Qingdao Qihang Tyre Co. v. United States (308 F. Supp. 3d 1329, 2018)

Stanceu, Chief Judge:

In this consolidated action, seven 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 tires from the People's Republic of China ("China" or the "PRC"). Ruling that certain of the Department's decisions were contrary to law, 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; 2013-2014 , 81 Fed. Reg. 23,272 (Int'l Trade Admin. Apr. 20, 2016) ("Final Results "). Incorporated by reference in the 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; 2013-2014 (Int'l Trade Admin. Apr. 12, 2016) (P.R. Doc. 334), available at https://enforcement.trade.gov/frn/summary/prc/2016-09165-1.pdf (last visited Mar. 30, 2018) (" Final I & D Mem. ").

B. Proceedings Conducted by Commerce

Commerce issued an antidumping duty order (the "Order") on certain off-the-road ("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 sixth administrative review of the Order, on October 30, 2014. Initiation of Antidumping and Countervailing Duty Administrative Review , 79 Fed. Reg. 64,565 (Int'l Trade Admin. Oct. 30, 2014). The sixth administrative review pertained to entries of subject merchandise made during the period of review ("POR") of September 1, 2013 through August 31, 2014. Final Results , 81 Fed. Reg. at 23,272.

Commerce published the preliminary results of the review in October 2015. Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Preliminary Results of Antidumping Duty Administrative Review; 2013-2014 , 80 Fed. Reg. 61,166 (Int'l Trade Admin. Oct. 9, 2015) ("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; 2013-2014 (Int'l Trade Admin. Sept. 30, 2015) (P.R. Doc. 269), available at https://enforcement.trade.gov/frn/summary/prc/2015-25804-1.pdf (last visited Mar. 30, 2018) ("Prelim. I & D Mem. ").

In the Final Results, Commerce assigned individually-determined weighted-average dumping margins to two groups of Chinese companies: Xuzhou Xugong Tyres Co., Ltd., Armour Rubber Co. Ltd., and Xuzhou Hanbang Tyre Co., Ltd. (collectively, "Xugong"), which Commerce treated as a single entity for purposes of the review; and Qingdao Qihang Tyre Co., Ltd. ("Qihang"). Final Results , 81 Fed. Reg. at 23,272. Having selected these exporters/producers of OTR tires as "mandatory" respondents, i.e., respondents it intended to examine individually, Commerce assigned a weighted-average dumping margin of 65.33% to Xugong and a weighted-average dumping margin of 79.86% to Qihang in the Final Results. Id. at 23,273. Commerce assigned a weighted average of these two margins, 70.55%, to respondents that it did not select for individual examination but that Commerce found to have qualified for a "separate rate" based on demonstrated independence from the government of China. Id.

C. The Parties to this Consolidated Case

The plaintiffs in this litigation are Qihang and Xugong, i.e., the two mandatory respondents, and the following separate rate respondents: Qingdao Free Trade Zone Full-World International Trading Co., Ltd. ("Full World"), Trelleborg Wheel Systems (Xingtai) Co., Ltd. ("Trelleborg" or "TWS Xinghai"), and Weihai Zhongwei Rubber Co., Ltd. ("Weihai Zhongwei").

D. Proceedings before the Court

The five actions consolidated in this litigation were each commenced between April 29, 2016 and May 12, 2016. Before the court are plaintiffs' motions for judgment on the agency record brought under USCIT Rule 56.2, all of which are opposed by defendant United States. Defendant advocates that the court sustain the Final Results in all respects. See Def.'s Resp. to Mots. for J. on the Agency R. (June 7, 2017), ECF No. 44 ("Def.'s Br."). The court held oral argument on November 30, 2017. See Order (Aug. 3, 2017), ECF No. 60.

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), 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, including an action contesting a final determination that Commerce issues to conclude an antidumping duty administrative review. 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).

B. Summary of the Parties' Claims and the Court's Rulings

Qihang and Xugong have three claims in common. See Pl.'s Mem. of Law in Supp. of Mot. for J. on the Agency R. Pursuant to Rule 56.2 (Dec. 7, 2016), ECF No. 35 ("Qihang's Br."); Mem. of P. & A. of Pls. Xuzhou Xugong Tyres Co., Ltd., Armour Rubber Co. Ltd., and Xuzhou Hanbang Tyre Co., Ltd. in Supp. of their Mot. for J. on the Agency R. (Dec. 7, 2016), ECF Nos. 32 (conf.), 33 (public) ("Xugong's Br."). Both claim that Commerce, when determining the export prices or constructed export prices of the sales of their subject merchandise, erred in making deductions for unrefunded value-added tax ("VAT") incurred in China. Qihang's Br. 5-15; Xugong's Br. 71-78. They also claim that the Department's calculation of a "surrogate" value for one of their production materials, reclaimed rubber, was not supported by substantial evidence on the record. Qihang's Br. 33-54; Xugong's Br. 23-38. In their third claim in common, both contest the method by which Commerce valued foreign inland freight in China. Qihang's Br. 15-33; Xugong's Br. 38-44. In this Opinion and Order, the court explains why it believes a remedy is necessary in response to each of these three claims of the two mandatory respondents.

Xugong claims, additionally, that Commerce erred in not choosing Peru as the market-economy country it would use as a primary surrogate country, see Xugong's Br. 5-23, and that Commerce unlawfully resorted to facts otherwise available and an adverse inference for certain sales Commerce determined to have been unreported in the review, see id. at 44-71. The court does not find merit in these two additional claims of Xugong.

Trelleborg claims that Commerce acted contrary to law in assigning it the margin of 70.55% that Commerce assigned to all separate rate respondents. Mem. of P. & A. of Pl. Trelleborg Wheel Systems (Xingtai) Co., Ltd. in Supp. of its Mot. for J. on the Agency R. (Dec. 7, 2016), ECF Nos. 30 (conf.), 31 (public) ("Trelleborg's Br."). The court rules that Commerce acted in accordance with law in assigning to Trelleborg an all-others rate.

Like Trelleborg, Full World and Weihai Zhongwei were assigned the all-others rate of 70.55% in the sixth administrative review. As plaintiffs in this case, they seek relief in the form of a redetermined all-others rate based on any revision to the rates of the examined respondents that ultimately is made as a result of judicial review. Mem. of Law in Supp. of Pl. Qingdao Free Trade Zone Full-World Int'l Trading Co., Ltd.'s Rule 56.2 Mot. for J. upon the Agency R. (Dec. 7, 2016), ECF No. 34; Mem. of Law in Supp. of Pl.'s Rule 56.2 Mot. for J. on the Agency R. (Dec. 7, 2016), ECF No. 36. The court rules in favor of these two plaintiffs and also rules that Trelleborg will be assigned the redetermined all-others rate.

C. Adjustment to 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. Section 772 of the Tariff Act, 19 U.S.C. § 1677a, determines export price ("EP") and constructed export price ("CEP") by making various adjustments to "[t]he price used to establish export price and constructed export price," 19 U.S.C. § 1677a(c) ; Commerce refers to the unadjusted price for determining EP and CEP as the "starting price." See 19 C.F.R. § 351.402(a).

The statutory provision at the center of the Xugong's and Qihang's value-added tax claims is section 772(c)(2)(B) of the Tariff Act, 19 U.S.C. § 1677a(c)(2)(B), which effects a downward adjustment in EP and CEP starting prices and thereby increases any dumping margin. The provision directs Commerce to reduce the starting price 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." 19 U.S.C. § 1677a(c)(2)(B).

For the Final Results, Commerce made several findings concerning value-added tax incurred in China by the two mandatory respondents. Among them was a finding that the respondents incurred VAT of 17% and were refunded 9%, which Commerce described as "the rebate rate for exported goods." Final I & D Mem. at 23 ("the record makes clear that exporters of OTR tires will pay 17 percent VAT and be refunded only nine percent ...."); id. at 24 ("according to the Chinese VAT schedule, the standard VAT levy is 17 percent and the rebate rate for subject merchandise is nine percent."). Concluding that the portion of the VAT that was not "rebated" or "refunded" due to exportation, to which Commerce referred as "irrecoverable" VAT, is an "export tax, duty, or other charge" within the meaning of 19 U.S.C. § 1677a(c)(2)(B), Commerce made downward adjustments to the EP or CEP starting prices of both mandatory respondents. Id. at 24. Further finding that the irrecoverable VAT was the difference between the 17% "standard VAT levy" and the 9% "rebate" rate, i.e., 8%, Commerce reduced both respondents' EP or CEP starting prices by an amount it calculated as 8% of the free-on-board ("FOB") value of the exported subject merchandise. Id. at 23-24. This adjustment to the starting prices for EP and CEP effected a commensurate increase in the dumping margins of both mandatory respondents.

Xugong and Qihang claim that 19 U.S.C. § 1677a(c)(2)(B) does not apply to irrecoverable VAT. They argue that Chinese VAT is a domestic tax imposed on certain materials used in producing OTR tires, not an "export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise to the United States" within the intended meaning of the provision. See 19 U.S.C. § 1677a(c)(2)(B). In the alternative, they argue that the Department's having calculated irrecoverable VAT as the 8% difference between the 17% VAT rate and the 9% refund rate is unsupported by record evidence. See Qihang's Br. 13-15; Xugong's Br. 75-78. They maintain that because the 17% Chinese VAT is paid on material inputs, not the value of the exported merchandise, any irrecoverable VAT was not equal to 8% of the export value of the finished good.

1. Commerce Did Not Make a Finding, and the Record Would Not Support a Finding, that Xugong and Qihang Actually Paid Value-Added Tax to the PRC Government upon Exportation of Subject Off-the-Road Tires

Commerce did not state a factual finding that either Xugong or Qihang actually paid value-added tax to the government of China "on the exportation of" subject off-the-road tires to the United States. See 19 U.S.C. § 1677a(c)(2)(B). While the Final Issues and Decision Memorandum contains findings of fact and conclusions of law pertaining to value-added tax, that specific factual finding, or one equivalent to it, does not appear in the document. Commerce stated that irrecoverable VAT "amounts to an export tax, duty, or other charge imposed on exported merchandise," Final I & D Mem. at 22 (emphasis added), and "is a product-specific export tax, duty, or other charge that is incurred on the exportation of subject merchandise," id. at 26 (emphasis added). The quoted statements are not the equivalent of a finding that VAT actually was paid "on the exportation of" the subject OTR tires. In response to Xugong's assertion that under the applicable Chinese VAT regulations the VAT rate on exports is zero, Commerce answered that

nowhere in the documents on the record does it say that exporters of OTR tires should not be liable for VAT upon export of the merchandise, and Xugong does not point to a specific exhibit number or page number where this information can be found on the record. To the contrary, the record makes clear that exporters of OTR tires will pay 17 percent VAT and be refunded only nine percent (see below).

Final I & D Mem. at 23 (emphasis added). In stating its conclusion in this way, Commerce did not find that Xugong and Qihang actually paid VAT "on the exportation of" their subject merchandise, instead stating that the exporters were "liable" for it. Id. Nor does the statement specify the intended meaning of the words "will pay 17 percent VAT." Id.

Were the court to interpret any of the Department's quoted statements to mean that Commerce found as a fact that the mandatory respondents actually paid VAT "on the exportation of" their subject merchandise, the statements would conflict with the Department's finding that exportation of OTR tires resulted in a refund of value-added tax, calculated as 9% of the FOB export value of the tires. See id. at 22-23. It also would conflict with the Department's finding that the value-added tax at issue in this case "is VAT paid on inputs and raw materials (used in the production of exports)." Id. at 23.

Additionally, the record in this case would not have supported a finding that the value-added tax was paid upon the exportation of the subject merchandise. The questionnaire responses of both mandatory respondents constitute record evidence that the VAT incurred by these respondents resulted from purchases of some of the material inputs used in OTR tire production. See Qingdao Qihang Tyre Co. Ltd.-Section C and Double Remedies Questionnaire Responses at 44-50 (Feb. 27, 2015) (P.R. Doc 100); 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 at 57-59 (Feb. 27, 2015) (P.R. Doc. 101).

2. Commerce Reasoned that VAT Incurred on Material Inputs Used in Domestic Production of a Good, But Not Refunded upon Exportation of the Good, "Amounts to" a "Tax, Duty, or Other Charge Imposed by the Exporting Government on the Subject Merchandise"

Commerce concluded that under China's VAT regime "some portion of the input VAT that a company pays on purchases of inputs used in the production of exports is not refunded" upon the exportation of the finished good. Final I & D Mem. at 22. As the court noted above, Commerce reasoned that the portion that is not refunded (to which Commerce referred as irrecoverable VAT) "amounts to" an "export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise to the United States" within the meaning of 19 U.S.C. § 1677a(c)(2)(B). Id. at 23 ("... irrecoverable VAT, not VAT per se , amounts to an export tax."). Commerce stated that "[t]he statute does not define the terms 'export tax, duty, or other charge imposed' on the exportation of subject merchandise," id. at 23, and that "[w]e find it reasonable to interpret these terms as encompassing irrecoverable VAT because the irrecoverable VAT is a cost imposed by the government that arises as a result of the exportation of the subject merchandise." Id. at 23-24. The court considers, therefore, whether it was reasonable for Commerce to interpret the terms of § 1677a(c)(2)(B) to encompass VAT incurred on materials used in production of OTR tires in China that was not fully refunded upon exportation of the finished tires. The court concludes that it was not.

3. The Department's Interpretation of 19 U.S.C. § 1677a(c)(2)(B) Is Impermissible

Defendant argues that the Department's interpretation of 19 U.S.C. § 1677a(c)(2)(B) to apply to Chinese irrecoverable VAT is a reasonable statutory interpretation entitled to deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) (" Chevron "). Def.'s Br. 45. The court disagrees.

As the Supreme Court instructed in Chevron , "[f]irst, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter, for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Chevron , 467 U.S. at 842-843, 104 S.Ct. 2778 (footnote omitted). "If a court, employing traditional tools of statutory construction, ascertains that Congress had an intention on the precise question at issue, that intention is the law and must be given effect." Id. at 843 n.9, 104 S.Ct. 2778. "Traditional tools of statutory construction," id. , include not only an examination of the statutory text and structure but also consideration of the legislative history. See, e.g. , Aqua Products, Inc. v. Matal , 872 F.3d 1290, 1303, 1312-14 (Fed. Cir. 2017) (en banc ); Gazelle v. Shulkin , 868 F.3d 1006, 1010 (Fed. Cir. 2017), cert. denied , --- U.S. ----, 138 S.Ct. 690, 199 L.Ed.2d 539 (2018) ("We may find Congress has expressed unambiguous intent by examining the statute's text, structure, and legislative history, and apply the relevant canons of interpretation.") (internal quotations and citations omitted); Kyocera Solar, Inc. v. U.S. Int'l Trade Comm'n , 844 F.3d 1334, 1338 (Fed. Cir. 2016). In this case, the "precise question at issue," Chevron , 467 U.S. at 842, 104 S.Ct. 2778, is whether the words "export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise to the United States" can be interpreted to describe a value-added tax incurred on materials used in the production of the merchandise in the foreign country but not refunded upon the exportation of that merchandise to the United States.

The plain meaning of the statutory language casts doubt on the Department's interpretation. The words "export tax, duty, or other charge imposed ... on the exportation of the subject merchandise," as used in § 1677a(c)(2)(B) (emphasis added), would not appear to describe a value-added tax incurred on materials used in the domestic production of a good, even if entirely unrefunded upon a later exportation of that good. At least arguably, a value-added tax incurred on materials used in production has been "imposed" on something other than exportation and already has been incurred by the time the exportation of the finished good occurs. And although the term "tax, duty, or other charge " is broader than the word "tax," the provision requires that any such "charge" be "imposed ... on the exportation" of the good, 19 U.S.C. § 1677a(c)(2)(B) (emphasis added). A previously-incurred tax on materials used in domestic production would not seem to satisfy this requirement.

Additionally, the statutory structure and legislative history of 19 U.S.C. § 1677a(c)(2)(B) and related provisions in the Tariff Act cause the court to conclude that "Congress had an intention on the precise question at issue" that "must be given effect." Chevron , 467 U.S. at 843 n.9, 104 S.Ct. 2778. Congress intended that a domestic tax, such as a value-added tax, imposed by the foreign country on a good or the materials used to produce that good, would not result in a downward adjustment to EP and CEP starting prices under § 1677a(c)(2)(B).

Section 772(c) of the Tariff Act, 19 U.S.C. § 1677a(c), was enacted in its current form by the Uruguay Round Agreements Act ("URAA"). See Uruguay Round Agreements Act, Pub. L. No. 103-465, § 223, 108 Stat. 4809, 4876 (1994). The Statement of Administrative Action (the "SAA") accompanying the URAA explained that

New section 772 retains the distinction in existing law between "purchase price" (now called "export price") and "exporter[']s sale price" (now called "constructed export price")....

* * *

Under new section 772(c)(1), Commerce will calculate export price and constructed export price by adding to the starting prices: (1) packing costs for shipment to the United States, if not included in the price; (2) import duties that are rebated or not collected due to the exportation of the merchandise (duty drawback); and (3) countervailing duties attributable to export subsidies. Section 772(c)(2) requires that Commerce reduce export price to account for: (1) transportation and other expenses, including warehousing expenses, incurred in bringing the subject merchandise from the original place of shipment in the exporting country to the place of delivery in the United States; and (2) if included in the price, export taxes or other charges imposed by the exporting country. These adjustments have not changed from current law.

Statement of Administrative Action accompanying the Uruguay Round Agreements Act, H.R. Rep. No. 103-316, Vol. 1 at 822-23 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4163 (emphasis added) ("SAA "). The reference to "current law" clarifies that the downward adjustment to EP and CEP for "export taxes or other charges" (the "export tax" adjustment) under the new statute was intended to be the same downward adjustment as the downward adjustment to purchase price and exporter's sale price (identified collectively in the statute as "United States price") as was made under the prior statute. That is, the only change to the export tax adjustment Congress intended to make in enacting the URAA was the change to the new terminology used to describe what was being adjusted.

The statutory language specifying the adjustment for export taxes, duties, and other charges, i.e., the "export tax" adjustment, was not materially changed by the URAA. Consistent with the explanation in the SAA that no change was intended in this adjustment, Congress retained in the post-URAA section 772(c)(2)(B) the provision accomplishing the adjustment that was nearly identical to that of section 772(d)(2)(B), as codified by the Trade Agreements Act of 1979 ("TAA"), the antecedent provision. Trade Agreements Act of 1979, Pub. L. No. 96-39, § 101, 93 Stat. 144, 182 (1979). Therefore, the court must decide if Congress had an intention on whether the TAA export tax adjustment would apply to materials used in the production of a good in a foreign country that was not remitted or avoided by reason of exportation of the finished good. The court concludes that Congress intended that it would not.

Just prior to enactment of the URAA in 1994, section 772, in all respects relevant to the issue presented here, was unchanged from the form in which it was enacted as part of the TAA. Significant to this discussion is that the 1979 statute included not only the export tax adjustment, which if applied would increase a dumping margin, but then also included an upward adjustment to purchase price and exporter's sales price, i.e., an adjustment that would reduce a dumping margin, that applied to recoverable value-added taxes. The two foreign-tax-related provisions that appeared in the TAA version of the statute are as follows:

The purchase price and the exporter's sales price shall be adjusted by being-

(1) increased by-

* * *

(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). A comparison of the language Congress used in the two provisions demonstrates an intent to address different classes of taxes in each. In § 1677a(d)(1)(C), Congress addressed a tax "imposed in the country of exportation directly upon the exported merchandise" or the components used to produce it. 19 U.S.C. § 1677a(d)(1)(C) (1982) (emphasis added). This language plainly describes a domestic tax such as a VAT. Any amount of such tax that was refunded, or not collected, by reason of exportation to the United States would reduce a dumping margin if it was reflected in prices of home-market sales of identical or similar merchandise. Consistent with its plain meaning, the provision generally was understood to refer to recoverable VAT imposed by the country of exportation. See Federal-Mogul Corp. v. United States , 63 F.3d 1572 (Fed. Cir. 1995).

In contrast, Congress provided in § 1677a(d)(2)(B) (1982) (and currently in § 1677a(c)(2)(B) ) that a tax, duty, or other charge in the home-market country imposed on the exportation of the merchandise to the United States, if included in the price of the merchandise, would increase a dumping margin (unless intended to offset a countervailable subsidy). The provision does not refer to domestic taxes imposed on the merchandise itself, and there is no mention of a tax imposed on components of that merchandise, as there was in § 1677a(d)(1)(C).

Because of the different language Congress used in the two provisions, any attempt to interpret § 1677a(d)(2)(B) to address irrecoverable VAT poses an insurmountable problem. The differences in the two provisions of the TAA demonstrate congressional awareness of a distinction between domestic taxes, such as value-added taxes, that are imposed directly on finished goods or the components thereof (which had the potential to result in an adjustment that reduces a dumping margin), and taxes imposed on the exportation of finished, exported goods (which had the potential to result in an adjustment that increases a dumping margin). While specifying in § 1677a(d)(1)(C) that a dumping margin would be reduced for a domestic tax, such as a VAT, if it was recovered (or not collected) by reason of exportation and appeared in the price of the foreign like product, Congress did not provide for a margin adjustment, downward or upward, for irrecoverable VAT. Congress having addressed taxes such as value-added taxes in subparagraph (1)(C) of § 1677a(d), it would be unreasonable, and illogical, to conclude that Congress also intended to address these same types of taxes in subparagraph (2)(B), in which it used language that was different and unsuitable for that purpose. Congress plainly was aware that a foreign government might impose a domestic tax on materials used in producing a good that is later exported to the United States and also aware that such a tax might be, or might not be, recovered or not collected by reason of the exportation of the good made from those materials. The plain meaning of the two provisions, when read together, demonstrates congressional intent not to increase a dumping margin for VAT, whether or not recoverable upon exportation of the finished good. In sum, the 1979 TAA reduced a dumping margin for recoverable VAT that was present in home-market prices, increased a dumping margin for taxes, duties, and other charges imposed on the exportation of the finished good to the United States, if appearing in the purchase price or exporter's sale price (unless imposed to adjust for a countervailable subsidy), and made no margin adjustment at all for irrecoverable VAT.

While imposing the same adjustment to United States price (now EP and CEP) for export taxes as did the TAA, the URAA converted the § 1677a(d)(1)(C) upward adjustment to United States price to a downward adjustment to normal value, where it also would reduce a dumping margin. A side-by-side comparison of the TAA and URAA provisions illustrates the change. As noted above, the TAA increased United States price (and thereby reduced dumping margins) by:

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 ....

19 U.S.C. § 1677a(d)(1)(C) (1982). As amended by the URAA, the antidumping statute reduces the price by which normal value is determined (and thereby reduces dumping margins) 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 has remained in the antidumping law since the 1994 enactment of the URAA and is unchanged in the current statute.

The SAA discussed the change from the TAA version to the URAA version as follows:

The deduction from normal value for indirect taxes constitutes a change from the existing statute. The change is intended to ensure that dumping margins will be tax-neutral. The requirement that the home-market consumption taxes in question be "added to or included in the price" of the foreign like product is intended to insure that such taxes actually have been charged and paid on the home market sales used to calculate normal value, rather than charged on sales of such merchandise in the home market generally. It would be inappropriate to reduce a foreign price by the amount of the tax, unless a tax liability had actually been incurred on that sale.

SAA at 827-28, reprinted in 1994 U.S.C.C.A.N. at 4166.

In Federal-Mogul Corp. , 63 F.3d at 1575-76, which was decided after enactment of the URAA but on a factual situation arising under the prior TAA provisions, the Court of Appeals noted that Commerce had a practice under the TAA of addressing recoverable VAT by making a downward adjustment to normal value rather than an upward adjustment to U.S. price. The Court of Appeals affirmed this practice, noting that doing so corrects a mathematical problem that understated the downward margin adjustment, from the standpoint of achieving tax neutrality, when the adjustment is made to U.S. price. Id. at 1580-82. The URAA made a statutory change analogous to the Department's practice under the prior statute.

The principle that dumping margins should be "tax-neutral," which is noted in the SAA excerpt quoted above and in Federal-Mogul , id. , serves to explain the adjustments in the URAA and those in the TAA as well. Unless a downward margin adjustment is made, home-market taxes such as a VAT, if present in the price of the foreign like product but, due to recovery upon exportation, not present in the U.S. price (i.e., the purchase price or the exporter's sales price under the TAA, and the export price or constructed export price under the URAA), improperly inflate a dumping margin. To obtain a tax-neutral price comparison, the margin-inflating effect of a recoverable domestic tax is removed from the margin calculation, either by adding it to the U.S. price (under the previous law) or by removing it from the home-market price (under the current statute). On the other hand, an "export" tax, i.e., an export tax, duty, or other charge that is incurred upon the exportation of the merchandise, is by definition one that is not present in the home-market price of the foreign like product. Congress intended that such a tax, if present in the U.S. price, should be removed from U.S. price to achieve a tax-neutral price comparison between normal value (when based on the home-market price or other comparison-market price) and U.S. price, unless imposed to offset a countervailable subsidy. In summary, Congress provided, in both the TAA and the URAA, a statutory scheme under which home-market taxes that are recoverable upon exportation, such as recoverable VAT, the adjustment for which would reduce a dumping margin, are treated one way and export taxes, the adjustment for which would increase a dumping margin, are treated the opposite way.

It can now readily be seen that the Department's interpretation of the current § 1677a(c)(2)(B) to require a margin increase for irrecoverable VAT, which is not supported by the plain meaning of the provision, also conflicts with the legislative purpose. A foreign exporter of a product upon which VAT, a domestic tax, was imposed (either on the product itself or components therein) will receive a reduction in the dumping margin to the extent the VAT appears in the home-market price but does not appear in the U.S. price that is compared to that price, i.e., to the extent the VAT is refunded or not collected as a result of exportation ("recoverable" VAT). The downward adjustment to the margin (whether effected by an upward adjustment to U.S. price, as under former law, or a downward adjustment to normal value, as under current law) restores the balance to tax-neutrality. On the other hand, Congress intended that VAT that appears in both the home-market price and also in the U.S. price, because it is irrecoverable upon export, would result in neither an upward nor a downward adjustment to the dumping margin. Having incurred it, the foreign producer or exporter can be expected to pass it on by including it in the U.S. price, and there is no justification for removing this domestic tax from the U.S. price. Because the irrecoverable VAT is present in the home-market price of the foreign like product and also in the U.S. price, the comparison is already tax-neutral, and no adjustment to the dumping margin is required or appropriate. The producer or exporter already lost the benefit of any downward adjustment to the margin to the extent the VAT was not recovered, in that the downward adjustment to normal value (as was the previous upward adjustment to U.S. price) is limited to recoverable VAT. This stands in contrast to an export tax, which may be present in the U.S. price but, by definition, cannot be present in the home-market price. This is because, as the URAA recognized in 19 U.S.C. § 1677a(c)(2)(B) (which is continued in current law) and the TAA recognized in 19 U.S.C. § 1677a(d)(2)(B) (1982), an export tax, duty, or other charge under the "export tax" provision is limited to one that is "imposed by the exporting country on the exportation of the subject merchandise to the United States." 19 U.S.C. § 1677a(c)(2)(B) (emphasis added); see 19 U.S.C. § 1677a(d)(2)(B) (1982) ("imposed by the country of exportation on the exportation of the merchandise to the United States") (emphasis added). The Department's construction of 19 U.S.C. § 1677a(c)(2)(B) to increase a dumping margin for irrecoverable VAT does not achieve tax neutrality but upsets the balance the statute is intended to achieve, impermissibly inflating a dumping margin by the amount of the irrecoverable VAT.

To summarize, because irrecoverable VAT would be present in both the price of the foreign like product and the U.S. price, no adjustment to the margin is necessary to achieve tax neutrality. Making an adjustment under these circumstances by reducing the starting price for EP or CEP by the amount of the irrecoverable VAT would be "double-counting" the effect of the irrecoverable VAT, inflating the dumping margin accordingly.

Up to this point, the court's analysis considered comparisons between U.S. price and normal value that is based on price, either in the home market or another comparison market. The court now considers this issue in the context of situations in which normal value is not based on price. Normal value may be based on constructed value (under 19 U.S.C. § 1677b(e) ) and, in the special case of goods produced in a non-market economy country, ordinarily is based on valuation of factors of production according to the best available information in a market economy country Commerce considers appropriate (under 19 U.S.C. § 1677b(c) ). In the case of constructed value, the Tariff Act includes a provision to ensure that the cost of materials used in producing the subject imported merchandise do not include a recoverable internal tax such as a VAT. Under this provision, "the cost of materials shall be determined without regard to any internal tax in the exporting country imposed on such materials or their disposition that is remitted or refunded upon exportation of the subject merchandise produced from such materials." 19 U.S.C. § 1677b(e). The use of the term "internal tax" distinguishes the provision from the export tax adjustment, which applies only to external taxes imposed on exportation. No provision parallel to § 1677b(e) is in § 1677b(c), which addresses normal value for non-market economy countries based on surrogate values for factors of production. This omission is logical because the prices for the materials in the home-market, non-market economy country ordinarily are not used in calculating normal value under that provision. But here also, the objective of tax neutrality is still relevant, as Commerce implicitly recognizes in preferring surrogate values that are exclusive of taxes. See, e.g. , Final I & D Mem. at 51.

Commerce explained in the review that previously it did not adjust EP and CEP starting prices for Chinese irrecoverable VAT but that "[i]n 2012, we announced a change of methodology with respect to the calculation of the EP or CEP to include an adjustment for irrecoverable VAT in certain NME [non-market economy] countries, in accordance with section 772(c)(2)(B) of the Act."Final I & D Mem. at 22 (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, 36,482 (Int'l Trade Admin. June 19, 2012) (" Methodological Change ") ). In Methodological Change , Commerce explained that its administrative practice had been not to make the adjustment to EP and CEP starting prices under 19 U.S.C. § 1677a(c)(2)(B) when the good was exported from a non-market economy country "because pervasive government intervention in NMEs precluded proper valuation of taxes paid by NME respondents to NME governments." Methodological Change , 77 Fed. Reg. at 36,482. In the notice, Commerce concluded that for certain non-market economy countries, specifically China and Vietnam, under its countervailing duty practice it now believed it could "determine whether the Chinese or Vietnamese governments have bestowed an identifiable and measurable benefit upon a producer, and whether the benefit is specific, including certain measures related to taxation." Id. On that reasoning, Commerce announced that for antidumping investigations and reviews of merchandise from China and Vietnam "the Department will determine whether, as a matter of law, regulation, or other official action, the NME government has imposed 'an export tax, duty, or other charge' upon export of the subject merchandise during the period of investigation or the period of review (e.g. , an export tax or VAT that is not fully refunded upon exportation)." Id. As applied to an internal tax such as a VAT, this reasoning was contrary to the congressional intent underlying 19 U.S.C. § 1677a(c)(2)(B).

Rather than take account of the differences between an export tax and an internal tax such as a VAT imposed domestically on materials used in production in the country of exportation, Methodological Change treats all irrecoverable VAT in a non-market economy country as the equivalent of an export tax for purposes of 19 U.S.C. § 1677a(c)(2)(B). This is erroneous for the reasons the court discussed previously: Congress drew a clear distinction between the export tax adjustment, which it addressed in § 1677a(c)(2)(B), and VAT imposed domestically in the country of production, on the good or the materials used to make it, which it addressed in the normal value provisions of the statute. Congress was familiar with the concept of irrecoverable VAT and addressed it by enacting provisions under which irrecoverable VAT would neither increase nor decrease a dumping margin. In carefully crafting § 1677a(c)(2)(B) to apply only to export taxes and other charges imposed upon exportation of the good, and not to internal taxes imposed by the country of exportation (whether or not recoverable upon export), Congress made no exception for the determination of EP or CEP for goods exported from non-market economy countries. To the contrary, while such countries are treated differently as to the determination of normal value, see 19 U.S.C. § 1677b(c), they are not treated differently as to the determination of U.S. price (EP or CEP), see 19 U.S.C. § 1677a. It is noteworthy that the non-market economy provisions of 19 U.S.C. § 1677b(c) predated the URAA, having been enacted as part of the Omnibus Trade and Competitiveness Act of 1988, replacing the more limited provisions relating to state-controlled economies. See Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418, § 1316(a), 102 Stat. 1107, 1186-87 (1988). The 1988 amendments did not make changes to § 1677a(d)(2)(B), which addressed export taxes.

From the time of the 1988 amendments to the present, there has been no indication that Congress intended for value-added taxes imposed by non-market economy countries to be treated differently under 19 U.S.C. § 1677a(d)(2)(B) (1982) (now § 1677a(c)(2)(B) ) than those imposed by market economy countries. The reasoning Commerce put forth in Methodological Change , which applies only to certain non-market economy countries, is based on a contrary, and invalid, assumption. Broadly stated, normal value is the value at which a good should be sold in the U.S. market in order to be considered to be fairly traded under the antidumping duty laws. U.S. price (EP or CEP) is the adjusted price at which the good is sold in the U.S. market. Unlike the method of determining the former, the method of determining the latter does not change in the special situation in which the good is exported from a non-market economy country. Compare 19 U.S.C. § 1677a, with 19 U.S.C. § 1677b. Under the correct implementation of the statute, irrecoverable VAT does not result in an increase or a decrease in a dumping margin, regardless of whether the exporting country is a market economy country or a non-market economy country.

In the Final Issues and Decision Memorandum, Commerce attempts to distinguish China from other countries with respect to VAT. Commerce compared the Chinese VAT system with what it called a "typical VAT system," according to which producers "receive on export a full rebate of the VAT which they pay on purchases of inputs used in the production of exports ('input VAT'), and, in the case of domestic sales, the company can credit the VAT they pay on input purchases for those sales against the VAT they collect from customers." Final I & D Mem. at 22 (footnote omitted). According to Commerce, "[t]hat stands in contrast to the PRC's VAT regime, where some portion of the input VAT that a company pays on purchases of inputs used in the production of exports is not refunded." Id. (footnote omitted). Under the Department's flawed reasoning, Chinese irrecoverable VAT is within the scope of 19 U.S.C. § 1677a(c)(2)(B) simply because it is irrecoverable. Were this reasoning sound, any VAT not recovered or avoided by reason of exportation of the finished good, regardless of the country of exportation, would have to be treated the same way, i.e., to increase a dumping margin. As the history and purpose of the statute demonstrate, that is not what Congress intended.

Because the Department's interpretation of 19 U.S.C. § 1677a(c)(2)(B) to allow it to deduct irrecoverable VAT from EP or CEP starting prices is not supported by plain meaning and is contrary to congressional intent, it must be set aside according to Chevron Step One. Defendant cites decisions in which this Court concluded that the Department's interpretation is a reasonable one, Def.'s Br. 46-49, and the court notes that other decisions of this Court also have reached that conclusion. In these prior decisions, the issue of whether the Department's interpretation was consistent with statutory history and legislative purpose, and with legislative history as shown in the SAA, does not appear to have been argued, as that issue is not addressed in the various opinions. See Diamond Sawblades Mfrs.' Coal. v. United States , 42 CIT ----, ----, Slip Op. 18-28 at *4-12, 301 F.Supp.3d 1326, ----, 2018 WL 1445677 (Mar. 22, 2018) ; Aristocraft of Am., LLC v. United States , 41 CIT ----, ----, 269 F.Supp.3d 1316, 1321-26 (2017) ; Jacobi Carbons AB v. United States , 41 CIT ----, ----, 222 F.Supp.3d 1159, 1186-88 (2017) ; Juancheng Kangtai Chem. Co. v. United States , 41 CIT ----, ----, Slip Op. 17-3 at *25-31, 2017 WL 218910 (Jan. 19, 2017) ; Fushun Jinly Petrochemical Carbon Co. v. United States , 40 CIT ----, ----, Slip Op. 16-25 at *20-25, 2016 WL 1170876 (Mar. 23, 2016). The court now concludes that the statutory history and legislative purpose demonstrate that the Department's interpretation cannot be a reasonable one.

In conclusion, Commerce has made downward adjustments to the EP and CEP starting prices for subject merchandise exported by Xugong and Qihang based on an impermissible construction of 19 U.S.C. § 1677a(c)(2)(B). Congress did not intend for such deductions to occur. Commerce must correct this error in responding to the court's order in this proceeding. The court, therefore, has no occasion to consider the claims in the alternative of Xugong and Qihang that Commerce erroneously determined the amounts of irrecoverable VAT.

D. Claims Challenging Surrogate Values

In proceedings, including reviews, of antidumping duty orders on merchandise from non-market economy countries such as China, Commerce ordinarily determines the normal value of the subject merchandise according to the procedures of section 773(c)(1) of the Tariff Act, 19 U.S.C. § 1677b(c)(1). Under these procedures, Commerce determines normal value "on the basis of the value of the factors of production utilized in producing the merchandise" plus "an amount for general expenses and profit plus the cost of containers, coverings, and other expenses." Id. § 1677b(c)(1). The factors of production include, but are not limited to, the "hours of labor required," the "quantities of raw materials employed," "amounts of energy and other utilities consumed," and "representative capital cost, including depreciation." Id. § 1677b(c)(3). Commerce is directed generally to base the values of factors of production "on the best available information regarding the values of such factors in a market economy country or countries considered to be appropriate." Id. § 1677b(c)(1). Commerce is further directed to value factors of production using information from one or more market economy countries that are "at a level of economic development comparable to that of the nonmarket economy country" and "significant producers of comparable merchandise." Id. § 1677b(c)(4).

In contesting the Final Results, Xugong and Qihang challenge specifically the surrogate value for reclaimed rubber, a raw material that both used in tire production. See Xugong's Br. 23-38; Qihang's Br. 33-54. They also challenge the method Commerce used to calculate a surrogate value for one of the expenses Commerce included in the normal value calculation, which was "foreign inland freight." See Xugong's Br. 38-44; Qihang's Br. 15-33.

1. Surrogate Value for Reclaimed Rubber

"Reclaimed rubber" is a product obtained by processing rubber products into a form that can be used as a material in the manufacturing of new rubber products, such as tires. Xugong and Qihang challenge as unreasonable and aberrational the surrogate value Commerce calculated for this factor of production, which was an average unit value ("AUV") of $2.49 per kilogram, using Global Trade Atlas ("GTA") import data from Thailand on reclaimed rubber. Final I & D Mem. at 53-57. They argue that the AUV obtained from the Thai GTA import data was aberrational when compared to other record data and that it also was aberrational because it was higher than the surrogate values Commerce applied to natural rubber. According to Xugong and Qihang, the historical record data demonstrate that reclaimed rubber prices over the last thirty years always have been lower than the prices for natural rubber. Both argue that Commerce should have used, as the best available information, an AUV obtained from GTA data on Peruvian imports of reclaimed rubber, which was $0.53 per kilogram, and which was lower than the AUV shown in the Peruvian data for natural rubber. See Provision of Initial Surrogate Values by Xuzhou Xugong Tyres Co. Ltd. at Ex. 7 (Mar. 19, 2015) (P.R. Docs. 128-32) ("Xugong Initial SV Submission ").

The record contained GTA import data on reclaimed rubber from countries Commerce considered to be economically comparable to China that allowed Commerce to determine per-kilogram AUVs, based on quantities, as follows: Peru ($0.53, based on 1,102,938 kg.), Belarus ($0.73, based on 1,479,490 kg.), Bulgaria ($0.79, based on 367,000 kg.), Serbia ($0.82, based on 306,485 kg.), Ukraine ($0.90, based on 93,521 kg.), Ecuador ($0.99, based on 170,346 kg.), Romania ($1.07, based on 3,967,111 kg.), South Africa ($1.34, based on 312,374 kg.), Montenegro ($1.41, based on 839 kg.), Colombia ($1.84, based on 16,002 kg.), Algeria ($2.21, based on 58,157 kg.), Thailand ($2.49, based on 205,384 kg.), Jordan ($12.94, based on 249 kg.), and Paraguay ($19.57, based on 53 kg.). See Qihang's Br. 43. Commerce viewed the AUVs for Jordan and Paraguay as "truly aberrational" and excluded them from consideration. Final Results of the 2013-2014 Administrative Review of the Antidumping Duty Order on Certain New Pneumatic off-The-Road Tires from the People's Republic of China: Surrogate Value Memorandum 6 (Apr. 12, 2016) (P.R. Doc. 336) ("Final Surrogate Value Mem. "). The small quantities on which the AUVs for Jordan and Paraguay were based (249 kg. and 53 kg., respectively) would appear to make these AUVs unsuitable for use as surrogate values for this reason as well.

Commerce concluded that the surrogate value based on the Thai GTA data was not aberrational, giving several reasons. Commerce recognized that the Thai AUV was approximately two-and-one-half times as large as the median value obtained from most of the other potential surrogate countries on the list prepared by its Office of Policy but stated that "we do not find this price difference to be so substantial as to call into question the validity of the Thai value or constitute evidence of aberrationality." Final I & D Mem. at 55-56 (footnote omitted). It also found that the quantity of imports represented by the Thai reclaimed rubber value of $2.49, which was 205,384 kg., was "a commercially viable quantity which is not distortive." Id. at 56-57.

Commerce also addressed the issue of whether the Thai-based value of $2.49 per kilogram was aberrational because it was higher than the Thai-based values for natural rubber, ($2.01 per kilogram for technically-specified natural rubber and $2.28 per kilogram for ribbed smoked sheets). Commerce concluded it was not, citing record data showing that "the price of natural rubber has dropped by 32-33 percent over the POR itself, and more so over the years before" and that "the value of reclaimed rubber, in comparison, has risen over the past years, 138 percent since 2009, and this rise has been at a generally steady increase." Final I & D Mem. at 56 (footnotes omitted). Commerce concluded that "[w]ith such a significant decrease in price for natural rubber in the POR, that natural rubber may fall below the cost of the consistently steadily increasing reclaimed rubber does not signal that the reclaimed rubber value is aberrational or unusual."Id.

The Department's conclusion that the surrogate value of $2.49 per kilogram for reclaimed rubber is not aberrational lacks the support of substantial evidence on the record. The record includes data on the historical relationship between the price of natural rubber and that of reclaimed rubber, which is in the form of a table Commerce included in its final surrogate value memorandum ("Chart C: Historical Price of Natural Rubber vs. Reclaimed Rubber"). See Final Surrogate Value Mem. at 10. The table shows that over the 30 years between 1983 and 2013, the price for reclaimed rubber consistently has been lower than the price of natural rubber and, as a general matter, much lower. Id. The chart shows that despite the rise in the value of reclaimed rubber and the fall in the price of natural rubber over the last several years that are shown in the table, the price of natural rubber, as of 2013 (the last year shown in the table), still was approximately 180% higher than the price of reclaimed rubber. Id. Commerce relied on the movement in the prices of both commodities to conclude that the value of reclaimed rubber could be higher than the value of natural rubber, but this conclusion is refuted by the record evidence in the 30-year table. Also, record evidence that reclaimed rubber is used in production of off-the-road tires instead of natural rubber because of its cost advantage is not rebutted by other record evidence. And as Commerce itself acknowledged, the Thai AUV for reclaimed rubber was approximately two-and-one-half times the median value for this product obtained from import data from most of the other potential surrogate countries. Because the Department's finding that its surrogate value for reclaimed rubber is not aberrational is unsupported by the record evidence considered as a whole, Commerce cannot be said to have reached a valid finding that it valued reclaimed rubber according to the "best available information" as required by 19 U.S.C. § 1677b(c)(1). Commerce must reconsider that value and reach a new determination based on findings supported by substantial evidence on the record.

2. Surrogate Value for Foreign Inland Freight

Xugong and Qihang claim that the surrogate value Commerce applied to foreign inland freight in China, which was based on data for Thailand, was not supported by substantial record evidence. See Xugong's Br. 38-44; Qihang's Br. 15-33. Commerce used the Thai data to calculate a surrogate freight rate of $0.0015 per kilogram, per kilometer. Final Surrogate Value Mem. at Attach. I. Xugong and Qihang challenge the method by which the surrogate value was calculated. In the alternative, they argue that Commerce should have used record data other than the data Commerce used in determining the surrogate value.

In calculating normal value according to 19 U.S.C. § 1677b(c), Commerce adds to the price of material inputs a surrogate cost for the expense incurred for inland transportation of the materials, i.e., truck freight, to the point of production. It also deducts from U.S. price (EP or CEP) a surrogate cost for the expense of transporting finished goods to the port of exportation. To calculate a surrogate value for this "foreign inland freight" in the sixth review, Commerce used a World Bank report entitled Doing Business 2015: Thailand , which estimated at $210 the cost of transporting products in a standard 20-foot shipping container weighing 10 metric tons from the largest city in Thailand, i.e., Bangkok, to the nearest seaport. See Petitioners' First Surrogate Value Submission at Ex. 9 (Mar. 19, 2015) (P.R. Docs. 138-39). The 2015 Doing Business report did not present information on the actual distance goods would have to travel to reach a seaport. Id. Therefore, to use the information in the 2015 report in calculating a per-kilogram, per-kilometer surrogate cost for foreign inland freight, Commerce estimated the average distance from 26 industrial districts in Bangkok to the nearest seaport, for use as the denominator in the calculation. Final I & D Mem. at 57-62. The distance Commerce used, both for the Preliminary Results and the Final Results, was 13.87 kilometers. Id. at 60. Using this average distance, Commerce calculated its surrogate freight rate of $0.0015 per kilogram, per kilometer. Final Surrogate Value Mem. at Attach. I. Xugong and Qihang view this distance as unreasonably low (causing the rate derived therefrom to be excessively high) and unsupported by the record data. The 13.87 kilometer estimate was derived from information in a table listing various locations in Bangkok, submitted to the record by the petitioner. See Petitioners' Second Surrogate Value Submission at Attach. 8 (Aug. 31, 2015) (P.R. Docs. 253-54). The source of the table was a "Bangkok Post" document describing various "districts" of Bangkok, located within "clusters." Id.

In addition to freight-cost information relating to Thailand, the record contained information relating to freight costs in Indonesia, submitted by Qihang, see Qingdao Qihang Tyre Co. Ltd.-Initial Surrogate Value Submission at Ex. SV-24 (Mar. 19, 2015) (P.R. Docs. 121-26), and information relating to freight costs in Peru, which Xugong submitted, see Xugong Initial SV Submission at Ex. 8. In the Final Issues and Decision Memorandum, Commerce did not discuss the information relating to freight costs in Indonesia and Peru, confining its discussion to the record data pertaining to Thailand. Final I & D Mem. at 57-62. Specifically, Commerce directed most of the discussion to the choice of data from which it could estimate an average distance from industrial locations in Thailand to the nearest port. Commerce concluded that the record was sufficiently developed to support consideration of only three "usable" distances in Thailand: the 13.87 kilometer average distance, a second calculated distance of 8.3 kilometers, which was the distance from downtown Bangkok to the port of Bangkok as determined in the Department's investigation of Certain Passenger Vehicle and Light Truck Tires from China that also used the 2015 Doing Business in Thailand report, and a distance of 9.51 kilometers, which was developed "from a list of the distances to the Port of Bangkok from all Thai companies that provided information for Doing Business in Thailand 2015 for which the World Bank provided an address." Final I & D Mem. at 61. Commerce concluded that "given the paucity of information on the record supporting distances higher than 13.87 km, the De