PURSUANT TO COURT REMAND
GEUM POONG CORPORATION AND SAM YOUNG SYNTHETICS CO., LTD.
V. UNITED STATES V. E. I. DUPONT DE NEMOURS, INC, ET. AL.
Court No. 00-06000298
The Department of Commerce ("Commerce" or "the Department") has prepared these results of redetermination pursuant to the remand order of the U.S. Court of International Trade in Geum Poong Corporation and Sam Young Synthetics Co., Ltd., v. United States v. E. I. Dupont De Nemours, Inc. et. al., Slip Op. 01-115 (September 6, 2001). This remand pertains to Commerce's determination to measure Geum Poong's constructed value (CV) profit based upon facts available on the record. See Certain Polyester Staple Fiber From the Republic of Korea and Taiwan; Final Results of Antidumping Administrative Review, 65 Fed. Reg 16880 (Mar. 30, 2000), as amended, 65 Fed. Reg. 33807 (May 25, 2000) and accompanying Decision Memo at Comment 15. ("Final Results"). As requested by the Court, Commerce explains in further detail its decision to average Sam Young and Samyang's actual profit data with the Bank of Korea ("BOK") profit data to determine Geum Poong's CV profit.
In the underlying investigation, Commerce was required to calculate a CV profit rate for Geum Poong. The information available to the Department to make this calculation was limited. Specifically, based on the record developed in the investigation, the Department could select from: (1) Geum Poong's own profit rate; (2) the CV profit rates calculated for the two other responding companies, Sam Young and Samyang; (3) the profit rates found in the public audited financial statements of certain Korean polyester staple fiber ("PSF") producers; (1) and (4) a general profit ratio for the entire man-made fibers industry in Korea, extracted from a Bank of Korea ("BOK") publication. The Department determined that a combination of the second and fourth sources was a reasonable method for calculating Geum Poong's profit and, thus, was permissible under section 1677b(e)(2)(B)(iii). See Final Results.
In its September 6, 2001, opinion, the Court affirmed Commerce's determination not to apply section 1677b(e)(2)(B)(ii)("Alternative Two"), because (1) the alternatives described in section 1667b(e)(2)(B) are not hierarchical, and (2) Commerce could not use Alternative Two without revealing respondent Samyang's proprietary profit rate to Geum Poong, as Samyang was the only respondent with viable home market sales. Slip Op. 01-115 at 5-6. Furthermore, the Court affirmed the Department's reading of section 1677b(e)(2)(B)(iii) ("Alternative Three") to the effect that "any reasonable" method for calculating profit is not limited by the amount of profits reflected in home market sales. Id. at 8 - 11. Finally, the Court agreed that the Department did not commit a "ministerial error" when it combined the CV profit rates of Samyang and Sam Young, and the general profit rate from the BOK publication. Id. at 13.
Beyond these points, however, the Court expressed several concerns about the Department's calculation. In particular, the Court drew attention to the requirement in the Statement of Administrative Action ("SAA") that the Department provide interested parties with "a description of the method chosen and an explanation of why it was selected" when the Department uses the "reasonable method" approach to calculating profit. Statement of Administrative Action, accompanying H.R. Rep. No. 103-826-(I), at 841 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4176 (1994). The Court held that "Commerce does not explain whether any other data were available to calculate the profit cap. Nor does Commerce explain why the BOK data do not provide an adequate facts available profit cap." Slip Op. 01-115 at 14.
The Court continued, that even if the profit cap need not be applied in this case, "Commerce must explain why it chose one methodology over another." Id. at 15. The Court also expressed concern about the reasonableness of the Department's calculation. In this regard, the Court noted: (1) the possibility of double counting Samyang's and Sam Young's profit information, with the result of skewing the profit calculation; (2) the lack of precedent for averaging product-specific profit information with information on a broad range of products, and (3) the inconsistency of the Department's claims regarding the information included in the BOK publication. Id. at 15-16.
The Department appreciates the opportunity the Court has provided to explain the calculation of Geum Poong's profit and to address the Court's concerns about the reasonableness of the calculation.
Calculation of a Profit Cap:
As noted above, the Department had four sources of information on the record of the proceeding for computing the CV profit rate for Geum Poong. These sources were: (1) Geum Poong's own profit rate; (2) the CV profit rates calculated for the two other responding companies, Sam Young and Samyang; (3) the profit rates found in the public audited financial statements of certain Korean PSF producers; and (4) a general profit ratio for the entire man-made fibers industry in Korea, extracted from a BOK publication. We first discuss whether any of these sources provides an appropriate "profit cap"within the meaning of section 1677b(e)(2)(B)(iii), i.e., "the amount normally received by exporters or producers (other than the exporter or producer described in clause (i)) in connection with the sale, for consumption in the foreign country, of merchandise that is in the same general category of products as the subject merchandise."
Under section 351.405(b)(2) of the Department's regulations, the Department interprets the term "foreign country" in section 1677b(e)(2)(B)(iii) to mean the country in which the merchandise is produced. Because of this, we are limited to considering profit rates earned on sales in Korea. Consequently, we were precluded from using Geum Poong's reported profit because it reflected profits from several of Geum Poong's third country markets. (2) See Final Results. We were also precluded from using Sam Young's profit because it was not based on home market sales. (3) See Final Results.
With regard to the public audited financial statements submitted on the record by Geum Poong, information indicates that these producers also had sales outside the Korean market. One of the companies, Samyang, had been investigated by the Department. Consequently, its profit as depicted in its financial statement would include, at a minimum, U.S. sales. The other two companies, Saehan Industries, Inc. and SK Chemical Co. Ltd., were both identified as exporters to the United States in the original petition. (4) Therefore, the profit rates for these companies as reported in the financial statements could not appropriately serve, individually, or as a group, as a profit cap.
Finally, although the information provided from the BOK publication does not explicitly identify the companies whose results are included in its general profit rate, the Department believes it is reasonable to assume that the BOK data includes companies that sell outside the Korean market. This assumption is supported by the evidence regarding the sales of three investigated producers, i.e., that all three had sales outside of Korean and two (Sam Young and Geum Poong) did not have viable home markets.
We further note that the Department addressed use of industry-wide profit averages, such as the BOK data, as profit caps in the Preamble to its regulations. See Antidumping Duties; Countervailing Duties, Preamble to the Regulations, 62 Fed. Reg. 27,296, 27,360 (May 19, 1997) (Final Rule). In rejecting the use of such averages, the Department stated:
... the Department is required to determine the profit cap figure based on sales in the foreign country exclusive of profits realized by the exporter or producer under investigation or review. By contrast, the proposed average industry-wide profit figure presumably would include sales by all exporters and producers in all markets, including sales by the exporter and producer in question and sales to the United States. In our view, the statute prohibits the use of such sales for this purpose.
Thus, with the exception of the Samyang CV profit data developed by the Department in the underlying investigation and discussed in footnote 3 above, the Department believes that all of the profit data on the record of this proceeding is flawed for purposes of calculating a profit cap because it all includes, or is likely to include, profits earned on sales outside of Korea. Consequently, as a matter of law and regulation, these sources could not be used as a profit cap and, lacking a profit cap, the Department was forced to use the methodology contemplated in the SAA, i.e., to apply alternative (iii) on the basis of the facts available (See SAA at 841).
Alternative Profit Calculation:
Having shown that the Department was not able, given the information on the record of the underlying investigation, to calculate a profit cap, the next step is to explain why the Department calculated Geum Poong's profit as it did, including an explanation of why the method was reasonable.
First, we explain why we did not choose Geum Poong's own profit rate as the CV profit rate for that company. Although the Department did not expressly address this option in its Final Results, it did not dispute the petitioners' claim that Geum Poong's calculated profit rate largely reflected sales to the United States. (According to the petitioners, the United States accounted for approximately 86 percent of Geum Poong's sales.) Final Results. The petitioners reasoned, and we agree with their reasoning, that using Geum Poong's own profit would be tantamount to basing normal value on export price. This is because the net-of-profit CV calculated for Geum Poong is the company's cost of producing the product it sells to the United States. By adding the profit Geum Poong earns in the United States, the Department would essentially be reconstructing the price Geum Poong earns in the United States. (5) Therefore, the Department would not use Geum Poong's profit if other, preferable alternatives were available.
Second, we did not use the public, audited financial statements for three Korean PSF producers submitted by Geum Poong. As noted in Final Results, the financial results of two of these companies, Saehan Industries and SK Chemicals, were included in the BOK data. The third company's data, i.e., Samyang's data, were used, albeit in a different form. The issues raised by blending company-specific information with aggregated data are discussed further below. As a general matter, however, the Department is cautious about using company specific data submitted by parties. This is because parties can be expected to submit only data that is favorable to them. In this case, Geum Poong was seeking a low profit rate and the companies for which it submitted profit data had low profits (ranging from 0.67 to 1.9 percent). (6) Other Korean producers and exporters, whose financial results were not submitted, might have had higher rates. Neither the magnitude of the submitted profit rates, nor the fact that they were submitted by a party to support its claim automatically results in the rates being rejected. Instead, these factors cause the Department to consider all the alternative sources of data.
The remaining sources of profit information on the record were the CV profit rates calculated by the Department for Sam Young and Samyang, and the BOK data.
Of these sources, Samyang's calculated profit rate should be given weight because it was based on sales in Korea. (7) Because that rate is proprietary, Samyang's profit could not be used by itself. Therefore, the Department examined the remaining sources of profit information: Sam Young's calculated profit rate and the BOK data.
Both of these data sources, in the Department's view, are flawed. Sam Young's profit rate reflects profits earned on third country sales, not home market sales. Regarding the BOK data, although the Department does not know what companies are included in that average, we believe the best assumption is that most Korean companies producing manmade fibers are represented. Thus, the BOK data likely reflect a wide range of products and the experience of much of the Korean industry. Moreover, because companies like Samyang, Sam Young, and Geum Poong are likely included, the BOK data will also reflect profits earned in all markets: Korea, third country markets, and the United States.
Given the options available for using these sources singly or in combination, the Department decided to combine the Samyang, Sam Young and BOK data. In doing so, the Department was able to incorporate Samyang's home market profit experience with other useable data from Sam Young and the BOK. The two investigated companies, Samyang and Sam Young, were effectively given greater weight because their data conformed to the subject merchandise and did not include profits earned in the United States. However, weight was also given to the BOK data because it reflected the experience of the broader Korean industry and it included home market profits. (8)
In response to the Court's concerns about the possible double-counting of Samyang's and Sam Young's profits because these companies' data may also have been included in the BOK data, we first acknowledge that Samyang's and Sam Young's data are likely included in the BOK average. Thus, in a sense, these companies' profit rates have been counted twice in calculating Geum Poong's CV profit. However, we believe that any skewing that potentially results from this is very small.
First, although we do not have the information that would permit us to compute these two companies' "shares" in the BOK data, i.e., how great a weight they received, we note that the Department was aware of at least 25 producers in Korea of PSF. (9) There may have been numerous other producers of manmade fibers that did not produce PSF, but were included in the BOK data. Moreover, the profit rates reflected in the BOK data for Sam Young and Samyang likely differed from the profit rates calculated by the Department for these companies, because the rates calculated by the Department were obtained from comparison market sales made in the ordinary course of trade. Thus, because the profit rates for Sam Young and Samyang as reflected in the BOK data were diluted by virtue of the large number of companies that were likely included in the BOK results, and because the Sam Young and Samyang profit rates reflected in the BOK data likely differed from the profit rates calculated by the Department for those companies, we do not believe that the double counting which concerns the Court is likely to skew the result to such an extent that the Department should reject either the BOK data or the calculated profits of Sam Young and Samyang, and thereby lose the desirable aspects of these two data sources described above.
The Department further acknowledges that the combination of company/product-specific information with average industry information may be unprecedented. However, we believe that for the reasons discussed above, the combination of these two types of information in this case allowed us to include as much information as possible to determine Geum Poong's profit. By balancing the narrower company/product-specific information with the broader industry average, the Department believes it has determined Geum Poong's CV profit "as accurately as possible." Slip Op. 01 - 115 at 16, citing NTN Bearing Corp. v. United States,74 F.3d. 1204, 1208 (Fed. Cir. 1995).
Finally, in providing its reasoning for the calculation of Geum Poong's profit in this redetermination on remand, the Department has made a single assumption about which companies are likely reflected in the BOK data. Although we do not have the information on the record to test our assumption, we believe it is best to treat the BOK data as including most, if not all, of Korean producers of manmade fibers.
RESULTS OF REDETERMINATION
For the foregoing reasons, the Department determines, on remand, that the calculation of Geum Poong's CV profit using a simple average of BOK industry-wide profit data for manmade fiber producers in Korea and a weighted average of the calculated profit rates of respondents Sam Young and Samyang is reasonable and the most accurate figure available on the record. Furthermore, the Department incorporates the descriptions of the Department's methodology above in accordance with the requirements of the SAA to "provide to interested parties a description of the method chosen and an explanation of why it was selected" as order by this Court.
Faryar Shirzad Date
for Import Administration
1. The producers in question were Samyang, Saehan Industries, Inc., and SK Chemical Co. Ltd. See Letter from Sandler, Travis and Rosenberg to Department re: BOK Data (February 8, 2000); P.R. 258 (Res. Exhibit 9) (Attachment 1).
2. Moreover, the statutory language expressly precludes use of data from the "exporter or producer described in clause (i)," Geum Poong.
3. The Department also developed information on respondent Samyang's profit. This data reflected profits exclusively on sales in the Korean market. However, consistent with the Department's position regarding use of Samyang's data under section 1677(e)(2)(B)(ii), use of this data would have "impermissibly revealed Samyang's proprietary profit ratio." (See Slip Op. 01-115 at 7).
4. See Antidumping Duty Petition, Certain Polyester Staple Fiber from South Korea and Taiwan, April 2, 1999, at p. 9 (Res. Exh. 4) (P.R.1).
5. The Department's reluctance to use the profits of a company that mainly exports to the United States under section 1677(e)(2)(B)(iii) is articulated in the recent Final Affirmative Determination of Sales at Less Than Fair Value: Pure Magnesium from Israel, 66 Fed. Reg. 49349, September 27, 2001 ("Israeli Magnesium"). Admittedly, Israeli Magnesium postdates the PSF final determination, but the Department is not aware of determinations prior to or contemporaneous with the PSF final determination that reflect a different position.
6. See Letter from Sandler, Travis and Rosenberg to Department re: BOK Data (February 8, 2000); P.R. 258 (Res. Exhibit 9) (Attachment 1).
7. The importance of home market sales for calculating CV profit is reflected in section1677b(e)(2)(B).
8. Under this logic, it would not have been correct for the Department to include the profit rates for the companies, other than Samyang, whose public audited financial statements were submitted by Geum Poong. In particular, because these financial statements reflected the financial results for the entire operations of these companies, they likely included non-subject merchandise and sales to the United States. Thus, they did not likely present information that was as useful as the profit rates calculated by the Department for Sam Young and Samyang, nor did they have the advantage of presenting a broad picture of the Korean industry.
9. See, Memorandum to Richard W. Moreland, Deputy Assistant Secretary, AD/CVD Enforcement Group I, regarding Respondent Selection, dated June17, 1999 (P.R. 76).