based upon the costs of merchandise created during the [POI] . .

. . and was recorded in Kejriwal’s books on an accrual basis for

the [POI] . . . the question of when the actual scrap sale

occurred [is] irrelevant)”.

     Kejriwal notes that, because it first began producing
Consol. Court No. 06-00395                                Page 20

subject merchandise during the POI (i.e., was a start-up

operation), it sold much of the scrap generated during the POI in

the several months after the POI ended, rather than during it.

See Kejriwal Resp. Pl.’s Mot. 9-10 (citing Verification Report at

15-17).   Thus, “although Kejriwal’s sales of scrap were outside

of the POI, the revenue from sales was verifiable, and Commerce

appropriately used the verified sales of scrap generated during

the POI to value the required scrap offset.”   See Kejriwal Resp.

Pl.’s Mot. 10 (citations omitted).   In other words, Commerce

examined Kejriwal’s financial records and concluded that,

although Kejriwal did not sell the scrap during the POI, it

estimated the value of the scrap based upon average market

prices, recorded that amount in its stock statement and balance

sheets, and was able to trace this estimated value to Kejriwal’s

own invoices for sales after the POI.

     Kejriwal argues, therefore, that Commerce complied with the

statutory requirements of 19 U.S.C. § 1677(b)(f)(1)(A) in its

calculations.   For Kejriwal, Commerce: (1) “calculate[d] [costs]

based on the records of the exporter or producer of the

merchandise, if such records are kept in accordance with the

generally accepted accounting principles [“GAAP”] of the

exporting country . . . and reasonably reflect the costs

associated with the production and sale of the merchandise,” and

(2) “consider[ed] all available evidence on the proper allocation
Consol. Court No. 06-00395                               Page 21

of costs, including that which is made available by the exporter

or producer on a timely basis, if such allocations have been

historically used by the exporter or producer . . . .”   19 U.S.C.

§ 1677(b)(f)(1)(A).   Accordingly, Kejriwal insists that, using

the accrual method of accounting, in accordance with Indian GAAP,

it recorded the estimated value of scrap generated “as a

manufacturing cost” and that Commerce correctly considered this

fact when it reviewed its books.   See Kejriwal Resp. Pl.’s Mot.

11 (citing Verification Report at 23).

     The Association’s claim presents both a legal and factual

question: (1) whether Commerce’s methodology in granting Kejriwal

a scrap offset was in accordance with law, and (2) whether

Commerce supported its decision to grant Kejriwal the offset with

substantial evidence.   As to the Association’s legal claim, this

Court, in Ames True Temper v. United States, 31 CIT __, __, Slip

Op. 07-133 at 10 (Aug. 31, 2007) (not reported in the Federal

Supplement) (“Ames”), recently observed “the antidumping statute

is silent as to how Commerce is to determine whether a respondent

is entitled to a scrap offset to normal value and, if so

entitled, how to calculate the amount of the offset.”    As such,

the court’s role is to assess if Commerce’s determination is

“based on a reasonable permissible construction of the statute.”

Id. at __, Slip Op. 07-133 at 11-12 (citing Chevron U.S.A., Inc.

v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843 (1984));
Consol. Court No. 06-00395                                Page 22

see also Guangdong Chem. Imp. & Exp. Corp. v. United States, 30

CIT __, __, 460 F. Supp. 2d 1365, 1373 (2006) (“19 U.S.C.

§ 1677b(c) does not mention the treatment of byproducts,

nonetheless, Commerce sometimes grants a respondent a credit for

a by-product . . . generated in the manufacturing process [that

is] either reintroduced into production or sold for revenue.”)

(quotations and citation omitted).

     The court finds that Commerce acted in accordance with law

in granting Kejriwal a scrap offset.   The agency based its

decision on its review of “the normal books and records of

[Kejriwal] in accordance with Indian generally accepted

accounting principles,” kept on an accrual basis.   I&D Memo,

Comm. 4 at 11.   In addition, although Kejriwal’s sales of scrap

were outside of the POI, Commerce was able to verify the revenue

from those sales and compare it to the amount recorded on

Kejriwal’s books during the POI.   As a result, the Department

confirmed the accuracy of Kejriwal’s estimated values by tracing

Kejriwal’s actual average sales value to its invoices.    I&D Memo,

Comm. 4 at 11.   Thus, the amount of the offset was supported by

substantial evidence.   See Thai Pineapple Pub. Co. v. United

States, 187 F.3d 1362, 1366 (Fed. Cir. 1999) (“As a general rule,

an agency may either accept financial records kept according to

generally accepted accounting principles in the country of

exportation, or reject the records if accepting them would
Consol. Court No. 06-00395                                Page 23

distort the company’s true costs.”) (citation omitted).

     Accordingly, the court cannot credit the Association’s

argument that Commerce did not offer an adequate explanation for

its decision.   “Commerce is [obligated] to adequately explain how

its chosen methodology achieves the required result [of

determining antidumping margins as accurately as possible].”

Shandong Huarong Mach. Co., 29 CIT at 489, Slip Op. 05-54 at 10

(citations omitted).   It has done so here.

      It is clear that, because its CLPP business was a start-up

operation, Kejriwal would not in the ordinary course of business

sell its scrap during the POI.   It is equally clear that its

process generates valuable scrap and that Commerce was able to

determine the scrap’s value.   Thus, in granting Kejriwal the

scrap offset, Commerce acted reasonably by trying to present a

true picture of Kejriwal’s business under the circumstances.     See

Ames, 31 CIT at __, Slip Op. 07-133 at 14 (sustaining a scrap

offset because “Commerce properly based its decision to grant

Huarong the steel scrap offset on the company’s financial books

and records, applied a reasonable methodology, [and] supported

its conclusion with substantial evidence . . . .”).

     Therefore, the court finds Commerce’s conclusions to be in

accordance with law and supported by substantial evidence and

sustains Commerce’s scrap offset.
Consol. Court No. 06-00395                                   Page 24

III.    Commerce’s Grant of an Excise Tax Rebate Offset to Kejriwal

       The Association additionally argues that Commerce’s decision

to grant Kejriwal an excise tax rebate offset was improper.         See

Ass’n Br. 25-26.    Kejriwal paid an excise tax8 on the purchase of

raw materials in India and then received a rebate on the tax paid

when the finished products were exported.      Ass’n Br. 25-26

(citation omitted).    Given that Kejriwal’s lined paper business

was a start-up operation, the rebates “in most cases, . . .

occurred after the [POI].”      Ass’n Br. 26 (citing Verification

Report at 7).    According to the Association, under these

circumstances, the grant of an offset was improper because “the

       8
           Kejriwal explains:

             India’s excise tax is an indirect internal
             tax levied on goods manufactured in India and
             intended to be paid by the ultimate consumer.
             A manufacturer such as Kejriwal pays the
             excise tax on its inputs (currently 16% for
             most products), and passes the tax on to its
             own domestic customers by including the tax
             on its invoices. The tax is not passed on to
             customers in a foreign country. Thus it is
             an “internal” tax. When the final product is
             exported, India grants credits and rebates to
             Indian exporters. The Indian government also
             allows exporters to purchase inputs under
             bond, whereby the exporter pays no initial
             excise tax on its inputs. As with an
             application for an excise tax rebate, the
             exporter must provide proof of export for all
             merchandise produced from inputs purchased
             under bond. In all cases, the exporter pays
             no excise tax.

See Kejriwal Resp. Pl.’s Mot. 15-16 (footnote and citations
omitted).
Consol. Court No. 06-00395                                  Page 25

tax paid impacted . . .[Kejriwal’s] costs of manufacture, but . .

. the rebates had no effect at all on period costs.”    Ass’n Br.

26.

      The Association, therefore, maintains that Kejriwal did not

meet its burden of demonstrating that an offset was proper

because Kejriwal necessarily could not show that the rebates

reduced its costs during the POI.    Thus, it argues that

Commerce’s grant of a rebate here is “illogical” and asks the

court to remand the matter to Commerce for reconsideration.      See

Ass’n Br. 26.

      Commerce insists that the grant of an excise tax rebate

offset to Kejriwal was warranted because the rebate was directly

related to Kejriwal’s production of CLPP during the POI.      See

Def.’s Br. 19-20.   That is, “[a]s with the value of scrap

revenue, Commerce found that Kejriwal accrued or credited the tax

rebate in the current period in its normal books and records.”

Def.’s Br. 21.   Commerce argues that the Association’s “focus

upon the fact that the rebate was not received during the current

[POI] ignores record facts,” i.e., that Kejriwal’s lined paper

business was a start-up operation, it utilized the accrual method

of accounting, and it accounted for the value of the tax rebate

on its books.    Def.’s Br. 22.   Therefore, even though the revenue

was not received during the POI, Commerce contends that the

offset was justified and asks the court to sustain its
Consol. Court No. 06-00395                                Page 26

determination.   See Def.’s Br. 22-23.

     For its part, Kejriwal asserts that “Commerce’s recognition

of an excise tax offset was correct in every respect, in

accordance with India’s GAAP and India’s tax law and in

accordance with U.S. antidumping law.”    See Kejriwal Resp. Pl.’s

Mot. 15-16 (citing 19 U.S.C. § 1677b(e)(3), which states that

“the cost of materials shall be determined without regard to any

internal tax in the exporting country imposed on such materials

or their disposition which are remitted or refunded upon

exportation of the subject merchandise produced from such

materials”).   Thus, Kejriwal asserts that Commerce verified its

accounting of excise taxes paid and that, in fact, they were

later rebated, and that the Department’s decision to grant the

offset conforms with its past practice.   See Kejriwal Resp. Pl.’s

Mot. 17-18 (citing Stainless Steel Bar From India, 65 Fed. Reg.

48,965 (Dep’t of Commerce Aug. 10, 2000) (final results); Certain

Stainless Steel Wire from India, 65 Fed. Reg. 31,302 (Dep’t of

Commerce May 17, 2000)(final results).

     As with the scrap offset, Commerce relied on a review of

Kejriwal’s books to justify the grant of an excise tax rebate

offset.   Specifically, the Department observed that: (1) Kejriwal

paid excise taxes, (2) Kejriwal received a refund for these paid

taxes, albeit after the POI, and therefore (3) “[i]n the end, no

taxes were paid” upon CLPP during the POI.   Def.’s Br. 21
Consol. Court No. 06-00395                                Page 27

(quoting I&D Memo, Comm. 7 at 15).   Commerce further observed

that Kejriwal accounted for the tax rebate in its books for the

time period covered by the POI in accordance with the accrual

method of accounting.   See Def.’s Br. 20-21.

     The court sustains Commerce grant of an excise tax offset to

Kejriwal.   Commerce acted properly under 19 U.S.C.

§ 1677b(f)(1)(A) (requiring Commerce to calculate costs based on

the records of the exporter if kept in accordance with GAAP of

the exporting country and to “consider all available evidence”),

and in accordance with the case law.   See Elkem Metals Co. v.

United States, 468 F.3d 795, 802 (Fed. Cir. 2006) (“[I]t is

entirely appropriate for Commerce to make an individual

determination as to whether and to what extent [a value-added

tax] is, given the circumstances of a particular country and

company, a cost.”); FAG U.K. LTD. v. United States, 20 CIT 1277,

1290, 945 F. Supp. 260, 271 (1996) (“[T]his Court has

consistently upheld Commerce’s reliance on a firm’s expenses as

recorded in the firm’s financial statements, as long as those

statements were prepared in accordance with the home country’s

GAAP and do not significantly distort the firm’s actual costs.”).

     It is apparent that Commerce’s grant of an excise tax rebate

offset to Kejriwal was proper as Commerce based its decision on

Kejriwal’s financial records, circumstance as a start-up

operation, and “economic realities.”   See Elkem Metals Co., 468
Consol. Court No. 06-00395                                Page 28

F.3d at 802.



IV.    Commerce’s Calculation of Kejriwal’s Financial Expense Ratio

       The court next considers the Association’s claim that

Commerce’s calculation of Kejriwal’s financial expense ratio was

flawed and unlawful.     In antidumping investigations, Commerce

must determine whether merchandise is sold, or is likely to be

sold, at less than fair value by making “a fair comparison . . .

between the export price, or constructed export price and normal

value.”9   19 U.S.C. § 1677b(a).   During Commerce’s investigation,

it determined that “Kejriwal . . . did not sell subject

merchandise in the ordinary course of trade in its home market

during the POI.”     See Preliminary Determination, 71 Fed. Reg. at

19,707.    Therefore, Commerce concluded that it “must use

constructed value . . . in its calculation of normal value . . .

.”    See id.   No party objects to this conclusion.

       The financial expense ratio is a component of Commerce’s

       9
        The “export price” is “the price at which the subject
merchandise is first sold . . . by the producer or exporter of
the subject merchandise outside of the United States to an
unaffiliated purchaser in the United States or to an unaffiliated
purchaser for exportation to the United States,” as adjusted. 19
U.S.C. § 1677a(a).

       “Constructed export price” is “the price at which the
subject merchandise is first sold . . . in the United States . .
. by or for the account of the producer or exporter of
such merchandise or by a seller affiliated with the producer or
exporter, to a purchaser not affiliated with the producer or
exporter,” as adjusted. 19 U.S.C. § 1677a(b).
Consol. Court No. 06-00395                                Page 29

constructed value calculation.   Under 19 U.S.C. § 1677b(e)(1)(B),

when calculating constructed value, Commerce is directed to add

an “‘an amount for general expenses and profit equal to that

usually reflected in sales of merchandise of the same general

class or kind as the merchandise under consideration . . .’ to

the cost of materials and of fabrication or other processing.”10

     10
        “Congress has not clarified what ‘general expenses’ are
or how they are calculated . . . . [however,] [p]ursuant to the
discretion granted to it by Congress[,] . . . Commerce devised a
methodology for calculating general expenses. Commerce includes
in general expenses both (1) selling, general and administrative
expenses, and (2) financial expenses.” Gulf States Tube Div. of
Quanex Corp. v. United States, 21 CIT 1013, 1033, 981 F. Supp.
630, 648 (1997) (citation omitted).

     Commerce asks that a company calculate its financial expense
ratio, or interest expense ratio, as follows:

          . . . If your company is a member of a
          consolidated group of companies, calculate
          your financial expense based on the
          consolidated audited fiscal year financial
          statements of the highest consolidation level
          available. In calculating your company’s net
          interest ratio, use the full-year net
          interest expense and [cost of goods sold]
          reported in the consolidated audited fiscal
          year financial statements for the period that
          most closely corresponds to the [period of
          investigation].

          In calculating net interest expense for [cost
          of production] and CV, include interest
          expense relating to both long- and short-term
          borrowings made by your company. Reduce the
          amount of interest expense incurred by any
          interest income earned by your company on
          short-term investments of its working
          capital. Demonstrate how the interest
          income, interest expense, and [cost of goods
                                                    (continued...)
Consol. Court No. 06-00395                                    Page 30

See Gulf States Tube Div. of Quanex Corp. v. United States, 21

CIT 1013, 1033, 981 F. Supp. 630, 648 (1997) (citation omitted).

     The Association maintains that Commerce improperly “included

newsprint turnover in Kejriwal’s costs of goods sold and in the

financial expense ratio calculations.”     Ass’n Br. 13.   It argues

that the calculation was contrary to Commerce’s established

practices and inadequately explained.     Ass’n Br. 13.    According

to the Association, “[t]he Department’s decision to include

newsprint turnover value in the denominator of the financial

expense ratio calculations was inconsistent with the treatment of

the same item in the [general and administrative] expense ratio

calculations,” where the Department did not include newsprint

turnover value in the denominator.     Ass’n Br. 14-15.    It argues

that Commerce has consistently considered an item to be “part of

the costs of goods sold for purposes of calculating the financial

expense ratio where the item is recorded as part of the costs of

goods sold in a respondent’s audited financial statements.”


     10
          (...continued)
              sold] used in the ratio reconcile to your
              company’s audited fiscal year financial
              statements. To compute the per-unit amount
              of net interest expense, multiply the net
              interest expense ratio by the per-unit [total
              cost of manufacture] for each of the [control
              numbers].

See Standard Section D - Cost of Production and Constructed Value
Questionnaire at D-14, available at
http://ia.ita.doc.gov/questionnaires/q-inv-sec-d-092106.pdf.
Consol. Court No. 06-00395                                Page 31

Ass’n Br. 16 (citations omitted).

     The Association notes that the cost of newsprint is not

included as part of Kejriwal’s cost of goods sold on its

financial statements because it is a trader rather than a

manufacturer of newsprint.   Thus, according to the Association,

Commerce’s calculation contradicts its “consistent past

practice.”   Ass’n Br. 15-17 (citing Certain Pasta from Italy, 64

Fed. Reg. 6,615 (Dep’t of Commerce Feb. 10, 1999) (notice of

final results); Silicomanganese from India, 67 Fed. Reg 15,531

(Dep’t of Commerce Apr. 2, 2002) (notice of final determination);

Certain Frozen and Canned Warmwater Shrimp from Thailand, 69 Fed.

Reg. 47,100 (Dep’t of Commerce Aug. 4, 2004) (notice)).

     For its part, Commerce concedes that it departed from its

past practice when it included the cost of newsprint traded in

Kejriwal’s cost of goods sold, but argues that doing so was

necessary because of the unique nature of Kejriwal’s business

model.   Def.’s Br. 23 (citing I&D Memo, Comm. 2).   That is,

“[w]hile it is [Commerce’s] normal practice to use the [cost of

goods sold] from the income statements as [its] denominator, . .

. [the] unusual facts in this case [thwarted] the purpose of the

allocation ratio because of the structure of the newsprint

transactions.”   See I&D Memo, Comm. 2 at 6.   In other words,

Commerce determined that, even though Kejriwal incurred great

expense as a trader of newsprint, because it never took title to
Consol. Court No. 06-00395                              Page 32

the paper, using Commerce’s normal calculation these significant

expenses would not have been included in its cost of goods sold,

and therefore a deviation was justified.   See I&D Memo, Comm. 2

at 6.

     Thus, Commerce argues that, when necessary, “it is free to

change its methodology as long as it fully explains its reasoning

for doing so.”   Def.’s Br. 24-25 (explaining that Commerce

determined that following its standard practice in this matter

would have led to a “distorted calculation”) (citations omitted).

Commerce additionally argues that it was justified in including

newsprint turnover value in the denominator of Kejriwal’s

financial expense ratio but not in its G&A expense ratio.     Def.’s

Br. 29.   Again, Commerce noted, it did so because this case

presented “unusual facts,” i.e., the significant proportion of

Kejriwal’s financial expenses incurred by its trading rather than

its sales business.   See I&D Memo, Comm. 2 at 6.

     Kejriwal asserts that Commerce’s calculation of its

financial expense ratio was reasonable, supported by substantial

evidence, and in accordance with law.   See Kejriwal Resp. Pl.’s

Mot. 3.   It maintains that the Association seeks to have Commerce

calculate a ratio that “ignores the intensity of Kejriwal’s

financial investment and commitment to its newsprint business.”

Kejriwal Resp. Pl.’s Mot. 3.   Put another way, Kejriwal argues

that Commerce was correct in determining that Kejriwal’s
Consol. Court No. 06-00395                                Page 33

financial expense ratio would have been distorted if Commerce had

not included the cost of newsprint traded in the denominator.

     Kejriwal further notes that its audited financial statements

include “numerous references” to its newsprint turnover and that

“[d]uring verification, Commerce ascertained that approximately

69% of Kejriwal’s financial expenses were attributable solely to

the company’s newsprint business, compared to about 22%

attributable to the production of subject merchandise.”    Kejriwal

Resp. Pl.’s Mot. 3-4 (citing Verification Report at 36).

     It is well-settled that “[a]n agency is obligated to follow

precedent, and if it chooses to change, it must explain why.”

M.M. & P. Mar. Advancement, Training, Educ. & Safety Program

(MATES) v. Dep’t of Commerce, 729 F.2d 748, 755 (Fed. Cir. 1984);

Greater Boston Television Corp. v. FCC, 444 F.2d 841, 852 (D.C.

Cir. 1970) (“[A]n agency changing its course must supply a

reasoned analysis indicating that prior policies and standards

are being deliberately changed, not casually ignored, and if an

agency glosses over or swerves from prior precedents without

discussion it may cross the line from the tolerably terse to the

intolerably mute.”) (footnotes omitted).

     Here, Commerce was explicit in stating that it was not

following its “normal practice.”   I&D Memo, Comm. 2 at 6.    This

being the case, the court must examine the adequacy of the

Department’s justification for this deviation.   By way of
Consol. Court No. 06-00395                                Page 34

explanation, Commerce states that it typically uses the cost of

goods sold from a respondent’s income statements as the

denominator of the financial expense ratio.    I&D Memo, Comm. 2 at

6.   Commerce decided here, however, that because of Kejriwal’s

significant newsprint business, it was “appropriate to include

the value of the newsprint traded as part of the denominator of

the financial expense ratio in order to allocate the expenses to

all of Kejriwal’s business activities.”   I&D Memo, Comm. 2 at 6.

Commerce arrived at this decision after considering arguments

advanced by both Kejriwal and the Association at the agency level

and verifying Kejriwal’s financial expenses.

     Having reviewed Commerce’s findings and reasoning, the court

concludes that Commerce adequately explained itself and supplied

the “reasoned analysis” necessary to depart from its normal

practice.   Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm

Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983).    Commerce agreed

with Kejriwal that it would be unreasonable to include only cost

of goods sold in the denominator in calculating the financial

expense ratio because the financing costs associated with

Kejriwal’s newsprint business far exceeded the cost of goods sold

(i.e., its CLPP business) reflected in Kejriwal’s financial

statements.   That is, because the newsprint line of business

incurred significant financial expenses, it was not reasonable to

allocate all financial expenses to the CLPP line of business.
Consol. Court No. 06-00395                                Page 35

I&D Memo, Comm. 2 at 5 (“[A]llocating all financial expenses to

lined paper would overstate the cost of production of lined

paper.”).    Thus, Commerce concluded that in order to achieve a

true picture of the company’s business, an amount must be

included for the financial expenses incurred to trade paper,

i.e., the amount of interest it paid in financing its newsprint

transactions.

     Given this analysis, the court cannot credit the

Association’s assertions that Commerce did not adequately explain

its decision or provide adequate reasons for deviating from past

precedent.    The court’s review of the Department’s findings

reveals that the agency considered the unique facts that

Kejriwal’s business model presented and made its decision after

verifying Kejriwal’s financial expenses.11    Further, having

     11
          Commerce’s Verification Report explains:

             Company records indicated that interest on
             letters of credit and bill discounting
             expenses were based to a large extent on the
             transactions associated with its newsprint
             operations. Company officials stated that
             Kejriwal opens letters of credit with the
             paper manufacturers as the beneficiary. The
             paper manufacturer then produces and supplies
             newsprint to the purchaser of newsprint
             (i.e., the newsprint published). . . . [W]e
             noted that the newsprint manufacturer will
             issue an invoice to the newspaper publisher
             and the newspaper publisher will pay
             Kejriwal. According to company officials,
             Kejriwal is obligated to pay the invoice
             amount to the bank within the stipulated date
                                                       (continued...)
Consol. Court No. 06-00395                                    Page 36

acknowledged that it was treating this matter differently than it

typically treats financial expense ratio calculations, Commerce

provided “adequate guidance to parties affected by its actions”

and “present[ed] the reviewing court with a discernable basis to

judge” the deviation from its normal practice.     Comm. for Fair

Beam Imps. v. United States, 27 CIT 932, 944, Slip Op. 03-73 at

19-20 (2003) (not reported in the Federal Supplement) (citations

omitted).

     The court finds that Commerce’s determination is reasonable,

in accordance with law, and supported by substantial evidence.

Accordingly, Commerce’s calculation of Kejriwal’s financial

expense ratio is sustained.



V.   Kejriwal’s General and Administrative Expense Ratio

     The court next turns to Commerce’s calculation of Kejriwal’s

general and administrative (“G&A”) expense ratio,12 which is

     11
          (...continued)
              irrespective of whether Kejriwal receives the
              payment from the publisher, and in the
              process incurs interest expenses . . . .
              Bank charges on the letters of credit and
              miscellaneous bank charges are incurred for
              establishing the letters of credit,
              negotiating the bill of credit, and various
              expenses charged by the bank.

Verification Report at 36 (citations omitted).
      12
        Under 19 U.S.C. § 1677b(e)(2)(A), Commerce is directed,
in calculating constructed value, to include “the actual amounts
                                                   (continued...)
Consol. Court No. 06-00395                                 Page 37

challenged by both the Association and Kejriwal.    The G&A expense

ratio is the component of constructed value in which Commerce

accounts for certain of a company’s overhead expenses.     These are

expenses incurred during the period of investigation “which

relate indirectly to the general operations of the company rather

than directly to the production process.”     See Standard Section D

- Cost of Production and Constructed Value Questionnaire at D-18


     12
      (...continued)
incurred and realized by the specific exporter or producer being
examined in the investigation or review for selling, general, and
administrative expenses, and for profits, in connection with the
production and sale of a foreign like product . . . .”

      Furthermore, the statute directs that

           [c]osts shall normally be calculated based on
           the records of the exporter or producer of
           the merchandise, if such records are kept in
           accordance with the generally accepted
           accounting principles of the exporting
           country (or the producing country, where
           appropriate) and reasonably reflect the costs
           associated with the production and sale of
           the merchandise. The administering authority
           shall consider all available evidence on the
           proper allocation of costs, including that
           which is made available by the exporter or
           producer on a timely basis, if such
           allocations have been historically used by
           the exporter or producer, in particular for
           establishing appropriate amortization and
           depreciation periods, and allowances for
           capital expenditures and other development
           costs.

19 U.S.C. § 1677b(f)(1)(A). As Kejriwal’s motion points out,
however, the antidumping statute “provides . . . no further
guidance or methodology for calculating general and
administrative expenses.” Kejriwal’s Br. 14 (citation omitted).
Consol. Court No. 06-00395                                Page 38

(“Standard Questionnaire”), available at

http://ia.ita.doc.gov/questionnaires/q-inv-sec-d-092106.pdf.

They “include amounts incurred for general [research and

development] activities, executive salaries and bonuses, and

operations relating to [a] company’s corporate headquarters.”

Standard Questionnaire at D-18.

     For the Association, Commerce’s calculation was unlawful

because the Department relied on information not provided by

Kejriwal until verification.   For Kejriwal, Commerce’s

calculation was contrary to law and unsupported by substantial

evidence, primarily because it did not include the cost of

newsprint traded in the denominator of the G&A expense ratio as

it had done in computing Kejriwal’s financial expense ratio.


     1.   Commerce’s Verification of Kejriwal’s Reporting

     The Association argues that Commerce improperly “calculated

Kejriwal’s . . . [G&A] expense ratio based on information that

Kejriwal did not provide the Department until verification.”

Ass’n Br. 13.   By doing so, the Association maintains, Commerce

violated its own regulations, which state that the purpose of

verification is “to verify the accuracy and completeness of

[previously] submitted factual information,” i.e., not to accept

new information.   Ass’n Br. 13.

     In making its argument, the Association claims that Kejriwal
Consol. Court No. 06-00395                               Page 39

submitted “an entirely new analysis of its G&A expenses” at

verification, and that Commerce improperly accepted the new data

as having been “prepared at its request.”    Ass’n Br. 17-18

(citing I&D Memo, Comm. 3 at 9).    The Association acknowledges

that Commerce requested “a detailed analysis” of G&A expenses,

but claims that, rather than provide such an analysis, Kejriwal

provided new factual information.    It insists that Commerce’s

acceptance of this new information runs counter to the purpose of

verification, which is to confirm the accuracy of previously

obtained information rather than to gather new information.        See

Ass’n Br. 19 (citing 19 C.F.R. § 351.307(d)).    The Association

asserts, therefore, that Commerce should have rejected Kejriwal’s

submission as untimely.

     Commerce maintains that Kejriwal’s submission was not

untimely because the Department “asked Kejriwal to prepare, to

clarify and corroborate the data submitted in [its] questionnaire

responses.”   Def.’s Br. 36.   Commerce characterizes Kejriwal’s

submission as a “detailed analysis of information already

submitted,” rather than new information.    Def.’s Br. 36.   The

Department thus asserts that it acted within its discretion in

accepting Kejriwal’s analysis and also states that, in limited

circumstances,13 respondents may provide new factual information

     13
        The Department explains: “Commerce accepts information
at verification when ‘1) the need for that information was not
                                                   (continued...)
Consol. Court No. 06-00395                                  Page 40

at verification.

     Commerce notes that it sent Kejriwal an agenda before the

verification, asking for a more detailed analysis of certain G&A

expenses.    See Def.’s Br. 37-38; see also Letter Dated May 5,

2006 with Attachments from Program Manager to deKieffer & Horgan

at 10 (the “Verification Agenda”).    The Department adds:

            To the extent that Commerce requested and
            Kejriwal provided further details regarding
            particular cost items, accounts, or
            transactions, the information that was
            obtained [was] to “corroborate, support, or
            clarify information already on the record” of
            the proceeding, in accordance with Commerce
            practice.

Def.’s Br. 38-39 (quoting Structural Steel Beams From Luxembourg,

67 Fed. Reg. 35,488, Comm. 1 (Dep’t of Commerce May 20, 2002)

(notice)).    As a result, Commerce argues that the procedures it

employed respecting Kejriwal’s verification were in accordance

with law.

     While faulting Commerce’s calculation of its G&A expense

ratio in other respects, Kejriwal asserts that it timely

submitted all information requested by the Department.       See



     13
      (...continued)
evident previously, 2) the information makes minor corrections to
information already on the record, or 3) the information
corroborates, supports, or clarifies information already on the
record.’” Def.’s Br. 37-38 (quoting CITIC Trading Co. v. United
States, 27 CIT 356, 373, Slip Op. 03-23 at 27-28 (2003) (not
reported in the Federal Supplement) (quotations and citations
omitted).
Consol. Court No. 06-00395                                Page 41

Kejriwal Resp. Pl.’s Mot. 6-7.   It argues that its G&A analysis

submission was fully in accordance with Commerce’s requests.    In

other words, Kejriwal insists that its submission was responsive

rather than excessive.    See Kejriwal Resp. Pl.’s Mot. 7.

     Generally, when asked by an interested party, Commerce

“shall,” to the extent practicable, verify information presented

to it during an antidumping review.    See 19 U.S.C. § 1677m(i)(3);

19 C.F.R. § 351.307(a).   As noted above, however, the Department

enjoys some discretion in selecting its verification methodology.

See Micron Tech., Inc., 117 F.3d at 1396.

     With this in mind, the court finds that Commerce correctly

accepted Kejriwal’s G&A analysis submission provided to the

Department at the time of verification.    It is within Commerce’s

discretion to accept such information, particularly when Commerce

reasonably believes the information clarifies and corroborates

previously submitted information.     See Reiner, 26 CIT at 560, 206

F. Supp. 2d at 1334 (explaining that Commerce has discretion to

accept new information presented during verification that

clarifies or corroborates information on the record, but may also

reject as untimely “substantial revisions” presented during

verification) (citations omitted).

     Here, Commerce’s Verification Agenda expressly required

Kejriwal to prepare, in advance of verification: (1) a review of

its newsprint business explaining “how the expenses related to
Consol. Court No. 06-00395                                 Page 42

the Newsprint business is recorded in Kejriwal’s financial

accounting system;” (2) “[o]btain a schedule that identifies all

major categories of selling, general and administrative

expenses;” and (3) “[t]race the total of selling, general and

administrative expenses to the [company’s] financial statements .

. . .”   See Verification Agenda at 4, 10-11.    These requests

expanded upon requests previously made in Commerce’s Standard

Questionnaire.     See Standard Questionnaire at D-14, 1 (asking for

a G&A breakdown and requesting the respondent to “[d]emonstrate

how the G&A expenses and the [cost of goods sold] used in the

ratio reconcile to your company’s audited fiscal year financial

statements”).    In addition, Commerce’s regulations specifically

permit respondents to provide the Department with new factual

information at or soon after verification: “factual information

requested by the verifying officials from a person normally will

be due no later than seven days after the date on which the

verification of that person is completed.”      See 19 C.F.R.

§ 351.301(b)(1).

     Therefore, it was entirely in accordance with law for

Commerce to seek clarification as to these topics at the time of

verification and for Kejriwal to provide additional responsive

information, particularly concerning the extent of its newsprint

business.   “Commerce has often accepted new information when . .

. the information corroborates, supports, or clarifies
Consol. Court No. 06-00395                                Page 43

information already on the record.”    CITIC Trading Co., 27 CIT at

373, Slip Op. 03-23 at 27-28 (quotations and citations omitted).

     Here, as evidenced by Commerce’s Verification Report, the

Department “used the analyses provided by Kejriwal and reconciled

them with the information already submitted” and “ensure[d] that

cost data already submitted was categorized correctly.”

See Def.’s Br. 39; Verification Report at 31-34.    Accordingly, it

cannot be said that Commerce abused its discretion.    See Am.

Alloys, Inc. v. United States, 30 F.3d 1469, 1475 (Fed. Cir.

1994) (“[T]he statute gives Commerce wide latitude in its

verification procedures.”).


     2.   Commerce’s Calculation of Kejriwal’s General and
          Administrative Expense Ratio

     For its part, Kejriwal challenges Commerce’s calculation of

its G&A expense ratio because the Department did not include the

cost of newsprint traded in the ratio’s denominator.    Kejriwal

argues that, by not including the cost of newsprint traded in the

denominator, Commerce failed to adhere to its own precedent and

long-standing practice of calculating a company’s G&A expense

ratio for the operations of a company as a whole.

     As an initial matter, Kejriwal points to Commerce’s

Antidumping Manual to establish Commerce’s standard calculation

of the G&A expense ratio.    The Antidumping Manual states, in

pertinent part, that Commerce prefers to calculate the G&A
Consol. Court No. 06-00395                                Page 44

expense ratio “by dividing the fiscal year G&A expenses by the

fiscal cost of goods sold (adjusted for categories of expense not

included in [cost of manufacture], such as packing) . . . .”        See

Antidumping Manual Ch. 8 at 58 (Dep’t of Commerce Jan. 22, 1998).

Commerce then applies the percentage to the cost of manufacture

of the product.   See id.   But see Kejriwal’s Br. 15, n.16

(acknowledging that Commerce’s Antidumping Manual states that it

“is for the internal guidance of import administration personnel

only and cannot be cited to establish Commerce practice”).

Kejriwal then points to this Court’s decision in Floral Trade

Council v. United States, 23 CIT 20, 44, 41 F. Supp. 2d 319, 341

(1999), among others, to note that this Court has repeatedly

upheld this method of determining the G&A expense ratio.      See

Kejriwal’s Br. 16-17.

     According to Kejriwal, after verification, “Commerce

realized that it could not calculate an accurate [constructed

value] for Kejriwal on a company division basis,” and therefore

modified its methodology by “identif[ying] certain direct

expenses,” removing them from the numerator, “and add[ing] them

to the denominator as the cost of newsprint revenue.”   Kejriwal

Br. 18.   For Kejriwal, Commerce’s methodology did not fully

account for the significance of its newsprint business.     It

asserts that “[h]ad Commerce properly calculated the company’s

G&A expense ratio and thus arrived at an accurate [constructed
Consol. Court No. 06-00395                                Page 45

value], Kejriwal’s corresponding dumping margin would have been

de minimus and the company would not be subject to the

antidumping duty order against [CLPP] from India.”   Kejriwal’s

Br. 19.

     To bolster its point, Kejriwal notes that Commerce “verified

in great detail” that the bulk of its G&A expenses were

attributable to its newsprint business, but Commerce still

allocated 91 percent of its G&A expenses to subject CLPP and only

9 percent to non-subject merchandise.   See Kejriwal Br. 19-20.

Kejriwal further argues that Commerce’s reason for not including

newsprint traded in the denominator (i.e., that “the cost of the

raw materials supplied by the customer should not be included in

the [cost of goods sold] because there was no recognized expense

and there is no matching revenue item for those physical raw

materials”) is flawed.   See Kejriwal’s Br. 21 (quoting I&D Memo,

Comm. 3 at 9).

     Kejriwal points out that Commerce included the cost of

newsprint traded in the denominator in its calculation of

Kejriwal’s financial expense ratio because of the unique nature

of its business model.   See Kejriwal’s Br. 24-26.   It believes

that this unique nature makes it necessary to allocate company-

wide G&A expenses to the company-wide cost of goods sold in both

its G&A and financial expense ratios.   Therefore, it asserts

that, to “properly account for Kejriwal’s business in nonsubject
Consol. Court No. 06-00395                                Page 46

merchandise, Commerce should have included the cost of newsprint

traded in the denominator of its G&A expense ratio.   There are no

reasonable arguments to justify excluding this cost from

Commerce’s calculation.”   Kejriwal’s Br. 24.

     For its part, the Association argues that “Kejriwal proposes

that the Department impute a cost for newsprint that the company

never purchased, never received into inventory, never took title

to, never paid for, and never resold.”   See Ass’n Resp. Br. 10.

Therefore, it insists: “[T]he Departments’s refusal to include

the cost of newsprint in the G&A expense ratio was reasonable and

was supported by the evidence of record . . . .”   See Ass’n Resp.

Br. 10.

     Commerce argues that it justifiably distinguished its

treatment of the costs of newsprint traded in calculating

Kejriwal’s financial expense and G&A expense ratio because

          Commerce found that the financial expense for
          the traded newsprint was necessary due to
          “unusual facts in this case where the purpose
          of the allocation ratio is thwarted because
          of the structure of the newsprint
          transactions. Thus, it is appropriate to
          allocate the financing expenses of the
          company as a whole to both the cost of goods
          manufactured directly by Kejriwal and the
          cost of the goods traded.” For G&A expenses,
          on the other hand, Commerce found that the
          “cost of the raw materials supplied by the
          customer should not be included in the [cost
          of goods sold] because there was no
          recognized expense and there is no matching
          revenue item for those physical raw
          materials.” Thus, Commerce did not
Consol. Court No. 06-00395                                  Page 47

            “include[] the cost of newsprint in the [cost
            of goods sold] but instead reclassified
            certain newsprint operation direct expenses
            from G&A expense to cost of newsprint revenue
            and included those expenses in the
            denominator of the G&A expense ratio
            calculation.” This division is reasonable
            given the “unique” facts and division between
            financial expense, which applied to all of
            the newsprint, and G&A, which did not involve
            the raw materials for the newsprint.

Def.’s Br. 29 (quoting I&D Memo, Comms. 2-3) (internal citations

omitted).    Thus, the Department maintains that it made the

necessary adjustments to give a fair picture of Kejriwal’s

business.    As a result, Commerce asks the court to sustain its

decision because, it insists, the decision was justified, fully

explained, and within its discretion.     See Def.’s Br. 28-29.

     Commerce must calculate as accurate a constructed value as

possible, including therein its calculation of general and

administrative expenses.     See Thai I-Mei Frozen Foods Co. v.

United States, 32 CIT __, __, 572 F. Supp. 2d 1353, 1359 (2008)

(“Commerce must be guided by the objectives of achieving an

accurate margin and a fair comparison between export price and

normal value.”).    Commerce is further required to calculate costs

based on a respondent’s reasonably reflective records and

“consider all available evidence on the proper allocation of

costs . . . .”     See 19 U.S.C. § 1677b(f)(1)(A).   The statute

provides no further guidance and therefore Commerce is afforded

certain discretion in calculating G&A expenses.
Consol. Court No. 06-00395                               Page 48

      Having reviewed the record, the court finds that Commerce’s

explanation of its construction of the G&A expense ratio is

inadequate.   Therefore, it must be remanded for reconsideration.

Here, Commerce verified that the majority of Kejriwal’s G&A

expenses are associated with its newsprint operations, but

allocated the majority of such expenses to its CLPP business.      As

Kejriwal explains, and the record confirms, Kejriwal had

approximately 60 suppliers and customers of newsprint and fewer

than five CLPP customers.    Further, six and one-half out of

Kejriwal’s seven offices were dedicated to newsprint trading, as

were most of its employees.    See Kejriwal Br. 19-20 (citing

Verification Report at 8-11, Ex. 4 at 2.    This being the case,

the Department has failed to explain how it is reasonable to

include overhead expenses associated with Kejriwal’s newsprint

business in the numerator and not include some appropriate

corresponding value in the denominator.    In addition, the court’s

comparison of Kejriwal’s profit and loss account for the year

ending March 31, 2004, before the POR and before Kejriwal started

its CLPP operation, with that for the year ending March 31, 2005,

further reveals that the large majority of Kejriwal’s G&A

expenses were associated with newsprint trading, i.e., non-

subject merchandise.14   Nevertheless, Commerce’s calculation does

     14
        Kejriwal’s profit and loss account for the year ending
March 31, 2004, before the POR and before Kejriwal started its
                                                   (continued...)
Consol. Court No. 06-00395                                Page 49

not seem to account for this in allocating G&A expenses to

subject merchandise, and therefore does not give a fair picture

of the company’s business.

     Given these findings, the court cannot conclude that

Commerce’s analysis was reasonable.   Accordingly, this matter is

remanded to Commerce for it to reconsider Kejriwal’s G&A expense

ratio calculation in a manner comporting with this opinion.     On

remand, the agency is directed to account for Kejriwal’s cost of

newsprint traded (or some fair equivalent value) in the

denominator of the ratio of its G&A expense ratio calculation,

and recalculate Kejriwal’s G&A expenses allocated to Kejriwal’s

subject merchandise.   Alternatively, Commerce is directed to

explain in detail how its treatment of Kejriwal’s G&A expense

ratio fairly allocates G&A expenses between subject and non-

subject merchandise.   Commerce shall make specific reference to

the record evidence demonstrating that, as reported in footnote

14, the majority of Kejriwal’s G&A expenses are associated with

its newsprint operations.    This includes, but is not limited to,

the number of Kejriwal’s offices, employees, suppliers, and

customers dedicated to its newsprint business, as compared to its


     14
      (...continued)
CLPP operation, reported approximately [[                 ]] as
G&A expenses. For the year ending March 31, 2005, covering most
of the POR and including the start-up CLPP business, Kejriwal
reported approximately [[                 ]] as G&A expenses.
See Verification Report, Ex. 1 at 14.
Consol. Court No. 06-00395                               Page 50

CLPP operation.   The Department shall further explain how its G&A

expense ratio calculation is consistent with its treatment of

Kejriwal’s financial expense ratio and with the overarching

purpose of calculating as accurate a dumping margin as possible.



                             CONCLUSION

     For the reasons stated, Commerce’s final results of

administrative review are sustained in part and remanded.    Remand

results are due on or before January 16, 2009.   Comments to the

remand results are due on or before February 16, 2009.     Replies

to such comments are due on or before March 2, 2009.



                                          /s/ Richard K. Eaton
                                              Richard K. Eaton

 Dated: November 17, 2008
        New York, New York
