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Kerr-Mcgee Chemical Corp. v. United States

U.S. Court of Appeals, Federal Circuit

February 19, 1999


Before Michel, Plager, and Rader, Circuit Judges.

The opinion of the court was delivered by: Rader, Circuit Judge.

NOTE: Pursuant to Fed. Cir. R. 47.6, this Disposition is not citable as precedent. It is a public record. The Disposition will appear in tables published periodically.

The Court of International Trade affirmed the Commerce Department's (Commerce's) valuation of manganese imports from the People's Republic of China (PRC), and determinations of margins therefor. Kerr-McGee Chem. Corp. v. United States, 985 F. Supp. 1166 (Ct. Int'l Trade 1997); Notice of Final Determination of Sales at Less Than Fair Value: Manganese Metal From the People's Republic of China, 60 Fed. Reg. 56,045 (Dep't Comm. 1995), as amended, Notice of Amended Final Determination and Antidumping Duty Order: Manganese Metal From the People's Republic of China, 61 Fed. Reg. 4,415 (Dep't Comm. 1996). Plaintiffs-Appellants Kerr-McGee Chemical Corp. and Elkem Metals Co. appeal the Court of International Trade's decision. Because the Court of International Trade's decision is supported by substantial evidence and is otherwise in accordance with law, this court affirms.


Kerr-McGee Chemical and Elkem Metals (collectively, Kerr-McGee) are the sole producers of electrolytic manganese metal in the United States. On November 8, 1994, Kerr-McGee filed an antidumping duty petition under Section 773 of the Tariff Act of 1930 (Tariff Act), on behalf of the United States manganese metal industry. See 19 U.S.C. § 1677b (1994). The petition alleges that Chinese companies imported manganese metal into the United States and sold it at less than fair market value. Defendants-Respondents Chinese Hunan International Economic Development (Group) Corp., China Metallurgical Import & Export Hunan Corp., and Minmetals Precious & Rare Minerals Import & Export Corp. (collectively, Intervenors) are residents of the PRC and export the subject merchandise to the United States.

In response to Kerr-McGee's petition, Commerce initiated an antidumping investigation. Because it considers the PRC to have a non-market (i.e. State-controlled) economy, Commerce did not attempt to value the Chinese metal by determining production costs in the PRC. Rather, Commerce, as required by 19 U.S.C. § 1677b(c)(2), chose an appropriate surrogate country with a market economy to value each factor of production used in the PRC. Following Kerr-McGee's recommendation, Commerce selected India as the surrogate country in this investigation. Commerce noted that India is a market economy country of similar economic development to the PRC; India also is a significant producer of material similar to manganese metal.

Commerce computed the "normal value" of the Chinese manganese metal by assessing the market-determined cost of each of its production factors such as materials, labor, and energy in India. PRC factories that produced the manganese metal submitted reports to Commerce detailing the quantities of various input factors used. Commerce also obtained such information from publicly available reports. Commerce determined the cost of those inputs that the PRC factories purchase or obtain domestically from PRC suppliers, by multiplying the quantity used in the PRC factories by the Indian rates for usage of the input. The two input factors at issue in this appeal are manganese ore (i.e., a raw material) and electricity usage.

Neither Commerce nor any of the parties were able to locate a surrogate manganese ore used in India that was identical to the ore used to produce manganese metal in the PRC. Commerce and the parties determined a list of five potential surrogate ores, all of which varied somewhat from the Chinese ore. Kerr-McGee favored "ore one," a low ferruginous peroxide ore (82-84% MnO2). Kerr-McGee submitted the price data for ore one, which was the most expensive of the five ores on the list. Commerce in its preliminary determination chose "ore three," a low-grade manganese ore (26-28% Mn). Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Manganese Metal From the People's Republic of China, 60 Fed.Reg. at 31,282, 31,284 (Dep't Comm. 1995). Commerce obtained the price for ore three based on an actual transaction between an Indian mine (the seller) and two Japanese purchasers, as reported in a trade journal. Commerce noted that ore one was insufficient because it is a high-grade ore. The Chinese companies use a low-grade ore to produce the subject manganese metal, and would not use a high-grade ore like ore one.

Commerce apparently reconsidered its evaluation, and in its Final Determination switched its choice of surrogate ore. Its choice, however, was not ore one or ore three, but "ore two." Ore two is a metallurgical grade manganese ore (30-35% Mn). The Intervenors had submitted the price data, obtained from the 1993 Indian Minerals Yearbook, for ore two. Commerce reasoned that ore two is comparable to the Chinese ore in manganese content, and also is favorable because its list prices are Indian domestic prices rather than export prices.

To determine the cost of electricity for the PRC factories to produce the manganese metal, Commerce relied on electricity usage reports submitted by the Intervenors. Kerr-McGee argued that the Intervenors' reported rates were unrealistically low. Commerce, however, corroborated the reported rates with informaion from the U.S. Bureau of Mines and found the rates to be within an expected range.

Using the costs it determined for each of the input factors, Commerce assessed dumping margins of 0.97%, 4.6%, 5.88%, and 11.77% for each of the Intervenors' manganese metal imports. These values are in stark contrast to the margins derived from Commerce's preliminary determination: 148.82%, 148.24%, 132.22%, and 82.44%.

Kerr-McGee appealed Commerce's amended final determination to the Court of International Trade. The Court of International Trade affirmed. Kerr-McGee Chem. Corp. v. United States, 985 F. Supp. 1166. Kerr-McGee appeals to this court, pursuant to 28 U.S.C. § 1295(a)(5).


The Court of International Trade reviews an antidumping duty determination by Commerce to determine if it is supported by "substantial evidence on the record and is otherwise in accordance with law." 19 U.S.C. § 1516a(b)(1)(B) (1994). This court reviews the Court of International Trade's decision under the same standard. See NEC Home Elecs., Ltd. v. United States, 54 F.3d 736, 742 (Fed. Cir. 1995).


Kerr-McGee first argues that Commerce's decision to use ore two as the surroate ore is unsupported by substantial evidence. Although ore two has a manganese content similar to that of the Chinese ore in terms of percentage, Kerr-McGee argues, it is unacceptable as a surrogate because it has a much different manganese/iron ratio. Kerr-McGee asserts that manganese/iron ratio is much more probative than manganese content to determine whether the ore would be used in manganese metal production.

Commerce's choice of ore two, however, was based on a number of factors. First, the Chinese ore is a low-grade ore that could not be sold on the international market because of its low quality. Ore two also had these characteristics. In contrast, Commerce noted, and the record supports, the fact that the vast majority of published prices are for high-grade ores. Ore one, which was advocated as the surrogate by Kerr-McGee, was a high grade ore.

Second, the prices for ore two were domestic prices, rather than Indian export prices. Commerce favors using domestic prices to determine cost of a surrogate because domestic prices are more indicative of actual value. Export prices could be affected by tariffs, subsidies, or a number of other factors. See Technoimportexport v. United States, 783 F. Supp. 1401, 1405 (Ct. Int'l Trade 1992). Ore three thus was undesirable because the price was an Indian export price.

Third, although Commerce expressed reservations about the manganese/iron ratio in ore two, ore two's manganese/iron ratio was in fact an improvement over ore three. Thus, in light of ore two's similar manganese content to the Chinese ore and the availability of domestic prices for ore two, Commerce's switch from ore three to ore two was reasonable and logical.

At best, Kerr-McGee has shown that Commerce was faced with three alternatives, all of which had relative shortcomings. "When Commerce is faced with the decision to choose between two reasonable alternatives and one alternative is favored over the other in their eyes, then they have the discretion to choose accordingly." Union Camp Corp. v. United States, 941 F. Supp. 108, 116 (Ct. Int'l Trade 1996). Thus, the Court of International Trade properly found that substantial evidence supported Commerce's choice of ore two as the surrogate.


Kerr-McGee next argues that the electricity rates reported by the Intervenors are unrealistically low. Electricity is a primary input in manganese metal production and thus is an important factor in Commerce's valuation calculations. Kerr-McGee relies mainly on the testimony of its own expert witness, Dr. J.C. Agarwal, to support its contention of unrealistic electricity rates.

Kerr-McGee, however, does not address sufficiently the effect of a confidential input (Factor A) that the Intervenors use in producing the manganese metals. The Intervenors allege that Factor A increases energy efficiency in manganese metal production. Kerr-McGee asserts that, even taking into account Factor A, the reported rates are still too low. However, Kerr-McGee lacked reliable quantitative evidence to support this claim.

Commerce, on the other hand, verified the reported price data it used. It is "within the discretion of Commerce to determine how to verify" and "due deference will be given to the expertise of the agency." Carlisle Tire & Rubber Co. v. United States, 622 F. Supp. 1071, 1082 (Ct. Int'l Trade 1985). Commerce's verification procedures appeared to be more than adequate in this case. For example, Commerce officials personally travelled to the PRC to verify the data. Furthermore, Commerce corroborated the data with Bureau of Mines information, which showed, given the effect of Factor A on electricity usage, that the reported rates were not outside an expected range. Thus, the Court of International Trade properly found that substantial evidence supported Commerce's reliance on electricity rates reported by the Chinese producers.


Finally, Kerr-McGee argues that it has been denied due process of law. Kerr-McGee asserts that it had a due process right to notice and opportunity to comment on Commerce's "change in position" from ore three to ore two and Commerce's reliance on the effect of Factor A as rendering the reported electricity rates reasonable.

Kerr-McGee, however, was on notice throughout Commerce's investigation that Commerce was considering five ores as surrogates, one of which was ore two. Kerr-McGee had ample opportunity to comment on the relative merits of the ores, and in fact did so, during Commerce's investigation. Commerce had no duty to inform Kerr-McGee before it issued its final determination that it had reached a different Conclusion than it did in the initial determination. See Technoimportexport v. United States, 766 F. Supp. 1169, 1175 (Ct. Int'l Trade 1991) (holding that Commerce had no obligation to notify the parties beforehand that it had chosen a different surrogate country for the final determination than it used in the initial determination). Thus, Kerr-McGee was not denied a due process right to comment on Commerce's later change from ore three to ore two.

Kerr-McGee similarly had ample opportunity to comment on, and attempt to refute, the reported electricity rates. The record shows that Kerr-McGee did in fact submit evidence to Commerce on this matter, and Commerce considered the evidence and rejected Kerr-McGee's arguments. Thus, again, there is no due process violation.

Because substantial evidence supports the Court of International Trade's findings, and the Court of International Trade's decision is otherwise in accordance with law, this court affirms.


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