Pam and Jcm v. United States ( 2006 )


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  •  United States Court of Appeals for the Federal Circuit
    06-1084, -1085
    PAM, S.p.A.,
    Plaintiff-Appellee,
    and
    JCM, LTD.,
    Plaintiff,
    v.
    UNITED STATES,
    Defendant-Appellant,
    and
    A. ZEREGA’S & SONS, DAKOTA GROWERS PASTA CO.,
    NEW WORLD PASTA CO., and AMERICAN ITALIAN PASTA CO.
    Defendants-Appellants.
    David L. Simon, Law Office of David L. Simon, of Washington, DC, argued for
    plaintiff-appellee.
    David C. Smith, Jr., Collier, Shannon, Scott, PLLC, of Washington, DC, argued for
    defendants-appellants A. Zerega’s & Sons, et al. With him on the brief was Paul C.
    Rosenthal.
    Patricia M. McCarthy Assistant Director, Commercial Litigation Branch, Civil
    Division, United States Department of Justice, of Washington, DC., argued for
    defendant-appellant United States. With her on the brief were Peter D. Keisler, Assistant
    Attorney General, and David M. Cohen, Director. Of counsel was Mykhaylo A. Gryzlov,
    Attorney International, Office of the General Counsel, Office of the Chief Counsel for
    Import Administration, United States Department of Commerce, of Washington, DC.
    Appealed from: United States Court of International Trade
    Judge Gregory W. Carman
    United States Court of Appeals for the Federal Circuit
    06-1084, -1085
    PAM, S.p.A.,
    Plaintiff-Appellee,
    and
    JCM, LTD.,
    Plaintiff,
    v.
    UNITED STATES,
    Defendant-Appellant,
    and
    A. ZEREGA'S & SONS, DAKOTA GROWERS PASTA CO.,
    NEW WORLD PASTA CO., and AMERICAN ITALIAN PASTA CO.,
    Defendants-Appellants.
    _________________________
    DECIDED: September 13, 2006
    _________________________
    Before MICHEL, Chief Judge, FRIEDMAN, Senior Circuit Judge, and MAYER, Circuit
    Judge.
    MICHEL, Chief Judge.
    The United States and its co-defendants, various domestic pasta producers,
    appeal the final judgment of the United States Court of International Trade that the
    Department of Commerce's ("Commerce") latest administrative review of dumping by
    eight foreign pasta exporters, including PAM, S.p.A. ("PAM"), was void ab initio as to
    PAM because the domestic petitioners failed to serve PAM as required by 
    19 C.F.R. § 351.303
    (f)(3)(ii). PAM, S.p.A. v. United States, 
    395 F. Supp. 2d 1337
     (Ct. Int'l Trade
    2005). In so holding, the Court of International Trade reasoned that strict compliance
    with section 351.303(f)(3)(ii) is required and that Commerce may not "relax or modify its
    regulations in this case." 
    Id. at 1343
    . We disagree. Rescission of a completed
    administrative review is not a proper remedy for lack of service in this case because
    PAM did not demonstrate substantial prejudice. We therefore reverse the judgment
    voiding the review as to PAM and remand for adjudication on the merits of Commerce's
    final determination of further dumping by PAM, in view of the challenges set forth in
    PAM's complaint.
    I.
    On July 1, 2002, Commerce published in the Federal Register notice of an
    opportunity to request another (apparently the sixth) administrative review of certain
    pasta imported into the United States for possible changes in dumping margins and
    hence antidumping duties. On July 31, 2002, certain members of the domestic pasta
    industry, specifically A. Zerega's & Sons, Dakota Growers Pasta Co., New World Pasta
    Co., and American Italian Pasta Co. (collectively, "Zerega"), submitted a request for
    further administrative review of eight companies, including PAM, that were under
    dumping duty orders. Zerega served its request for review on some of the companies,
    but not on PAM.1 On August 27, 2002, Commerce published in the Federal Register
    notice of its initiation of this review, as required by statute. This notice did list PAM. On
    1
    Zerega explains that this omission occurred because it had inadvertently
    relied upon a list of companies involved in a previous administrative review that did not
    include PAM and four other exporters.
    06-1084, -1085                               2
    August 28, 2002, (i.e., the next day), counsel for PAM entered an appearance in
    Commerce's administrative review.         On August 29, 2002,        Commerce sent
    questionnaires to the foreign companies, including PAM.
    On September 3, 2002, PAM notified Commerce that it had not been properly
    served by Zerega and requested a 29-day extension of time to file its response in order
    to "mitigate to some extent the harm to PAM."2 PAM did not request rescission in this
    September 3 letter to Commerce. On September 27, 2002, Commerce granted PAM a
    two-week extension. On October 8, 2002, PAM requested another extension of three
    weeks, but again did not request rescission.3 On October 18, 2002, Commerce gave
    PAM a 15-day extension, in effect granting the 29-day extension PAM had initially
    requested. Commerce later granted PAM at least six additional extensions of time.4
    In August 2003, Commerce published the preliminary results of its review. It
    concluded that PAM was still dumping and to an even greater extent, finding that PAM
    had underreported its home sales. Commerce applied the highest antidumping margin,
    which resulted in higher duties payable by PAM.        In February 2004, Commerce
    2
    Although PAM requested an extension of 29 days, it was only 17 days
    between the time that Zerega should have served notice of its request for review on
    PAM (i.e., by August 10, 2002) and the time that Commerce published its notice of
    initiation of its review in the Federal Register (i.e., on August 27, 2002).
    3
    It is unclear at what point PAM requested a rescission as opposed to
    merely an extension of time. It appears that PAM first requested rescission on
    September 22, 2003, in a Case Brief to Commerce, over a year after it first requested
    only an extension of time and approximately one month after the publication of
    preliminary results in which Commerce determined there was dumping by PAM.
    4
    According to the record submitted on appeal, it appears that PAM
    requested and received additional extensions of time on: (1) February 21, 2003,
    (2) March 10, 2003, (3) April 17, 2003, (4) May 29, 2003, (5) July 3, 2003, and
    (6) August 18, 2003.
    06-1084, -1085                            3
    published its final results, affirming its preliminary results. PAM appealed to the Court of
    International Trade, arguing that the review was void ab initio under section
    351.303(f)(3)(ii) due to the lack of service by Zerega. The Court of International Trade
    held that the review was void as to PAM, reasoning that: (1) the plain language of the
    regulation at issue divested Commerce of any discretion to relax its procedural rule on
    notice, and (2) the regulation at issue confers important procedural benefits upon
    foreign entities like PAM and therefore requires strict compliance.
    The government and Zerega appeal, arguing that the Court of International Trade
    erred by: (1) not following the general rule of agency discretion in relaxing procedural
    rules, as described in American Farm Lines v. Black Ball Freight Service, 
    397 U.S. 532
    (1970), and (2) not requiring a showing of substantial prejudice to PAM before
    rescinding Commerce's administrative review, as required by the Supreme Court in
    American Farm Lines and by the Federal Circuit in Kemira Fibres Oy v. United States,
    
    61 F.3d 866
    , 875 (Fed. Cir. 1995) and Intercargo Insurance Co. v. United States, 
    83 F.3d 391
    , 394 (Fed. Cir. 1996). PAM responds that the Court of International Trade
    correctly held that Commerce must strictly enforce its notice regulation and lacks
    discretion to relax this rule, even if no prejudice is shown. We have jurisdiction pursuant
    to 
    28 U.S.C. § 1295
    (a)(5).
    II.
    A.
    The regulation at issue, entitled "Request for review," provides that:
    [A]n interested party that files with the Department a request for . . . an
    administrative review . . . must serve a copy of the request on each
    exporter or producer specified in the request and on the petitioner by the
    end of the anniversary month or within ten days of filing the request for
    06-1084, -1085                               4
    review, whichever is later. If the interested party that files the request is
    unable to locate a particular exporter or producer, or the petitioner, the
    Secretary may accept the request for review if the Secretary is satisfied
    that the party made a reasonable attempt to serve a copy of the request
    on such person.
    
    19 C.F.R. § 351.303
    (f)(3)(ii) (emphasis added).
    The threshold issue is whether PAM was required to show substantial prejudice.
    PAM asserts that a showing of substantial prejudice may only be required if the
    regulation at issue does not confer an important procedural benefit on the foreign
    companies.    Section 351.303(f)(3)(ii), it asserts, does confer important procedural
    benefits on foreign companies, namely, transparency, notice, and procedural fairness.
    Thus, PAM argues, an agency must strictly enforce this regulation, whether or not the
    foreign company was prejudiced.
    The government counters that this regulation is merely intended to facilitate the
    orderly transaction of business before the agency. It gives foreign companies a few
    weeks advance notice before Commerce notifies them by publishing in the Federal
    Register. The government also responds that substantial prejudice must be shown
    even if the regulation does confer an important procedural benefit. We agree with the
    government that the Court of International Trade should have conducted an analysis of
    whether PAM proved substantial prejudice, regardless of whether the regulation confers
    an important procedural benefit on foreign companies. Because no such analysis was
    done here, we reverse. We further find, on this record, that no substantial prejudice
    was shown as a matter of law.
    Although PAM contends that American Farm Lines requires a showing of
    substantial prejudice to the reviewed party only if the regulation does not confer an
    06-1084, -1085                             5
    important procedural benefit, we do not agree. Rather, American Farm Lines states that
    it is a "general principle" that agencies may relax or modify their procedural rules and
    teaches that a subsequent agency action is only rescindable "upon a showing of
    substantial prejudice." 
    397 U.S. at 539
    . Nor does our own precedent read American
    Farm Lines as PAM suggests.           Both Kemira and Intercargo discussed whether
    substantial prejudice was shown. Yet, neither opinion addressed whether the regulation
    at issue confers an important procedural benefit nor implied that the lack thereof was a
    prerequisite to requiring a showing of substantial prejudice.
    Indeed, PAM's reading of American Farm Lines seems to defy common sense.
    Even if a regulation is intended to confer an important procedural benefit, if the failure of
    a party to provide notice as required by such a regulation does not prejudice the
    non-notified party, then we think neither the government, the non-serving party, nor the
    public should be penalized for such a failure.         PAM's reading also defies logic.
    American Farm Lines states: "The rules were not intended primarily to confer important
    procedural benefits upon individuals. . . . Thus there is no reason to exempt this case
    from the general principle that '[i]t is always within the discretion of a court or an
    administrative agency to relax or modify its procedural rules adopted for the orderly
    transaction of business before it when in a given case the ends of justice require it.'"
    
    397 U.S. at 538-39
     (citations omitted and emphases added). It does not necessarily
    follow that if a given rule is intended primarily to confer important procedural benefits
    upon individuals then there is a reason to exempt it from agency discretion.5 That is,
    5
    PAM's reasoning reflects a common error in logic. That is, given the
    statement: if not A, then not B, one might infer the reverse conditional statement: if A,
    then B. The second statement, however, does not logically follow from the first.
    06-1084, -1085                               6
    even if a rule does confer important procedural benefits upon individuals, there may still
    be a reason—such as lack of substantial prejudice—to allow a court or administrative
    agency to relax or modify the rule. Quite simply, the Supreme Court in American Farm
    Lines was not contemplating (and did not opine on) situations in which the rule in
    question did confer important procedural benefits on individuals.         Rather, it only
    discussed circumstances in which the rule did not confer important procedural benefits,
    as those were the facts in that case.      Thus, we need not decide whether section
    303.351(f)(3)(ii) confers such a benefit because we believe that substantial prejudice
    still must be shown.
    B.
    The real question, then, is whether PAM proved that it was substantially
    prejudiced by Zerega's lack of service, which delayed its notification by several weeks.
    See Am. Farm Lines, 
    397 U.S. at 539
     (requiring "a showing of substantial prejudice")
    (citations omitted); Intercargo, 
    83 F.3d at 396
     (reversing and remanding because we
    were "unable to discern any prejudice" caused by Commerce's failure to strictly comply
    with 
    19 U.S.C. § 1504
    (a) in publishing its notice of an antidumping review); Kemira, 
    61 F.3d at 875
     (reasoning that because the notice requirement of 
    19 C.F.R. § 353.25
    (d)(4)
    was "merely procedural, Kemira must establish that it was prejudiced by Commerce's
    non-compliance with this requirement").
    Here, PAM received constructive and actual notice of the review by publication in
    the Federal Register, a mere 17 days after the petition for administrative review should
    have been served by Zerega. PAM neither claims nor attempts to show that Zerega's
    failure to serve it impeded its ability to respond to and defend its interests in the
    06-1084, -1085                              7
    administrative review. Instead, PAM asserts in attorney argument, in purely conclusory
    fashion, that it suffered prejudice because "Commerce never granted any of PAM's
    extension requests in full and so never enabled PAM fully to catch up from the harm
    occasioned by the original failure of service."     Appellee's Br. at 39.    Yet, the total
    amount of additional time Commerce granted to PAM via eight extensions far exceeded
    the 17 days PAM lost due to the lack of service by Zerega. Indeed, even the first two
    extensions alone compensated for the 17-day delay in notice to PAM. All in all, PAM
    was allowed more than enough time to "catch up."
    PAM did not suffer substantial prejudice as required by American Farm Lines,
    Intercargo, and Kemira. This is clearly established as a matter of law. The multiple
    extensions of time it was later granted by Commerce far exceeded the 17-day delay in
    notification caused by Zerega's failure to comply with 
    19 C.F.R. § 351.303
    (f)(3)(ii).
    III.
    The Court of International Trade erred in voiding ab initio the administrative
    review as to PAM on the grounds that strict compliance with the regulation is required
    and that Commerce may not relax its procedural rules. Supreme Court and Federal
    Circuit precedent dictate that substantial prejudice must be shown to overturn an
    agency review where the agency exercised its discretion to relax a regulation
    concerning notice. Since PAM has failed to make such a showing, we reverse the
    judgment and remand for further proceedings on the merits.
    REVERSED and REMANDED.
    06-1084, -1085                               8