                         Slip Op. 09-71

             UNITED STATES COURT OF INTERNATIONAL TRADE
______________________________
                                :
ARCH CHEMICALS, INC., and       :
HEBEI JIHENG CHEMICALS,         :
CO., LTD.,                      :
                                :
     Plaintiffs,                :
                                :
           v.                   : Before: Richard K. Eaton, Judge
                                :
UNITED STATES,                  : Consol. Court No. 08-00040
                                :
     Defendant,                 :
                                :
           and                  :
                                :
CLEARON CORPORATION and         :
OCCIDENTAL CHEMICAL             :
CORPORATION,                    :
                                :
     Defendant-Intervenors.     :
______________________________:
                                :
CLEARON CORPORATION and         :
OCCIDENTAL CHEMICAL             :
CORPORATION,                    :
                                :
     Plaintiffs,                :
                                :
           v.                   :
                                :
UNITED STATES,                  :
                                :
     Defendant,                 :
                                :
           and                  :
                                :
ARCH CHEMICALS, INC., and       :
HEBEI JIHENG CHEMICALS,         :
CO., LTD.,                      :
                                :
     Defendant-Intervenors.     :
______________________________:
Consol. Court No. 08-00040                               Page 2

                         OPINION AND ORDER

[The United States Department of Commerce’s final results of
administrative review are sustained in part and remanded.]


                                         Dated:   July 13, 2009

     Blank Rome LLP (Peggy A. Clarke and Roberta Kienast Daghir),
for plaintiffs/defendant-intervenors Arch Chemicals, Inc. and
Hebei Jiheng Chemical Company, Ltd.

     Gibson, Dunn, & Crutcher LLP (Daniel J. Plaine, J.
Christopher Wood, and Andrea F. Farr) for plaintiffs/defendant-
intervenors Clearon Corporation and Occidental Chemical
Corporation.

     Tony West, Assistant Attorney General; Jeanne E. Davidson,
Director, Patricia M. McCarthy, Assistant Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (David F. D'Alessandris); Office of Chief Counsel for
Import Administration, United States Department of Commerce
(Sapna Sharma), of counsel, for defendant United States.


     Eaton, Judge:   This consolidated action is before the court

on the motions for judgment on the agency record pursuant to

USCIT Rule 56.2: of plaintiffs/defendant-intervenors Arch

Chemicals, Inc. (“Arch”) and Hebei Jiheng Chemical Company, Ltd.

(“Jiheng”); and of plaintiffs/defendant-intervenors Clearon

Corporation (“Clearon”) and Occidental Chemical Corporation

(“OxyChem”).   Both motions challenge certain aspects of the

United States Department of Commerce’s (“Commerce” or the

“Department”) final results of the first administrative review of

the antidumping duty order on chlorinated isocyanurates from the

People’s Republic of China (“PRC”).   See Chlorinated
Consol. Court No. 08-00040                                Page 3

Isocyanurates from the PRC, 73 Fed. Reg. 159 (Dep’t of Commerce

Jan. 2, 2008) (notice of final results) (the “Final Results”);

Chlorinated Isocyanurates from the PRC, 73 Fed. Reg. 9,091 (Dep’t

of Commerce Feb. 19, 2008) (notice of amended final results) (the

“Amended Final Results”).    The Final Results cover the period of

review (“POR”) December 16, 2004, through May 31, 2006, and

incorporate by reference the Department’s Issues and Decision

Memorandum.   See Issues and Decision Mem. for the 2004 - 2006

Admin. Review of Chlorinated Isocyanurates from the PRC (Dep’t of

Commerce Dec. 14, 2007) (the “I&D Mem.”).     Jurisdiction is had

pursuant to 28 U.S.C. § 1581(c) (2000) and 19 U.S.C.

§ 1516a(b)(1)(B)(i).

     For the reasons that follow, Arch and Jiheng’s motion is

granted and Clearon and OxyChem’s motion is denied.     Accordingly,

the Final Results are sustained in part and remanded.



                             BACKGROUND

     In June 2005, Commerce published an antidumping duty order

on chlorinated isocyanurates1 from the PRC.    See Chlorinated

Isocyanurates from the PRC, 70 Fed. Reg. 36,561 (Dep’t of

     1
          “Chlorinated isocyanurates are derivatives of cyanuric
acid, described as chlorinated s-triazine triones. . . . [They
are] available in powder, granular, and tableted forms.” See
Chlorinated Isocyanurates from the PRC, 72 Fed. Reg. 39,053,
39,054 (Dep’t of Commerce July 17, 2007) (notice of preliminary
results) (explaining the scope of Commerce’s antidumping duty
order).
Consol. Court No. 08-00040                               Page 4

Commerce June 24, 2005) (notice of antidumping duty order) (the

“Order”).   The following year, in June 2006, the Department

published a notice of opportunity to request an administrative

review of the Order.    See Antidumping or Countervailing Duty

Order, Finding, or Suspended Investigation; Opportunity To

Request Admin. Review, 71 Fed. Reg. 32,032 (Dep’t of Commerce

June 2, 2006) (notice).    Among others, Clearon and OxyChem,

petitioners in the original investigation, asked Commerce to

conduct an administrative review of foreign producer/exporter

Jiheng’s sales and entries of chlorinated isocyanurates during

the POR.    See Chlorinated Isocyanurates from the PRC, 72 Fed.

Reg. 39,053, 39,053 (Dep’t of Commerce July 17, 2007) (notice of

preliminary results) (the “Preliminary Results”).     Jiheng also

asked the Department to review its sales of subject merchandise.

Id.   Consequently, in July 2006, the Department initiated an

administrative review with respect to Jiheng.    See Initiation of

Antidumping and Countervailing Duty Admin. Reviews and Request

for Revocation in Part, 71 Fed. Reg. 42,626 (Dep’t of Commerce

July 17, 2006) (notice).

      Commerce published the Preliminary Results of its review in

July 2007, and its Final Results in January 2008, as amended in

February 2008.    See Preliminary Results, 72 Fed. Reg. at 39,053;

Final Results, 73 Fed. Reg. at 159; Amended Final Results, 73

Fed. Reg. at 9,091.
Consol. Court No. 08-00040                                Page 5

                        STANDARD OF REVIEW

     The court must uphold a final determination by the

Department in an antidumping proceeding unless it is “unsupported

by substantial evidence on the record, or otherwise not in

accordance with law.”   19 U.S.C. § 1516a(b)(1)(B)(i).   Thus,

“Commerce’s findings must be reached by reasoned decision-making,

including . . . a reasoned explanation supported by a stated

connection between the facts found and the choice made.”     Rhodia,

Inc. v. United States, 28 CIT 1278, 1283, 185 F. Supp. 2d 1343,

1349 (2001) (citations and quotations omitted).



                             DISCUSSION

I.   Arch and Jiheng’s Motion

     Arch and Jiheng argue that Commerce committed three errors

that led to its improper decision to reject Jiheng’s by-product

offset claims.   First, they claim that Commerce erred by

concluding that Jiheng’s factors of production (“FOPs”) were

reported net of its by-product consumption.   Next, they insist

that the Department improperly calculated normal value using a

new practice without providing notice to Jiheng.   Last, they

argue that Commerce erred by finding that there was insufficient

information on the record to identify the portions of purchased

sulfuric acid and recovered sulfuric acid used to produce

ammonium sulfate.
Consol. Court No. 08-00040                                 Page 6

     A.    Legal Framework for By-Product Offset Claims

     The antidumping statute “does not mention the treatment of

by-products,” and Commerce has not filled the statutory gap with

a regulation.    See Guangdong Chems. Imp. & Exp. Corp. v. United

States, 30 CIT 1412, 1422, 460 F. Supp. 2d 1365, 1373 (2006).

Generally, however, the Department’s practice has been to grant

an offset to normal value,2 for sales of by-products generated

during the production of subject merchandise, if the respondent

can demonstrate that the by-product is either resold or has

commercial value and re-enters the respondent’s production

process.    See Ass’n of Am. School Paper Suppliers v. United

States, 32 CIT __, __, Slip Op. 08-122 at 17 (Nov. 17, 2008) (not

reported in the Federal Supplement).    Thus, the burden rests with

the respondent to substantiate by-product offsets by providing

the Department with sufficient information to support its claims.

See id. at __, Slip Op. 08-122 at 18-23.




     2
            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. 08-00040                                Page 7

     B.   Arch and Jiheng’s By-Product Reporting

     Arch and Jiheng’s first complaint is that the Department

erred in concluding that “the costs reported [by Jiheng] were net

of the costs of the by-product production.”     See Mot. J. Agency

R. of Arch and Jiheng (“Arch/Jiheng Br.”) 11.    They insist that

this conclusion was wrong and that Jiheng reported its FOPs to

include the “costs” in producing the by-products for which Jiheng

claimed offsets.   See Arch/Jiheng Br. 11.    In other words, they

argue that Commerce erred by failing to recognize that Jiheng did

not deduct amounts used to produce by-products from its FOP

reporting.

     With respect to this argument, defendant concedes the

Department’s error.   It states: “Jiheng correctly notes that

Commerce made an error when it reviewed Jiheng’s calculations and

determined that Jiheng had reported its costs net of the costs of

the by-product production.”   Def.’s Opp’n to Pls.’ and Def.-

Ints.’ Mots. J. Agency R. (“Def.’s Br.”) 29-30.

     It is apparent that Commerce erred in its conclusions with

respect to the reporting of these costs.     On remand, in addition

to those instructions set out below, the Department is directed

to calculate Jiheng’s claimed by-product offsets consistent with

its recognition that Jiheng did not report its costs net of the

costs of by-product production.
Consol. Court No. 08-00040                                Page 8

     C.    Alleged Change in Commerce’s Practice

     In the original investigation and in the Department’s

Preliminary Results for this first administrative review,

Commerce accepted the sales documentation provided by Jiheng as

sufficient to substantiate its claimed by-product offsets.     In

the Final Results, however, Commerce determined that Jiheng’s

questionnaire responses were insufficient and rejected Jiheng’s

claims.

     By their motion, Arch and Jiheng argue that the Department

acted unlawfully by providing neither notice nor explanation when

it allegedly changed the practice by which it grants by-product

offsets.   They maintain that “principles of fairness” prevent the

Department’s action because Jiheng was given no notice and no

“opportunity to provide the precise information required,” and

instead first learned of Commerce’s change in practice in the

Final Results.   See Arch/Jiheng Br. 14 (quoting Shikoku Chems.

Corp. v. United States, 16 CIT 382, 388, 795 F. Supp. 417, 421

(1992)).   They further assert that Commerce’s claimed

questionnaire change was insufficient to alert the company that

it must provide additional data to support its by-product

production.   See Arch/Jiheng Br. 14-16.   Arch and Jiheng

acknowledge that Commerce may change course if it explains its

reason for doing so, but assert that here the Department acted

unfairly, unlawfully, and without a proper explanation.      See
Consol. Court No. 08-00040                              Page 9

Arch/Jiheng Br. 14.

     As noted, Arch and Jiheng insist that the Department’s

argument that a new question put Jiheng on notice of a change in

practice is without merit.   For them, Commerce’s various

questionnaires gave no notice that the Department had changed its

practice.   Rather, they claim that the company reasonably

believed that Commerce was only seeking more detailed information

than it had previously and there was no indication that Jiheng

needed to provide production data for claimed by-products.    See

Arch/Jiheng Br. 21.   Moreover, they maintain that, “[d]espite the

Department’s alleged change in practice, the Department accepted

the data provided as adequate for the purpose of the Preliminary

Results without any discussion of a change in practice.”

Arch/Jiheng Br. 20-21.

     Furthermore, Arch and Jiheng argue that Commerce failed to

provide an adequate explanation for its change in practice.   They

insist that it was insufficient for the Department to simply cite

one past investigation, Certain Lined Paper Products From the

PRC, 71 Fed. Reg. 53,079 (Dep’t of Commerce Sept. 8, 2006)

(“Certain Lined Paper”),3 that purportedly had previously


     3
         In Certain Lined Paper, Commerce found that “there was
not enough documentary evidence at verification to successfully
demonstrate that the[] two companies actually received the income
from their waste paper sales.” See Issues and Decision Mem. for
the Less-Than-Fair-Value Investigation of Certain Lined Paper
                                                   (continued...)
Consol. Court No. 08-00040                                 Page 10

“clarified” its practice.    See Arch/Jiheng Br. 20.

      For its part, Commerce contends that it lawfully denied

Jiheng’s claimed offsets because the company did not submit

documents demonstrating the amount of by-products produced during

the POR, despite the clear directions in the questionnaires to do

so.   The Department argues that its questionnaires contained a

new variable that specifically sought such information.     It

maintains that Jiheng failed to submit production data and

instead “provided evidence demonstrating sales of downstream

products that were produced using by-products, and stated that it

derived the amount of by-products produced during the [POR] using

sales invoices.”   Def.’s Br. 28 (citations omitted).   Thus,

according to Commerce, although the Department granted the

offsets in the original investigation and the Preliminary

Results, it determined, “after reviewing parties’ briefs,” that

it was unable to grant the by-product offsets in the Final

Results because it could not determine the amount of by-product

produced by Jiheng during the POR.    See Def.’s Br. 29.

      In addition, the Department states that it recognized that

it was changing its position from the Preliminary Results and

provided the necessary reasoned explanation.   It maintains:

“Commerce is generally at liberty to discard one methodology in

      3
      (...continued)
Prods. from the PRC at Comment 11 (Dep’t of Commerce Sept. 8,
2006).
Consol. Court No. 08-00040                                 Page 11

favor of another where necessary to calculate a more accurate

dumping margin; however, Commerce must explain the basis for its

change of methodology and demonstrate that its explanation is in

accordance with law and supported by substantial evidence.”

Def.’s Br. 30 (citation omitted).   According to the Department,

the Final Results explained that Commerce was changing course in

order to act in a manner consistent with its policy of requiring

respondents to demonstrate not only that by-products were sold or

reintroduced into the production process during the POR, but

actually produced during that period.    See Def.’s Br. 30-31.



     1.   Jiheng’s Previous By-Product Reporting

     Given the nature of the parties’ dispute, a detailed review

of the history of Jiheng’s by-product reporting is warranted.        In

its original investigation, the Department issued a questionnaire

to Jiheng that read in pertinent part:

           Please report the amount of byproducts or co-
           products produced per unit of subject
           merchandise. Please report each co- or by-
           product in separate columns. Identify only
           those co- or by-products that do not reenter
           the production process.

Arch/Jiheng Br. 17 (quoting Section D: Factors of Prod.

Questionnaire, Pub. R. Doc. No. (“PR”) 157 at D-6).   Jiheng

responded to the questionnaire and Commerce’s preliminary

determination granted the company its claimed offsets.     The

Department explained:
Consol. Court No. 08-00040                                 Page 12

           Both respondents reported certain by-products
           in producing the subject merchandise which
           each either re-sold or re-used to produce the
           subject merchandise during the [period of
           investigation]. Therefore, in those
           instances where the respondent provided
           documentation to support its by-product
           claim, we allowed a recovery/by-product
           credit. Our treatment of by-products in this
           proceeding is in accordance with the
           Department’s practice.

Chlorinated Isocyanurates From the PRC, 69 Fed. Reg. 75,294,

75,301 (Dep’t of Commerce Dec. 16, 2004) (notice of preliminary

determination) (citing Certain Hot-Rolled Carbon Steel Flat

Products From the PRC, 66 Fed. Reg. 49,632 (Dep’t of Commerce

Sept. 28, 2001) (notice), and accompanying Issues and Decision

Mem. at Comment 3)).   Thus, in its preliminary determination

during the investigatory phase, Commerce acknowledged that it was

basing its allowance of the by-product offset on sales——not

production——data.   That is, even though the questionnaire asked

for production information, Commerce accepted sales information.

In doing so, Commerce stated that it was acting “in accordance

with the Department’s practice.”   Chlorinated Isocyanurates From

the PRC, 69 Fed. Reg. at 75,301.

     Following verification, Commerce continued to grant Jiheng

its claimed by-product offsets to normal value in its final

results.   See Chlorinated Isocyanurates From the PRC, 70 Fed.

Reg. 24,502 (Dep’t of Commerce May 10, 2005) (notice of final

determination), adopting Issues and Decision Mem. for the Final
Consol. Court No. 08-00040                                Page 13

Determination in the Antidumping Duty Investigation of

Chlorinated Isocyanurates from the PRC - Oct. 1, 2003, through

Mar. 31, 2004, at Comment 6 (Dep’t of Commerce May 10, 2005) (the

“Investigation I&D Mem.”).   The Department concluded that

          . . . Jiheng and Nanning have provided
          necessary information for their claim of
          by-products, including production re-use
          and/or sale information. We have fully
          examined these companies’ information at
          verification and confirmed, with one
          exception (i.e., Nanning’s chlorine gas . .
          .), that the by-products at issue were
          compensated or were re-used in production.
          Therefore, we continue to grant, where
          applicable, by-product offsets to Jiheng and
          Nanning in the final determination.

Investigation I&D Mem. at Comment 6 (footnote omitted).    In other

words, Commerce found that Jiheng’s questionnaire responses,

which provided calculations of the amount of by-products claimed

and documented sales of by-products and/or downstream products,

sufficient to justify an offset in accordance with its practice.

     During the now disputed first administrative review, the

Department issued an initial questionnaire which had the

following question:

          Please report the amount of by-products or
          co-products produced per unit of merchandise
          under consideration. Explain why you have
          defined the products as by-products or co-
          products, as applicable. Describe the
          disposition of the by-products or co-products
          (e.g., sold, returned to production of the
          merchandise under consideration, discarded).
          If sold or returned to production, provide
          evidence thereof. State whether you are
          claiming an offset to production costs for
Consol. Court No. 08-00040                                Page 14

          the by-product or co-product, and show how
          you calculated the amount claimed. If you
          are claiming an offset, explain any further
          processing of the by-product or co-product,
          and list the factors and quantities thereof
          used in the further processing.

Arch/Jiheng Br. 17-18 (quoting Request for Info., PR 12 at D-9).

This question, expanding upon the question in the analogous

question asked by Commerce in the original investigation, appears

to be the new “variable” alleged by Commerce.   Yet, as in the

original investigation, the Department asked for production

information, but gave no indication that it was seeking

information materially different from that found sufficient in

the original investigation.

     In response to this question, Jiheng “identified the by-

products unavoidably created as a result of the production of the

intermediary products that are used in the production of subject

merchandise,” and “provided both the calculations of the amount

claimed and documentation of sales of the by-product or

downstream product, as applicable.”   Arch/Jiheng Br. 6

(quotations and citations omitted).   Jiheng insists that this

method of responding was identical to that accepted by the

Department in the original investigation.   Arch/Jiheng Br. 6-7.

     Commerce followed up on Jiheng’s by-product reporting in its

Second Supplemental Questionnaire:

          You stated . . . that you are claiming
          offsets for four by-products that are created
          during the production of the intermediate
Consol. Court No. 08-00040                                 Page 15

           products used to produce subject merchandise.
           Does your reported raw material consumption
           already account for the claimed by-product
           offset? With respect to sodium hypochlorite,
           hydrogen gas and ammonium sulfate, which you
           state were sold, were any sales made to
           unaffiliated customers? Provide
           documentation to support your claimed
           quantities of recovered by-products.

Second Suppl. Questionnaire dated Mar. 6, 2007, PR 63 at 15.

Notably, this question requests information relating to re-use

and sales——not production.

     In its April 2007 response, Jiheng stated that “[t]he raw

materials reported in the FOPs chart have all reflected all raw

materials entering into the production, and also account for the

claimed by-product offset generated during the production.”

Arch/Jiheng Br. 7 (quoting Jiheng Chemical, Resp. to Second

Suppl. Questionnaire dated Apr. 5, 2007, Confidential R. Doc. No.

(“CR”) 14, at SS-37).   Arch and Jiheng note that Jiheng provided

the Department with “monthly total sales, identified all invoices

within a sample month, and provided sample invoices for that

month.”   Arch/Jiheng Br. 7 (citation omitted).   Further, “[t]o

document the claimed quantities of recovered by-products, Jiheng

Chemical supplied the formulae used (the same formulae verified

and accepted in the [original] investigation) and documented the

sales quantities to which these formulae were applied, the same

methodology used in the investigation.”   Arch/Jiheng Br. 7

(internal citation omitted).
Consol. Court No. 08-00040                                Page 16

     Subsequently, in its Fourth Supplemental Questionnaire, the

Department once again inquired about Jiheng’s by-product

reporting.   It asked Jiheng to provide information about its

different production lines, about whether non-subject merchandise

production generates the same by-products as that of subject

merchandise, to submit worksheets about one of its plant’s by-

product production, and to provide source documentation

supporting its recovered sulfuric acid claim.   See Fourth Suppl.

Questionnaire dated May 17, 2007, PR 82, at 5-6.   Further,

Commerce specifically asked: “Please explain the way Jiheng

Chemical keeps by-products records in the normal course of

production.”   See Fourth Suppl. Questionnaire dated May 17, 2007,

PR 82, at 5 (emphasis added).

     In response to the inquiry about its by-product record

keeping, Jiheng wrote:

          Jiheng Chemical used the sales invoices to
          determine the recovered volume of the by-
          products, which is kept in the accounting
          department. As explained . . . [in a prior]
          submission, Jiheng Chemical claimed the
          offset of the volume of by-products (1)
          directly sold to market, such as hydrogen
          gas; and (2) entering into the production of
          the merchandise, which was sold to the
          market, such as hydrochloric acid, sodium
          hypochlorite and ammonium sulfate.
          Therefore, Jiheng used the sales invoices . .
          . [and] samples of such sales have been
          provided in Jiheng Chemical’s [prior]
          submission.

Jiheng Chemical, Resp. to Fourth Suppl. Questionnaire, June 8,
Consol. Court No. 08-00040                               Page 17

2007, CR 24, at FSR-24.   Again, according to Arch and Jiheng,

this reporting methodology was identical to what was accepted by

Commerce in the original investigation.    See Arch/Jiheng Br. 8.

     The Department’s Preliminary Results accepted Jiheng’s

reported by-product offsets.    See Arch/Jiheng Br. 8 (citing

Preliminary Results, 72 Fed. Reg. at 39,053 (“We used the FOPs

reported by respondents for materials, energy, labor,

by-products, and packing.”)).   Notably, the Preliminary Results

were published on July 17, 2007, nearly a year after the

publication of Certain Lined Paper, which Commerce claims

“clarified that, without . . . documentation [of by-product

production], Commerce has no way of knowing whether the quantity

of by-product claimed was actually produced during the period of

review, or the amount of income or savings that were actually

realized by respondent through the sale or reintroduction of the

by-product.”   Def.’s Br. 31 (citation omitted).

     In the Final Results, however, Commerce changed course and

rejected Jiheng’s claimed offsets.   Commerce’s Issues and

Decision Memorandum explains:

          We acknowledge that the Department granted
          Jiheng Chemical’s claimed by-product offsets
          in the original investigation. However,
          since then, the Department has changed its
          standard questionnaire to include a separate
          variable for claimed by-product offsets, and
          has also clarified its practice in granting
          such offsets. In Lined Paper Products . . .
          the Department clearly articulated its
          position: “The mere fact that a company
Consol. Court No. 08-00040                                Page 18

          demonstrates that it sold scrap has been
          rejected by the Department in the past as a
          justification for allowing a scrap offset.”
          The Department added that in order to be able
          to grant an offset, “it is the Department’s
          practice to require that respondents provide
          sufficient documentation of the actual
          {by-product} produced and the amount of the
          {by-product} reintroduced into the production
          process.”

          . . . [We are] unable to allow the offset in
          this segment of the proceeding, however,
          because Jiheng Chemical failed to provide
          documentation of the actual amount of the
          by-products generated from the production of
          subject merchandise.

I&D Mem. at Comment 15 (footnotes and citations omitted).


     2.   The Department’s By-Product Offset Determinations is
          Remanded

     The Final Results, when viewed in the context of Jiheng and

Commerce’s interactions during the course of the proceedings

leading up to the Final Determination, demonstrate that the

methodology used by Commerce amounts to an unannounced and

inadequately explained change in practice.   As such, the issue of

Jiheng’s by-product offsets must be remanded for reconsideration.

      Commerce generally has discretion to discard one

methodology in favor of another in order to calculate more

accurate dumping margins.    See Fujian Mach. and Equip. Imp. &

Exp. Corp. v. United States, 25 CIT 1150, 1169, 178 F. Supp. 2d

1305, 1327 (2001).   This discretion, however, is subject to two

limitations.   First, “Commerce may not make minor but disruptive
Consol. Court No. 08-00040                               Page 19

changes in methodology where a respondent demonstrates its

specific reliance on the old methodology used in multiple

preceding reviews”; second, “in every instance where an agency

changes tack, it must provide a reasoned explanation for doing

so.”    Id. at 1169-70, 178 F. Supp. 2d at 1327 (citation omitted);

see also Nippon Steel Corp. v. U.S. Int’l Trade Comm’n, 494 F.3d

1371, 1378 n.5 (Fed. Cir. 2007) (“When an agency decides to

change course . . . it must adequately explain the reason for a

reversal of policy.”) (citation omitted).

       In support of their arguments, Arch and Jiheng cite Shikoku

Chemicals Corp. v. United States, 16 CIT 382, 795 F. Supp. 417

(1992) (“Shikoku”), where this Court held that reliance on prior

administrative practice can, in certain circumstances, be

sufficient to prevent Commerce from changing course without

providing notice.    In Shikoku, plaintiffs challenged Commerce’s

final results of the fifth and sixth administrative reviews of an

antidumping duty order.    In those final results, Commerce

employed a different methodology than it used in the original

investigation and the first four administrative reviews.      Id. at

384, 795 F. Supp. at 418.    Plaintiffs argued that they were being

unfairly penalized by Commerce’s decision to use a new

methodology because they relied on the Department’s old practice.

       Commerce insisted that plaintiffs “had no right to rely on

the continuation of a particular calculation methodology.”     See
Consol. Court No. 08-00040                                  Page 20

id. at 384, 795 F. Supp. at 420.    Moreover, the Department

maintained that, even if the court found Commerce to have changed

its methodology, its final determination should still be upheld

because it was explained adequately and supported by substantial

evidence.    Id. at 384, 795 F. Supp. at 419.

     The Shikoku Court concluded that Commerce acted unreasonably

and did not provide a sufficient explanation for changing

methodologies:

            Principles of fairness prevent Commerce from
            changing its methodology at this late stage.
            Commerce is required to administer the
            antidumping laws fairly. Adherence to prior
            methodologies is required in some
            circumstances. . . .

Id. at 388, 795 F. Supp. at 421 (footnote and citation omitted).

     Shikoku involved a longer period of reliance than in this

case, but the logic underpinning its holding remains useful here.

Thus, for the court, as in Shikoku, “principles of fairness”

prevent the Department from modifying its by-product offset

analysis without giving Jiheng notice of the change.       See NEC

Corp. v. United States, 151 F.3d 1361, 1371 (Fed. Cir. 1998)

(“[T]here inheres in a statutory scheme such as this an

expectation that those charged with its administration will act

fairly and honestly.”); Budd Co., Wheel & Brake Div. v. United

States, 14 CIT 595, 602, 746 F. Supp. 1093, 1099 (1990) (stating

that the Federal Circuit has made clear that “fairness is the
Consol. Court No. 08-00040                                Page 21

touchstone of Commerce’s duty in enforcing the antidumping

laws”).    This is particularly the case given that the

Department’s questionnaires in this first administrative review

did not seek materially different information from that sought in

the original investigation.

     Moreover, no serious argument can be made that Certain Lined

Paper provided either notice of or an explanation of Commerce’s

changed practice.    First, an examination of the final results and

accompanying Issues and Decision Memorandum in that investigation

reveals that at no point does the Department state that

henceforth only production information would be sufficient to

justify a by-product offset.    Second, any claim that Certain

Lined Paper’s results informed Jiheng of a change in practice is

discounted by the fact that Commerce’s own personnel did not take

Certain Lined Paper into account in preparing the Preliminary

Results.

     Accordingly, the court finds that Commerce did not act

reasonably under the circumstances and remands this matter to the

Department for reconsideration.    On remand, the Department shall

reopen the record and provide Jiheng with sufficient opportunity

to submit documentation relevant to the methodology Commerce

employs in its by-product analysis.    Commerce shall notify Jiheng

precisely what information it expects Jiheng to produce.

Commerce shall then complete its by-product offset analysis
Consol. Court No. 08-00040                               Page 22

accordingly.



II.   Clearon and OxyChem’s Motion

      Domestic companies Clearon and OxyChem challenge the

Department’s calculation of surrogate values for urea, sea salt,

and steam coal, each of which is used in Jiheng’s production of

the subject merchandise.    For the reasons set forth below, the

Department’s surrogate value calculations are sustained.


      A.   Legal Framework for Calculating Surrogate Values

      In determining whether the subject merchandise is being, or

is likely to be, sold at less than fair value, 19 U.S.C.

§ 1677b(a) requires Commerce to make “a fair comparison . . .

between the export price4 or constructed export price5 and normal

value.”    When merchandise that is the subject of an antidumping

investigation is exported from a nonmarket economy country,6 such


      4
          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).
      5
          “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).
      6
            A “nonmarket economy country” is “any foreign country
                                                     (continued...)
Consol. Court No. 08-00040                                 Page 23

as the PRC, Commerce, under most circumstances, determines normal

value by valuing the FOPs used in producing the merchandise using

surrogate data.7    The statute directs Commerce to value the FOPs

“based on the best available information regarding the values of

such factors in a market economy country or countries considered

to be appropriate by the [Department] . . . .”     19 U.S.C.

§ 1677b(c)(1).     “Specifically, Commerce’s task in a nonmarket

economy investigation is to calculate what a producer’s costs or

prices would be if such prices or costs were determined by market

forces.”   Tianjin Mach. Imp. & Ex. Corp. v. United States, 16 CIT



     6
      (...continued)
that [Commerce] determines does not operate on market principles
of cost or pricing structures, so that sales of merchandise in
such country do not reflect the fair value of the merchandise.”
19 U.S.C. § 1677(18)(A). “Because it deems China to be a
nonmarket economy country, Commerce generally considers
information on sales in China and financial information obtained
from Chinese producers to be unreliable for determining, under 19
U.S.C. § 1677b(a), the normal value of the subject merchandise.”
Shanghai Foreign Trade Enters. Co. v. United States, 28 CIT 480,
481, 318 F. Supp. 2d 1339, 1341 (2004). Therefore, because the
subject merchandise comes from the PRC, Commerce constructed
normal value by valuing the FOPs using surrogate data from India.
See 19 U.S.C. § 1677b(c)(4).
     7
           Section 1677b(c)(4)(A) requires that:

           The administering authority, in valuing
           factors of production [to determine normal
           value of the subject merchandise exported
           from a nonmarket economy], shall utilize, to
           the extent possible, the prices or costs of
           factors of production in one or more market
           economy countries that are . . . at a level
           of economic development comparable to that of
           the nonmarket economy country . . . .
Consol. Court No. 08-00040                                Page 24

931, 940, 806 F. Supp. 1008, 1018 (1992).



     B.   Surrogate Value for Urea

     Clearon and OxyChem argue that the Department did not use

the “best available information” in selecting the source of a

surrogate value for urea.    19 U.S.C. § 1677b(c)(1).   As a

surrogate value, the Department used the weighted-average unit

value of Indian imports from the World Trade Atlas (“WTA”), which

included data from the Oman India Fertilizer Company (“OMIFCO”).

Clearon and OxyChem assert that “Commerce erred by including in

its calculations the value of imports of urea to India from Oman

. . . . [when the] record revealed these data to consist solely

of imports by the Government of India from a joint venture

controlled by the governments of India and Oman [OMIFCO].”     Mot.

J. Agency R. Clearon and OxyChem (“Clearon/OxyChem Br.”) 2.

     According to Clearon and OxyChem, the OMIFCO prices were

anomalous because the joint venture did not sell urea on the open

market, but rather “has committed to sell all of its urea output

for 15 years to the Government of India under a declining, price-

fixed contract irrespective of changes in the market price for

urea.”    Clearon/OxyChem Br. 15.   Thus, they maintain that

Commerce’s acts were “inconsistent with a broad array of judicial

and administrative precedent directing Commerce to avoid the use

of prices that have been distorted by government involvement.”
Consol. Court No. 08-00040                                         Page 25

Clearon/OxyChem Br. 15.         For Clearon and OxyChem, the Department

erroneously based the decision to use these prices on whether the

OMIFCO data was “aberrational.”          They assert that the data should

have simply been rejected outright, because the prices were not

determined by the market.

     Clearon and OxyChem additionally claim that Commerce’s

decision to employ an “aberrational” price analysis for the

OMIFCO imports was “compounded by factually inaccurate statements

in support of its conclusion.”         Clearon/OxyChem Br. 23.          They

argue: “Commerce’s stated basis for refusing to exclude the Oman

import values — that the Oman imports were at comparable or

higher prices than other imports of urea to India — was factually

incorrect.”8         Clearon/OxyChem Br. 3.      Accordingly, they ask that



     8
          WTA data for imports of urea from December 2004 through
May 2006 was as follows:

                                                            Average Value
           Country                Quantity (KG)
                                                             (Rupees/KG)

     United Kingdom                   3,000                     6.67

             Oman                 1,291,398,509                 6.99

           Bahrain                 21,997,000                   11.53

         Saudi Arabia              135,027,000                  11.60

  United Arab Emirates             139,815,134                  11.65

           Ukraine                 245,524,000                  11.85

            Qatar                  142,167,000                  11.87

          Bangladesh               20,999,000                   12.27

            Kuwait                 16,497,000                   12.32
                                                              (continued...)
Consol. Court No. 08-00040                                   Page 26


the court to remand the determination to the Department for

further consideration.

      Commerce argues that, by comparing the weighted-average unit

value for all Indian imports of urea to that of OMIFCO, and

determining that the OMIFCO data was not aberrational, it

complied with section 1677(b)(c)(1)’s “best available

information” standard.        It states that it “compared the weighted-

average unit value for urea imports from Oman with the values of

imports from other market-economy countries, and found that,

contrary to Clearon’s allegations, the value for imports from

Oman was within the range of imports of urea from other market-

economy countries.”        Def.’s Br. 11 (citing I&D Mem. at Comment

1).   Having found that the value of the Omani imports was not

aberrational, Commerce argues that it was correct not to exclude

this data.      Def.’s Br. 12 (citing Allied Tube & Conduit Corp. v.

United States, 32 CIT __, __, 556 F. Supp. 2d 1350, 1353 (2008)).

      With respect to Clearon and OxyChem’s argument that Commerce

was factually incorrect in finding that Omani imports were

“comparable” to other imports of urea into India, Commerce notes



      8
          (...continued)
            Russia                66,702,000              12.58

            Germany                   760                 30.26

             Total               2,080,130,403            8.83


Clearon/OxyChem Br. 6 (footnote and citation omitted).
Consol. Court No. 08-00040                                   Page 27


that, “[a]lthough the Omani value was the second lowest” of all

imports, “this fact alone does not indicate an aberrational

price, because the quantity of Omani imports was far larger than

all other Indian imports of urea.”       Def.’s Br. 12 (citation

omitted).       Apparently, Commerce is arguing that the Omani price

was at the low end of the range because it would be subject to a

volume discount.       The Department also insists that it is

appropriate to include these imports notwithstanding Clearon and

OxyChem’s argument concerning government control because “Oman is

a market economy country and, therefore, its imports would not be

excluded based upon Commerce’s non-market practices,”

particularly given that Commerce determined that the prices were

not aberrational.       See Def.’s Br. 14-15.   Therefore, the

Department asks the court to sustain its calculation of the

surrogate value for urea.

     The court finds that Commerce acted reasonably by declining

to exclude the OMIFCO data when selecting the surrogate value for

urea.       Although not a hard-and-fast rule,9 when selecting

        9
          For example, Commerce may use non-public information
when doing so is consistent with its duty of calculating a more
accurate dumping margin.

               As the United States Court of Appeals for the
               Federal Circuit has explained . . ., actual
               prices paid for inputs on the international
               market are more accurate and indicative of
               actual input cost than surrogate values and
               therefore are preferable as they yield a more
                                                        (continued...)
Consol. Court No. 08-00040                                  Page 28


surrogate data, Commerce has a longstanding preference to “use

public, country-wide data, where it is available,” and will also

consider the “quality, specificity and contemporaneity of the

data.”     See Mittal Steel Galati S.A. v. United States, 31 CIT __,

__, 502 F. Supp. 2d 1295, 1298 (2007) (citations omitted).      This

preference has been sustained by numerous decisions of this

Court.     See Sichuan Changhong Elec. Co. v. United States, 30 CIT

1481, 1492, 460 F. Supp. 2d 1338, 1349 (2006) (“The Court has

consistently sustained Commerce’s preference for

publicly-available information representative of the industry

norm.”); Wuhan Bee Healthy Co. v. United States, 31 CIT __, __,

Slip Op. 07-113 at 25 (July 20, 2007) (not reported in the

Federal Supplement).

     Here, the WTA data is from a publicly available source for

the POR.     Additionally, Commerce analyzed that data to ensure

that “value for imports from Oman to India was not aberrational,

and was comparable to imports from other market economy

countries.”     Def.’s Br. 11 (citation omitted).   As has been seen,



     9
         (...continued)
             accurate dumping margin. Actual input prices
             paid, however, are not necessarily public
             information.

See Allied Pac. Food (Dalian) Co. v. United States, 30 CIT 736,
761-62, 435 F. Supp. 2d 1295, 1317-18 (2006) (citing Lasko Metal
Prods., Inc. v. United States, 43 F.3d 1442, 1446 (Fed. Cir.
1994)).
Consol. Court No. 08-00040                              Page 29


the Omani value was within the range of values examined, though

at the low end, and was close to the average value, i.e., 6.99

rupees/KG for Oman and 8.83 rupees/KG for the average of all data

sets.   Furthermore, as Arch and Jiheng point out, the Department

has previously engaged in analyses to determine if surrogate

value data is aberrational and thus there is nothing novel about

its methodology.   See Arch/Jiheng Opp’n Br. 11 (citing Certain

Hot-Rolled Carbon Steel Flat Prods. from Rom., 70 Fed. Reg.

34,448 (Dep’t of Commerce June 14, 2005) (notice of final

results), adopting Issues and Decision Mem. for the 2002-03

Antidumping Duty Admin. Review: Certain Hot-Rolled Carbon Steel

Flat Prods. from Rom., at Comment 2 (Dep’t of Commerce June 6,

2005) (analyzing allegations of aberrational surrogate value

data)).   In addition, Commerce acted reasonably in concluding

that “economies of scale is one factor contributing to OMIFCO’s

price [being lower than that of other urea imports into India],

given the quantity of imports from Oman into India.”   See I&D

Mem. at Comment 1; Def.’s Br. 12 (noting that “the quantity of

Omani imports of urea was higher than the quantity of all other

Indian imports of urea combined”).   Thus, having found that the

OMIFCO data was “within the normal range” and taking into

consideration the large quantity of OMIFCO imports, it cannot be

said that Commerce was unreasonable in using this information.

     Moreover, the court is unconvinced that Commerce erred by
Consol. Court No. 08-00040                               Page 30


not excluding the OMIFCO data as tainted by reason of government

involvement.   Oman and India are market economy countries and

there is no evidence that, at the time the contract was entered

into, the prices set were not market-driven.   In addition,

Commerce could reasonably find that, the mere fact that a product

is sold to a single purchaser pursuant to a long-term contract,

does not necessarily make the price anomalous.   Further, there

was no record evidence demonstrating that urea sales made subject

to the contract were distorted.

     Therefore, the court sustains Commerce’s surrogate value

calculation for urea.   “Commerce need not prove that its

methodology was the only way or even the best way to calculate

surrogate values for factors of production as long as it was

reasonable.”   Hebei Metals & Minerals Imp. & Exp. Corp. v. United

States, 28 CIT 1185, 1190, Slip Op. 04-88 at 9-10 (2004) (not

reported in the Federal Supplement) (quotation omitted).



     C.   Surrogate Value for Sea Salt

     Salt is a key component in Jiheng’s production process,

during which sea salt is used to create chlorine gas and caustic

soda——two of the “principal inputs” in the production of subject

merchandise.   See Clearon/OxyChem Br. 11.   Clearon and OxyChem

take issue with the Department’s selection of the WTA import data

for rock salt as a surrogate value for the sea salt actually used
Consol. Court No. 08-00040                                Page 31


by Jiheng.   Rather than the rock salt value, they maintain that

Commerce should have used vacuum salt pricing data, as published

in the Indian publication Chemical Weekly.    Clearon/OxyChem Br.

29.

      Clearon and OxyChem assert that Commerce’s decision to

reject the Chemical Weekly pricing data and rely on the

International Trade Commission’s (“ITC”) determination in Rock

Salt From Canada was erroneous.    See Rock Salt From Can., USITC

Pub. 1658, n.6, No.731-TA-239 (Mar. 1985).    In support of their

position, they argue that Commerce improperly “disregard[ed] the

evidence that rock salt is produced through a completely

different process [involving mining] than the evaporative methods

[involving evaporating salt-containing brine] used to produce sea

salt and vacuum salt.”    Clearon/OxyChem Br. 28.   In addition,

they insist that Commerce failed to fully consider the vacuum

salt pricing data contained in Chemical Weekly.     See

Clearon/OxyChem Br. 31.    It is worth noting at the outset,

however, that they never make clear why this distinction is

important.   If not vacuum salt, Clearon and OxyChem alternatively

claim that Commerce should have used WTA import data under the

Harmonized Tariff Schedule (“HTS”)10 subheading “other salts of

pure sodium chloride” because it was “the only import category


      10
          The Harmonized Tariff Schedule (“HTS”) referred to
herein is that of the Republic of India.
Consol. Court No. 08-00040                               Page 32


that actually covered the input in question - sea salt.”     See

Clearon/OxyChem Br. 29.

     Commerce argues that it properly selected rock salt as a

surrogate because it is the “most similar” to the sea salt used

by Jiheng in its production process.    Def.’s Br. 16.

Specifically, “Commerce found that [imports under the] the HTS

[subheading] for ‘rock salt’ was the most appropriate surrogate

for Jiheng’s input, because [rock salt] is most similar in purity

and crystal size” to sea salt.   Def.’s Br. 16-17 (citing I&D Mem.

at Comment 2).

     Commerce acknowledges that certain types of salts may have

overlapping applications (for example, can be used for both food

and industrial purposes), but notes that it arrived at its

determination to use rock salt based on specific evidence

provided by Jiheng demonstrating that it used “industrial grade

sea salt, which is manufactured by allowing sea water to

evaporate, and which does not undergo further processing to be

sold as ‘high purity’ vacuum salt.”    Def.’s Br. 19 (citing I&D

Mem. at Comment 2).   In other words, Commerce argues that

although rock salt and vacuum salt can both be used in the

production of chemicals, it determined that rock salt was the

most similar to the salt actually used by Jiheng because vacuum

salt is more processed and refined.

     Furthermore, as to Clearon and OxyChem’s contention that
Consol. Court No. 08-00040                               Page 33


Commerce did not fully consider the domestic Chemical Weekly

data, the Department argues that those companies did not raise

this argument at the administrative level and therefore failed to

exhaust their administrative remedies.    See Def.’s Br. 20

(citations omitted).   Moreover, even if the court were to

consider the issue, Commerce argues, it is within its power to

use import data instead of domestic data when it explains the

reasons for its decision.    See Def.’s Br. 20-21 (citing Wuhan Bee

Healthy Co. v. United States, 29 CIT 587, 601, 374 F. Supp. 2d

1299, 1311 (2005)).    Finally, as to its decision not to use WTA

import data from the HTS category “other salts of pure sodium

chloride” as a surrogate value, the alternative proposed by

Clearon and OxyChem, Commerce argues that its policy is to avoid

using “overly broad HTS categories for surrogate values where a

more product-specific surrogate value is available.”    See Def.’s

Br. 21 (citation omitted).

     The court finds that the Department acted reasonably under

the facts presented.   In its Issues and Decision Memorandum,

Commerce explained that it relied on the ITC’s investigation in

Rock Salt from Canada for guidance concerning the different types

of salt, salt usage, and salt mining, because “after a thorough

examination of all of the evidence on the record,” it considered

this determination to be the most persuasive and informative

information placed on the record by the parties.    See I&D Mem. at
Consol. Court No. 08-00040                                  Page 34


Comment 2 (citations omitted).    Rock Salt from Canada, though not

precisely on point, is instructive in several ways.

     First, Rock Salt from Canada made clear that a “significant

percentage” of rock salt shipped to the U.S. is used in the

chemical industry for the manufacture of chlor-alkalis, of the

type made by Jiheng.    I&D Mem. at Comment 2 (citations omitted).

Next, relying upon Rock Salt from Canada, Commerce noted that

“solar salt” (meaning sea salt that is produced by solar

evaporation) “has about the same purity and crystal size as rock

salt.”   Id. (footnote and quotation omitted).

     Further, the court agrees with Commerce that the

similarities in purity and crystal size not only supports the use

of rock salt, but discourages reliance on the Chemical Weekly

data for vacuum salt.    This is because “Jiheng demonstrat[ed]

that it uses industrial grade sea salt, which is manufactured by

allowing sea water to evaporate . . . .”    Def.’s Br. 19

(citations omitted).    On the other hand, vacuum salt undergoes

“further processing” in order to be sold as “high purity” vacuum

salt.    Def.’s Br. 19 (citing I&D Mem. at Comment 2).   Therefore,

considering the differences and structural similarities of the

proposed surrogate sources, it is apparent that rock salt

represented the “best available information.”    Moreover, although

the court finds that the Chemical Weekly data was from a domestic

source, which is typically preferable to import data, the court
Consol. Court No. 08-00040                                Page 35


“is mindful that Commerce does not have an unconditional

preference for using domestic prices over import prices when

valuing surrogates.”   See Wuhan Bee Healthy Co., 29 CIT at 601,

374 F. Supp. 2d at 1311 (citation omitted).    This should

particularly be the case where, as here, other factors such as

the similarities between the surrogate and the input actually

used weigh in favor of the imported input.

     Finally, the court notes that, by placing the domestic

vacuum salt data (Chemical Weekly) on the record before Commerce

and arguing that it should be used as a surrogate value, Clearon

and OxyChem exhausted their administrative remedies, and thus

this matter is properly before the court.     See Fabrique de Fer de

Charleroi S.A. v. United States, 25 CIT 741, 743, 155 F. Supp. 2d

801, 805 (2001) (“The exhaustion doctrine requires a party to

present its claims to the relevant administrative agency for the

agency’s consideration before raising these claims to the

Court.”).   Nonetheless, it was reasonable for Commerce to reject

import data under HTS subheading 2501.00.90 covering “other salts

of pure sodium chloride” because that category of imports was

overbroad as it is a “basket” provision.     See I&D Mem. at Comment

2.   Citing to Certain Preserved Mushrooms from the People’s

Republic of China, the Department noted that it “does not prefer

an overly broad HTS category where a more product-specific

surrogate value is available.”   See I& D Mem. at Comment 2
Consol. Court No. 08-00040                                 Page 36


(citing Certain Preserved Mushrooms from the PRC, 72 Fed. Reg.

44,827 (Dep’t of Commerce Aug. 9, 2007)).

     In addition, as Commerce points out, it would be improper to

rely on this data because no party put “information [on the

record] describing the type of salt included in the basket

category.”     Id.   As a result, while Commerce knew what was

actually imported under HTS subheading 2501.00.20, it had no way

of knowing what was imported under HTS subheading 2501.00.90.

Thus, the Department reasonably relied on record evidence that

WTA Indian import data included in HTS subheading 2501.00.20 for

rock salt was more representative of Jiheng’s reported input, and

therefore more product-specific.      See I&D Mem. at Comment 2;

Polyethylene Retail Carrier Bag Comm. v. United States, 29 CIT

1418, 1443-44, Slip Op. 05-157 at 43 (2005) (not reported in the

Federal Supplement) (stating that “Commerce recognized that

import statistics based on a basket tariff category are

inappropriate if a more representative alternate surrogate is

available”).

     The Department made its decision based upon a reasoned

review of the record evidence, considered the alternatives before

it, and supported its determination with substantial evidence.

As such, the court will not disturb Commerce’s findings.         See

Shakeproof Assembly Components Div. of Ill. Tool Works, Inc. v.

United States, 23 CIT 479, 481, 59 F. Supp. 2d 1354, 1357 (“The
Consol. Court No. 08-00040                                Page 37


statute requires Commerce to use the best available information,

but does not define that term.”) (footnote omitted).

Accordingly, the court sustains Commerce’s surrogate value

calculation for sea salt.



     D.   Surrogate Value for Steam Coal

     Clearon and OxyChem object to the Department’s selection of

a surrogate value for steam coal.   As a surrogate, the Department

used domestic Indian price data from the Tata Energy Research

Institute’s Energy Data Directory and Yearbook (the “TERI data”)

from Coal India Ltd., the state-owned producer of coal in India.

See Def.’s Br. 5.   Commerce’s choice rested on its conclusion

that the TERI data were the most specific to Jiheng’s actual

reported coal input.   See I&D Mem. at Comment 7.   That is,

Commerce determined that it would use the TERI data because

Jiheng “provided the Department with information on the specific

types of coal it uses and their UHV [(“useful heat value”)],” and

the “TERI Data are categorized by major types of coal and UHV

value whereas WTA import data are listed under ‘steam coal’

without further specificity.”   Id. (footnote omitted).

     Clearon and OxyChem, however, insist that the Department

used the TERI data only because it has used it in other reviews,

and it never “actually analyz[ed] the implication of new factual

information and arguments presented for the first time in the
Consol. Court No. 08-00040                               Page 38


context of this review.”   Clearon/OxyChem Br. 25.   Clearon and

OxyChem primarily argue that they have placed on the record

evidence that the steam coal prices included in the TERI data

were available only to certain “core sector” purchasers,11 a

group they allege does not include chemical producers like

Jiheng.

     Clearon and OxyChem further argue that non-“core sector”

purchasers generally purchase coal through auctions “in which

prices routinely exceeded the listed prices in the TERI data by

50% or more.”   Clearon/OxyChem Br. 10.   To support this claim,

Clearon and OxyChem cite record evidence including two Internet

news articles (one from “The Hindu Business Line”12 and one from

     11
          According to Clearon and OxyChem, “[t]he industries
classified as ‘core sector’ consumers of coal are power, defense,
railway, fertilizer, metallurgic, cement, aluminum, and paper.”
Clearon/OxyChem Br. 10 (citation omitted).
     12
          This article noted that the Supreme Court of India had
recently held that “[t]he differential pricing of coal that was
being practised by [Coal India Ltd.] through the e-auction system
violated the right to equality guaranteed in the Constitution . .
. .” BioLab Inc.’s Submission of Factor Value Data dated Aug. 6
2007, PR 606 at Ex. 3. It went on:

          [W]hile core sector consumers like power
          plants, cement and steel manufacturers
          continued to receive coal supplies at the
          Government notified prices, non-core sector
          consumers ended up paying much higher prices
          as the base price for each auction was being
          fixed by the coal companies based on the
          highest realisation in the previous auction.
          There had been several occasions when buyers
          had to pay anywhere between 30 to 50 per cent
                                                    (continued...)
Consol. Court No. 08-00040                                     Page 39


an indecipherable source13), which they insist demonstrate

inequality in coal availability at TERI data prices.          See

Clearon/OxyChem Br. 26 (citations omitted).      Thus, they argue

that Commerce failed to choose the surrogate value that most

“accurately reflects the coal consumption pattern of producers in

the relevant industry.”      See Clearon/OxyChem Br. 10 (quotations

omitted).      Given their insistence that the prices represented by

the TERI data would not be available to Jiheng, Clearon and

OxyChem argue that the WTA import data necessarily represented

the best available information for valuing steam coal.          See

Clearon/OxyChem Br. 25.

      The Department argues in response that it properly used the



      12
           (...continued)
               more than the notified prices, sources said.

              The customers in the non-core sector are of
              three types – linked customers, non-linked
              customers, and small and tiny industries.

Id.
      13
          The second article, entitled “Glitches in coal e-
auction,” also discusses the Supreme Court’s decision.
Curiously, this article contains the following sentence: “The
entry of these coal guzzlers [referring to certain Indian
companies mentioned earlier in the article] in the core sector
like power, steel and chemicals boosted the price of coal, [and]
endangered the existence of small players.” BioLab Inc.’s
Submission of Factual Info. dated Dec. 15, 2006, PR 480 at Ex. 2
(emphasis added). This seems to imply that chemical companies,
like Jiheng, may be considered “core sector” consumers. At the
very least, the article is ambiguous as to whether chemical
companies are in the “core sector.”
Consol. Court No. 08-00040                                  Page 40


TERI data to calculate the surrogate value for steam coal because

it was the most representative data of Jiheng’s reported coal

input.    That is, comparing the UHV of coal in the TERI data to

that actually used by Jiheng, Commerce concluded that the TERI

data was the “best available information” for valuing steam coal.

See Def.’s Br. 23 (citing I&D Mem. at Comment 7).

     In addition, Commerce insists that there is no conclusive

record evidence to substantiate the claim that only “core sector”

consumers could take advantage of the TERI data prices.      Def.’s

Br. 23.    The Department explains:

            Although Clearon cites evidence of non-core
            sectors paying higher prices for the coal,
            the evidence cited does not specify the type
            of coal available at these prices. Without
            such evidence, Commerce could not determine
            whether the type of coal being sold at these
            elevated prices was the type used by Jiheng.
            By contrast the Coal India Ltd. documents
            clearly specified that the type of coal used
            by Jiheng had been deregulated in 1996 and
            has been sold at market prices since 2000.
            Thus, Commerce chose to use the TERI data to
            value steam coal, because there was no
            evidence that the prices for the type of coal
            used by Jiheng were distorted or non-market.

Def.’s Br. 24 (internal citation omitted).    Based on the

assertion that the type of coal used by Jiheng was available to

all purchasers and its finding that coal prices in the TERI data

were representative of Jiheng’s reported input, the Department

maintains that this surrogate price is the best available

information.
Consol. Court No. 08-00040                                   Page 41


     The court finds that Commerce acted reasonably in using the

TERI data to value steam coal.    Commerce explained that Jiheng

provided it “with information on the specific types of coal it

uses and their UHV.”    I&D Mem. at Comment 7.    The Department

further observed that “TERI Data are categorized by major types

of coal and UHV value whereas WTA import data are listed under

‘steam coal’ without further specificity.”       Id.   Thus, for

Commerce, examining the information placed on the record, the

TERI data was the most “product specific” surrogate available,

and therefore the most representative of Jiheng’s actual coal

input.   Def.’s Br. 23.   This was reasonable under the facts of

this case.

     Furthermore, the court finds that Commerce supported its

determination with substantial evidence and adequately explained

the manner by which it reached its result.    Thus, to address

Clearon and OxyChem’s arguments about the limitations of the TERI

data, Commerce’s Issues and Decision Memorandum notes that Jiheng

has provided it with Coal India, Ltd. documents stating that the

Government of India has deregulated the price of steam coal used

by Jiheng.   See I&D Mem. at Comment 7; Prelim. Results Surrogate

Value Mem., PR 94, at Att. III (Dep’t of Commerce July 2, 2007).

Specifically, the evidence revealed that deregulation occurred in

1996 and that the coal used by Jiheng has been sold at market

prices since 2000.     See Prelim. Results Surrogate Value Mem., PR
Consol. Court No. 08-00040                               Page 42


94, at Att. III (Dep’t of Commerce July 2, 2007) (noting that,

effective January 1, 2000, Coal India, Ltd. “was free to fix the

prices of such grades of coal in relation to the market prices”).

As to Clearon and OxyChem’s claims that certain articles support

its contention that only “core sector” purchasers may buy coal

from Coal India, Ltd. and that non-“core sector” purchasers pay

more, one article is at best equivocal on this question (noting

that “customers in the non-core sector are of three types –

linked customers, non-linked customers, and small and tiny

industries”), while the other article appears to support

Commerce’s position (referencing companies being “in the core

sector like power, steel and chemicals . . . .”).    See BioLab

Inc.’s Submission of Factor Value Data dated Aug. 6 2007, PR 606

at Ex. 3; BioLab Inc.’s Submission of Factual Info. dated Dec.

15, 2006, PR 480 at Ex. 2 (emphasis added).

     Additionally, to further justify its reliance on the TERI

data as a surrogate value for a chemical producer such as Jiheng,

Commerce cited its recent determination in Saccharin from the

PRC, 72 Fed. Reg. 51,800 (Dep’t of Commerce Sept. 11, 2007)

(final results of the 2005-2006 antidumping duty administrative

review) (“Saccharin”).   In Saccharin, the Department found the

TERI data to be a more appropriate surrogate to value steam coal

than Indian WTA data.    See Issues and Decision Mem. for the

2005-2006 Admin. Review of the Antidumping Duty Order on
Consol. Court No. 08-00040                              Page 43


Saccharin from the PRC, at Comment 3 (Dep’t of Commerce Sept. 11,

2007).   The Department noted that saccharin is a chemical and the

POR in the Saccharin investigation overlapped with eleven of the

twelve months of the POR here.   See I&D Mem. at Comment 7.    In

other words, although the Saccharin investigation did not

explicitly address the “core” versus non-“core” distinction,

Commerce reasoned that, given that saccharin is a chemical, the

Saccharin determination is further evidence that the coal

represented by the TERI data was available to chemical producers

such as Jiheng during the POR.

     The court finds that the evidence cited by Commerce meets

the substantial evidence test.   Put another way, the Department

has shown that: (1) the TERI data represents most closely the

coal actually used by Jiheng, and (2) Clearon and OxyChem’s claim

that TERI data prices were unavailable to chemical manufacturers

like Jiheng is, at best, subject to conflicting interpretations

of the record evidence.   See Technoimportexport, ECF Am. Inc. v.

United States, 16 CIT, 13, 18, 783 F. Supp. 1401, 1406 (1992)

(“When Commerce is faced with the decision to choose between two

reasonable alternatives and one alternative is favored over the

other in their eyes, then they have the discretion to choose

accordingly.”).   Accordingly, the court finds the Department’s

explanation to be reasonable and sustains Commerce’s surrogate

value calculation for steam coal.
Consol. Court No. 08-00040                                Page 44


                             CONCLUSION

     For the reasons stated, Commerce’s Final Results of

administrative review are sustained in part and remanded.    In

light of the ordered remand, the court has not separately

addressed Jiheng’s claimed by-product offset for recovered

sulfuric acid.    On remand, the Department shall reexamine each of

Jiheng’s claimed by-product offsets consistent with the

instructions herein.    Remand results are due on or before October

12, 2009.    Comments to the remand results are due on or before

November 11, 2009.    Replies to such comments are due on or before

November 25, 2009.



                                            /s/Richard K. Eaton
                                               Richard K. Eaton

Dated:      July 13, 2009
            New York, New York
