Guizhou Tyre Co. v. United States

In this consolidated action, eight plaintiffs contest an administrative determination the International Trade Administration, U.S. Department of Commerce ("Commerce" or the "Department"), issued to conclude a periodic review of an antidumping duty order on off-the-road ("OTR") tires from the People's Republic of China ("China" or the "PRC"). 1 Ruling that the determination is contrary to law in certain respects, the court remands the determination to Commerce for appropriate corrective action.

I. BACKGROUND

A. The Contested Determination

The determination contested in this litigation (the "Final Results") is Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Final Results of Antidumping Duty Administrative Review; 2014-2015 , 82 Fed. Reg. 18,733 (Int'l Trade Admin. Apr. 21, 2017) (" Final Results "). See also Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Amended Final Results of Antidumping Duty Administrative Review; 2014-2015 , 82 Fed. Reg. 27,224 (Int'l Trade Admin. June 14, 2017) (" Amended Final Results "). Incorporated by reference in the Final Results and the Amended Final Results is a final "Issues and Decision Memorandum" containing explanatory discussion. Issues and Decision Memorandum for Final Results of Antidumping Duty Administrative Review: Certain New Pneumatic Off-the-Road Tires from the People's Republic of China; 2014-2015 (Int'l Trade Admin. Apr. 12, 2017) (P.R. Doc. 308), available at https://enforcement.trade.gov/frn/summary/prc/2017-08011-1.pdf (last visited May 21, 2019) (" Issues and Decision Mem. ").

B. Proceedings Conducted by Commerce

Commerce issued an antidumping duty order (the "Order") on certain OTR tires from China (the "subject merchandise") in 2008. Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Notice of Amended Final Affirmative Determination of Sales at Less Than Fair Value and Antidumping Duty Order , 73 Fed. Reg. 51,624 (Int'l Trade Admin. Sept. 4, 2008). Commerce initiated the review at issue in this litigation, which was the seventh periodic administrative review of the Order, on November 9, 2015. Initiation of Antidumping and Countervailing Duty Administrative Reviews , 80 Fed. Reg. 69,193 (Int'l Trade Admin. Nov. 9, 2015). The seventh review pertained to entries of subject merchandise made during the period of review ("POR") of September 1, 2014 through August 31, 2015. Id. , 80 Fed. Reg. at 69,196 .

Commerce published the preliminary results of the review on October 14, 2016. Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Preliminary Results of Antidumping Duty Administrative Review; 2014-2015 , 81 Fed. Reg. 71,068 (Int'l Trade Admin. Oct. 14, 2016) (" Prelim. Results "). Commerce incorporated by reference a "Decision Memorandum for Preliminary Results." Decision Memorandum for Preliminary Results of Antidumping Duty Administrative Review: Certain New Pneumatic Off-the-Road Tires from the People's Republic of China; 2014-2015 (Int'l Trade Admin. Oct. 5, 2016), available at https://enforcement.trade.gov/frn/summary/prc/2016-24821-1.pdf (last visited May 21, 2019) (" Prelim. Decision Mem. ").

In the Final Results, Commerce selected two "mandatory" respondents for individual examination: (1) Xuzhou Xugong Tyres Co., Ltd., Armour Rubber Co. Ltd., and Xuzhou Hanbang Tyre Co., Ltd. (collectively, "Xugong"), which Commerce treated as a single entity ("collapsed") for purposes of the review; and (2) Guizhou Tyre Co., Ltd. and Guizhou Tyre Import and Export Co., Ltd. (collectively, "GTC"), which Commerce also treated as a single entity. Final Results , 82 Fed. Reg. at 18,733 -34 & nn.3-4.

Commerce concluded that Xugong, but not GTC, established independence from the government of China and therefore, under its practice, qualified for what Commerce terms a "separate rate," i.e., an antidumping duty rate other than the rate Commerce assigns to exporters and producers it considers to be part of the "PRC-wide entity." Id. , 82 Fed. Reg. at 18,734. 2 In the Final Results, Commerce assigned a weighted-average dumping margin of 33.08% to Xugong and assigned to GTC the PRC-wide rate, which in the seventh review was 105.31%. Id. , 82 Fed. Reg. at 18,735. 3

Because Xugong was the only individually-examined respondent that Commerce determined to be qualified for a separate rate, Commerce assigned to all other separate rate respondents a rate of 33.08%, equivalent to the margin it calculated for Xugong. Id. Commerce found that two respondents in addition to GTC failed to qualify for a separate rate and therefore treated these two respondents as part of the PRC-wide entity, assigning them the rate of 105.31%: Aeolus Tyre Co., Ltd. ("Aeolus") and Tianjin Leviathan International Trade Co., Ltd. ("Leviathan"). Id.

On June 14, 2017, Commerce issued the Amended Final Results to correct a ministerial error. Amended Final Results , 82 Fed. Reg. 27,224 . Specifically, the Amended Final Results explained that Xugong correctly identified an error Commerce made in its calculation of Xugong's margin for the Final Results by inadvertently using the incorrect sales figures as a denominator to devise the indirect sales expense ratio. Id. In response to the ministerial error allegation, Commerce determined that the weighted-average dumping margin applicable to Xugong was 33.14% rather than 33.08%. Id. , 82 Fed. Reg. at 27,225. Commerce applied this margin to the other "separate rate" respondents. Id. The 105.31% rate applied to respondents Commerce found to be part of the PRC-wide entity in the Final Results was unchanged by the Amended Final Results. Id.

C. The Parties to this Consolidated Case

The eight plaintiffs in this litigation include the two mandatory respondents, Xugong (to which Commerce assigned a rate of 33.14%) and GTC (consisting of Guizhou Tyre Co., Ltd. and Guizhou Tyre Import and Export Co., Ltd., to which Commerce assigned the 105.31% PRC-wide rate). The other five plaintiffs are Aeolus (to which Commerce also assigned the PRC-wide rate) and four separate rate respondents, to each of which Commerce assigned the 33.14% rate determined for Xugong in the Amended Final Results: Qingdao Free Trade Zone Full-World International Trading Co., Ltd. ("Full World"); Qingdao Qihang Tyre Co., Ltd. ("Qingdao Qihang"); Trelleborg Wheel Systems (Xingtai) China, Co. Ltd. ("Trelleborg"); and Weihai Zhongwei Rubber Co., Ltd. ("Zhongwei"). Defendant is the United States. 4

D. Proceedings before the Court

The consolidated cases each were commenced between May 4, 2017 and May 19, 2017. Before the court are the motions of seven plaintiffs for judgment on the agency record brought under USCIT Rule 56.2, all of which are opposed by defendant United States. 5 See Xugong's Mem. in Support of Mot. for J. on the Agency R. 1-2 (Jan. 30, 2018), ECF Nos. 48 (conf.), 49 (public) ("Xugong's Br."); Guizhou Tyre Co., Ltd.'s and Guizhou Tyre Import and Export Co., Ltd.'s Mem. in Support of Mot. for J. on the Agency R. 1-2 (Jan. 30, 2018), ECF Nos. 51 (conf.), 52 (public) ("GTC's Br."); Aeolus's Mem. in Support of Mot. for J. on the Agency R. 1-2 (Jan. 30, 2018), ECF Nos. 55 (conf.), 56 (public) ("Aeolus's Br."); Trelleborg's Mem. in Support of Mot. for J. on the Agency R. 1-2 (Jan. 30, 2018), ECF No. 50; Qingdao Qihang's Mem. in Support of Mot. for J. on the Agency R. 1-2 (Jan. 30, 2018), ECF No. 53; Full World's Mem. in Support of Mot. for J. on the Agency R. 1-2 (Jan. 30, 2018), ECF No. 54; Def.'s Resp. to Mots. for J. on the Agency R. 1-2 (June 1, 2018), ECF No. 58 ("Def.'s Br.").

The court held oral argument on December 6, 2018. Oral Argument (Dec. 6, 2018), ECF No. 67.

II. DISCUSSION

A. Jurisdiction and Standard of Review

The court exercises jurisdiction under section 201 of the Customs Courts Act of 1980, 28 U.S.C. § 1581 (c) (2012), pursuant to which the court reviews actions commenced under section 516A of the Tariff Act of 1930 (the "Tariff Act"), as amended 19 U.S.C. § 1516a (2012), including an action contesting a final determination that Commerce issues to conclude an administrative review of an antidumping duty order. 6 In reviewing a final determination, the court "shall hold unlawful any determination, finding, or conclusion found ... to be unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B)(i). Substantial evidence refers to "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion."

SKF USA, Inc. v. United States , 537 F.3d 1373 , 1378 (Fed. Cir. 2008) (" SKF I ") (quoting Consol. Edison Co. v. NLRB , 305 U.S. 197 , 229, 59 S.Ct. 206 , 83 L.Ed. 126 (1938) ).

B. Summary of the Parties' Claims and the Court's Disposition of those Claims

Aeolus claims that Commerce erred in determining that Aeolus failed to rebut the Department's presumption of de facto control by the government of the PRC. Because the court cannot conclude that Commerce considered certain record evidence relevant to its determination, the court orders Commerce to reconsider its decision that Aeolus does not qualify for a separate rate.

GTC claims that Commerce erred in determining that GTC failed to rebut the presumption of de facto control. As discussed below, defendant advocates that the court allow Commerce to reconsider one aspect of the issue of whether GTC should be granted separate rate status. See Def.'s Br. 1-2. While allowing Commerce to reconsider the aspect of the determination as to GTC's separate rate status that defendant identifies, the court's Order directs Commerce to reconsider that determination in the entirety.

Xugong claims that Commerce erred in making deductions from the prices used to determine export price ("EP") and constructed export price ("CEP") of Xugong's subject merchandise to account for the PRC's value-added tax ("VAT"). Concluding that the antidumping duty statute does not permit the deductions Commerce made for VAT, the court orders Commerce to redetermine Xugong's margin upon eliminating these deductions.

Full World, Qingdao Qihang, Trelleborg, and Zhongwei each claim entitlement to a new antidumping duty rate that is adjusted for any change made to the rate to be assigned to separate rate respondents. The court awards this remedy to these plaintiffs.

C. The Department's Decision to Deny Aeolus a Separate Rate

In the Issues and Decision Memorandum, Commerce stated that "[f]or the final results and based on record evidence, we continue to find that Aeolus is not eligible for a separate rate." Issues and Decision Mem. at 10. Aeolus claims that this determination was not supported by substantial evidence. See Aeolus's Br. 16-34.

1. The Department's Test for Separate Rate Status in Proceedings Involving Nonmarket Economy Countries

In antidumping duty proceedings involving nonmarket economy countries, including China, Commerce applies a rebuttable presumption that all companies within the nonmarket economy country are controlled by the government of that country. See AMS Assocs. v. United States , 719 F.3d 1376 , 1379 (Fed. Cir. 2013). An exporter may overcome this presumption by convincing Commerce that it is subject neither to de jure nor to de facto government control over its export activities. Id. De jure independence, which is not at issue in this case, may be shown by legislation and other governmental measures in the nonmarket economy country demonstrating legal independence. See Sigma Corp. v. United States , 117 F.3d 1401 , 1405 (Fed. Cir. 1997). To establish the absence of de facto control, Commerce requires an exporter to demonstrate that it (i) sets its prices independently of the government and other exporters, (ii) negotiates its own contracts, (iii) keeps the proceeds of its sales (apart from taxation), and (iv) selects its management autonomously. AMS Assocs. , 719 F.3d at 1379 ; see also Advanced Tech. & Materials Co. v. United States , 37 CIT ----, ---, 938 F.Supp.2d 1342 , 1348-49 (2013) ; Advanced Tech. & Materials Co. v. United States , 36 C.I.T. 1576 , 1576-78, 885 F.Supp.2d 1343 , 1346-47 (2012) ; Notice of Final Determination of Sales at Less Than Fair Value: Silicon Carbide From the People's Republic of China , 59 Fed. Reg. 22,585 , 22,587 (Int'l Trade Admin. May 2, 1994) ; Final Determination of Sales at Less Than Fair Value: Sparklers From the People's Republic of China , 56 Fed. Reg. 20,588 , 20,589 (Int'l Trade Admin. May 6, 1991).

2. The Department's Conclusion that Aeolus Did Not Rebut the Presumption of Government Control Resulted from an Incomplete Analysis of the Record

Commerce determined, and Aeolus does not dispute, that Aeolus: (1) is 42.58% owned by China National Tire & Rubber Co., Ltd. ("China National Tire"), a 100%-owned subsidiary of China National Chemical Corporation ("ChinaChem"), a state-owned enterprise ("SOE") supervised by China's State-Owned Assets Supervision and Administration Commission ("SASAC"), and (2) is 6.48% owned by other SOEs supervised by "local SASACs," 7 making Aeolus's total SOE ownership 49.06%. Issues and Decision Mem. at 10. Aeolus claims that record information shows that the SOE shareholders cannot exercise control over Aeolus's business decisions despite the high level of SOE ownership. Aeolus's Br. 27-29.

When conducting a separate rate analysis for a company with less than a majority of SOE ownership, Commerce has considered whether the record contains "additional indicia of control" sufficient to demonstrate that the company lacks independence and therefore should receive a PRC-wide rate. See, e.g. , An Giang Fisheries Imp. & Exp. Joint Stock Co. v. United States , 42 CIT ----, ----, 284 F.Supp.3d 1350 , 1359 (2018). In the seventh review, Commerce found government control of Aeolus based on (1) a statement on Aeolus's website indicating that it is a state-owned enterprise and (2) the company's corporate policies governing how certain shareholders can select members of management. See Issues and Decision Mem. at 10-12 (citing Letter From Stewart & Stewart for Sec'y Commerce Attach. 3 (Dec. 30, 2015) (C.R. Doc. 38) (P.R. Doc. 75) (stating that Aeolus is "[a] model state-owned enterprise")). 8 Commerce found that Aeolus's SOE shareholders exercised control over the selection of the company's board, which in turn selected management, despite the various shareholder protections present in PRC law and Aeolus's Articles of Association ("AoA"). See id. at 10-11.

Aeolus argues that Commerce failed to consider important contrary record evidence: a "Rectification Report" it placed on the record, which, it argues, demonstrates Aeolus's independence. Aeolus's Br. 12-13 (citing Letter from Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt to U.S. Department of Commerce Ex. 1A (Jan. 8, 2016) (C.R. Doc. 39) (P.R. Doc. 79)

(" Rectification Report Letter ")). The court notes that the Issues and Decision Memorandum makes no mention of the Rectification Report.

The Rectification Report originally was submitted by the Aeolus board of directors to the Henan Security Regulatory Commission in China as part of a proceeding unrelated to the seventh review and is dated January 13, 2014, i.e., before the commencement of the POR on September 1, 2014. See Rectification Report Letter 2-4, Ex. 1A. On December 30, 2015, petitioners placed on the record an English-language translation of the Rectification Report in support of their argument that Aeolus was not independent of the government of China. Id. at 2 (citing petitioners' submission). According to petitioners, the Rectification Report indicated that the SOE ChinaChem: (1) maintained direct control over Aeolus's operations, (2) could access Aeolus's financial information at any time through software it shared with Aeolus, and (3) required Aeolus to submit "investment, key projects, and tender process" for ChinaChem's approval. See id. In its rebuttal submission dated January 8, 2016, Aeolus placed on the record its own translation of the Rectification Report, which it claimed was more accurate than petitioners' translation, and argued that the properly-translated Rectification Report actually supported Aeolus's independence. Id. at 2-4, Ex. 1A. Specifically, Aeolus claimed the Rectification Report demonstrates that, as of the commencement of the POR, the government control issues identified in the Rectification Report showed a "Rectification Status" of "[c]ompleted," i.e., that "the Rectification Report does not address current issues, but, instead, describes past issues that have been identified as improper connections between Aeolus and ChinaChem and that have now been rectified." Id. at 2, Ex. 1A. Aeolus argues that, as of the publication of the Rectification Report (i.e., before the POR), Aeolus's SOE shareholders could not access the company's financial information and that review and approval of key projects did not depend on the company's SOE shareholders but only on Aeolus's board of directors. 9

Because the Issues and Decision Memorandum does not refer to the Rectification Report, the court cannot conclude that Commerce considered the report or the evidence therein when determining that Aeolus was not independent of government control. Commerce is tasked with weighing the record evidence, but it nonetheless must address significant contrary evidence when making determinations. See CS Wind Vietnam Co. v. United States , 832 F.3d 1367 , 1373 (Fed. Cir. 2016) ("The substantiality of evidence must take into account whatever in the record fairly detracts from its weight." (internal quotation marks and citation omitted)). It did not do so in the administrative determination being challenged before the court. Accordingly, the court is ordering Commerce to reconsider its separate rate determination as to Aeolus in light of all evidence on the record, including the evidence in the Rectification Report. The court does not address Aeolus's remaining arguments at this time.

D. The Department's Decision to Deny GTC a Separate Rate

Commerce stated that "[f]or the final results, we continue to find, based on record evidence, that GTC is not eligible for a separate rate." Issues and Decision Mem. at 13. Before the court, GTC contests this determination, arguing that it was not supported by substantial evidence. See GTC's Br. 20-43.

1. The Department's Analysis

As it did with Aeolus, Commerce found de jure independence but concluded that GTC failed to demonstrate independence under its four-factor de facto test. Issues and Decision Mem. at 6-9, 13-15. Commerce found that the absence of government control had not been demonstrated as to Guizhou Tyre Co., Ltd.'s selection of management and as to its ability to distribute profits. Id. at 14-15. Commerce also found that, because Guizhou Tyre Import and Export Co., Ltd. was a wholly-owned subsidiary of Guizhou Tyre Co., Ltd., it too was subject to government control. Id. at 13-14. On that basis, Commerce considered the combined entity, i.e., GTC, subject to government control and assigned it the PRC-wide rate.

Commerce found that Guizhou Tyre Co., Ltd.'s largest shareholder, Guiyang Industry Investment (Group) Co., Ltd. ("GIIG"), was an SOE that was 100% owned and supervised by the "Guiyang SASAC" (i.e., the local SASAC in Guiyang, China). Issues and Decision Mem. at 13. Commerce further found that GIIG owned 25.20% of Guizhou Tire Co., Ltd. during the POR and concluded that the Guiyang SASAC therefore was in a position to control the activities of Guizhou Tyre Co., Ltd. as well as those of the wholly-owned subsidiary Guizhou Tyre Import and Export Co., Ltd. (which Commerce collapsed with Guizhou Tyre Co., Ltd. for the purposes of the review). Id. at 13-14.

According to Commerce, record evidence showed that Guizhou Tyre Co., Ltd. "elected members of its board of directors through shareholders' meetings not available to all shareholders" and made decisions affecting the distributions of profits at these meetings. Id. at 14. Commerce found that "[b]ecause GIIG circumvented a more inclusive board election process, it was able to elect specific board members of its preference and preferred profit distribution schemes [ sic ]." Id. Commerce concluded that "[b]ased on these findings, we do not find any practical difference between holding shareholder elections to select board members, or the Guiyang SASAC, through GIIG, directly appointing board members by direct decree" notwithstanding certain shareholder protections in Guizhou Tyre Co., Ltd.'s Articles of Association. Id. Commerce found it unavailing that shareholders with 10% ownership could nominate director candidates of their choosing, noting that GIIG was the only shareholder with sufficient ownership to meet that threshold. Id. Commerce also addressed the contention that shareholder voting protections in Guizhou Tyre Co., Ltd.'s AoA, such as cumulative voting and online voting, prevented GIIG from exercising de facto control over the election of directors and selection of management. Commerce characterized the protections as "unsuccessful," finding that "GIIG was ultimately able to dominate GTC's decision-making process, despite such safeguards, and appoint its preferred members to GTC's board, as well as control profit distribution." Id. at 15 (footnote omitted).

2. The Court Remands the Department's Determination of Government Control as to GTC

Defendant has requested a remand to reconsider its separate rate determination as to GTC. See Def.'s Br. 2, 20-21. Rather than respond substantively to GTC's arguments, defendant "respectfully request[s] a voluntary remand, without confessing error, for Commerce to reconsider and explain its determination with respect to assigning a separate rate to GTC." Id. at 20. Defendant explains that "[o]ne factor that Commerce relied on in [its] analysis was its finding that, 'GTC [i.e., Guizhou Tyre Co., Ltd.] elected members of its board of directors through shareholders' meetings not available to all shareholders.[']" Id. at 21 (quoting Issues and Decision Mem. at 14). Defendant called that factual finding into question by explaining that "[i]n its brief, however, GTC has identified that a particular shareholders' meeting [of Guizhou Tyre Co., Ltd.] that Commerce found was not available to all shareholders was, in fact, publicly noticed and available to all shareholders." Id. (citing GTC's Br. 27-28). Defendant concludes that because "Commerce's understanding of such record evidence has the potential to impact the analysis concerning whether to grant GTC a separate rate in the underlying review," the Department's concern is "substantial and legitimate," justifying a remand in this case. Id. (citations omitted). GTC does not oppose defendant's request but maintains its challenge to the Department's separate rate decision in the entirety. See Reply of Pls. GTC 2 (July 16, 2018), ECF No. 61.

The court exercises its discretion in considering a request for a remand. "[I]f the agency's concern is substantial and legitimate, a remand is usually appropriate." SKF USA, Inc. v. United States , 254 F.3d 1022 , 1029 (Fed. Cir. 2001) (" SKF II "). The court agrees that the Department's concern in this case is "substantial and legitimate" and will order a remand for Commerce to reconsider and explain its separate rate analysis with respect to the collapsed GTC entity. Because the factual finding defendant identifies was significant to the outcome, Commerce upon remand must reconsider its separate rate determination as to GTC in the entirety, i.e., in light of all record evidence. The court does not reach any conclusions at this time regarding the other arguments GTC directs to that determination.

E. Adjustment to Prices Used to Determine Export Price and Constructed Export Price for Irrecoverable Value-Added Tax

Under section 731 of the Tariff Act, 19 U.S.C. § 1673 , an antidumping duty is imposed "in an amount equal to the amount by which the normal value exceeds the export price (or the constructed export price) for the merchandise." 19 U.S.C. § 1673 . The amount by which the normal value exceeds the export price or constructed export price of the subject merchandise is referred to as the "dumping margin." Id. § 1677(35)(A). The prices in some of Xugong's U.S. sales of subject merchandise during the seventh review were determined on the basis of export price; others were determined on the basis of constructed export price. See Issues and Decision Mem. at 37.

Section 772 of the Tariff Act, 19 U.S.C. § 1677a, directs Commerce to make various adjustments (upward and downward) to "[t]he price used to establish export price and constructed export price." 19 U.S.C. § 1677a(c). In its regulations, Commerce refers to this unadjusted price for determining EP and CEP as the "starting price." 10 See 19 C.F.R. § 351.402 (a). Because the export price or the constructed export price (both of which are sometimes identified as "U.S. price") is compared to normal value, an upward adjustment to the starting price will reduce a dumping margin, and a downward adjustment will increase one.

Xugong's claim pertaining to Chinese value-added tax turns on the meaning of a provision in the Tariff Act that effectuates the "export tax" adjustment. This provision, in section 772(c)(2)(B) of the Tariff Act ( 19 U.S.C. § 1677a(c)(2)(B) ), reduces the starting price for determining EP or CEP by "the amount, if included in such price, of any export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise to the United States, other than an export tax, duty, or other charge described in section 1677(6)(C) of this title." 11 19 U.S.C. § 1677a(c)(2)(B). The question before the court is whether the export tax adjustment applies to Chinese value-added taxes present in the prices of the materials Xugong used to produce the OTR tires it exported to the United States and not refunded (i.e., "recovered") due to exportation. For the reasons discussed below, the court holds that it does not.

With respect to both EP and CEP sales, Commerce "reduce[d] Xugong's U.S. sales prices by eight percent, which is the percentage of irrecoverable VAT." Issues and Decision Mem. at 37 (footnote omitted). Commerce considered "irrecoverable VAT" to be value-added tax that is incurred on inputs used to produce subject merchandise and that is not avoided or recovered by reason of exportation of the finished good. Id. at 37-38 ("Irrecoverable VAT, as defined in PRC law, is a net VAT burden that arises solely from, and is specific to, exports. It is VAT paid on inputs and raw materials used in the production of exports that is non-refundable and, therefore, a cost." (footnotes omitted)).

Xugong contests the downward, margin-increasing adjustments Commerce made to Xugong's EP and CEP starting prices on two grounds. It argues that Chinese value-added tax is not an "export tax, duty, or other charge" within the meaning of 19 U.S.C. § 1677a(c)(2)(B). See Xugong's Br. 6-8. In the alternative, it argues that even were Commerce entitled to treat irrecoverable VAT as an "export tax" subject to the provision, Xugong did not incur irrecoverable VAT in the amount of eight percent of its U.S. prices. See id. at 9-14 . Because Xugong is correct that the export tax adjustment does not apply to Chinese value-added tax present in the prices of materials Xugong used to produce subject merchandise (whether or not recoverable upon export), the court does not reach Xugong's alternative argument.

The export tax provision is one of several tax-related provisions in the Tariff Act that potentially affect a dumping margin. While the export tax adjustment potentially increases a dumping margin, two other tax-related adjustment provisions-a provision addressing import duties in the exporting country and the "home market tax" adjustment provision-may reduce a dumping margin. These other tax-related provisions lend context to the intended meaning of the export tax provision.

The three tax-related provisions stem from international trade commitments under which a "fair comparison" must be made between U.S. price and normal value and under which "due allowance" must be made for differences in taxation. 12 The provision on import duties, set forth in section 772(c)(1)(B) of the Tariff Act, makes an upward adjustment to the EP or CEP starting price to account for import duties imposed by the exporting country that are refunded or avoided by reason of exportation. See 19 U.S.C. § 1677a(c)(1)(B) (adding to the starting price "the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the subject merchandise to the United States"). Such import duties would include, for example, duties on materials used in producing the subject merchandise in the exporting country that are refunded as drawback or avoided by use of a similar program.

The import duty adjustment provision implicitly presumes that import duties imposed by the government of the exporting country would be present in the U.S. price of the subject merchandise unless rebated or avoided due to the exportation of the good to the United States. If rebated or avoided due to exportation, the import duties are added to U.S. price, thereby adjusting for a difference in taxation for purposes of the comparison with normal value and reducing the dumping margin accordingly. If the import duties are "irrecoverable," i.e., if they are not rebated or avoided by reason of the exportation, the duties presumably are included in the U.S. price and also in the price of the foreign like product when sold for consumption in the home market (or other, i.e., third-country, comparison market), and, therefore, no upward adjustment (or, of course, downward adjustment) in the EP or CEP starting price is made under this provision. The export tax provision is, in effect, the reverse: taxes the exporting government imposes on the exportation of the good are, by definition, taxes that would not be imposed on the good if sold for consumption in the domestic market. If present in U.S. price (whether EP or CEP), and if not levied to offset a countervailable subsidy, they are removed from the starting price in the EP or CEP determination.

The provision allowing for the "home market tax" adjustment, in 19 U.S.C. § 1677b(a)(6)(B)(iii), is similar in operation, and in purpose, to the import duty adjustment. If the home market tax is present in the price of the foreign like product and rebated or avoided on the subject merchandise, the provision adjusts the price comparison for the difference in taxation, thereby lowering the dumping margin. The home market tax adjustment provision reduces normal value by:

the amount of any taxes imposed directly upon the foreign like product or components thereof which have been rebated, or which have not been collected, on the subject merchandise, but only to the extent that such taxes are added to or included in the price of the foreign like product.

19 U.S.C. § 1677b(a)(6)(B)(iii). This provision applies when normal value is determined from the price at which the foreign like product is sold in the comparison market (the home market or, where applicable, the third-country market). An analogous provision in 19 U.S.C. § 1677b(e) accomplishes the same purpose when normal value is determined by the constructed value method.

The home market tax adjustment has been understood to apply to value-added taxes imposed by the exporting country. See generally Federal-Mogul Corp. v. United States , 63 F.3d 1572 (Fed. Cir. 1995). The history of the home market tax adjustment is, therefore, instructive on the treatment of value-added taxes under the antidumping duty statute. Prior to the amendment of the Tariff Act by the Uruguay Round Agreements Act, Pub. L. No. 103-465, 108 Stat. 4809 (1994) (the "URAA"), the home market tax adjustment was effectuated as an addition to U.S. price rather than as a reduction to normal value. In the pre-URAA version of the statute (as codified by the Trade Agreements Act of 1979 ("TAA")), the home market tax adjustment provision stood alongside the import duty provision and the export tax provision in the same section, as follows:

The purchase price [equivalent to today's "export price"] and the exporter's sales price [equivalent to today's "constructed export price"] shall be adjusted by being-

(1) increased by-

* * *

(B) the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the merchandise to the United States;

(C) the amount of any taxes imposed in the country of exportation directly upon the exported merchandise or components thereof, which have been rebated, or which have not been collected, by reason of the exportation of the merchandise to the United States, but only to the extent that such taxes are added to or included in the price of such or similar merchandise when sold in the country of exportation;

* * *

and

(2) reduced by-

* * *

(B) the amount, if included in such price, of any export tax, duty, or other charge imposed by the country of exportation on the exportation of the merchandise to the United States other than an export tax, duty, or other charge described in section 1677(6)(C) of this title.

19 U.S.C. § 1677a(d) (1982). The opinion of the Court of Appeals for the Federal Circuit ("Court of Appeals") in Federal-Mogul , which referred to the home market tax provision as the "adjustment for Home Market (HM) taxes," 63 F.3d at 1574 , discussed the provision in the context of a recoverable value-added tax. The case, which arose under the TAA version of the Tariff Act, 19 U.S.C. § 1677a(d) (1982), involved a value-added tax that was imposed by the government of the home market country, Japan, on antifriction bearings that were manufactured and sold in Japan but not on these products when exported to the United States. Federal-Mogul , 63 F.3d at 1575 .

Under the TAA version of the statute, it would have been unreasonable to interpret the export tax adjustment to apply to value-added taxes imposed by the exporting country. Having effectuated an adjustment to U.S. price for value-added taxes in the home market tax provision, Congress could not also have intended to adjust for them again, in the opposite way, in the export tax provision. The former, like the import duty provision, potentially reduced a dumping margin (to the extent the tax was avoided or recovered upon export), and the latter potentially increased one (to the extent the export tax was present in the U.S. price and not levied to offset a countervailable subsidy). The statute used language to describe the home market taxes ("taxes imposed in the country of exportation directly upon the exported merchandise or components thereof") and the import duties ("any import duties imposed by the country of exportation") that differed from the language it used to describe the export taxes ("any export tax, duty, or other charge imposed by the country of exportation on the exportation of the merchandise"). 19 U.S.C. § 1677a(d) (1982) (emphasis added). In short, the statute treated export taxes quite differently than it treated import duties and home market taxes such as value-added taxes. Having clearly distinguished export taxes from home market taxes (as well as from import duties), Congress could not have intended to place home market taxes such as value-added taxes within the scope of the export tax provision.

The next question to be answered is whether the URAA, which placed the relevant provisions of the Tariff Act into current form, brought value-added taxes within the ambit of the export tax adjustment. The court concludes that it did not. The wording of the URAA version of the export tax adjustment essentially was identical to the previous version, indicating a lack of intent to broaden or otherwise alter the scope. 13 Congress made no change in the provision for the import duty adjustment, except to add the word "subject" before the word "merchandise," and also retained the home market tax adjustment, albeit in modified form. But the modification the URAA effected in the home market tax adjustment does not demonstrate a congressional intent to address internal taxes such as value-added taxes in the export tax provision as opposed to the home market tax provision. Specifically, as discussed above, the URAA converted the § 1677a(d)(1)(C) (1982) upward adjustment to United States price to a downward adjustment to normal value, where it also potentially reduces a dumping margin for recoverable value-added taxes. The URAA did not alter substantively the TAA's treatment of recoverable home market taxes in the determination of constructed value, retaining the exclusion of such taxes from the valuation of materials. 14 The legislative history of the URAA is a further indication that Congress intended to leave the scope of the export tax adjustment unchanged. 15

In summary, Congress expressly confined the export tax provision to export taxes, duties, and other charges on the exportation of the subject merchandise to the United States. The provision cannot permissibly be construed to apply to a domestic home market tax such as a value-added tax, whether or not recoverable due to export. The Department's deductions from Xugongs' EP and CEP starting prices for Chinese value-added taxes were, therefore, unlawful.

Qingdao Qihang Tyre Co., v. United States , 42 CIT ----, 308 F. Supp. 3d 1329 (2018) (" Qingdao Qihang ") held, as the court does here, that the Department's applying the export tax adjustment provision to home market value-added taxes is incorrect and, contrary to the government's argument in that case, cannot be sustained as reasonable under the principle of deference established by Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc. , 467 U.S. 837 , 104 S.Ct. 2778 , 81 L.Ed.2d 694 (1984). 16 Below, the court explains why the reasoning Commerce included in the Issues and Decision Memorandum for the review at issue in this case to support its interpretation of 19 U.S.C. § 1677a(c)(2)(B) does not alter the court's conclusion.

Commerce began its analysis by citing a 2012 Federal Register notice ("Methodological Change") in which it announced a change in its interpretation of the export tax provision. Issues and Decision Mem. at 37 (citing Methodological Change for Implementation of Section 772(c)(2)(B) of the Tariff Act of 1930, as Amended, in Certain Non-Market Economy Antidumping Proceedings , 77 Fed. Reg. 36,481 (Int'l Trade Admin. June 19, 2012) (" Methodological Change ")). Commerce explained that "[i]n this announcement, the Department stated that, when a NME [nonmarket economy] government has imposed an export tax, duty, or other charge on subject merchandise or on inputs used to produce subject merchandise from which the respondent was not exempted, the Department will reduce the respondent's EP or CEP, accordingly, by the amount of the tax, duty or charge paid, but not rebated." Issues and Decision Mem. at 37 (footnote omitted). This explanation presents two immediate problems.

First, while the export tax provision, in some circumstances, will reduce the EP or CEP starting price for "an export tax, duty, or other charge," 19 U.S.C. § 1677a(c)(2)(B), it is not precisely correct to say, as the Issues and Decisions Memorandum does, that it may apply to any such tax, duty, or charge "on subject merchandise." Issues and Decision Mem. at 37. Instead, the export tax adjustment applies only to a tax, duty, or other charge "on the exportation of the subject merchandise." 19 U.S.C. § 1677a(c)(2)(B) (emphasis added). Commerce does not demonstrate (from record evidence or otherwise) that China actually imposed a tax on the exportation of OTR tires, or anything resembling one. Nor does the export tax adjustment apply to a tax, duty, or other charge on "inputs used to produce subject merchandise." Issues and Decision Mem. at 37. A tax applied to materials used in the domestic production of a good subsequently exported, whether or not rebated or avoided, is by definition not a tax on the exportation of the finished merchandise. The Department's formulation, which imposes the export tax provision "on subject merchandise or on inputs used to produce subject merchandise," id. , tracks the language of the home market tax provision (as originally enacted and as amended by the URAA) rather than the export tax provision. See 19 U.S.C. § 1677a(d)(1)(C) (1982) (applying the home market tax adjustment for "the amount of any taxes imposed in the country of exportation directly upon the exported merchandise or components thereof"); 19 U.S.C. § 1677b(a)(6)(B)(iii) (applying the home market tax adjustment for "the amount of any taxes imposed directly upon the foreign like product or components thereof").

Second, nothing in 19 U.S.C. § 1677a distinguishes between market economy and nonmarket economy countries. While nonmarket economy countries are treated differently than are market economy countries in the determination of normal value, see 19 U.S.C. § 1677b(c), they are not treated differently in the determination of export price and constructed export price, see id. § 1677a. Nevertheless, Methodological Change is directed solely to nonmarket economy countries. Were the statute to treat irrecoverable VAT as subject to the export tax adjustment (which it does not), Commerce would be required to adjust U.S. price for irrecoverable VAT in all antidumping duty proceedings in which it occurred, whether involving merchandise from market economy or from nonmarket economy countries. Methodological Change does not indicate that Commerce intends to adopt such a practice.

The reasoning in the Issues and Decisions Memorandum is flawed in other respects as well. Commerce opined as follows:

In a typical VAT system, companies do not incur any VAT expense for exports. Rather, upon export, they receive a full rebate of the VAT paid on inputs used in the production of exports ("input VAT"), and, in the case of domestic sales, the company can credit the VAT they paid on input purchases for those sales against the VAT they collect from customers. That stands in contrast to the PRC's VAT regime, where some portion of the input VAT that a company pays on inputs used in production of exports is not refunded. This unrefunded amount differs from the amount refunded on domestic sales, and thus amount[s] to a tax, duty, or other charge imposed on exports that is not imposed on domestic sales.

Issues and Decision Mem. at 37 (footnotes omitted). The statement that input VAT not refunded by reason of exportation (to which Commerce referred as "irrecoverable VAT") "amount[s] to a tax, duty or other charge imposed on exports that is not imposed on domestic sales ," id. (emphasis added), can be read to suggest that domestic sales of OTR tires in China do not incur VAT. But Commerce did not actually reach a finding that these sales do not incur VAT, and had it done so, it would have been contradicted by record evidence. See Xuzhou Xugong Tyres Co., Ltd., ("Xugong") Section C Questionnaire Response for the Administrative Review of New Pneumatic Off-The-Road Tires from the People's Republic of China 55, Ex. C-20(1) to C-20(3) (Feb. 4, 2016) (C.R. Docs. 74-88) (P.R. Docs. 110-111). As the court discussed above, a tax, duty, or other charge that actually is subject to the export tax provision, which applies only to a tax, duty, or other charge imposed on the exportation of a good, is one that, by definition, is not imposed on a domestic sale of the same good. 17

Similarly, the Department's opining that the "unrefunded amount" of input VAT "differs from the amount refunded on domestic sales" is not accompanied by an actual finding that under the PRC VAT regime any amount of input VAT is refunded on domestic sales. Rather, if the PRC VAT regime operates domestically as does any normal VAT regime (and there is nothing in the record or in the Department's explanation indicating it does not), the domestic producer credits the amount of input VAT incurred in the prices of materials used in production of its goods against any amount of VAT payable to government on the sales of the finished goods (i.e., the "output" VAT). 18 In this way, the domestic producer would incur a value-added tax on the value added by that producer. Even though Commerce did not find that irrecoverable VAT does not occur on domestic sales in China, Commerce nevertheless reasoned, paradoxically, that "[i]rrecoverable VAT, as defined in PRC law, is a net VAT burden that arises solely from, and is specific to, exports." Issues and Decision Mem. at 38 (footnote omitted).

Commerce reasoned, further, that because irrecoverable VAT "is VAT paid on inputs and raw materials used in the production of exports that is non-refundable and, therefore, a cost," id. (footnote omitted), irrecoverable VAT is "an 'export tax, duty or other charge imposed' on exports of the subject merchandise to the United States." 19 Continuing on this line of reasoning, Commerce stated that "[t]he statute does not define the terms 'export tax, duty, or other charge imposed' on the exportation of subject merchandise" and that "[w]e find it reasonable to interpret these terms as encompassing irrecoverable VAT because the irrecoverable VAT is a cost that arises as a result of export sales." Id.

The Department's rationale is, essentially, that the statute treats irrecoverable value-added tax as an export tax subject to the export tax adjustment because it is irrecoverable. That is directly contrary to the treatment the statute accords to home market taxes. As the court has explained, Congress, having addressed value-added taxes in the home market tax provision and export taxes in the export tax provision, could not have intended for value-added taxes (whether or not recoverable) to fall within both provisions. Moreover, by identifying only recoverable home market taxes as qualifying for the home market tax adjustment, Congress indicated its awareness of the existence of irrecoverable home market taxes. Nowhere in the statute did it designate them as taxes subject to the export tax adjustment.

Nor does the statutory formulation "export tax, duty, or other charge ," 19 U.S.C. § 1677a(c)(2)(B) (emphasis added), lend anything to the Department's analysis. Commerce itself regards Chinese value-added tax as a "tax" that is imposed on materials used domestically to produce OTR tires, some portion of which, according to Commerce, may be avoided or rebated by reason of subsequent exportation of the finished good. But whether or not recovered by reason of exportation, the value-added tax imposed by the PRC, as Commerce itself describes it, cannot lawfully be deemed a tax "on the exportation of the subject merchandise" within the intended meaning of 19 U.S.C. § 1677a(c)(2)(B).

The Department further stated that its "adjustment for irrecoverable VAT achieves what is called for under section 772(c)(2)(B) of the Act [ 19 U.S.C. § 1677a(c)(2)(B) ], as it reduces the gross U.S. price charged to the customer to a net price received. This deduction is consistent with our longstanding policy, which is consistent with the intent of the statute, i.e. , that dumping margin calculations be tax neutral." Issues and Decision Mem. at 38 (citing, inter alia, Methodological Change , 77 Fed. Reg. at 36 ,483 ). This "tax-neutral" justification for the Department's deduction is unavailing. The statute itself specifies the tax-related adjustments that Commerce is directed to make to adjust for differences in taxation, for purposes of the comparison of EP or CEP to normal value. The statute provides for a margin-reducing adjustment for recoverable value-added tax (not applicable here, in this nonmarket economy country proceeding, because normal value was not determined based on home market price or other comparison market price). It does not authorize Commerce to make a margin- increasing adjustment for value-added tax that is not recoverable, whether or not the good is exported from a nonmarket economy country. Commerce may not rewrite the statute in a misguided attempt to adjust U.S. price downward for home market taxes that it considers to be present in that price. Nor is it free to bring about what it considers a "tax-neutral" result by any means it sees fit. The statute confines the export tax adjustment to taxes, duties, and other charges imposed on the exportation of the good and does not apply it to home market taxes on the good or the materials incorporated therein. It is no more permissible for Commerce to adjust U.S. price downward for irrecoverable value-added tax than it would be for Commerce to adjust U.S. price downward for irrecoverable import duty that also may be present in the U.S. price. In each case, the statute speaks directly to the adjustment that is to be made.

In summary, Commerce has made downward adjustments in calculating the EP and CEP for subject merchandise exported by Xugong based on an impermissible construction of the export tax provision of 19 U.S.C. § 1677a(c)(2)(B). Therefore, Commerce must correct this error in responding to the court's Opinion and Order in this proceeding.

F. The All-Others Rate as Applied to Separate Rate Respondents

Trelleborg, Qingdao Qihang, Full World, and Zhongwei are parties to this litigation and were assigned the all-others rate of 33.14% in the seventh administrative review. Both in its briefings and at oral argument, defendant indicated that Commerce does not oppose this claim, should it be determined judicially that revision in the rates of the examined respondents is required. Def.'s Br. 28; Oral Argument (Dec. 6, 2018), ECF No. 67. Because Trelleborg, Qingdao Qihang, Full World, and Zhongwei contested the Final Results as plaintiffs, they will qualify for relief that ultimately results from any recalculation of the individually-determined rate applicable to Xugong or to an individually-determined rate for GTC, should one be forthcoming. Should Aeolus be determined to qualify for a separate rate, it also will qualify for relief.

III. CONCLUSION AND ORDER

For the reasons discussed in the foregoing, the court remands to Commerce the decision published as Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Final Results of Antidumping Duty Administrative Review; 2014-2015 , 82 Fed. Reg. 18,733 (Int'l Trade Admin. Apr. 21, 2017) (" Final Results ") and amended as Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Amended Final Results of Antidumping Duty Administrative Review; 2014-2015 , 82 Fed. Reg. 27,224 (Int'l Trade Admin. June 14, 2017) (" Amended Final Results ") for reconsideration according to the decisions the court reaches in this Opinion and Order. Therefore, upon consideration of all papers and proceedings had herein, and upon due deliberation, it is hereby

ORDERED that Commerce shall submit a new determination upon remand ("Remand Redetermination") in which it reconsiders its decisions not to assign separate rates to GTC and Aeolus and redetermines the dumping margins for those respondents as required by its reconsideration of those decisions; it is further

ORDERED that Commerce, in the Remand Redetermination, shall recalculate export price and constructed export price for Xugong without making deductions for Chinese value-added tax; it is further

ORDERED that Commerce will redetermine the weighted average dumping margin for Xugong and also the rates to be assigned to all other qualifying separate rate respondents that are plaintiffs in this action; it is further

ORDERED that Commerce will submit its Remand Redetermination within 90 days of the date of this Opinion and Order; it is further

ORDERED that comments of plaintiffs on the Remand Redetermination must be filed with the court no later than 30 days after the filing of the Remand Redetermination; and it is further

ORDERED that the response of defendant to the aforementioned comments must be filed no later than 15 days from the date on which the last comment is filed.