Mid Continent Nail Corporation v. United States , 846 F.3d 1364 ( 2017 )

United States Court of Appeals
for the Federal Circuit
______________________
MID CONTINENT NAIL CORPORATION,
Plaintiff-Appellant
v.
UNITED STATES, DUBAI WIRE FZE, ITOCHU
BUILDING PRODUCTS CO., INC.,
Defendants
PRECISION FASTENERS, LLC,
Defendant-Appellee
______________________
2016-1426
______________________
Appeal from the United States Court of International
Trade in Nos. 1:12-cv-00133-GWC, 1:12-cv-00153-GWC,
1:12-cv-00162-GWC, Judge Gregory W. Carman.
______________________
Decided: January 27, 2017
______________________
DAVID ALBERT YOCIS, Picard Kentz & Rowe LLP,
Washington, DC, argued for plaintiff-appellant. Also
represented by ANDREW WILLIAM KENTZ, ROOP BHATTI,
MEIXUAN LI, DOUGLAS KNOX BEMIS, JR.
2 MID CONTINENT NAIL CORPORATION v. US
MICHAEL PAUL HOUSE, Perkins Coie, LLP, Washing-
ton, DC, argued for defendant-appellee. Also represented
by DAVID JOHN TOWNSEND, DAVID STEWART CHRISTY, JR.
______________________
Before NEWMAN, LOURIE, and DYK, Circuit Judges.
DYK, Circuit Judge.
In 2012, the Department of Commerce issued a final
determination in an antidumping investigation of certain
steel nails from the United Arab Emirates (“UAE”) find-
ing that Precision Fasteners, LLC had engaged in target-
ed dumping and imposed a duty. In calculating Precision’s
dumping margin, Commerce declined to apply a regula-
tion limiting the use of the average-to-transaction meth-
odology to non-targeted sales because the agency asserted
that the regulation had been withdrawn in 2008. See 19
C.F.R. § 351.414(f)(2) (2008).
The Court of International Trade (“Trade Court”) held
that Commerce had violated the Administrative Proce-
dure Act (“APA”) by withdrawing the regulation without
providing notice and opportunity for comment. On re-
mand, Commerce redetermined Precision’s duty by apply-
ing the withdrawn regulation and found that no duty was
owing. The Trade Court affirmed. We hold that Commerce
violated the requirements of the APA in withdrawing the
regulation, leaving the regulation in force; that its viola-
tion of the APA was not harmless; and that the agency did
not err in applying the regulation on remand. We there-
fore affirm the final judgment of the Trade Court.
BACKGROUND
I
In 2011, appellant Mid Continent Nail Corp. filed a
petition with Commerce alleging that “imports of certain
steel nails from the UAE . . . [were being] sold in the
United States at less than fair value, . . . and that such
MID CONTINENT NAIL CORPORATION v. US 3
imports [were] materially injuring, or threatening mate-
rial injury to, an industry in the United States.” Certain
Steel Nails From the United Arab Emirates: Initiation of
Antidumping Duty Investigation, 76 Fed. Reg. 23,559,
23,560 (Apr. 27, 2011). Commerce initiated an antidump-
ing investigation during which it determined that appel-
lee Precision was among the mandatory respondents, i.e.,
an importer whose dumping rate would be individually
determined in the course of the investigation. 1 See Cer-
tain Steel Nails From the United Arab Emirates: Prelimi-
nary Determination, 76 Fed. Reg. 68,129 (Nov. 3, 2011).
In 2012, Commerce issued an antidumping duty order
imposing a 2.51 percent duty on Precision. See Certain
Steel Nails From the United Arab Emirates: Final De-
termination, 77 Fed. Reg. 17,029, 17,031–32 (Mar. 23,
2012); Certain Steel Nails from the United Arab Emir-
ates: Amended Final Determination, 77 Fed. Reg. 27,421,
27,422 (May 10, 2012).
Commerce found that Precision had engaged in “tar-
geted dumping” because Precision’s sales reflected a
“pattern of export prices . . . that differ[ed] significantly
among certain customers, regions, and time periods.” 77
Fed. Reg. at 17,031; see also 19 U.S.C. § 1677f-
1(d)(1)(B)(i); U.S. Steel Corp. v. United States, 621 F.3d
1351, 1359 (Fed. Cir. 2010). And, central to this appeal,
the agency proceeded to calculate Precision’s dumping
margin by applying the average-to-transaction methodol-
ogy to all U.S. sales reported by Precision, irrespective of
1 Another mandatory respondent identified by
Commerce, Dubai Wire FZE (“Dubai Wire”), participated
in the agency’s dumping investigation and intervened in
the Trade Court, but did not file a brief in this appeal. We
have limited our recitation of the facts to those pertinent
to Precision, but note that the relief sought by Mid Conti-
nent could impact Dubai Wire as well.
4 MID CONTINENT NAIL CORPORATION v. US
whether the agency had deemed a sale to be targeted or
not. See 77 Fed. Reg. at 17,031.
The average-to-transaction methodology is one of the
three methods that Commerce may use in an investiga-
tion to calculate dumping margins in accordance with the
Tariff Act of 1930, as amended by the Uruguay Round
Agreements Act (URAA), Pub. L. No. 103–465, 108 Stat.
4809 (1994). The statute provides that, in general, Com-
merce “shall determine whether . . . subject merchandise
is being sold in the United States at less than fair value”
by either: (1) “comparing the weighted average of the
normal values to the weighted average of the export
prices (and constructed export prices) for comparable
merchandise”; or (2) “comparing the normal values of
individual transactions to the export prices (or construct-
ed export prices) of individual transactions for comparable
merchandise.” 19 U.S.C. § 1677f-1(d)(1)(A)(i)–(ii). These
two methods are respectively known as the “average-to-
average” and “transaction-to-transaction” methodologies.
The statute permits Commerce to use a third meth-
od—the average-to-transaction methodology—if certain
conditions are met. The average-to-transaction methodol-
ogy “compar[es] the weighted average of the normal
values to the export prices (or constructed export prices)
of individual transactions for comparable merchandise.”
Id. § 1677f-1(d)(1)(B). To calculate dumping margins
using the average-transaction methodology, however,
Commerce must find “a pattern of export prices (or con-
structed export prices) for comparable merchandise that
differ significantly among purchasers, regions, or periods
of time,” (i.e., targeted dumping) and explain “why such
differences cannot be taken into account using” the first
two methods. Id. § 1677f-1(d)(1)(B)(i)–(ii). In other words,
Commerce must first conclude that a respondent is en-
gaged in targeted dumping and explain why the other two
statutory methodologies fail to sufficiently account for it.
See U.S. Steel, 621 F.3d at 1358–59.
MID CONTINENT NAIL CORPORATION v. US 5
In calculating dumping margins using the average-to-
transaction methodology, Commerce has “historically”
used a practice known as “zeroing” in which “negative
dumping margins (i.e., margins of sales of merchandise
sold at nondumped prices) are given a value of zero and
only positive dumping margins (i.e., margins for sales of
merchandise sold at dumped prices) are aggregated.”
Union Steel v. United States, 713 F.3d 1101, 1104 (Fed.
Cir. 2013). As a result, “dumping margins for sales below
normal value are not offset by ‘negative dumping margins’
for those sales made above normal value.” Corus Staal BV
v. United States, 502 F.3d 1370, 1372 (Fed. Cir. 2007).
This lack of offsetting leads to higher dumping margins
when the average-to-transaction methodology is used,
which has made calculation of margins using this meth-
odology “controversial.” See Union Steel, 713 F.3d at 1104.
II
Shortly after the enactment of the URAA, Commerce
promulgated a regulation through notice-and-comment
rulemaking restricting the agency’s use of the average-to-
transaction methodology. This regulation—known as the
“Limiting Regulation”—provided that even in cases
meeting the statutory criteria for applying the average-to-
transaction methodology, the agency would “normally . . .
limit [its] application . . . to those sales that constitute
targeted dumping,” as opposed to applying the average-to-
transaction methodology to all of a respondent’s sales. See
19 C.F.R. § 351.414(f)(2) (2008); see also Antidumping
Duties; Countervailing Duties, Final Rule, 62 Fed. Reg.
27,296, 27,375 (May 19, 1997).
In 2008, however, Commerce withdrew the Limiting
Regulation, along with several other regulations govern-
ing the agency’s handling of targeted dumping allega-
tions. See Withdrawal of the Regulatory Provisions
Governing Targeted Dumping in Antidumping Duty
Investigations, Interim Final Rule, 73 Fed. Reg. 74,930,
6 MID CONTINENT NAIL CORPORATION v. US
74,931 (Dec. 10, 2008) [hereinafter Withdrawal Notice].
The agency stated that it had originally promulgated the
regulations “without the benefit of any experience on the
issue of targeted dumping,” and that the regulations “may
have established thresholds or other criteria that . . .
prevented the use of [the average-to-transaction] method-
ology to unmask dumping, contrary to the [c]ongressional
intent.” Id. Commerce noted that withdrawal would allow
the agency to gain “additional experience” with targeted
dumping through “case-by-case adjudication.” Id.Commerce acknowledged in Withdrawal Notice that
repeal of the targeted dumping regulations was subject to
“the requirement to provide prior notice and opportunity
for public comment, pursuant to . . . 5 U.S.C. § 553(b)(B),”
but expressly “waive[d] the requirement” by invoking the
APA’s “good cause” exception to notice-and-comment
rulemaking. 73 Fed. Reg. at 74,931.
In finding good cause, Commerce explained that no-
tice-and-comment rulemaking was “impracticable and
contrary to the public interest” because the rescinded
regulations were “applicable to ongoing antidumping
investigations” and that “immediate revocation [was]
necessary to ensure the proper and efficient operation of
the antidumping law[s].” Id. At no point in Withdrawal
Notice did Commerce refer to any prior notices proposing
to withdraw the Limiting Regulation, or otherwise sug-
gest that the agency had provided adequate notice and
opportunity for comment under the APA.
In calculating Precision’s dumping margin three years
later in this proceeding, Commerce applied the average-
to-transaction methodology, having found both “a pattern
of export prices . . . that differ[ed] significantly among
customers, regions, or by time-period,” and that applying
the “average-to-average methodology mask[ed] differences
in the patterns of prices between the targeted and non-
targeted groups.” 77 Fed. Reg. at 17,031. In this appeal,
MID CONTINENT NAIL CORPORATION v. US 7
no party has challenged Commerce’s determination that
the statutory criteria for applying the average-to-
transaction methodology were met. What the parties
dispute is the agency’s decision to apply the average-to-
transaction methodology not just to “those sales that
constitute[d] targeted dumping,” as the Limiting Regula-
tion had previously provided, but “to all U.S. sales report-
ed by . . . Precision.” See id. (emphasis added).
III
Precision challenged Commerce’s final determination
in the Trade Court. See Mid Continent Nail Corp. v.
United States (Mid Continent I), 999 F. Supp. 2d 1307,
1309–10 (Ct. Int’l Trade 2014). In relevant part, Precision
argued that Commerce was required to apply the Limit-
ing Regulation to calculate Precision’s dumping margin
because the agency’s repeal of the regulation in “With-
drawal Notice was ineffective and contrary to law,” as it
had “occurred outside the basic procedural framework
required by Congress under the [APA].” Id. at 1319–20.
According to Precision, had the agency applied the Limit-
ing Regulation, application of the average-to-transaction
methodology to all of Precision’s domestic sales would not
have been “justif[ied]” because the agency had “only found
evidence of targeting for less than one percent” of Preci-
sion’s U.S. sales, the exact scenario that had concerned
Commerce when it adopted the Limiting Regulation in
the first place. Id. at 1319. 2
The Trade Court agreed that Commerce’s withdrawal
of the Limiting Regulation violated the APA. After con-
cluding that withdrawal of the regulation was subject to
2 Commerce stated at the time that “it would be
‘unreasonable and unduly punitive’ to apply the [average-
to-transaction methodology] to all sales where, for exam-
ple, targeted dumping accounted for only one percent of a
firm’s total sales.” 62 Fed. Reg. at 27,375.
8 MID CONTINENT NAIL CORPORATION v. US
notice-and-comment rulemaking, the court rejected the
argument that the agency had provided adequate notice
and opportunity for comment through two earlier Federal
Register notices because those notices had not proposed to
repeal the regulation. See id. at 1322. The court also
rejected Commerce’s invocation of good cause and found
that the agency’s procedural default was not excusable as
harmless error. See id. Accordingly, the Trade Court
remanded Commerce’s final determination and instructed
the agency to “redetermine [Precision’s] dumping mar-
gin[] by applying the Limiting Regulation.” Id. at 1323.
IV
On remand, Commerce applied the Limiting Regula-
tion as ordered by the Trade Court. As the regulation
provided that Commerce would “normally” not apply the
average-to-transaction methodology to all sales, see 19
C.F.R. § 351.414(f)(2) (2008), the agency concluded that
application of the average-to-transaction methodology to
all of Precision’s sales was unwarranted because “the
record does not contain evidence to suggest that this
normal limitation should not be applied.” J.A. 89. As a
consequence of limiting the average-to-transaction meth-
odology to only targeted sales, Commerce found that
Precision’s dumping margin was “de minimis,” and there-
fore imposed a duty of 0.00 percent. Id.Mid Continent appealed Commerce’s remand rede-
termination to the Trade Court, arguing that the agency
had misapplied the Limiting Regulation. See Mid Conti-
nent Nail Corp. v. United States (Mid Continent II), 113 F.
Supp. 3d 1318, 1326 (Ct. Int’l Trade 2015). The court
rejected Mid Continent’s argument and affirmed Com-
merce’s remand redetermination. See id. at 1327–28,
1331. Mid Continent then filed this appeal, which Com-
merce has not joined. We have jurisdiction under 28
U.S.C. § 1295(a)(5).
MID CONTINENT NAIL CORPORATION v. US 9
V
During the pendency of the Trade Court proceedings,
and in light of the court’s ruling that Withdrawal Notice
was ineffective to repeal the Limiting Regulation, 3 Com-
merce in 2013 initiated a new proceeding to accomplish
the repeal. The agency published a Notice of Proposed
Rulemaking (“NPRM”) in which it sought comments on a
proposal “not to apply . . . the previously withdrawn
regulatory provisions governing targeted dumping.” Non-
Application of Previously Withdrawn Regulatory Provi-
sions Governing Targeted Dumping in Antidumping Duty
Investigations, Proposed Rule, 78 Fed. Reg. 60,240,
60,240 (Oct. 1, 2013). In 2014, Commerce issued a final
rule making withdrawal of the regulations effective May
22, 2014. See 79 Fed. Reg. 22,371 (Apr. 22, 2014). No
party to this appeal has challenged the 2014 withdrawal,
or contended that it should be applied retroactively.
Accordingly, this case solely addresses whether the with-
drawn regulations were in effect during the period be-
tween December 10, 2008, and May 22, 2014.
DISCUSSION
We review the Trade Court’s decision to uphold Com-
merce’s remand redetermination de novo. See U.S. Steel,
621 F.3d at 1357. We will affirm the agency unless its
decision “is unsupported by substantial evidence on the
record, or otherwise not in accordance with law.” 19
U.S.C. § 1516a(b)(1)(B)(i). “Commerce’s decision will [also]
be set aside if it is arbitrary and capricious.” Changzhou
Wujin Fine Chem. Factory Co. v. United States, 701 F.3d
1367, 1374 (Fed. Cir. 2012).
We do not defer to an agency’s interpretation of the
APA’s statutory requirements, although the statute itself
3 The Trade Court first reached this conclusion in
an earlier case, Gold East Paper (Jiangsu) Co. v. United
States, 918 F. Supp. 2d 1317, 1328 (Ct. Int’l Trade 2013).
10 MID CONTINENT NAIL CORPORATION v. US
presumes that review of agency action under the arbi-
trary-and-capricious standard is “highly deferential.”
Nat’l Org. of Veterans’ Advocates, Inc. v. Sec’y of Veterans
Affairs, 260 F.3d 1365, 1372 (Fed Cir. 2001); see also
Collins v. Nat’l Transp. Safety Bd., 351 F.3d 1246, 1253
(D.C. Cir. 2003) (“For generic statutes like the APA, . . .
the broadly sprawling applicability undermines any basis
for deference, and courts must therefore review interpre-
tative questions de novo.”); Mobil Oil Corp. v. Dep’t of
Energy, 728 F.2d 1477, 1486–87 (Temp. Emer. Ct. App.
1983) (“We are free to make an independent determina-
tion of the legal question as to whether the agency has
made a showing of good cause.”). 4
I
We first address Mid Continent’s contention that
Commerce provided adequate notice for the repeal of the
Limiting Regulation through two Federal Register notices
issued in 2007 and 2008: (1) Targeted Dumping in Anti-
dumping Investigations; Request for Comment, 72 Fed.
Reg. 60,651 (Oct. 25, 2007) [hereinafter Request for Com-
ment]; and (2) Proposed Methodology for Identifying and
Analyzing Targeted Dumping in Antidumping Investiga-
tions; Request for Comment, 73 Fed. Reg. 26,371 (May 9,
2008) [hereinafter Proposed Methodology].
4 Accord Sorenson Commc’ns Inc. v. FCC, 755 F.3d
702, 706 (D.C. Cir. 2014); Iowa League of Cities v. EPA,
711 F.3d 844, 872 (8th Cir. 2013); Meister v. U.S. Dep’t of
Agric., 623 F.3d 363, 370–71 (6th Cir. 2010); Reno-Sparks
Indian Colony v. EPA, 336 F.3d 899, 909 n.11 (9th Cir.
2003); Warder v. Shalala, 149 F.3d 73, 79 (1st Cir. 1998);
Weyerhaeuser Co. v. Shalala, 590 F.2d 1011, 1027 (D.C.
Cir. 1978). See generally United States v. Reynolds, 710
F.3d 498, 507–09 (3d Cir. 2013); Jared P. Cole, Cong.
Research Serv., R44356, The Good Cause Exception to
Notice and Comment Rulemaking: Judicial Review of
Agency Action 13–14 (2016).
MID CONTINENT NAIL CORPORATION v. US 11
A
The requirement that an agency provide adequate no-
tice before altering its regulations is rooted in the APA’s
provisions governing the administrative rulemaking
process. Under the APA, whenever an agency decides to
“formulat[e], amend[], or repeal[] a rule,” it must first
publish an NPRM setting forth “either the terms or
substance of the proposed rule[,] or a description of the
subjects and issues involved.” 5 U.S.C. §§ 553(b), 551(5).
For the purposes of notice and comment, withdrawal or
repeal of an existing regulation is treated the same as
promulgation of a new regulation. See Tunik v. MSPB,
407 F.3d 1326, 1342 (Fed. Cir. 2005). Although the notice
“need not specify every precise proposal which [the agen-
cy] may ultimately adopt,” it “must be sufficient to fairly
apprise interested parties of the issues involved.” Nuvio
Corp. v. FCC, 473 F.3d 302, 310 (D.C. Cir. 2006) (quoting
Action for Children’s Television v. FCC, 564 F.2d 458, 470
(D.C. Cir. 1977)). Adequate notice “is crucial to ‘ensure
that agency regulations are tested via exposure to diverse
public comment, . . . to ensure fairness to affected parties,
and . . . to give affected parties an opportunity to develop
evidence in the record to support their objections to the
rule and thereby enhance the quality of judicial review.’”
Int’l Union, United Mine Workers of Am. v. Mine Safety &
Health Admin., 626 F.3d 84, 95 (D.C. Cir. 2010) (quoting
Int’l Union, United Mine Workers of Am. v. Mine Safety &
Health Admin., 407 F.3d 1250, 1259 (D.C .Cir. 2005)).
The dispositive question in assessing the adequacy of
notice under the APA is whether an agency’s final rule is
a “logical outgrowth” of an earlier request for comment.
Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 174
(2007); Veteran’s Justice Grp., LLC v. Sec’y of Veterans
Affairs, 818 F.3d 1336, 1344 (Fed. Cir. 2016).
12 MID CONTINENT NAIL CORPORATION v. US
The logical outgrowth doctrine recognizes that a cer-
tain degree of change between an NPRM and a final rule
is inherent to the APA’s scheme of rulemaking through
notice and comment. See Int’l Harvester Co. v. Ruckel-
shaus, 478 F.2d 615, 632 n.51 (D.C. Cir. 1973). According-
ly, judicial formulations of the doctrine have sought to
“balance” the values served by adequate notice, see Int’l
Union, 626 F.3d at 94–95, with “the public interest in
expedition and finality.” Small Refiner Lead Phase-Down
Task Force v. EPA, 705 F.2d 506, 547 (D.C. Cir. 1983). We
recently stated, for instance, that “[a] final rule is a logical
outgrowth of a proposed rule only if interested parties
should have anticipated that the change was possible, and
thus reasonably should have filed their comments on the
subject during the notice-and-comment period.” Veteran’s
Justice, 818 F.3d at 1344 (alterations and internal quota-
tion marks omitted). 5
Courts have consistently upheld final rules as logical
outgrowths “where the NPRM expressly asked for com-
ments on a particular issue or otherwise made clear that
the agency was contemplating a particular change.” CSX
Transp. Inc. v. Surface Transp. Bd., 584 F.3d 1076, 1081
(D.C. Cir. 2009) (citing Owner–Operator Indep. Drivers
Ass’n v. Fed. Motor Carrier Safety Admin., 494 F.3d 188,
209–10 (D.C. Cir. 2007); and City of Portland v. EPA, 507
F.3d 706, 715 (D.C. Cir. 2007)); see also, e.g., Alto Dairy v.
Veneman, 336 F.3d 560, 570 (7th Cir. 2003) (upholding
final rule prohibiting “paper pooling” of milk producers
with “distant supply plants” because agency’s notice
raised the issue of “pool” eligibility); Public Service Com-
5See also Am. Water Works Ass’n v. EPA, 40 F.3d
1266, 1274 (D.C .Cir. 1994) (“We apply [the logical out-
growth] standard functionally by asking . . . whether a
new round of notice and comment would provide the first
opportunity for interested parties to offer comments that
could persuade the agency to modify its rule.”).
MID CONTINENT NAIL CORPORATION v. US 13
mission v. FCC, 906 F.2d 713, 715 (D.C. Cir. 1990) (final
rule was logical outgrowth because board affiliated with
the agency asked for comments on the proposal that was
finally adopted, even though the agency itself did not).
Courts applying the logical outgrowth doctrine have
also permitted agencies to drop critical elements of pro-
posed rules even if a resulting final rule effectively aban-
dons an agency’s initial proposal. In Long Island Care, for
example, the Department of Labor proposed a rule that
would have rendered certain “companionship workers”
outside the exemption to wage and hour restrictions
under the Fair Labor Standards Act (“FLSA”). See 551
U.S. at 174–75. The rule the agency eventually adopted,
however, left these workers within the FLSA’s exemption.
The Court sustained the agency’s final rule, observing
that “[s]ince the proposed rule was simply a proposal, its
presence meant that the Department was considering the
matter; after that consideration the Department might
choose to adopt the proposal or to withdraw it.” Id. at 175.
Because this result was “reasonably foreseeable,” the
Court held that the agency had complied with notice-and-
comment rulemaking. Id. 6
Nonetheless, there are limits to how far a notice of
proposed rulemaking may be stretched under the logical
outgrowth doctrine. In some cases, these limits may be
difficult to discern, Kooritzky v. Reich, 17 F.3d 1509, 1513
(D.C. Cir. 1994), but certain clear lines have been drawn.
“The logical outgrowth doctrine does not extend to a final
6 See also, e.g., Veterans Justice, 818 F.3d at 1345
(upholding a final rule because “[o]ne logical outgrowth of
a proposal is surely . . . to refrain from taking the pro-
posed step”); Ariz. Pub. Serv. Co. v. EPA, 211 F.3d 1280,
1299 (D.C. Cir. 2000) (“In first proposing that tribes
would have to meet the ‘same requirements’ [for judicial
review under the Clean Air Act] as states, EPA effectively
raised the question as to whether this made sense.”).
14 MID CONTINENT NAIL CORPORATION v. US
rule that finds no roots in the agency’s proposal because
something is not a logical outgrowth of nothing, . . . [or]
where interested parties would have had to divine the
agency’s unspoken thoughts, because the final rule was
surprisingly distant from the [a]gency’s proposal.” Envtl.
Integrity Project v. EPA, 425 F.3d 992, 996 (D.C. Cir.
2005) (internal quotation marks and citations omitted).
B
Having summarized the principles animating the log-
ical outgrowth doctrine, we turn to whether Commerce’s
repeal of the Limiting Regulation in Withdrawal Notice
was a logical outgrowth of Request for Comment and
Proposed Methodology. The Trade Court determined that
the notices were insufficient because neither notice made
“obvious to an interested observer that . . . rule making [to
withdraw the rule was] intended” by the agency. Mid
Continent I, 999 F. Supp. 2d at 1322. We agree.
We begin with the statute. The Tariff Act as amended
by the URAA obligates Commerce to make two findings
before the agency may use the average-to-transaction
methodology to assess targeted dumping in an investiga-
tion. First, the agency must find “a pattern of export
prices (or constructed export prices) for comparable mer-
chandise that differ significantly among purchasers,
regions, or periods of time.” 19 U.S.C. § 1677f-1(d)(1)(B)(i).
Second, Commerce must “explain[] why such differences
cannot be taken into account using” the other two statuto-
ry methods. Id. § 1677f-1(d)(1)(B)(ii).
Once these criteria are met, however, the statute
leaves undefined the precise scope of Commerce’s applica-
tion of the average-to-transaction methodology; this led to
concerns that if a respondent had been found to be en-
gaged in targeted dumping, but only in some limited
fashion, application of the methodology to “all of [the
respondent’s] sales . . . would be unreasonable and unduly
punitive.” See Antidumping Duties; Countervailing Du-
MID CONTINENT NAIL CORPORATION v. US 15
ties, 61 Fed. Reg. 7308, 7350 (Feb. 27, 1997). Commerce
responded to these concerns by promulgating the Limiting
Regulation, which provided that the agency would “nor-
mally limit the application of the average-to-transaction
method[ology] to those sales that constitute targeted
dumping.” 19 C.F.R. § 351.414(f)(2) (2008). Thus, even if
the agency had found a respondent to have engaged in
targeted dumping—a condition precedent to the agency’s
use of the average-to-transaction methodology—under the
Limiting Regulation, Commerce would “normally” limit
the scope of the average-to-transaction methodology to the
respondent’s targeted sales—instead of all sales.
Ten years after promulgating the Limiting Regula-
tion, Commerce published Request for Comment, in which
the agency sought guidance regarding an appropriate test
to determine the existence of targeted dumping. In this
notice, Commerce admitted that it had accrued only
“limited experience with targeted dumping” despite the
intervening years; that it had yet to develop a standard
targeted dumping test; and that its “experience with
regard to the use of the [average-to-transaction] method
ha[d] been very limited.” 72 Fed. Reg. at 60,651. By
publishing Request for Comment, Commerce hoped to
solicit the public’s views on “its development of a method-
ology for determining whether targeted dumping is occur-
ring in antidumping investigations,” and “input on
standards and tests that may be appropriate in a targeted
dumping analysis.” Id. Specifically, the agency sought
guidance on: (1) how to determine the existence of a
“pattern of export prices . . . among purchasers, regions,
or periods of time”; (2) how to determine if such a pattern
“differ[s] significantly”; and (3) the “appropriate statistical
techniques” to assess targeted dumping. Id.
Despite raising these concerns, Request for Comment
was not published in the Federal Register as an NPRM,
meaning that the notice on its face did not indicate that
Commerce was considering a rulemaking. More problem-
16 MID CONTINENT NAIL CORPORATION v. US
atically, Request for Comment did not propose any kind of
rule or raise any question about the scope of the average-
to-transaction methodology, much less the conditions
under which the agency should depart from its “normal”
practice of not applying the methodology to all sales.
Request for Comment did not even include a citation to the
Limiting Regulation. Instead, in Request for Comment,
Commerce simply sought information on the broad issue
of how the agency should determine the existence of
targeted dumping—a distinct, predicate issue to the
problem addressed by the Limiting Regulation (i.e., the
scope of the average-to-transaction methodology).
The consequence of these deficiencies is that Request
for Comment falls short of satisfying the APA’s require-
ments for notice and opportunity for comment. We find
the D.C. Circuit decision in Kooritzky to be instructive on
this point. At issue in Kooritzky was a “no-substitution”
rule promulgated by the Department of Labor that pro-
hibited employers from substituting one alien for another
with respect to certifications necessary for obtaining
employment-based visas. See 17 F.3d at 1512. In a notice
of proposed rulemaking to implement then-recent statuto-
ry amendments, the agency made no mention of substitu-
tion. Id. at 1513. In rejecting the agency’s NPRM as
inadequate, the D.C. Circuit observed that the “notice . . .
contain[ed] nothing, not the merest hint, to suggest that
the [agency] might tighten its existing practice of allowing
substitution,” and that the preamble to the agency’s
notice in the Federal Register “offered no clues” to a
“nonexpert reader . . . of what was to come.” Id.Like the notice at issue in Kooritzky, Request for
Comment gave no indication that Commerce was contem-
plating a potential change in the Limiting Regulation.
Nor did commentators responding to Request for Com-
ment perceive the agency to be raising the issue of the
regulation’s repeal or revision, or suggest such repeal or
MID CONTINENT NAIL CORPORATION v. US 17
revision themselves. 7 We therefore have no doubt that
Commerce’s repeal of the Limiting Regulation was not a
logical outgrowth of Request for Comment because, as in
Kooritzky, “[s]omething is not a logical outgrowth of
nothing.” 17 F.3d at 1513.
C
Six months after Request for Comment, Commerce—
still concerned with the appropriate test for determining
the existence of targeted dumping—proposed a new two-
part test addressing the problem in Proposed Methodolo-
gy. 8 This second notice acknowledged the responses that
7 At best, commenting parties understood the agen-
cy to be open to suggestions on how to apply the Limiting
Regulation. To illustrate, as one commentator stated:
“[T]he Department should clarify when it will apply the
average-to-transaction methodology to all sales, rather
than only targeted sales. We think it would be appropri-
ate . . . to apply the average-to-transaction method to all
sales . . . where the targeted quantity exceeds twenty
percent of the U.S. sales database.” Letter from David A.
Hartquist, Executive Director, Committee to Support U.S.
Trade Laws to David Spooner, Assistant Secretary for
Import Administration 3 (Dec. 10, 2007) (emphasis add-
ed), available at https://perma.cc/5FJR-WKZD.
8 Under this test—also known as the Nails test, see
JBF RAK LLC v. United States, 790 F.3d 1358, 1367 &
n.5 (Fed. Cir. 2015)—Commerce first “determine[s], on an
exporter-specific basis, the share of the allegedly targeted
customer’s purchases of subject merchandise, by sales
value, that are at prices more than one standard devia-
tion below the weighted-average price to all customers of
that exporter, targeted and non-targeted.” 73 Fed. Reg. at
26,372. “If that share exceeds 33 percent of the total value
of the exporter’s sales of subject merchandise to the
allegedly targeted customer, then the pattern require-
ment is met.” Id. In the second part of the Nails test,
18 MID CONTINENT NAIL CORPORATION v. US
Commerce had received following Request for Comment,
but did not offer the agency’s response thereto. See Pro-
posed Methodology, 73 Fed. Reg. at 26,371. In addition to
seeking new comments on its proposed test for determin-
ing the existence of targeted dumping, Commerce also
raised several “related issues.” Id. In particular, the
agency “request[ed] comment on the application of the
[average-to-transaction methodology] and the conditions,
if any, under which the [average-to-transaction] method-
ology should apply to all sales to the target, even if some
sales of a control number do not pass the targeted dump-
ing test.” Id. at 26,372 (emphasis added).
Proposed Methodology thus presents a closer question
under the logical outgrowth doctrine than Request for
Comment. The Limiting Regulation had provided that
Commerce would “normally” apply the average-to-
transaction methodology only to “those sales” found to
“constitute targeted dumping.” 19 C.F.R. § 351.414(f)(2)
(2008). Therefore, by seeking public comment on “the
conditions, if any,” under which the average-to-
transaction methodology should be applied to all sales
made by a respondent—instead of just the respondent’s
targeted sales—Commerce effectively raised the general
subject of the Limiting Regulation, perhaps suggesting
Commerce “determine[s] the total sales value for which
the difference between (i) the sales-weighted average
price to the allegedly targeted customer and (ii) the next
higher sales-weighted average price to a non-targeted
customer exceeds the average price gap . . . for the non-
targeted group.” Id. If the share of sales satisfying these
criteria “exceeds 5 percent of the total value of sales of
subject merchandise to the allegedly targeted customer,”
then the pattern of price differences is deemed “signifi-
cant,” and the exporter will be found to have engaged in
targeted dumping. Id.MID CONTINENT NAIL CORPORATION v. US 19
wholesale elimination of the agency’s discretion to apply
the average-to-transaction methodology to all sales.
Although courts have found logical outgrowths when
an NPRM “expressly asked for comments on a particular
issue or otherwise made clear that the agency was con-
templating a particular change,” CSX, 584 F.3d at 1081,
we do not think that this principle supports holding
Proposed Methodology to have provided the “necessary
predicate” for Withdrawal Notice. Kooritzky, 17 F.3d at
1513. For starters, like Request for Comment, Proposed
Methodology on its face did not indicate that further
action to withdraw the Limiting Regulation was being
considered. Instead, Proposed Methodology merely sought
public views on how to interpret the regulation itself—
which provided that the agency would “normally” not
apply the average-to-transaction methodology to all
sales—that is, how exactly Commerce should apply the
“normally” limitation. Because the agency had left the
circumstances in which it would have applied the aver-
age-to-transaction methodology to all sales largely unde-
fined, “interested persons” would have perceived the
question regarding the Limiting Regulation posed in
Proposed Methodology as simply Commerce’s first step in
clarifying the scope of its own regulation. Indeed, com-
ments that the agency received in response to Proposed
Methodology did not understand Commerce to be raising a
broader question, i.e., whether to repeal the Limiting
Regulation. See note 10, infra.
Posing such a general “scope” question does not suf-
fice to provide the requisite “fair notice” for an agency rule
to be upheld as a logical outgrowth. See Long Island Care,
551 U.S. at 174. In CSX, the D.C. Circuit confronted a
similar problem in addressing a rule promulgated by the
Surface Transportation Board (“STB”) to resolve railroad
rate disputes. The STB had originally proposed a rule
allowing such disputes to be resolved using “comparison
groups drawn from the most recent year of waybill sam-
20 MID CONTINENT NAIL CORPORATION v. US
pling.” 584 F.3d at 1078. In the rule finally adopted,
however, the agency “switch[ed] from one year to four
years’ worth of data.” Id. The STB argued that the final
rule was a logical outgrowth because “mention[ing] . . .
the release of one-year data . . . gave notice that the
amount of data available . . . might change.” Id. at 1082.
The D.C. Circuit rejected this argument for two rea-
sons. First, the court observed that although the STB’s
notice had proposed a number of related regulatory
changes, “it nowhere even hinted that [the agency] might
consider expanding the number of years from which
comparison groups could be derived.” Id. Second, permit-
ting the “mere mention” of the one-year timeframe for
drawing comparison groups to provide adequate notice
would allow the agency “to justify any final rule it might
be able to devise by whimsically picking and choosing
within the four corners of a lengthy ‘notice.’” Id. (quoting
Envtl. Integrity Project, 425 F.3d at 998). “Such a rule
would hardly promote the purposes of the APA’s notice
requirement.” Id.The same reasoning applies to Proposed Methodology.
Despite mentioning the subject matter of the Limiting
Regulation, Commerce’s primary purpose in the Proposed
Methodology was to propose a new test for determining
whether a respondent was engaged in targeted dumping
and to seek public comment on this proposal. As a “relat-
ed issue” the agency posed a general question of when to
apply the average-to-transaction methodology to all sales,
not just targeted sales. But this question did not raise the
“particular issue” of withdrawing the Limiting Regula-
tion; it sought only to clarify the meaning of the Limiting
Regulation’s recitation of the word “normally.” And, as in
CSX, allowing Commerce’s question in Proposed Method-
ology to provide adequate notice for Withdrawal Notice
would permit the agency to adopt a final rule from a
limitless continuum of regulatory actions. Given this
range of possibilities, we cannot say that Commerce’s
MID CONTINENT NAIL CORPORATION v. US 21
repeal of the Limiting Regulation was “reasonably fore-
seeable.” Long Island Care, 551 U.S. at 175. It follows
that neither Request for Comment nor Proposed Method-
ology provided adequate notice and opportunity for com-
ment necessary for compliance with the APA.
D
Mid Continent argues that even if Commerce did not
itself provide the required notice, comments made in
response to Request for Comment and Proposed Methodol-
ogy urged Commerce to apply the average-to-transaction
methodology to “all sales” and thereby effectively raised
the issue of repealing the Limiting Regulation.
Although responses by commentators may be relevant
to the court’s inquiry under the logical outgrowth doc-
trine, as a general matter, an agency “cannot bootstrap
notice from a comment.” Fertilizer Inst. v. EPA, 935 F.2d
1303, 1312 (D.C. Cir. 1991). 9 Here, the comments relied
on by Mid Continent never urged Commerce to repeal the
Limiting Regulation; commentators simply asked the
agency to construe the regulation more or less broadly. 10
9 See also Shell Oil Co. v. EPA, 950 F.2d 741, 751
(D.C. Cir. 1991) (noting that under NRDC v. Thomas, 838
F.2d 1224, 1243 (D.C. Cir. 1998), comments to an agency
proposal are a relevant factor if they raise a “foreseeable
possibility of agency action”); Int’l Union, 407 F.3d at
1261 (underscoring that NRDC v. Thomas represents “the
outer limits of the ‘logical outgrowth’ doctrine” and that
the agency in that case gave notice and opportunity for
comment two weeks before promulgating the final rule).
10 Responses to Proposed Methodology, for example,
suggested a number of ways to apply the Limiting Regu-
lation, including the establishment of numerical thresh-
olds that if satisfied would result in applying the average-
transaction methodology to all sales. See Letter from King
& Spalding LLP to Hon. David Spooner, Assistant Secre-
22 MID CONTINENT NAIL CORPORATION v. US
Many of these comments simply urged Commerce to
follow the approach the agency had set forth when it first
promulgated the regulation in 1997, viz., that “in some
instances, it may be necessary to apply the average-to-
transaction methodology to all sales to the targeted area,
. . . or even to all sales of a particular respondent,” 62 Fed.
Reg. at 27,375 (noting that such cases could encompass
tary for Import Administration 12 (June 23, 2008), avail-
able at https://perma.cc/Q7T6-5RH3 (proposing a twenty
percent threshold based on U.S. sales); Letter from Skad-
den, Arps, Slate, Meagher & Flom LLP to David Spooner,
Assistant Secretary for Import Administration 20 (June
23, 2008), available at https://perma.cc/HUJ4-UXPE
(proposing a twenty percent threshold or “when the
Department cannot identify the full scope of the respond-
ent’s targeted dumping”).
Mid Continent identifies a number of specific com-
ments responding to Proposed Methodology that it con-
tends addressed “possible modification” of the Limiting
Regulation. We disagree. These comments addressed
Commerce’s interpretation of the Limiting Regulation’s
“normally” limitation and did not suggest revision or
repeal. To illustrate, one comment cited by Mid Continent
stated that Commerce “should apply the [average-to-
transaction] methodology to all of the sales to the target”
because “[o]nce a customer or region has been identified
as being targeted by a respondent . . . [Commerce] should
consider that all sales to that target are subject to the
same pricing practices and are, therefore, targeted sales.”
Letter from David A. Hartquist, Kelley Drye & Warren
LLP to Secretary of Commerce 30 (June 23, 2008) (em-
phasis added), available at https://perma.cc/D34C-VU94.
The emphasized portions of this comment underscore the
comment’s consistency with the Limiting Regulation, i.e.,
that Commerce should “normally” limit the average-to-
transaction methodology to “sales that constitute targeted
dumping.” 19 C.F.R. § 351.414(f)(2) (2008).
MID CONTINENT NAIL CORPORATION v. US 23
respondents engaged in “widespread” or “extensive[]”
targeted dumping). See note 10, supra. And, the fact that
comments responding to Request for Comment and Pro-
posed Methodology were entirely silent on the issue of
repealing the Limiting Regulation supports the conclusion
that these notices were insufficient to render the agency’s
actions in Withdrawal Notice a “logical outgrowth.” See,
e.g., Council Tree Commc’ns, Inc. v. FCC, 619 F.3d 235,
256 (3d Cir. 2010).
Finally, our conclusion that Withdrawal Notice is not
a logical outgrowth of either Request for Comment or
Proposed Methodology is further bolstered by four other
considerations. First, Commerce never referred to Request
for Comment or Proposed Methodology in Withdrawal
Notice, nor responded to the comments it had received in
response to the two earlier notices. 11 Second, in With-
drawal Notice the agency did not adopt any of the pro-
posals made by commentators, choosing instead to resolve
the scope of the average-to-transaction methodology
through “case-by-case adjudication.” 73 Fed. Reg. at
74,931. Third, Commerce curiously requested further
comments regarding its repeal of the Limiting Regulation
in Withdrawal Notice, which suggests that the agency
believed itself to not have secured adequate comments on
the issue. In contrast, Commerce did not make a similar
request for additional comments in its 2014 rulemaking to
withdraw the Limiting Regulation. See 79 Fed. Reg. at
22,378. Last but not least, Commerce did not suggest in
Withdrawal Notice that it had in fact complied with the
11 See, e.g., Motor Vehicle Mfrs. Ass’n v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 48 (1983); Disabled Am.
Veterans v. Gober, 234 F.3d 682, 692 (Fed. Cir. 2000)
(“[I]nextricably intertwined with . . . 5 U.S.C. § 553(c) is
the agency’s need to respond, in a reasoned manner, to
any comments received by the agency that raise signifi-
cant issues with respect to a proposed rule.”).
24 MID CONTINENT NAIL CORPORATION v. US
APA by issuing the earlier notices. To the contrary, Com-
merce thought it necessary to invoke the APA’s good
cause exception, which implies that the agency did not
consider its prior notices to have satisfied the statute’s
procedural requirements. Although the inconsistency of
simultaneously invoking good cause and arguing post hoc
compliance with the APA is not dispositive, the tension
between these conflicting positions strongly supports our
view that Commerce’s (and now, Mid Continent’s) asser-
tion that the agency had complied with notice-and-
comment rulemaking is not supportable.
In summary, we hold that Commerce’s repeal of the
Limiting Regulation in Withdrawal Notice was not a
logical outgrowth of Request for Comment and Proposed
Methodology, and that agency failed to provide adequate
notice under the APA.
II
We must now consider whether Commerce’s failure to
provide adequate notice may be excused for good cause,
the sole ground Commerce cited for dispensing with notice
and comment in Withdrawal Notice. An agency may forgo
notice-and-comment rulemaking for good cause if it “finds
(and incorporates the finding and a brief statement of
reasons therefor in the rules issued) that notice and
public procedure thereon are impracticable, unnecessary,
or contrary to the public interest.” 5 U.S.C. § 553(b)(3)(B).
As a general matter, exceptions to notice-and-
comment rulemaking under the APA are “narrowly con-
strued and only reluctantly countenanced.” Mobil Oil, 728
F.2d at 1490 (quoting New Jersey v. EPA, 626 F.2d 1038,
1045 (D.C. Cir. 1980)). 12 In Mobil Oil, we stated that an
12 Accord NRDC v. Abraham, 355 F.3d 179, 204 (2d
Cir. 2004); United States v. Reynolds, 710 F.3d 498, 507–
08 (3d Cir. 2013); United States v. Gould, 568 F.3d 459,
469 (4th Cir. 2009); United States v. Johnson, 632 F.3d
MID CONTINENT NAIL CORPORATION v. US 25
invocation of good cause requires an agency to show that
delaying the rule at issue would create “a significant
threat of serious damage to important public interests” as
the exception would otherwise become an “all purpose
escape-clause” to the APA’s rulemaking provisions. Id. at
1492. Such “significant threat[s]” encompassed situations
where the announcement of a proposed rule itself would
“precipitate activity by affected parties that would harm
the public welfare,” for example, price controls subject to
predatory regulatory arbitrage or other market disloca-
tions. Id. (citing Nader v. Sawhill, 514 F.2d 1064, 1068–
69 (Temp. Emer. Ct. App. 1975)). Other courts have
emphasized the need to find similarly serious threats in
order to invoke the good cause exception. See, e.g., Mack
Trucks, Inc. v. EPA, 682 F.3d 87, 93 (D.C. Cir. 2012)
(citing “possible imminent hazard to aircraft, persons, and
property” and rules of “life-saving importance” necessary
to “stave off any imminent threat to the environment or
safety or national security”); Haw. Helicopter Operators
Ass’n v. FAA, 51 F.3d 212, 214 (9th Cir. 1995) (citing a
“recent escalation of fatal air tour accidents”).
The requirement that an agency “incorporate[] the
finding and a brief statement of reasons” for good cause
“in the rules issued” means that we are limited to examin-
ing the reasons Commerce cited in Withdrawal Notice to
justify its invocation of good cause. See Mobil Oil Corp. v.
Dep’t of Energy, 610 F.2d 796, 802–03 (Temp. Emer. Ct.
App. 1979); see also N.C. Growers’ Ass’n, Inc. v. United
912, 928 (5th Cir. 2011); United States v. Cain, 583 F.3d
408, 420–21 (6th Cir. 2009); Nw. Airlines, Inc. v. Gold-
schmidt, 645 F.2d 1309, 1321 (8th Cir. 1981); Alcaraz v.
Block, 746 F.2d 593, 612 (9th Cir. 1984); N. Am. Coal
Corp. v. Dep’t of Labor, 854 F.2d 386, 388 (10th Cir. 1988);
United States v. Dean, 604 F.3d 1275, 1279 (11th Cir.
2010); Utility Solid Waste Activities Grp. v. EPA, 236 F.3d
749, 754 (D.C. Cir. 2001).
26 MID CONTINENT NAIL CORPORATION v. US
Farm Workers, 702 F.3d 755, 766–67 (4th Cir. 2012).
Commerce cited two of the three available statutory
grounds for invoking the good cause exception. First, the
agency stated that notice and comment were “impractica-
ble” because the Limiting Regulation was applicable to
ongoing dumping investigations, and “immediate revoca-
tion [was] necessary to ensure the proper and efficient
operation of the antidumping law and to provide the relief
intended by Congress.” 73 Fed. Reg. at 74,931. Mid Con-
tinent relatedly asserts that dumping investigations are
subject to statutory deadlines that cannot be extended at
the agency’s discretion. See 19 U.S.C. §§ 1673b(b)(1)(A),
1673b(c), 1673d(a).
“Notice and comment on a rule may be found to be
‘impracticable’ when ‘the due and required execution of
the agency functions would be unavoidably prevented by
its undertaking public rulemaking proceedings.’” N.C.
Growers, 702 F.3d at 766 (quoting Nat’l Nutritional Foods
Ass’n v. Kennedy, 572 F.2d 377, 384–85 (2d Cir. 1978)).
Critically, we along with several other courts have held
that statutory deadlines in and of themselves do not
generally provide a basis for invoking good cause on the
ground of impracticability. See, e.g., Shell Oil Co. v. Fed.
Emer. Admin., 527 F.2d 1243, 1248 (Temp. Emer. Ct.
App. 1975). 13 But see Phila. Citizens in Action v. Schweik-
er, 669 F.2d 877, 885–86 (3d. Cir. 1982) (upholding good
cause where Congress gave the agency only 49 days to
promulgate regulations implementing a complex scheme
of federally funded state benefits). A contrary rule would
encourage administrative gamesmanship because “an
agency unwilling to provide notice or an opportunity to
comment could simply wait until the eve of a statutory,
13 See also Council of S. Mountains, Inc. v. Donovan,
653 F.2d 573, 581 (D.C. Cir. 1981); U.S. Steel Corp. v.
EPA, 595 F.2d 207, 213 (5th Cir. 1979); Am. Iron & Steel
Inst. v. EPA, 568 F.2d 284, 292 (3d Cir. 1977).
MID CONTINENT NAIL CORPORATION v. US 27
judicial, or administrative deadline, then raise up the
‘good cause’ banner and promulgate rules without follow-
ing APA procedures.” Council of S. Mountains, Inc. v.
Donovan, 653 F.2d 573, 581 (D.C. Cir. 1981). In fact, the
temporal exigency implied by Withdrawal Notice appears
more theoretical than actual—as Mid Continent observes,
Commerce did not have occasion to apply the Limiting
Regulation’s withdrawal until eight months after With-
drawal Notice, and did not issue a final determination
relying on the withdrawal until fifteen months later. 14
Thus, the fact that Commerce would have had to apply
the Limiting Regulation to ongoing investigations cannot
constitute a basis for good cause excusing its failure to go
through notice and comment.
Second, Commerce invoked the good cause exception
on the ground that notice was “contrary to the public
interest” because the agency’s application of the Limiting
Regulation “may have . . . prevented the use of [the aver-
age-to-transaction] methodology to unmask dumping.” 73
Fed. Reg. at 74,931. This argument, however, is again
foreclosed by precedent because an assertion of mere
pocketbook (or balance-sheet) harm to regulated entities
is generally not sufficient to establish good cause as
nearly every agency rule imposes some kind of economic
cost. 15 See Mack Trucks, 682 F.3d at 95 (contrasting such
economic harms with a situation “in which an entire
14 See Polyethylene Retail Carrier Bags From Tai-
wan, Preliminary Determination, 74 Fed. Reg. 55,183,
55,187–88 (Oct. 27, 2009); Polyethylene Retail Carrier
Bags From Taiwan, Final Determination, 75 Fed. Reg.
14,569, 14,569 (Mar. 26, 2010).
15 See generally Maeve P. Carey, Cong. Research
Serv., R41974, Cost-Benefit and Other Analysis Require-
ments in the Rulemaking Process (Dec. 9, 2014) (sum-
marizing presidential and congressional actions requiring
agencies to conduct economic cost-benefit analysis).
28 MID CONTINENT NAIL CORPORATION v. US
industry and its customers [are] imperiled”). As the Trade
Court observed, the denial of regulatory relief in this case
is not the sort of “pressing urgency of a type that does not
always exist in the trade context.” Mid Continent I, 999 F.
Supp. 2d at 1323 (citing Gold East Paper (Jiangsu) Co. v.
United States, 918 F. Supp. 2d 1317, 1327 (Ct. Int’l Trade
2013)). Thus, Commerce did not show a public interest
consideration sufficient to support the agency’s invocation
of good cause.
On appeal, Mid Continent offers a new justification
for good cause that Commerce did not adopt in Withdraw-
al Notice. Citing Commerce’s statement that the “effect” of
the agency’s targeted dumping regulations was “to deny
relief to domestic industries,” and that this effect was
“inconsistent with the [agency’s] statutory mandate to
provide [such] relief,” 73 Fed. Reg. at 74,931, Mid Conti-
nent argues that Commerce “had determined the with-
drawal was necessary because the existing regulations
were contrary to law,” and thus “immediate withdrawal
was . . . fully justified.” In connection with this argument,
Mid Continent cites the doctrine of deference to agency
statutory interpretations under Chevron, U.S.A., Inc. v.
Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–45 (1984),
to assert that the Limiting Regulation was contrary to
statute because it was inconsistent with Commerce’s view
of the statute in Withdrawal Notice. Mid Continent’s
theory, therefore, is that there was no need for Commerce
to undergo notice-and-comment rulemaking because the
Limiting Regulation was contrary to the statutory provi-
sions of the Tariff Act.
This theory of good cause did not appear in With-
drawal Notice and therefore cannot support a finding of
good cause. See N.C. Growers, 702 F.3d at 767. In any
case, we do not agree with Mid Continent’s premise that
the agency had determined the Limiting Regulation to be
“contrary to law.” Commerce did not state in Withdrawal
Notice that the Limiting Regulation was contrary to an
MID CONTINENT NAIL CORPORATION v. US 29
unambiguous statutory provision—and, to our knowledge,
no party has ever challenged the validity of the Limiting
Regulation under the Tariff Act. What Commerce actually
stated was that the “effect” of the regulations was “incon-
sistent . . . with [its] statutory mandate,” which the agen-
cy broadly framed as “provid[ing] relief to domestic
industries materially injured by unfairly traded imports.”
73 Fed. Reg. at 73,931. These statements are not tanta-
mount to a determination that a regulation is contrary to
an unambiguous provision of statutory law. 16
Nor do we agree that the inconsistency of a regulation
adopted under an agency’s previous statutory interpreta-
tion with the agency’s present statutory interpretation
ipso facto renders the regulation “contrary to law.” By
definition, an agency’s ability to alter its statutory inter-
pretation requires statutory ambiguity, and, under Chev-
ron, an agency can only reject a prior interpretation of an
ambiguous statute if it explains why it is doing so. See,
e.g., Nat’l Cable & Telecomms. Ass’n v. Brand X Internet
Servs., 545 U.S. 967, 981–82 (2005); Smiley v. Citibank
(South Dakota), N.A., 517 U.S. 735, 742 (1996); Rust v.
Sullivan, 500 U.S. 173, 186–87 (1991). In this situation,
notice-and-comment rulemaking under the APA is more—
rather than less—important to lay the groundwork for the
agency’s exercise of its Chevron authority.
Thus, we agree with the Trade Court that Commerce’s
invocation of the good-cause exception did not support its
decision to dispense with notice-and-comment rulemaking
under the APA.
16 See Nat’l Customs Brokers & Forwarders Ass’n v.
United States, 59 F.3d 1219, 1223–24 (Fed. Cir. 1995)
(upholding agency’s invocation of good cause where regu-
lation was amended without notice or comment to exactly
parallel intervening statutory amendment).
30 MID CONTINENT NAIL CORPORATION v. US
III
Mid Continent argues that even if Commerce’s repeal
of the Limiting Regulation violated the APA, the agency’s
actions may nonetheless be affirmed on the ground of
harmless error. The APA directs reviewing courts to take
“due account . . . of the rule of prejudicial error” in decid-
ing whether to “hold unlawful and set aside agency ac-
tion.” See 5 U.S.C § 706(2). The Supreme Court has de-
described this provision as an “administrative law . . .
harmless error rule.” Shinseki v. Sanders, 556 U.S. 396,
406 (2009). We must therefore determine whether Com-
merce’s failure to comply with notice-and-comment rule-
making may be excused as harmless error.
Mid Continent contends that Commerce’s procedural
error was harmless because Precision cannot show preju-
dice of a sort cognizable under the statute. Relying on our
decision in Intercargo Insurance Co. v. United States, Mid
Continent argues that “[p]rejudice . . . means injury to an
interest that the statute, regulation, or rule in question
was designed to protect,” and that the only injury Preci-
sion can show—that Commerce reached an adverse deci-
sion in its dumping investigation—is not an interest
protected by notice and comment. 83 F.3d 391, 396 (Fed.
Cir. 1996). Precision counters that it was required to show
only that Commerce’s procedural error had some “bearing
on . . . the substance of [the] decision reached,” and that
given the magnitude of the agency’s error and its inability
to participate in a rulemaking, this standard is satisfied.
Riverbend Farms, Inc. v. Madigan, 958 F.2d 1479, 1487
(9th Cir. 1992).
In determining whether a procedural error committed
in the course of rulemaking was harmless under the APA,
courts have distinguished between an agency’s “technical
failure” or substantial compliance with the APA’s proce-
dural requirements on one hand (which may constitute
harmless error), and its “complete failure” to do so on the
MID CONTINENT NAIL CORPORATION v. US 31
other (which may prevent the error from being harmless).
United States v. Reynolds, 710 F.3d 498, 516–19 (3d Cir.
2013). 17 “In the first category, the agency has provided
some notification and method for commenting but some
technical failure in that process violates statutory re-
quirements. In these ‘technical failure’ cases, the party
challenging the agency rule ‘may be required to demon-
strate that, had proper notice been provided, they would
have submitted additional, different comments that could
have invalidated the rationale’ of the rule.” Id. at 516(internal citation omitted) (quoting City of Waukesha v.
EPA, 320 F.3d 228, 246 (D.C. Cir. 2003)).
17 See also, e.g., Sprint Corp. v. FCC, 315 F.3d 369,
376 (D.C. Cir. 2003) (“[A]n utter failure to comply with
notice and comment cannot be considered harmless if
there is any uncertainty at all as to the effect of that
failure.”); Shell Oil Co. v. EPA, 950 F.2d 741, 752 (D.C.
Cir. 1991) (“While petitioners must show that they would
have submitted new arguments to invalidate rules in the
case of certain procedural defaults, such as an agency’s
failure to provide access to supplemental studies, peti-
tioners need not do so here, where the agency has entirely
failed to comply with notice-and-comment requirements,
and the agency has offered no persuasive evidence that
possible objections to its final rules have been given
sufficient consideration.” (citations omitted)); compare
Int’l Union, 407 F.3d at 1259–61 (final rule setting maxi-
mum air velocity cap where proposed rule only set mini-
mum cap was not a logical outgrowth, not harmless), with
Int’l Union, 626 F.3d at 95–96 (D.C. Cir. 2010) (challenger
failed to demonstrate prejudice because it was able to
participate in the agency’s rulemaking proceedings and
raised issues on appeal that were already “encompassed
in its comments”).
32 MID CONTINENT NAIL CORPORATION v. US
To illustrate this first “technical failure” category of
cases, in Riverbend Farms, the Ninth Circuit concluded
that the Secretary of Agriculture’s failure to publish
notice in the Federal Register and refusal to accept writ-
ten comments were harmless because the parties chal-
lenging the rule were given actual notice—albeit not
published in the Federal Register—and had the oppor-
tunity to give oral comments at meetings conducted by
the agency. See 958 F.2d at 1488. Similarly, in Friends of
Iwo Jima v. National Capital Planning Commission, the
Fourth Circuit held that the National Capital Planning
Commission’s failure to provide notice for two meetings in
a “protracted process” was harmless because the chal-
lengers had notice of other opportunities to submit com-
ments, and the substance of the comments they allegedly
would have submitted was the “main focus of each stage
in the approval process.” 176 F.3d 768, 774 (4th Cir.
1999); see also, e.g., Air Transport Ass’n of Am. v. Civil
Aeronautics Bd., 732 F.2d 219, 224 n.11 (D.C. Cir. 1984)
(agency’s failure to timely provide internal staff studies
was harmless in the absence of petitioner “explain[ing]
what it would have said had it been given earlier access”).
Our decision in Intercargo is consistent with these
“technical failure” cases. In Intercargo, after concluding
that the Customs Service was required to recite a statuto-
ry basis when issuing an extension of time to liquidate
import entries, we considered whether the Service’s
failure to do so was harmless. See 83 F.3d at 392, 394. We
noted that the “omission of the requisite language . . . had
no effect on [the] right to challenge the extension” and
that the importer had not alleged the absence of a statu-
tory basis—the agency had simply failed to identify the
basis in its notice. Id. at 396. In rejecting the imposition of
additional duties as a source of prejudice, we observed
that “[a] party is not ‘prejudiced’ by a technical defect
simply because that party will lose its case if the defect is
disregarded.” Id. (emphasis added).
MID CONTINENT NAIL CORPORATION v. US 33
In the second, “complete failure” category of cases, the
total absence of notice-and-comment rulemaking and the
resulting thin or nonexistent record make it difficult for a
reviewing court to conclude with certainty that no preju-
dice has ensued. See Reynolds, 710 F.3d at 518. In such
cases, even a minimal showing of prejudice may suffice to
defeat a claim of harmless error because “an utter failure
to comply with notice and comment cannot be considered
harmless if there is any uncertainty at all as to the effect
of that failure.” Sugarcane Growers Coop. of Fla. v. Vene-
man, 289 F.3d 89, 96 (D.C. Cir. 2002); see also, e.g., Sprint
Corp. v. FCC, 315 F.3d 369, 376 (D.C. Cir. 2003); Paulsen
v. Daniels, 413 F.3d 999, 1007 (9th Cir. 2005).
Commerce’s failure to comply with the APA was not a
mere technical defect, but amounted to a complete failure
to provide the adequate notice and opportunity for com-
ment that the APA requires. There is considerable uncer-
tainty as to the effect of this failure. We find it significant
that during Commerce’s subsequent rulemaking to with-
draw the Limiting Regulation, the agency relied on its
post-2008 experience to justify the repeal. See 79 Fed.
Reg. at 22,375 (noting Commerce’s development of “differ-
ential pricing analysis”). Moreover, Commerce did not in
Withdrawal Notice address any substantive objections to
withdrawing the Limiting Regulation. Cf. United States v.
Johnson, 532 F.3d 912, 931 (5th Cir. 2011) (finding harm-
less error where the agency “thoroughly engage[d] the
issues and challenges inherent in the regulation” and
“was able to address objections in the interim final rule”).
The agency in fact did not address those objections until
its 2014 rulemaking. See 79 Fed. Reg. at 22,374–75. All
this suggests that Commerce’s failure to go through notice
and comment could well have affected the result reached
in Withdrawal Notice. 18
18 We also do not think that Commerce’s subsequent
decision to formally withdraw the Limiting Regulation
34 MID CONTINENT NAIL CORPORATION v. US
Accordingly, we hold that Commerce’s failure to com-
ply with notice-and-comment rulemaking cannot be
excused as harmless error.
IV
We finally address Mid Continent’s argument that
Commerce erred in applying the Limiting Regulation on
remand from the Trade Court. To recap, Commerce’s
remand redetermination applied the Limiting Regulation
and concluded that application of the average-to-
transaction methodology to all of Precision’s sales was
unwarranted because “the record does not contain evi-
dence to suggest that this normal limitation should not be
applied.” J.A. 89. On appeal, Mid Continent argues that
Commerce misapplied the Limiting Regulation by failing
to reinterpret the regulation to be consistent with the
agency’s post-2008 interpretation of the statute, which
assertedly requires broader application of the average-to-
transaction methodology. In connection with this argu-
ment, Mid Continent suggests that Commerce misinter-
preted the Trade Court’s remand instructions as
prohibiting the agency from reinterpreting the regulation,
or that the court erred by depriving the agency of such
discretion and then deferring to Commerce’s application
of the Limiting Regulation on remand.
Having examined Commerce’s remand redetermina-
tion, we find Mid Continent’s arguments unavailing. The
Trade Court’s instructions did not compel Commerce to
apply the average-to-transaction methodology only to
targeted sales, and on remand, the agency did not misin-
terpret the court’s instructions. See Mid Continent II, 113
F. Supp. 3d at 1327 (“To the extent that [Mid Continent]
changes the calculus of our decision; agency attempts to
cure procedural defects ex post are not generally accepted
as validating prior missteps. See, e.g., Mack Trucks, 682
F.3d at 95; U.S. Steel Corp., 595 F.2d at 214–15.
MID CONTINENT NAIL CORPORATION v. US 35
argues that the government adopted an inappropriately
narrow view of its authority . . . and inaccurately con-
strued the remand order as cover for doing so, [Mid Con-
tinent] is mistaken.”).
As for Mid Continent’s argument that Commerce
erred by not reinterpreting the Limiting Regulation, this
argument misses the mark. There is no serious contention
that Commerce’s application of the Limiting Regulation
contravened an unambiguous provision of statutory law,
or was otherwise “plainly erroneous or inconsistent with
the [Limiting] [R]egulation” itself. Auer v. Robbins, 519
U.S. 452, 462 (1997); Bowles v. Seminole Rock & Sand
Co., 325 U.S. 410, 414 (1945). Nor has Mid Continent
argued that the agency’s application of the regulation was
arbitrary, capricious, or unsupported by substantial
evidence. In the absence of these contentions, a court is
not free to displace an agency’s reasoned application of its
own rule. Mid Continent’s argument that Commerce
misapplied the Limiting Regulation in the agency’s re-
mand redetermination is without merit.
CONCLUSION
For the stated reasons, we hold that Commerce failed
to comply with notice-and-comment rulemaking under the
APA by repealing the Limiting Regulation in Withdrawal
Notice, that its failure cannot be excused for good cause or
harmless error, and that the agency did not err in apply-
ing the Limiting Regulation on remand. The judgment of
the Court of International Trade is
AFFIRMED
COSTS
Costs to appellee.