E c v kja public version enforcement trade gov

Pdf File 270.14 KByte,

A-570-918 Remand ? ARP: 10/01/2013 ? 9/30/2014

AR6 Remand Court No. 15-00307 Proprietary Document E&C/V: KJA Public Version

Aristocraft of America, LLC v. United States Consol. Court No. 15-00307, Slip Op. 17-132 (CIT September 28, 2017) FINAL RESULTS OF REDETERMINATION PURSUANT TO COURT REMAND A. SUMMARY The Department of Commerce (Commerce) has prepared these final results of redetermination pursuant to the decision and remand order of the Court of International Trade (CIT or Court) in Aristocraft of America, LLC v. United States, Consol. Court No. 15-00307, Slip Op. 17-132 (CIT September 28, 2017) (Remand Opinion and Order). These final results of redetermination concern Steel Wire Garment Hangers from the People's Republic of China: Final Results of Antidumping Duty Administrative Review, 2013?2014, 80 FR 69942 (November 12, 2015) (AR6 Final Results), and accompanying Issues and Decision Memorandum (AR6 IDM). In its Remand Opinion and Order, the CIT remanded the AR6 Final Results for Commerce to reconsider its value-added-tax (VAT) deduction and selection of financial statements for use in the calculation of surrogate financial ratios.1 As set forth in detail below, pursuant to the CIT's Remand Opinion and Order, we have further explained our adjustment for irrecoverable VAT and our selection of the Thai financial statements of LS Industry Co., Ltd. (LS Industry), to calculate surrogate financial ratios. Consequently, for the purposes of these results of redetermination on remand, Commerce made no changes to the margin calculation for the mandatory respondent in the AR6 Final Results,

1 See Remand Opinion and Order at 3.

1

Shanghai Wells Hanger Co., Ltd (Shanghai Wells). The period of review (POR) is October 1, 2013, through September 30, 2014.

On December 1, 2017, we released our draft results of redetermination to interested parties.2 On December 11, 2017, Shanghai Wells Hanger Co, Ltd., Hong Kong Wells Ltd., Hong Kong Wells Ltd. (USA) (collectively, Shanghai Wells), Best For Less Dry Cleaners Supply LLC, Ideal Chemical & Supply Company, Laundry & Cleaners Supply Inc., Rocky Mountain Hanger MFG Co., Rosenberg Supply Co., Ltd., and ZTN Management Company, LLC (collectively, U.S. Distributors), provided comments.3 We respond to these comments below. After considering these comments and analyzing the record, for purposes of this final remand redetermination, the Department continues to make an adjustment for irrecoverable VAT in the amount of eight percent and makes no change to its selection of financial statements for calculating surrogate financial ratios in this review. B. REMANDED ISSUES 1. Irrecoverable VAT Adjustment Background

In the AR6 Final Results, we declined to use Shanghai Wells' proposed alternative calculation for its irrecoverable VAT because its calculation relied on allocations across all company sales and across sales of products with different VAT schedules and because Shanghai Wells did not demonstrate that it was more appropriate than Commerce's standard irrecoverable VAT calculation methodology.4 In the AR6 IDM, we explained that our irrecoverable VAT

2 See Department Letter re: Draft Remand Determination in the Antidumping Duty Administrative Review of Steel Wire Garment Hangers from the People's Republic of China; 10/01/2013-9/30/2014, dated December 1, 2017 (Draft Remand). 3 See Shanghai Wells and U.S. Distributors' Letter "Comments on Draft Remand," dated December 11, 2017, (Draft Comments). 4 See AR6 IDM at Comment 3.

2

calculation methodology, as applied in this review, consists of performing two basic steps: (1) determining the irrecoverable VAT on subject merchandise, and (2) reducing U.S. price by the amount determined in step one.5 We further stated that because information placed on the record of this review by Shanghai Wells indicates that according to the Chinese VAT schedule, the standard VAT levy is 17 percent and the rebate rate for subject merchandise is nine percent, we removed from U.S. price the difference between the rates as the irrecoverable VAT, i.e., eight percent.6

Aristocraft of America LLC, Shanghai Wells, Hong Kong Wells Ltd., Hong Kong Wells Ltd. (USA), Best For Less Dry Cleaners Supply LLC, Ideal Chemical & Supply Company, Laundry & Cleaners Supply Inc., Rocky Mountain Hanger MFG Co., Rosenberg Supply Co., Ltd., and ZTN Management Company, LLC, (collectively, Shanghai Wells, et al.), contend that Commerce erred in calculating Shanghai Wells' irrecoverable VAT adjustment and that the application of our VAT methodology was unreasonable given the administrative record.7

Although the Court supported our determination that a cost that arises as the result of export sales such as irrecoverable VAT can be considered to constitute an export tax or duty imposed within the meaning of the Act,8 the Court remanded the AR6 Final Results to Commerce with respect to the amount of irrecoverable VAT deducted by Commerce. Specifically, the Court held that Commerce failed to demonstrate that the calculation of an eight percent irrecoverable VAT deduction from Shanghai Wells' EP and CEP was reasonable.9 In its decision, the Court directs Commerce to provide "further explanation and, if appropriate,

5 Id. 6 Id. 7 See Remand Opinion and Order at 5. 8 Id. at 11; see also section 772(c)(2)(B) of the Tariff Act of 1930, as amended (the Act). 9 See Remand Opinion and Order at 11-12.

3

reconsideration" of our irrecoverable VAT calculation with respect to Shanghai Wells.10 For purposes of these final results of redetermination, Commerce has reviewed the record of this review in order to provide further explanation regarding the basis for its calculation methodology for irrecoverable VAT and clarification regarding its methodology. Analysis

For these final results of redetermination, Commerce continues to reduce Shanghai Wells' prices by eight percent to account for irrecoverable VAT. Commerce has further reviewed its determination and the record evidence and expands upon, and further explains, its determination with respect to the amount of the deduction of irrecoverable VAT.

Commerce is directed to reduce the export price or constructed export price used in the antidumping margin calculation 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 771(6)(C) . . . ."11 Commerce's irrecoverable VAT adjustment entails deducting the amount of irrecoverable VAT that was included in the selling price of steel wire garment hangers to the United States. In a typical VAT system, for both domestic and foreign sales, companies are able to recover the VAT paid on inputs. That stands in contrast to the China's VAT regime, where some portion of the VAT is not refunded for exports. That is, companies do not receive a full rebate of VAT for exports when the government-mandated VAT refund rate for a particular exported product is less than the government-mandated VAT rate under China's VAT system. This amounts to a tax, duty, or other charge imposed on exports that is not imposed on domestic

10 Id. at 13-14. 11 Section 772(c)(2)(B) of the Act.

4

sales, an interpretation that the Court held was reasonable.12 Where the irrecoverable VAT is a

fixed percentage of U.S. price, Commerce explained that the final step in arriving at a tax-neutral

dumping comparison is to reduce the U.S. price downward by this same percentage.13

As explained below, companies that export a good, rather than sell it domestically, build

VAT unrefunded by the government into the export price itself. Adjusting

for this unrefunded VAT/irrecoverable VAT, which equates to an export tax, is consistent with

section 772(c)(2)(B) of the Act. Moreover, this deduction is consistent with Commerce's

longstanding policy that dumping margin calculations be tax-neutral.14

In the AR6 Final Results, Commerce calculated the amount of irrevocable VAT using a

methodology that is supported by China's tax law and regulation and the accounting records of

Shanghai Wells. In its initial questionnaire response, Shanghai Wells claimed that it was not

required to pay any VAT on its export sales, and referred to Article 2 of China's VAT interim

regulations that were effective on January 1, 2009).15 Article 2 simply states that "{f}or

taxpayers selling or importing goods. . . the tax rate shall be 17 percent."16 In a supplemental

response, Shanghai Wells stated that "the calculation of VAT payable, regardless of whether the

sales are domestic sales or exports, is as follows: Output VAT (sales to customers X applicable

VAT rate (17%)) minus Input VAT (VAT paid for purchase of materials)."17 Shanghai Wells

12 See Remand Opinion and Order at 11; see also section 772(c)(2)(B) of the Act; Diamond Sawblades and Parts Thereof from the People's Republic of China: Final Results of Antidumping Duty Administrative Review; 2011-201, 79 FR 35723 (June 24, 2014) and accompanying IDM and Comment 6. 13 See AR6 IDM at Comment 3. 14 See Antidumping Duties; Countervailing Duties: Final Rule, 62 FR 27296, 27369 (May 19, 1997) (citing Statement of Administrative Action accompanying the Uruguay Round Agreements Act, H.R. Doc. No. 103?316, vol. 1 at 827); see, e.g. Fushun Jinly Petrochemical Carbon Co. v. United States, Court No. 14-00287, Slip Op. 1625, 2016 WL 1170876, at *10-11 (CIT Mar 23, 2016). 15 See Shanghai Wells' February 9, 2015, Section C and D questionnaire response (Shanghai Wells' CDQR) at C-36 and Exhibit C-12 (2009 VAT Interim Regulations). 16 See Shanghai Wells' CDQR at Exhibit C-12. 17 See Shanghai Wells' April 23, 2015, Supplemental Section C and D Questionnaire response (Shanghai Wells' SuppCD) at 6.

5

also provided an alternative irrecoverable VAT calculation that relies on deriving the input VAT paid on sales of subject merchandise through an allocation based on all company sales and then offsetting the input VAT paid by the nine percent VAT refund rate on exports.18 However, as explained in the AR6 Final Results,19 and further detailed below in these final results of redetermination, Shanghai Wells' alternative calculation makes a number of assumptions that are inappropriate. Moreover, the record demonstrates that its alternative calculation methodology is inconsistent with China's guidance on irrecoverable VAT and inconsistent with Shanghai Wells' own accounting records for the recording of irrecoverable VAT.

In the AR6 IDM, we stated that "we will not consider allocations across all company sales or across sales of products with different VAT schedules but, rather, to use the difference between the standard VAT rate and the refund rate, consistent with China's regulations, unless the company can show otherwise for the subject merchandise."20 The aggregate input VAT that Shanghai Wells paid on purchases of materials that it used to make products, which it used in its alternative calculation for irrecoverable VAT, is not relevant to the calculation of the transactionspecific adjustment to U.S. price for irrecoverable VAT that Commerce makes to measure dumping. While Chinese companies may still deduct input VAT from output VAT similar to companies in a typical VAT system, in China's VAT system the companies do not receive a full rebate of the VAT on exports of specific products and that is the reason for our irrecoverable VAT adjustment. Specifically, according to Chinese law, the irrecoverable VAT rate for a particular product that is exported is the difference between the standard VAT levy rate for that

18 Id. at 7 and Exhibit 17. 19 See AR6 IDM at Comment 3. 20 Id. (citing to Diamond Sawblades and Parts Thereof from the People's Republic of China: Final Results of Antidumping Duty Administrative Review; 2011-2012, 79 FR 35723 (June 24, 2014) and accompanying Issues and Decision Memorandum at Comment 6).

6

Download Pdf File