CIT Upholds Use of Exporter's Acquisition Costs as Proxy for Suppliers' COP in AD Suit

The Court of International Trade in a decision made public March 5 sustained the Commerce Department's use of exporter Nexco's acquisition costs as a proxy for its suppliers' costs of production in the antidumping duty investigation on raw honey from Argentina.

After previously remanding the issue on the grounds that Commerce failed to address whether Nexco's costs were overinclusive of the actual honey producers' costs, Judge Claire Kelly said the agency's duty to calculate an accurate duty rate outweighed the concern over whether the data was overinclusive.

In addition, Kelly upheld Commerce's comparison of Nexco's normal values (based on third country sales prices) and U.S. sales prices on a monthly, rather than a quarterly, basis. Nexco's sales prices correlate with its changing costs due to high inflation of the Argentine peso, so the export sales prices in the U.S. and comparison markets differed significantly, requiring the monthly comparisons, the agency had said.

The court found this justification to be sufficient. However, the court declined to opine on Commerce's conclusion that the "triggering of" its "high inflation methodology, without more, is sufficient for it to adopt a month-to-month averaging period when all sales are denominated in U.S. dollars, rather than local currency."

In a prior decision, Kelly remanded the use of Nexco's acquisition costs as a proxy for the beekeeper-suppliers' costs of production (see 2306070028). On remand, the agency stuck with its use of the exporter's acquisition costs, explaining that Nexco knows what it paid to the suppliers, but there was no evidence to show that the company knew the suppliers' costs in making the raw honey (see 2310130049).

Even if Nexco knew, there's no evidence showing that it would consider the costs of an unaffiliated party when setting its prices. As a result, the pertinent cost data is what the exporter recorded in its own books. The costs of hundreds of small beekeepers is impractical to gather, Commerce said.

Kelly was originally concerned about Nexco's data being overinclusive. In her second opinion, the judge said it's "readily discernible that Commerce is not concerned with whether" the data is overinclusive. The relevant statute lets the agency use Nexco's production costs and the suppliers' costs to the extent needed to accurately calculate the total amount incurred and realized for costs, expenses and profits of the raw honey. The agency can rely on Nexco's own records to get this value, the court found.

Commerce said on remand that Nexco was chosen as a respondent to "satisfy the statute's concern that there were no missing costs" and since the company's "prices were low." The agency claimed that these reasons let it ignore evidence of disparate costs between Nexco and the company's suppliers. The court said it "cannot disagree."

Kelly also previously remanded Commerce's month-to-month comparisons of Nexco's sales prices. The agency originally said it uses its high inflation methodology in price comparisons if inflation is beyond 25% in the exporting country and that monthly price comparisons is part of this methodology. The court said Commerce failed to justify monthly averaging periods where both the U.S. and third-country sales data is denominated in U.S. dollars.

On remand, Commerce said it's reasonable because its regulations don't strictly limit the agency's discretion, and differing prices justify its use of monthly averaging. The agency added that its high inflation methodology is a "holistic" methodology that combats inflation-related distortions, and that evidence shows that prices differed significantly throughout the investigation period.

The court first held that Commerce must act reasonably even if it has the discretion to deviate from its normal practice. Kelly then addressed the agency's two reasons for why the use of the monthly comparisons was reasonable: that high inflation affects margin calculations regardless of whether the currency is denominated in U.S. dollars or pesos, and that Nexco's sales prices correlate with its changing costs due to high peso inflation, making the U.S. sales prices significantly different from the comparison markets.

Since the second reason is "specifically articulated" in Commerce's regulations, "it is a sufficient basis for Commerce’s redetermination to be sustained," the court said.

(Nexco v. United States, Slip Op. 24-22, CIT # 22-00203, dated 02/26/24; Judge: Claire Kelly; Attorneys: Julie Mendoza of Morris Manning for plaintiff Nexco; Kara Westercamp for defendant U.S. government; Melissa Brewer of Kelley Drye for defendant-intervenors American Honey Producers Association and Sioux Honey Association)