CIT Judge Reif Sustains Commerce's Surrogate Selection Method Under Loper Bright
In an April 14 opinion, Court of International Trade Judge Timothy Reif remanded in part and sustained in part the Commerce Department’s final determination in its administrative review of the antidumping duty order on chlorinated isocyanurates from China. He upheld the department’s usual two-step surrogate selection process under Loper Bright, but he found that Commerce erred in its selection of comparable merchandise for chlorinated isos.
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Domestic producers of chlorinated isos, used as a disinfectant in swimming pools, brought their case to the trade court in 2024 contesting the department’s surrogate selection. They said the department should have emphasized the availability of data on like products over potential surrogates’ economic comparability to China. In particular, they argued for the inclusion of Mexico on the list of six possible surrogates, pointing out that Mexico was only slightly less economically comparable to China than the listed surrogates and the only country with data on chlorinated isos.
Reif said the department’s surrogate selection process had been conducted reasonably, upholding both Commerce’s restriction of its potential surrogate list to only six countries and its ultimate selection of Romania.
Conducting an analysis under Loper Bright, Reif determined Commerce’s two-step analysis of statutory factors was the “best reading” of the relevant statute. He explained the law’s language seemed to indicate the department was being granted discretion to choose its surrogate selection method, as “ terms like ‘appropriate,’ ‘comparable’ and ‘significant’ in the statute permit Commerce flexibility,” he said.
He acknowledged that the two-step “sequential approach gives the first factor, economic comparability, a gate-keeping function not afforded to the second factor,” which means that Commerce often ends up excluding countries that are significant producers of a like product.
But, in designing its selection process, the department had three options to fulfill its obligation to consider both statutory factors, he said: it could consider a potential surrogate country’s economic comparability first; it could consider the country’s production level of like product first; or it could conduct the analysis on a case-by-case basis.
The judge provided four reasons for upholding Commerce’s usual practice as the “best reading” of the statute.
First, the law granted Commerce significant discretion, he said. Second, both factors were still being considered -- the department’s use of economic comparability as the threshold factor had been “affirmed consistently” by CIT because it meant “Commerce can better ensure that its normal value calculation accurately reflects the cost of producing the subject merchandise in a hypothetical [market economy] ME country,” he said.
Third, the department’s regulations have a contingency for when none of the countries that reached the second step of its analysis were a significant producer of like merchandise -- Commerce must “request a second list of potential surrogate countries from [the Office of Policy], and then follow the country selection procedure described above,” he said.
And, fourth, its regulations also provide for cases in which it would be better to flip the sequence; when subject merchandise is “unusual or unique (with correspondingly unusual or unique inputs or other unique aspects of the costs of product),” Reif said.
Because Commerce’s analysis was reasonably applied, Reif upheld the department’s exclusion of Mexico from the list of potential surrogates, as well as its determination that Romania was economically comparable.
But he said the department had been wrong to conclude that sodium hypochlorite and calcium hypochlorite were “comparable” products to chlorinated isos.
Although Commerce acknowledged that the petitioners had put more information on the record about sodium hypochlorite and calcium hypochlorite than in the past, the department “decided to disregard the new information as insufficient without an adequate explanation,” he said. Instead, it just said that the petitioners had never raised concerns about its use of the two hypochlorites in past reviews.
“Reiteration of an approach or conclusion in successive segments of a proceeding is insufficient where there is new information on the record,” Reif said. “Commerce’s explanation in this, as in any, proceeding must stand on its own merits.”
He also noted that the petitioner had argued chlorinated isos should have been “narrowly define[d]” because it had only a few major inputs, and the department’s usual practice in such cases is to select comparable products by matching inputs. Commerce had disagreed, saying that method wouldn’t make sense for “industrial commodity chemicals” such as chlorinated isos. It has explained in the past that “[i]n these cases, the large number, and generic nature, of the inputs makes input matching very complicated,” Reif said.
But Commerce didn’t explain how chlorinated isos, which have only three intermediate inputs, “belong to the category of ‘industrial commodity chemicals,’” which have many, he said.
And the department also failed to discuss the physical characteristics of calcium hypochlorite -- it only considered those of sodium hypochlorite, he said.
(Bio-Lab, Inc. v. United States, Slip Op. 25-39, CIT # 24-00024, dated 04/14/25; Judge: Timothy Reif; Attorneys: James Cannon of Cassidy Levy Kent for plaintiffs Bio-Lab, Inc., Innovative Water Care and Occidental Chemical Corp.; Gregory Menegaz of The Inter-Global Trade Law Group for consolidated plaintiffs and defendant-intervenors Juancheng Kangtai Chemical Co. and Heze Huayi Chemical Co.; Tate Walker for defendant U.S. government)