On Remand, Commerce Again Direct Values Energy Costs for Xanthan Gum Producer
On remand, the Commerce Department again chose to directly value xanthan gum exporter Neimenggu Fufeng Biotechnologies’ energy costs for an antidumping duty review. It explained that for the first time in its reviews of the relevant AD order, it was able to break out a surrogate’s costs in a way that let it directly value Fufeng’s energy without fear of double-counting (Neimenggu Fufeng Biotechnologies Co. v. U.S., CIT # 23-00068).
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It also again directly valued Fufeng’s bituminous coal input under Harmonized System subheading 2701.12, not 2701.19.
The review results were remanded by the Court of International Trade in December (see 2412160069). Commerce had initially refused to address either issue, claiming Fufeng failed to exhaust them because it hadn’t raised them in its opening administrative brief.
But CIT Judge Gary Katzmann agreed with the exporter that expecting Fufeng to bring up the two issues unprompted -- after years of the department taking alternative approaches -- was unreasonable. Expecting Commerce’s reversal in its valuation of Fufeng’s coal for instance, would have required “the farthest-gazing of auguries,” he said.
The department directly addressed both on remand.
First, it defended its direct valuation of Fufeng’s energy costs. The surrogate used in both this and prior reviews, Ajinomoto (Malaysia) Berhad, had in the past only ever included energy costs in a selling, general and administrative costs line item labeled “other operating expenses,” it said. Because of that, Commerce couldn’t also directly include mandatory respondents’ energy costs in its costs valuation without double-counting. But in its financial information for this period of review, 2021, Ajinomoto broke out its “other operating expenses” line into “selling and distribution expenses” and “administrative and other expenses.”
Because Commerce determined that “selling and distribution expenses” can’t contain energy, it found that energy must have been housed under the “administrative and other expenses” item, the department said. It said it decided it could safely remove that line item and use Fufeng’s energy costs instead. Doing that still preserved almost 56% of Ajinomoto’s selling and general expenses costs, it said.
“While we acknowledge that ‘administrative and other expenses’ may continue to blend energy expenses with G&A, we clarify here that energy expenses are sufficiently isolated such that we are able to exclude energy costs from the calculation of surrogate financial ratios while still including an amount for SG&A in the numerator of the ratio,” it said.
It added that “[i]n fact,” this reclassification would actually “understate the SG&A expense ratio.”
Second, it explained why it found HS subheading 2701.12 to be the most accurate option for Fufeng’s coal inputs.
It said the most specific way Fufeng’s initial and supplemental questionnaire responses described the input was as “energy coal” and “bituminous coal” that was “of a non-coking grade.” The exporter also clarified on the record that the coal “had a calorific value limit (on a moist, mineral-matter-free basis) less than 5800 Kcal/Kg.”
Subheading 2701.12 covers non-coking and bituminous coal, Commerce said, while 2701.19 is broader, doesn’t cover bituminous coal and does possibly include coking grade coal. As a result, it selected the former subheading to value the coal.
Despite Fufeng’s argument otherwise, “determinations of which [surrogate value] to assign to a given input do not apply across proceedings,” it said.
It distinguished the facts of similar activated carbon reviews, saying those reviews had "substantively different" facts.