CIT Upholds Surrogate Country Pick in AD Review Despite Reliance on Different Financial Ratios

The Court of International Trade on Oct. 22 backed the Commerce Department's decision to pick Malaysia as the primary surrogate country in an antidumping duty review, despite using a Romanian company's financial statements to determine the surrogate financial ratios is backed by substantial evidence. Sustaining Commerce's remand results in the AD review, Chief Judge Mark Barnett also upheld the agency's surrogate value selection for bituminous coal, an input of the subject merchandise of the review, activated carbon, and Commerce's financial ratio calculations.

The case concerns the 11th administrative review of the antidumping duty order on activated carbon from China, covering entries in 2017-2018, wherein plaintiff Carbon Activated Tianjin Co. served as a mandatory respondent. In the review, Commerce chose from Malaysia and Romania as potential primary surrogate countries. The agency initially chose Malaysia but used a financial statement from Romanian company Romcarbon to calculate the financial ratios. Commerce held that Romania was not a significant producer of similar merchandise, barring it from serving as the primary surrogate country. In April, Barnett remanded this finding, among other things, to Commerce.

The agency then reversed course, declaring Romania a significant producer and using Romcarbon's financial statements but continuing to rely on Malaysia as the main surrogate (see 2107010079). In comments on the remand results, the plaintiffs argued that Romania should have been the primary surrogate because it was found to be a significant producer of activated carbon (see 2108040078).

Instead, Barnett upheld Commerce's finding that the Malaysian data was more specific. Commerce said that it used Malaysia as the primary surrogate because that country gave data on a Harmonized System 10-digit level specific to coconut-shell charcoal -- a key input of activated carbon -- while Romanian data had only a six-digit basket category subheading. However, Commerce used Romcarbon's financial statement to find the financial ratios because the statement gave specific breakouts for raw material, labor and energy not found in the Malaysian statements.

The plaintiffs argued that the primary surrogate pick should be weighted toward the country from which the financial ratios are drawn. "Not only do Plaintiffs fail to cite to any provision of law or regulation requiring Commerce to weight its analysis in such a way, but they rely on instances in which a production input’s outsized impact on normal value led Commerce to prioritize that input in selecting a surrogate country, not the financial ratios’ impact on the normal value; thus, such reliance is inapposite," Barnett said. "Plaintiffs’ focus on Commerce’s previous reliance on the source of financial ratios to select a primary surrogate country is misplaced."

The fight over the remand results also concerned how Commerce picked surrogate values for bituminous coal (BT coal). In the review's original final results, Commerce valued all BT coal using Romanian import data under HS subheading 2701.12 after finding that the average unit value of Malaysian imports under this same subheading was unreliable. Barnett remanded this issue so that Commerce could explain how a certain HS note applies to it -- the note limits 2701.12 to BT coal with a calorific value equal to or greater than 5,833 kilocalories per kilogram. Originally, Commerce declined to apply this limit based on its view that the note pertained solely to Thai HS data and not Malaysian data.

Following its remand, Commerce said that the limit applied to the Malaysian data, so it chose different data sets to value the BT coal depending on whether the calorific value of the BT coal was known to be below 5,833 kcal/kg, the opinion said. Commerce continued to rely on the Romanian import data under HS 2701.12 to value BT coal that wasn't found to have a calorific value below 5,833 kcal/kg but used Malaysian import data under a different HS subheading, 2701.19, for BT coal with a calorific value below 5,833 kcal/kg.

Barnett sustained this change in BT coal valuation. Commerce used the Romanian HS 2701.12 BT coal data for two of Carbon Activated's suppliers since there was no data on the heat value of the suppliers' BT coal data. So since the calorific values weren't known, Commerce could rightly then rely on the plain language of HS 2701.12 to value the BT coal used by the suppliers, Barnett said.

"Having reviewed the record and Commerce’s explanation for its valuation of bituminous coal without a reported calorific value, the court finds that Commerce has provided a reasoned explanation based on substantial evidence to value bituminous coal," the judge said.

(Carbon Activated Tianjin Co., et al. v. United States, Slip Op. 21-149, CIT #20-00007, dated 10/22/21, Chief Judge Mark Barnett. Attorneys: Francis Sailer of Grunfeld Desiderio for plaintiffs and plaintiff-intervenors; Mollie Finnan for defendant U.S. government)