Jiaxing Brother Fastener Co. v. United States

Jiaxing Brother Fastener Co. v. United States
822 F.3d 1289 (Fed. Cir. 2016)
Authored by Michael M. Hart-Slattery


Statement of Facts: Appellants, Jiaxing Brother Fastener Co., Ltd., IFI & Morgan Ltd., and RMB Fasteners Ltd. (collectively “Jiaxing”), are affiliated Chinese producers and exporters of steel. In May of 2011, the U.S. Department of Commerce (“Commerce”) initiated an administrative review to determine whether less-than-fair value steel products from China materially injured the U.S. industry. Jiaxing was the subject of antidumping proceedings regarding the price of its steel threaded rod.

The Tariff Act directs Commerce to calculate a hypothetical normal value of a product in those circumstances in which a subject company manufactures a product in a nonmarket economy. The normal value is the price of the product produced in a comparable market economy: it is used to determine whether the nonmarket value is less-than-fair. To calculate the normal value of the subject company’s product, Commerce selects a surrogate country and uses data from that country in place of nonmarket data.

Commerce selects a comparable market economy by considering data quality and similarities in income. Under Federal Circuit precedent, Commerce has discretion to select one country over another if it decides there is better data available for the country it selects. See QVD Food Co. v. United States, 658 F.3d 1318, 1323 (Fed. Cir. 2011) (holding that Commerce had discretion to select country data it deemed the best available data); see also Qingdao Sea-Line Trading Co. v. United States, 766 F.3d 1378, 1386 (Fed. Cir. 2014) (noting that “Commerce generally selects, to the extent practicable, surrogate values that are publicly available, are product-specific, reflect a broad market average, and are contemporaneous with the period of review.”). Since 2007, Commerce has used the Gross National Income per capita (“GNI”), a measurement of per capita annual income, to compare incomes because the World Bank regularly compiles that information.

China is considered a nonmarket economy. For three decades, Commerce used India as a surrogate country when calculating normal values of Chinese products that were the subject of antidumping proceedings. At the initiation of Jiaxing’s antidumping proceedings, Indian GNI was $1,340 and Chinese GNI was $4,260.

Among seven countries considered to serve as a market economy of comparison, Commerce selected Thailand as the surrogate country in proceedings against Jiaxing. Commerce selected Thailand because the best information available related to steel threaded rod was from a Thai Company, Capital Engineering Network Public Company Limited (“CEN”), and because Thailand’s GNI was similar to that of China. CEN financial statements provided the best available data because they contained information on low carbon steel closely related to Jiaxing’s products. Thailand’s GNI was $4,210.

Jiaxing argued that the decision to select Thailand was erroneous for three reasons. First, Jiaxing argued that India should not have been excluded from consideration as a possible surrogate. Second, Jiaxing argued that because India had long been used as a surrogate, the decision to select Thailand was arbitrary and capricious. Third, Jiaxing argued that there was insufficient evidence to support selection of Thailand as the surrogate and that if India were not selected, the Philippines should have been selected instead.

For the last of these arguments, Jiaxing provided three sub-arguments. Jiaxing argued that Commerce should not have selected Thailand over the Philippines because (1) CEN was not an appropriate comparison; (2) that Commerce overestimated the value of steel by using Thai values which are higher than those in other countries; and (3) that Commerce erroneously favored Thai data on hydrochloric acid over similar data from the Philippines.

Procedural History: The U.S. Court of International Trade affirmed the decision of the U.S. Department of Commerce in antidumping proceedings to select a Thai company as the surrogate for the purpose of calculating the normal value of subject materials. Jiaxing subsequently appealed to the Federal Circuit.

Question Presented: Whether Commerce’s decision to use Thailand as a surrogate in calculating the normal value of steel threaded rod was permissible.

Holding: Judge Reyna, joined by Judges Chen and O’Malley, authored the Federal Circuit’s opinion. The court affirmed the decision of the U.S. Court of International Trade, holding that the decision of the U.S. Department of Commerce was in accordance with law, that it was not arbitrary or capricious, and that it was supported by substantial evidence.

Reasoning: The Federal Circuit held that the Tariff Act did not require Commerce to use a particular country as a surrogate in antidumping proceedings. Because Federal Circuit precedent permits Commerce discretion in selecting a surrogate and because Commerce provided reasoned analysis supported by substantial evidence, the court held that the exclusion of India from the selection process was permissible. For the same reasons, the court held that selecting Thailand as a surrogate was neither arbitrary nor capricious. Despite a long history of selecting India as surrogate, Commerce was not bound to continue selecting India as surrogate.

The Federal Circuit held that selecting Thailand over the Philippines as surrogate was reasonable and supported by substantial evidence. Selecting CEN was reasonable because the company derived a substantial amount of revenue from products similar to those produced by Jiaxing, the company was not receiving favorable tax benefits at the time in question, and because there was no evidence in the record that the company’s financial statements were erroneous. Commerce was permitted to select CEN despite higher costs for steel in Thailand than in the Philippines because evidence showed that Thai steel was superior to Philippine steel. Finally, the selection of Thai data on hydrochloric acid over Philippine data was permissible because the record showed that both data sets were equally usable and that the selection of Thai data was therefore supported by substantial evidence.

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