Ta Chen Stainless Steel Pipe Co. v. United States , 31 Ct. Int'l Trade 794 ( 2007 )

Slip Op. 07 - 87
UNITED STATES COURT OF INTERNATIONAL TRADE
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TA CHEN STAINLESS STEEL PIPE CO., LTD., :
Plaintiff, :
v.
: Consolidated
UNITED STATES, Court No. 05-00094
:
Defendant,
-and- :
ALLOY PIPING PRODUCTS, INC. et al., :
Intervenor-Defendants. :
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Opinion & Order
[Intervenor-defendants’ motion for judgment
on agency record granted in part; remanded
to the International Trade Administration.]
Decided: May 30, 2007
Miller & Chevalier Chartered (Peter J. Koenig and Elizabeth
E. Puskar) for the plaintiff.
Peter D. Keisler, Assistant Attorney General; Jeanne E.
Davidson, Director, Patricia M. McCarthy, Assistant Director,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Stephen C. Tosini); and Office of the Chief Counsel for
Import Administration, U.S. Department of Commerce (Kemba T.
Eneas), of counsel, for the defendant.
Collier Shannon Scott, PLLC (Jeffrey S. Beckington and
David A. Hartquist) for the intervenor-defendants.
AQUILINO, Senior Judge: This case, commenced pursuant
to 19 U.S.C. §1516a(a)(2)(A), consolidates complaints
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filed by foreign manufacturer and exporter Ta Chen Stainless
Steel Pipe Co., Ltd. (“Ta Chen”), CIT No. 05-00094, and by Alloy
Piping Products, Inc.; Flowline Division of Markovitz
Enterprises, Inc.; Gerlin, Inc.; and Taylor Forge Stainless,
Inc., which comprise the domestic U.S. industry, CIT No. 05-
00157, each complaint contesting certain aspects of Certain
Stainless Steel Butt-Weld Pipe Fittings From Taiwan: Final
Results and Final Rescission in Part of Antidumping Duty
Administrative Review published by the International Trade
Administration, U.S. Department of Commerce (“ITA”) at 70
Fed.Reg. 1,870 (Jan. 11, 2005).
I
That agency administrative review of the ITA’s
underlying antidumping-duty order, 58 Fed.Reg. 33,250 (June 16,
1993), pursuant to 19 U.S.C. §1675(a) was carried out at the
request of both sides for the period June 1, 2002 through May
31, 2003 [hereinafter the “POR”]. The goods subject to that
order are finished and unfinished pipe fittings less than 14
inches inside diameter that are typically used to connect pipe
systems where conditions require welded connections. They have
a variety of shapes, including “elbows”, “tees”, “reducers”,
“stub ends”, and “caps”.
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A
The record compiled during the review includes a Ta
Chen Affiliations Memorandum1; the Preliminary Results of
Antidumping Duty Administrative Review and Notice of Intent to
Rescind in Part, 69 Fed.Reg. 40,859 (July 7, 2004); and an
Issues and Decision Memorandum for the Administrative Review of
Stainless Steel Butt-Weld Pipe Fittings from Taiwan2.
In its Section A3 response to the ITA’s request for
information, Ta Chen reported that it was affiliated with Ta
Chen International (“TCI”); Ta Chen (BVI) Holdings, Ltd.; Ta-Jei
Investment Co., Ltd.; Ta Ever Investment Co., Ltd.; Ta Chen
Steel Investment Co., Ltd.; Banner Fastener, Inc.; Tension
Control Bolting, Inc.; Shiziahuang Hitai Precision Casting Co.,
Ltd.; and Ta Chen Baoding Precision Casting Co., Ltd.; the same
companies identified in Ta Chen’s previous administrative
1
Intervenor-Defendants’ Appendix, Tab 2 (June 29, 2004)
[hereinafter the Affiliations Memorandum].
2
Id., Tab 3 (Jan. 3, 2005)[hereinafter the Decision
Memorandum].
3
The Preliminary Results, 69 Fed.Reg. at 40,860 n. 1,
explain that
Section A of the questionnaire requests general
information concerning a company’s corporate
structure and business practices, the merchandise
under investigation, and the manner in which the
company sells that merchandise in all markets.
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review. See Affiliations Memorandum, p. 2. The domestic
industry thereupon alleged Ta Chen affiliation with a number of
theretofore-unidentified entities, claiming the company’s
responses on affiliation were incomplete and inaccurate and
demanding that the ITA instruct Ta Chen to disclose all
affiliated parties in Taiwan, the United States, and third
countries. The agency did just that, issuing a supplemental
Section A questionnaire as to Ta Chen corporate structure and
affiliation information. Its response thereto disclosed one
additional corporate affiliate.
The domestic industry renewed its allegations of
incomplete disclosure:
. . . Ta Chen has not put forth its maximum effort to
respond fully and accurately to the . . .
questionnaires. . . . Ta Chen has not disclosed all
of its affiliated parties, despite two attempts made
by the Department to obtain this information. . . .
* * *
. . . Petitioners ask . . . that the Department find
that Ta Chen has failed to exert its maximum efforts
to cooperate in this review . . . and has actively
misled the [ITA] in major and multiple respects,
foremost by withholding . . . the identities and
complete details of Ta Chen’s relationships with [its]
affiliated U.S. companies. . . . [T]he [ITA] should
. . . assign [a] 76.20 percent ad valorem [dumping
margin] to Ta Chen’s subject merchandise as total
adverse facts available.
Record Document (“R.Doc”) 31, pp. 3-4, 25.
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In its subsequent, third tender of information,
Ta Chen provided the ITA with corporate organizational charts,
identifying several additional potential affiliates. It noted
that it supplied this information “just in case”, in that it did
not believe it was affiliated with them. See R.Doc 40, p. B-1.
Counsel for the domestic industry met with ITA staff
to discuss the affiliation issues. The meeting precipitated the
issuance of a third, detailed, supplemental Section A
questionnaire. It noted that, given the information then on the
record, the ITA “may have reason to preliminarily find that
. . . [14] entities [in addition to the nine first identified]
are affiliated to [sic] Ta Chen.” R.Doc 43, p. B-1. On its
part, the respondent asserted that, from
the outset of this review, Ta Chen has reported those
companies that have anything to do with the subject
merchandise stainless steel butt-weld pipe fittings,
whether production, sales or supply of inputs. . . .
Ta Chen again submits a chart illustrating
relationships between Ta Chen and companies the [ITA]
submits as potential affiliates. . . . We include
these names as an exercise of caution, and not from a
belief on our part that they should be deemed
affiliates[.]
R.Doc 51, pp. 1-2.
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B
The ITA’s consideration of the “complex affiliation[]
issues”4 raised during the administrative review at bar is
reflected in determinations that are summarized seriatim below.
(1)
ITA staff’s initial analysis is set forth in the
Affiliations Memorandum. Some 31 entities, in addition to those
named by Ta Chen in its original Section A response, were
identified5 as potential affiliates. The Affiliations Memorandum
4
Stainless Steel Butt-Weld Pipe Fittings From Taiwan:
Exension of Time Limit for the Preliminary Results of the
Antidumping Duty Administrative Review, 69 Fed.Reg. 22,763
(April 27, 2004).
5
The domestic industry’s deficiency comments ultimately
identified some 17 companies as possible Ta Chen affiliates,
namely, Dragon Stainless, Inc. (“Dragon”); Millennium Stainless,
Inc. (“Millennium”); South Coast Stainless, Inc. (“South
Coast”); Southstar Steel Corporation (“Southstar”); Stainless
Express, Inc. (“Stainless Express 1”); Stainless Express
Products, Inc. (“Stainless Express 2”); NASTA International
(“NASTA”); Estrela Steel, Inc. (“Estrela 1”); AMS Specialty
Steel, LLC SOSID #0552293 (“AMS North Carolina 1”); AMS
Specialty Steel, LLC SOSID #0654511 (“AMS North Carolina 2”);
AMS Steel Corporation (“AMS Corp.”); KSI Steel, Inc.; K Sabert,
Inc.; Sabert Investments, Inc.; Becmen, LLC; Becmen Specialty
Steels, Inc.; and Becmen Trading International, Inc. See
Affiliations Memorandum, p. 2 n. 1.
Ta Chen’s supplemental submissions identified Emerdex
Stainless Flat Roll Products, Inc. (“Emerdex 1”); Billion
Stainless, Inc. (“Billion”); DNC Metals, Inc. (“DNC”); Hsieh
Family Trust; and LPJR Investment, LLC as possibly-affiliated
parties. See ibid. at 3 n. 2.
(footnote continued)
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considered Ta Chen’s possible affiliation with 28 of them.6 It
grouped them into two categories: “Entities with Activities
Related to the Production or Sale of Subject Merchandise” and
“Entities Without Apparent Activities Related to Subject
Merchandise”. Affiliations Memorandum, pp. 4, 14. As to the
five entities in the first group7, it determined that
the evidence on the record . . . supports a finding
that [those companies] were affiliated with Ta Chen
during the entire POR.
Id. at 36. Of the 23 companies in the second group, however, it
“found no evidence” showing that they
had business activities . . . related to subject
merchandise during the POR, or . . . had any known
transactions with Ta Chen during the POR[.] [ITA
staff] cannot find that the relationship between Ta
Chen and these companies had the potential to impact
The record of a previous Ta Chen administrative review
identified PFP Taiwan Co., Ltd. (“PFP”) and AMS Specialty Steel,
Inc. (“AMS California”) as possible affiliates. See ibid.Seven more possibly-affiliated companies were independently
identified by the ITA, namely, Emerdex Stainless Steel, Inc.,
(“Emerdex 2”); Emerdex Group, Inc. (“Emerdex 3”); Emerdex-
Shutters (“Emerdex 4”); TCI Estrela International (“TCI
Estrela”); Estrela LLC (“Estrela 2”); Estrela International
Corporation (“Estrela 3”); and Estrela International, Inc.
(“Estrela 4”). See ibid. at 3 n. 2 and 29 n. 24.
6
Citing “statutory time constraints”, ITA staff was “unable
to investigate” whether TCI Estrela, Estrela 3, and Estrela 4
were Ta Chen affiliates during the POR. See ibid. at 29 n. 24.
The staff did “note that each . . . ha[d] been dissolved or
suspended”, although it was “unaware whether they were dissolved
or suspended during the POR.” Id.7
Emerdex 1, 2, 3, and 4, and Dragon.
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production or pricing decisions of subject merchandise
during the POR. We therefore decline to examine
whether the[se remaining] companies[8] were affiliated
[with Ta Chen] during the POR.
Id.(2)
The Affiliations Memorandum’s proposed findings were
adopted by the ITA in its Preliminary Results, wherein the
agency pointed out that, as to the 23 alleged Ta Chen affiliates
without apparent activities related to subject merchandise, the
domestic industry
ha[d] not provided evidence indicating that these
companies were involved in subject merchandise or the
foreign like product. . . . [It] did not support any
allegations that the alleged affiliates were involved
in the specialty steel product which is the subject of
this review.
69 Fed.Reg. at 40,861-62. Moreover,
Ta Chen submitted rebuttal information . . . noting
that the companies were not involved in the subject
merchandise or foreign like product.
8
AMS California, AMS North Carolina 1, AMS North Carolina
2, AMS Corp., Stainless Express 1, Stainless Express 2, Estrela
1, Estrela 2, South Coast, Millennium, DNC, Billion, Southstar,
NASTA, KSI Steel, Inc., K Sabert, Inc., Sabert Investments,
Inc., Becmen, LLC, Becmen Specialty Steels, Inc., Becmen Trading
International, Inc., PFP, Hsieh Family Trust, and LPJR
Investments, LLC.
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Id. at 40,862. The ITA thus reported preliminarily that
there is no evidence [on the record] indicating that
these [23] companies were involved in any way that
potentially affected the production, pricing, costs,
or sales of subject merchandise or foreign like
product, or that these companies had any direct
transactions with Ta Chen. Because these companies
were not involved in subject merchandise or foreign
like product, it is not necessary to consider further
whether the[y are] affiliated with Ta Chen[.]
Id. at 40,861.
The agency did see fit to adopt preliminarily staff’s
recommendation that the Emerdex companies and Dragon be deemed
Ta Chen affiliates. See id., citing the Affiliations
Memorandum. It found
evidence indicating that [they] . . . were involved in
a certain number of transactions involving subject
merchandise. . . . The record shows that Ta Chen sold
subject merchandise to Emerdex 2, an affiliated
company under common control with the Emerdex
Companies . . . but Ta Chen failed to report Emerdex
2’s downstream sales of subject merchandise to
unaffiliated customers during the POR, despite being
instructed to [do so]. . . . In addition, . . .
Dragon, an affiliated company, incurred U.S. selling
expenses for subject merchandise on behalf of Ta Chen
. . .. Ta Chen failed to report the total amount of
these expenses, and the record does not indicate that
these expenses were captured in Ta Chen’s U.S. sales
database.
Id. at 40,862. With respect to those transactions, the ITA
applied “F[acts] A[vailable]” pursuant to 19 U.S.C. §1677e. Id.
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Moreover, “in selecting from among the facts available”, the
agency found it
appropriate to apply an adverse inference because Ta
Chen did not cooperate to the best of its ability to
provide information concerning Emerdex 2 or Dragon. .
. . As such . . . the Department has made adverse
inferences . . . concerning (1) the Emerdex Companies’
downstream sales of subject merchandise; and (2)
Dragon’s selling expenses in the United States.
Id. at 40,863.
In applying an adverse inference to Emerdex data, the
ITA accepted the domestic industry’s suggested 76.20 percent ad
valorem dumping margin as “reliable”, and thus assigned that
rate preliminarily for Ta Chen’s known sales of subject
merchandise in the United States to Emerdex 2. The agency
similarly applied an adverse inference to Dragon by
“allocat[ing] the total amount of all known payments from Ta
Chen to Dragon, for its services, to the U.S. sales of subject
merchandise for which Dragon was responsible.” Id. at 40,864.
Ultimately, as a result of its review, the ITA preliminarily
determined that a 5.08% weighted-average dumping margin existed
for Ta Chen for the period of June 1, 2002, through May 31,
2003. See id. at 40,866.
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(3)
In the wake of the Preliminary Results, the domestic
industry advanced a new argument. Its case brief asserted that
“[b]asic accounting concepts for the preparation of financial
statements” require the disclosure of related parties on
financial statements and that the accounting profession’s
definition of affiliated parties is “more expansive” than the
definition contained in the antidumping statutes. Intervenor-
Defendants’ Appendix, Tab 7, pp. 2-3. It thus posited that the
financial statements of Ta Chen and Emerdex 2 were “unreliable”
because they
should have disclosed the[ir] affiliation as well as
the purchases, sales and financing transactions by
these related companies with one another. The
financial statements . . ., however, fail to disclose
the simple fact of the affiliation between Ta Chen and
Emerdex [2], much less disclos[e] the financial impact
of this relationship on their financial statements[.]
Logically, given that [their] . . . financial
statements do not disclose and properly treat
affiliated-party transactions, and given that Emerdex
[2]’[s] financial statements are wrong, so is the
information derived from those financial statements[.]
. . . In summary . . . the submitted statements . . .
are inaccurate and unreliable, and cannot serve as
essential source documents for the [ITA]’s review.
Id. at 3-4. The domestic industry made similar arguments
concerning the financial statements of Dragon and several other
alleged affiliates, namely, Millennium, DNC, Billion, and PFP.
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The ITA considered these new arguments in its Decision
Memorandum, which confirmed and augmented the Preliminary
Results and was adopted by reference in the Final Results. The
Decision Memorandum concluded that, with
regard to Ta Chen’s financial statements, the
Department’s . . . affiliation definition is not
necessarily consistent with Taiwan or U.S. Generally
Accepted Accounting Principles (“GAAP”) definitions of
related parties. As such, a finding of affiliation by
the Department does not necessarily mean that such an
affiliation should be reflected in Ta Chen’s financial
statements. Furthermore, [the domestic industry]
ha[s] not demonstrated how Ta Chen’s financial
statements are inconsistent with Taiwanese GAAP.
Therefore, for these final results, the Department
will continue to rely on Ta Chen’s financial
statements.
Decision Memorandum, p. 8. The agency also
disagree[d] with the [domestic industry] regarding
their argument that Ta Chen was totally untimely and
uncooperative. Although the Department acknowledges
that Ta Chen was not prompt in providing information
requested . . ., the affiliation issue required
complex research and analysis, and issuance of
supplemental questionnaires. Based on submissions by
the parties and its own research, the Department
received sufficient information regarding the alleged
affiliates to make a determination for this review.
Id. at 35. It found that
the evidence on the record does not warrant total AFA
. . . because a review of all the entities identified
by [the domestic industry] and addressed by the
Department in the Affiliation Memo demonstrates that
almost all the entities did not produce, purchase, or
sell the subject merchandise during the POR, as Ta
Chen reported. . . . The Department finds that, with
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the exception[] . . . of partial AFA[] for Emerdex 2
and Dragon . . . applying total AFA to Ta Chen is not
warranted in this review. Notwithstanding Ta Chen’s
lack of promptness in submitting information to the
Department, the breadth of the information submitted
was accepted by the Department as sufficient for
making a determination. . . . The Department finds
that, with the exception of Emerdex 2 and Dragon . . .
Ta Chen cooperated . . . in providing satisfactory
data for the record and[,] therefore, total adverse
facts available is not appropriate.
Id. at 35-36.
The Decision Memorandum reveals that the ITA ulti-
mately declined to analyze the domestic industry’s allegations
concerning 25 companies9 because there was
no evidence on the record demonstrat[ing] that [these]
companies’ business activities [were] related to the
production or sale of subject merchandise during the
9
Millennium, South Coast, DNC, Billion, PFP, AMS
California, AMS North Carolina 1, AMS North Carolina 2, AMS
Corp., Stainless Express [collapsed by the ITA into one entity
in the Final Results, although considered two companies, viz.
Stainless Express 1 and Stainless Express 2, in the Preliminary
Results], Southstar, Estrela 1, Estrela 2, TCI Estrela, Estrela
3, Estrela 4, NASTA, Becmen, LLC, Becmen Specialty Steels, Inc.,
Becmen Trading International, Inc., KSI Steel, Inc., K Sabert,
Inc., and Sabert Investments, Inc.
The Final Results do not discuss potential Ta Chen
affiliation with the Hsieh Family Trust or LPJR Investment. The
Preliminary Results, however, concluded that they “were not
involved in subject merchandise or foreign like product”. 69
Fed.Reg. at 40,862. This preliminary determination was adopted
by the Final Results, thus bringing the total number of
allegedly-affiliated companies that the ITA declined to analyze
to 25.
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POR. Additionally, the Department cannot find that
the relationship between the[se] companies and Ta Chen
had the potential to impact production or pricing
decisions of subject merchandise.
Id. at 35. The Final Results “made no changes” to Ta Chen’s
preliminary dumping-margin calculation, 5.08 percent. The
instant, consolidated actions thereupon commenced.
II
Section 771 of the Trade Agreements Act of 1979, as
amended, provides that the following “shall be considered to be
‘affiliated’ or ‘affiliated persons’”:
(A) Members of a family, including brothers and
sisters (whether by the whole or half blood), spouse,
ancestors, and lineal descendants.
(B) Any officer or director of an organization
and such organization.
(C) Partners.
(D) Employer and employee.
(E) Any person directly or indirectly owning,
controlling, or holding with power to vote, 5 percent
or more of the outstanding voting stock or shares of
any organization and such organization.
(F) Two or more persons directly or indirectly
controlling, controlled by, or under common control
with, any person.
(G) Any person who controls any other person and
such other person.
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For purposes of this paragraph, a person shall be
considered to control another person if the person is
legally or operationally in a position to exercise
restraint or direction over the other person.
19 U.S.C. §1677(33).
During an antidumping investigation or review, the
“question of affiliation is relevant to a number of price and
cost issues”. Uruguay Round Agreements Act Statement of
Administrative Action (“URAA-SAA”), H.R. Doc. No. 103-316,
vol. 1, p. 838 (1994). One of those issues is
the special rule for major inputs in . . . section
773(e)(3) . . . address[ing] diversionary input
dumping by authorizing [the ITA] to inquire whether
the transfer between “related” persons (i.e.,
“affiliated” persons . . .) of such an input is at a
price below the input’s production cost.
Id. The issue of affiliation is also relevant when determining
whether a particular sale of merchandise occurred during the
ordinary course of trade, as sales between affiliated parties
are disregarded for purposes of calculating dumping margins.
See 19 U.S.C. §§ 1677(15)(B), 1677b(f)(2). Consideration of
whether subject merchandise sales are to or by an affiliated
party influences the ITA’s decision whether to calculate that
merchandise’s U.S. price according to either export price or
constructed export price. See 19 U.S.C. §1677a; Ta Chen
Stainless Steel Pipe, Ltd. v. United States, 28 CIT ___, ___,
342 F.Supp.2d 1191, 1194 (2004).
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A
The domestic industry’s Rule 56.2 Motion for Judgment
Upon the Agency Record [hereinafter “Intervenor-Defendants’
Brief”] raises three issues with regard to the ITA’s
determinations:
(1)
Ta Chen was obligated in the underlying review to
create an accurate record and provide the Department
with the information requested to ensure that [it]
could calculate accurate dumping margins for Ta Chen
and its subject merchandise. See, e.g., Reiner Brach
GmbH & Co. v. United States, 26 CIT 549, 558-59, 206
F.Supp.2d 1323, 1333 (2002) . . . and 19 C.F.R. §
351.401(b)(1). . ..
Intervenor-Defendants’ Brief, p. 9. The domestic industry
posits that this general rule applies to potential affiliation
issues because
as to affiliates . . . the Department’s regulations at
19 C.F.R. §351.102(b) implementing 19 U.S.C.
§1677(33)’s definition of “affiliated persons,” the
Department’s policy places the burden of proof on
respondents, not petitioners or the [ITA].
Id. It cites the ITA’s publication Antidumping Duties;
Countervailing Duties, 62 Fed.Reg. 27,296 (May 19, 1997). The
preamble to that rulemaking notice provides that, in determining
whether one entity controls a second, the agency should not
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ignore situations in which a control relationship,
while relating directly to another product or another
type of commercial activity, could affect decisions
involving the production, pricing or cost of the
merchandise under consideration. Therefore, in these
types of situations, where a control relationship
exists, the respondent will have to demonstrate that
the relationship does not have the potential to affect
the subject merchandise or foreign like product.
Intervenor-Defendants’ Brief, p. 10 (underscoring partially
deleted; quoting Antidumping Duties; Countervailing Duties, 62
Fed.Reg. at 27,298 [hereinafter “Preamble”]). It insists that,
[c]learly, the burden was Ta Chen’s to identify all of
its affiliations and related parties and to
demonstrate that these control relationships did not
actually affect or have the potential to affect
decisions involving the production, pricing or cost of
the merchandise under consideration.
Id. It therefore faults the ITA’s “cho[ic]e not to decide
whether Ta Chen was affiliated with a total of twenty-five
companies” as being
the reverse of what the Department’s policy and
judicial precedent require. As between the question
of affiliation and the question of . . . impact on the
merchandise under consideration, the logic of the
Preamble calls for the former to be decided
first[.] . . . To flip the order of decision, as the
Department did . . . was to invite Ta Chen to do as Ta
Chen did, that is, deny in a self-serving manner that
any of the companies alleged to be affiliated with Ta
Chen were affiliated with a Ta Chen or had any
involvement with Ta Chen’s subject merchandise or
foreign like product.
Id. at 11-12. The domestic industry complains that this approach
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unjustifiably transformed [Ta Chen’s] into [the
domestic industry’s] burden of proof (to show that the
alleged affiliates did actually or potentially affect
the production, pricing or costs of the subject
merchandise and foreign like product). . . . [This]
virtually guarantees . . . that the [ITA] will not
resolve on the merits the seminal issue of affiliation
in most or perhaps all instances, because Ta Chen, not
[the domestic industry], is privy to the sort of
commercially sensitive information necessary to
document its affiliates’ involvement or not with the
merchandise under review. . . . [T]he [ITA]’s
decision not to resolve the issue of affiliation for
twenty-five alleged affiliates . . . [is] fundamentally
flawed.
Id. at 12 (emphasis in original). The domestic industry claims
that the agency went so far as to inconsistently misapply its
allegedly-erroneous approach in that it
eventually found fourteen companies were affiliated
with Ta Chen. . . . Of these fourteen companies,
however, the Department concluded that only three
(TCI[10], Emerdex 2, and Dragon []) were involved with
the subject merchandise. Yet the [ITA] still found
the other eleven were affiliated with Ta Chen. . . .
In addition, the [ITA] did not ask Ta Chen to
demonstrate . . . that these control relationships by
Ta Chen did not have the potential to affect the
subject merchandise or foreign like product.
Id. at 13. The domestic industry concludes that the
10
The domestic industry provides no citation for its
proposition that the ITA explicitly found TCI to be involved
with the subject merchandise, although the agency did note that
TCI is “Ta Chen’s wholly-owned subsidiary” and that, due to TCI
and Dragon’s “close and intertwined business activities, it is
not clear that Dragon in substance is a different company than
TCI[.]” Affiliations Memorandum, p. 13.
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ultimate effect of the [ITA]’s mishandling of Ta
Chen’s burden of proof on affiliation was that the
[ITA] did not uphold its statutory duty of computing
the most accurate dumping margins it could for Ta Chen
and Ta Chen’s subject merchandise.
Id. at 14. The domestic industry furthermore claims that the
administrative record contains substantial evidence that Ta Chen
was in fact affiliated with certain other companies, given the
various affiliation criteria of section 1677(33)11, supra. See
id. at 15. It contends that
had the [ITA] first properly decided the issue of Ta
Chen’s affiliations . . . each such affiliation should
have triggered scrutiny of whether the affiliation had
an impact on the production, pricing or cost of Ta
Chen’s [product]. Under the Preamble, it would have
been Ta Chen’s burden to show that those affiliations
did not have even the potential for any such impact.
Id. at 16.
11
The domestic industry presented company-specific
affiliation arguments to the ITA based upon multiple subsections
of 19 U.S.C. §1677. It relied upon subsection (33)(A) in making
affiliation arguments regarding PFP, DNC, and Billion; subsection
(33)(B) regarding AMS California, Millennium, South Coast, KSI
Steel, Inc., K Sabert, Inc., Sabert Investments, Inc., Southstar,
Estrela 1 and Estrela 2; section (33)(D) regarding Stainless
Express 1, Becmen, LLC, Becmen Specialty Steels, Inc., Becmen
Trading International, Inc. and Southstar; subsection (33)(E)
regarding AMS California and AMS North Carolina 1 and 2; and
subsection (33)(F) regarding AMS California, Millennium, South
Coast, Stainless Express 1, PFP, DNC, Billion, AMS Corp., KSI
Steel, Inc., K Sabert, Inc., Sabert Investments, Inc., Becmen,
LLC, Becmen Specialty Steels, Inc., Becmen Trading International,
Inc., Southstar, NASTA, Hsieh Family Trust and LPJR Investments.
See Intervenor-Defendants’ Brief, p. 16.
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(2)
The domestic industry renews its argument that
Ta Chen’s audited financial statements were
inconsistent with U.S. GAAP and unreliable to serve as
a benchmark to check whether Ta Chen’s reported data
would yield accurate dumping margins. . . . U.S. GAAP
has a broad disclosure requirement for related parties
and related-party transactions and . . . Ta Chen (as
well as its various related U.S. parties) did not
satisfy that requirement.
Id. at 17. It complains that the ITA “said nothing at all on
this subject in . . . the Preliminary Results and only briefly
discussed this matter in connection with the final results”.
Id., citing Decision Memorandum, pp. 7-8. It insists that this
does not square with the [ITA]’s mandate to calculate
Ta Chen’s dumping margins as accurately as possible.
. . . Nor does this dismissal square with the
axiomatic precept that the burden was Ta Chen’s to
establish that its audited financial statements were
in accord with U.S. GAAP and could therefore serve as
a reliable benchmark to check the accuracy of Ta
Chen’s reported data.
Id. at 18. According to the domestic industry, the
definition of “related parties” under U.S. GAAP is
more expansive in every respect than the antidumping
statute’s definition of “affiliated persons”. . . .
Put otherwise, an entity that is an “affiliated
person” under the antidumping law almost certainly is
a “related party” under U.S. GAAP. On the other hand,
a “related party” under U.S. GAAP will not necessarily
also be an “affiliated person” under the antidumping
law. . . . Under these circumstances, the [ITA]’s
conclusion should have been that Ta Chen’s audited
financial statements are materially and severely
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inconsistent under U.S. GAAP due to Ta Chen’s failure
to disclose all of its related parties and, as
required, its related-party transactions.
Id. at 19-20. The domestic industry views the ITA’s treatment
of Ta Chen’s financial statements as
improperly plac[ing] the burden of proof on [it] to
demonstrate the relevance of these disclosure
obligations. . . . The upshot of Ta Chen’s failure to
carry its burden of proof and provide the [ITA] with
trustworthy financial statements is that the [ITA]
cannot legitimately rely upon those statements . . .
to check the accuracy of the data that Ta Chen
reported to the [ITA] and, therefore, of dumping
margins based upon those reported data.
Id. at 21-22.
(3)
The domestic industry contends that, instead of
assigning partial adverse facts available to Emerdex 2 and
Dragon, the ITA should have resorted to either facts otherwise
available or total adverse facts available due to Ta Chen’s
“pattern of deliberately withholding information that the [ITA]
properly sought and attempt[s] to deceive[] the [ITA].” Id.
at 34. It argues that the agency’s finding that Ta Chen’s
submitted affiliation data were “sufficient” and “satisfactory”
is “not correct under the antidumping statute”. Id. at 24,
quoting, in part, Decision Memorandum, pp. 35-36. That statute
provides for agency determinations on the basis of facts
Consolidated
Court No. 05-00094 Page 22
available if
(1) necessary information is not available on the
record, or
(2) an interested party or any other person --
(A) withholds information that has been
requested by the [ITA] . . .,
(B) fails to provide such information by the
deadlines for submission of the information or in
the form and manner requested . . .,
(C) significantly impedes a proceeding . . .,
or
(D) provides such information but the infor-
mation cannot be verified . . .[.]
* * *
If the [ITA] . . . finds that an interested party
has failed to cooperate by not acting to the best of
its ability to comply with a request for information
. . ., the [ITA] . . ., in reaching the applicable
determination . . . , may use an inference that is
adverse to the interests of that party in selecting
from among the facts otherwise available. Such
adverse inference may include reliance on the
information derived from --
(1) the petition,
(2) a final determination in the investigation
under this subtitle,
(3) any previous review under section 1675 of
this title or determination under section 1675b of
this title, or
(4) any other information placed on the record.
19 U.S.C. §1677e(a) and (b).
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The domestic industry argues that, due to agency
misallocation of the burden of proof on affiliation, the ITA
made no findings under [19 U.S.C. §§ 1677e(a)(1) and
(2)], except as to the four Emerdex Companies and
. . . Dragon[.] . . . The [ITA] should likewise have
followed these same statutory provisions in deciding
whether facts available were required as to Ta Chen’s
other[] “alleged affiliates” . . . but [it] did
not. . . .
Such disregard . . . of the statute should not be
allowed, especially given that Ta Chen did withhold
information, was untimely in giving other
information[,] . . . significantly impede[d] the
[ITA]’s administrative review, and left the Department
with information that could not be verified.
Intervenor-Defendants’ Brief, pp. 26-27.
The domestic industry ventures that Ta Chen’s deficient
submissions should be disregarded per 19 U.S.C. §1677m(d) and
(e), to wit:
(d) Deficient submissions
If the [ITA] . . . determines that a response to
a request for information . . . does not comply with
the request, the [ITA] . . . shall promptly inform the
person submitting the response of the nature of the
deficiency and shall, to the extent practicable,
provide that person with an opportunity to remedy or
explain the deficiency in light of the time limits
established for the completion of . . . reviews under
this subtitle. If that person submits further
information in response to such deficiency and
either --
(1) the [ITA] . . . finds that such response
is not satisfactory, or
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(2) such response is not submitted within
the applicable time limits,
then the [ITA] . . . may, subject to subsection (e) of
this section, disregard all or part of the original
and subsequent responses.
(e) Use of certain information
In reaching a determination under section . . .
1675 . . . the [ITA] . . . shall not decline to
consider information that is submitted by an
interested party and is necessary to the determination
but does not meet all the applicable requirements
established by the [ITA] . . ., if --
(1) the information is submitted by the
deadline established for its submission,
(2) the information can be verified,
(3) the information is not so incomplete
that it cannot serve as a reliable basis for
reaching the applicable determination,
(4) the interested party has demonstrated
that it acted to the best of its ability in
providing the information and meeting the
requirements established by the [ITA] . . . with
respect to the information, and
(5) the information can be used without
undue difficulties.
It further hypothesizes that, were the ITA to have closely
scrutinized Ta Chen’s submitted information under section
1677m(e), it would have found that that information could not
properly be considered, given its untimeliness and
unreliability. It posits that such a finding would mandate the
application of facts otherwise available per 19 U.S.C.
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Court No. 05-00094 Page 25
§1677e(a). See Intervenor-Defendants’ Brief, pp. 29-30. The
domestic industry complains that, “in deciding against total
facts available for Ta Chen and its subject merchandise”, the
ITA
did not apply the statutory test . . . . Instead, the
[ITA] said that “Ta Chen cooperated with the Depart-
ment in providing satisfactory data for the record
and[,] therefore, total adverse facts available is not
appropriate.” . . . Decision Memorandum, at 36. . . .
There is no reasonable way that cooperation by Ta
Chen in providing satisfactory data can be said to be
the same as the statutory test at 19 U.S.C. §1677e(b)
that obligates a respondent to cooperate with the
[ITA] to the best of that respondent’s ability. . . .
In Nippon Steel Corp. v. United States, 337 F.3d 1373,
1382 (Fed. Cir. 2003) . . . the Federal Circuit held
that the statutory mandate that a respondent act to
the best of its ability means that a respondent is
required to do “the maximum it is able to do.” . . .
[I]n order for the [ITA] to conclude that a respondent
has been uncooperative: (i) the [ITA] must objectively
demonstrate that a reasonable and responsible
respondent would have known that the requested
information was required to be kept and maintained . .
.; and (ii) the [ITA] must subjectively demonstrate
that the respondent . . . both failed promptly to
produce requested information and was not fully
responsive due to . . . lack of cooperation either by
failing to keep and maintain the requested information
or by failing to put forth its maximum efforts to
investigate and obtain the requested information from
its records.
Id. at 32-33 (underscoring deleted). It concludes that the ITA
did not carry out any of the analysis called for by
Nippon Steel[.] . . . [H]ad the [ITA] weighed the
issue . . . under the statutory standard, there is
substantial evidence on the record . . . that Ta Chen
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Court No. 05-00094 Page 26
did not cooperate to the best of its ability and did
not do the maximum it could do to answer the [ITA]’s
questions on the core issues of Ta Chen’s affiliations
and related parties. . . . Had the [ITA] consistently
and properly followed the statutory standards on facts
available and on adverse inferences, total facts
available should have been assigned to Ta Chen as a
matter of law.
Id. at 33, 35.
B
In its response to the domestic industry’s motion for
judgment on the agency record, Ta Chen, for the first time,
raises affirmative claims12. Stating that, if the propriety of
12
The defendant has moved to strike them, contending that
they are untimely and outside the scope of plaintiff’s
complaint. See generally Defendant’s Motion to Strike, pp. 2-4.
Motions to strike are a drastic remedy that are not favored
and infrequently granted unless factors such as bad faith or
prejudice are demonstrated by the moving party. E.g., Rhodia,
Inc. v. United States, 26 CIT 1107, 1109 and 240 F.Supp.2d 1247,
1249 n. 5 (2002). Here, the court deems plaintiff’s response as
both a request for leave to amend its complaint, which is hereby
granted, and a cross-motion for summary relief. See, e.g.,
Vanetta U.S.A. Inc. v. United States, 27 CIT 860, 861-62
(2003)(permitting party to assert a cross-motion for summary
judgment in its response to an original motion for summary
judgment); Saarstahl AG v. United States, 20 CIT 1413, 1416-18,
949 F.Supp. 863, 866-67 (1996), quoting Foman v. Davis, 371 U.S.
178, 182 (1962)(if a party’s claim is “a proper subject of
relief, he ought to be afforded an opportunity to test his claim
on the merits” unless a factor such as undue delay, bad faith,
dilatory motive or undue prejudice is present).
Since the defendant does not show any such negative factor,
its motion to strike should be, and it hereby is, denied.
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the ITA’s application of adverse facts available is “to be
reviewed anyway . . . a full review thereof best promotes . . .
accura[cy]”, the plaintiff takes the position that the ITA’s
application of adverse facts available to Emerdex 2 data
was not in accordance with law or supported by
substantial evidence. Only 0.012% by quantity (3 of
about 25,000 sales), and only 0.019% by value ($500 of
a total $2,587,631.95 value of U.S. sales) of TCI’s
[POR] subject merchandise U.S. sales[] that TCI
reported . . . were to Emerdex.[] When dealing with
25,000 sales, . . . Ta Chen’s failure in best
reporting of three sales cannot be but
inadvertent. . . . Such a mistake does not call for
adverse facts available . . ..
Plaintiff’s Corrected Response to Alloy Piping’s Motion for
Judgment on the Agency Record [hereinafter “Plaintiff’s Brief”],
p. 18. It also complains that the ITA’s resort to adverse facts
available regarding Dragon data was in error because the entity
had nothing to do with the subject merchandise; Dragon
sells only non-subject merchandise.[] [The ITA] cites
no evidence otherwise in its decision.[] Yet, Commerce
imposed adverse facts available as to Ta Chen’s
reporting regarding Dragon on the stated (and wrong)
basis that Dragon was involved with the subject
fittings.[]
Id. at 18-19.
III
The court’s jurisdiction is based upon 28 U.S.C. §§
1581(c), 2631(c). It will uphold the ITA’s determination if
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Court No. 05-00094 Page 28
supported by substantial evidence on the record and in
accordance with law. See 19 U.S.C. §1516a(b)(1)(B)(i). Sub-
stantial evidence is “such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.” Consol.
Edison Co. v. NLRB, 305 U.S. 197, 229 (1938); Shanghai Foreign
Trade Enterprises Co. v. United States, 28 CIT ___, ___, 318
F.Supp.2d 1339, 1345 (2004).
A
The primary focus of the domestic industry is the
ITA’s refusal to apply total adverse facts available13 to Ta Chen
subject-merchandise sales. It must be remembered, however,
that, in its review of the administrative record as a whole, the
court cannot
substitute its judgment for that of the [ITA] when the
choice is “between two fairly conflicting views, even
though the court would justifiably have made a
different choice had the matter been before it de
novo.”
13
Although the phrase “total adverse facts available” does
not appear in either the governing statute or the agency’s
regulations,
it can be understood . . . as referring to [the ITA]’s
application of adverse facts available not only to the
facts pertaining to specific sales for which
information was not provided, but to the facts
respecting all of respondents’ sales encompassed by the
relevant antidumping duty order.
Shandong Huarong Mach. Co. v. United States, 30 CIT ___, ___ and
435 F.Supp.2d 1261, 1265 n. 2 (2006).
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Court No. 05-00094 Page 29
SKF USA Inc. v. United States, 30 CIT ___, ___, 452 F.Supp.2d
1335, 1337 (2006), citing American Spring Wire Corp. v. United
States, 8 CIT 20, 22, 590 F.Supp. 1273, 1276 (1984). Rather, so
long as there is an adequate basis in support of the ITA’s
choice, the court must defer to the agency. Nippon Steel Corp.
v. United States, 458 F.3d 1345, 1359 (Fed.Cir. 2006), reh’g
denied (Oct. 27, 2006). Furthermore, in the absence of a
statutory mandate to the contrary, the ITA’s actions must be
upheld as long as they are reasonable. Timken Co. v. United
States, 23 CIT 509, 516, 59 F.Supp.2d 1371, 1377 (1999).
The statutory directive governing the ITA’s use of
adverse inferences in selecting among facts otherwise available
has been held to be permissive on its face. See, e.g., Dorbest
Ltd. v. United States, 30 CIT ___, ___, 462 F.Supp.2d 1262,
1317-18 (2006); Co-Steel Raritan, Inc. v. U.S. Int’l Trade
Comm’n, 31 CIT ___, ___, Slip Op. 07-7, p. 18-19 (Jan. 17,
2007). In assessing the propriety of discretionary agency
action,
unless a party alleges that [the agency] has exercised
its discretion in an unlawful manner . . . or that the
factual predicates of [the agency]’s decision were
unsupported by substantial evidence . . . th[e] court
may not disturb [the agency]’s decision[.]
30 CIT at ___, 462 F.Supp.2d at 1319.
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Although the domestic industry is correct that a
respondent must do “the maximum it is able to do” in meeting the
ITA’s requests for information, e.g., Nippon Steel Corp. v.
United States, 337 F.3d 1373, 1382 (Fed.Cir. 2003), there is no
requirement that the ITA affirmatively
prove that an importer cooperated to the best of its
ability every time that the agency decides not to
apply adverse facts available.[] This [would] run[]
counter to the discretion afforded to [the ITA] by
section 1677e(b)[.]
AK Steel Corp. v. United States, 28 CIT ___, ___, 346 F.Supp.2d
1348, 1355 (2004)(emphasis in original).
While it is possible to conclude from the
administrative record herein that Ta Chen did not cooperate with
the ITA to the best of its ability, the issue of whether a
respondent has been cooperative or recalcitrant amounts to a
“line-drawing exercise [that] is precisely the type of
discretion left within the agency’s domain.” Baoding Yude Chem.
Indus. Co. v. United States, 25 CIT 1118, 1126, 170 F.Supp.2d
1335, 1343 (2001). Cf. Uddeholm Corp. v. United States, 11 CIT
969, 971-72, 676 F.Supp. 1234, 1237 (1987)(ITA has the
discretion to change its data requests, to accept certain data
or to reject the information). Moreover, the record as a whole
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forms an “adequate basis” in support of the ITA’s decision14 not
to resort to total adverse facts available. Nippon Steel v.
United States, 458 F.3d at 1359. See also Consolo v. Fed.
Maritime Comm’n, 383 U.S. 607, 620 (“the possibility of drawing
two inconsistent conclusions from the evidence does not prevent
an administrative agency’s finding from being supported by
substantial evidence”).
In light of the above, the court cannot conclude that
the ITA’s decision not to apply total AFA was unreasonable. The
plaintiff’s arguments concerning the ITA’s application of
partial adverse facts available to Emerdex 2 and Dragon fall
short for similar reasons. Despite its characterization of its
failure to report subject merchandise sales to Emerdex as
“inadvertent”, Plaintiff’s Brief, p. 18, the ITA explained why
it viewed the omission otherwise, to wit, that,
despite [its] repeated requests for information
concerning Ta Chen’s affiliates, [] Ta Chen did not
identify certain U.S. sales of subject merchandise to
Emerdex 2. . . . [P]rior to the identification of
Emerdex 2, the [ITA] requested Ta Chen to identify any
sales of subject merchandise to Emerdex 1, an
affiliate of Ta Chen[.] . . . Ta Chen responded that
no sales of subject merchandise existed. . . . Ta
14
In reaching its determination, the ITA considered the
“breadth of information submitted” by Ta Chen along with the
“promptness” with which it was produced. See Decision Memorandum,
p. 36.
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Chen also did not identify the sales of subject
merchandise to Emerdex 2. Given this opportunity to
identify sales to affiliated parties, Ta Chen chose to
interpret the [ITA]’s question in the narrowest
possible manner[.]
Decision Memorandum, p. 11 (emphasis in original; quoting in
part the Preliminary Results, 69 Fed.Reg. at 40,863). In thus
explicitly stating why Ta Chen’s reporting of incomplete sales
data was something more than an inadvertent omission, the ITA
fulfilled its duty to articulate why it concluded that the
plaintiff failed to act to the best of its ability. Cf. Allegheny
Ludlum Corp. v. United States, 24 CIT 1424, 1445, 215 F.Supp.2d
1322, 1341 (2000), citing Mannesmannrohren-Werke AG v. United
States, 23 CIT 826, 841, 77 F.Supp.2d 1302, 1315 (1999). See also
China Steel Corp. v. United States, 27 CIT 715, 735, 264 F.Supp.2d
1339, 1360 (2003)(to apply an adverse inference the ITA must find
either a willful decision not to comply with its request or
behavior below the standard for a reasonable respondent).
The record at bar contains substantial evidence that the
plaintiff’s failure to report Emerdex 2 as an affiliate that dealt
in subject merchandise, and its sales of subject merchandise
thereto, was not “excusable inadvertence [rather] a demonstration
of a lack of regard for its responsibilities in the investigation.”
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Allegheny Ludlum Corp. v. United States, 24 CIT at 1445, 215
F.Supp.2d at 1341. That the data ultimately disclosed by the
plaintiff revealed that its sales to Emerdex 2 comprised only a
small percentage of its sales of subject merchandise does not
change this fact.15
The court also cannot find error in the ITA’s
determination that Dragon was involved with subject merchandise.
In considering that issue, the agency referred to substantial
evidence consisting of
thousands of sales observations of subject merchandise
reported in Ta Chen’s section C database [that] were
sold through [Dragon] facilities during the POR.
Therefore, the record shows that Dragon’s selling
activities included responsibility for these sales.
The record evidence does not support Ta Chen’s
argument that Dragon had no activities related to
subject merchandise. Rather, the record indicates
that Dragon incurred U.S. selling expenses related to
subject merchandise on behalf of Ta Chen. . . . Thus,
Ta Chen’s relationship with Dragon has the potential
to impact pricing decisions of subject merchandise.
Ta Chen’s submissions regarding Dragon have been
wholly inadequate in consideration of the [ITA]’s
mandate to calculate a dumping margin which accounts
for Ta Chen’s U.S. selling expenses.
15
Compare Mannesmannrohren-Werke AG v. United States, 23
CIT 826, 850-52, 77 F.Supp.2d 1302, 1322-24, which applied the
maxim de minimis non curat lex (“the law cares not for trifles”)
when presented with a respondent’s figures that were of a
“limited nature”, with Decision Memorandum, p. 11 (discussing Ta
Chen’s failure to disclose a potential affiliate and sales
thereto in response to repeated and pointed ITA questioning).
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Affiliations Memorandum, pp. 13-14. The ITA concluded that
Ta Chen failed to provide . . . information in a time-
ly manner or in the form or manner requested under the
antidumping statute. . . . [T]he information on the
record regarding . . . Dragon . . . was ultimately
obtained from Ta Chen only after the [ITA]’s multiple,
detailed and specific requests. Nonetheless, this
information was not disclosed to the [ITA] in a timely
manner and Ta Chen was less than forthcoming about the
nature of its affiliation and business transactions
with Dragon[.]
Decision Memorandum, p. 19, citing Affiliations Memorandum.
In light of the above, it cannot be said that the
ITA’s decision to apply partial adverse facts available to
Dragon was not in accordance with law or supported by
substantial evidence.
B
The court cannot fault the ITA’s decision to consider
Ta Chen’s financial statements. The agency reasonably
determined that their failure to disclose Ta Chen affiliates did
not render them unreliable.
The domestic industry’s arguments to the contrary echo
those raised in Kaiyuan Group Corp. v. United States, 29 CIT
___, 391 F.Supp.2d 1317 (2005), wherein plaintiff China First
challenged the ITA’s decision to find it affiliated with another
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entity under section 1677(33)(F). China First relied on
International Accounting Standards to argue that,
since [the alleged affiliate was] not listed in [its]
financial statements, and because outside auditors
certified [its] financial position, the two companies
are not affiliated and therefore should not be
collapsed.
29 CIT at ___ and 391 F.Supp.2d at 1324 n. 13. The ITA’s
response therein was a familiar one, to wit, there was
no basis for concluding that the [International
Accounting Standards] govern whether, for purposes of
antidumping reviews, companies should be collapsed
under Commerce’s regulations.
29 CIT at ___ and 391 F.Supp.2d at 1324-1325 n. 13. Siding with
the ITA, the court in Kaiyuan Group Corp. agreed that the
issue before the agency and the Court [wa]s not
whether, for accounting purposes, [the alleged
affiliate] should be considered [China First’s]
subsidiary or associate; rather, the question [wa]s
whether Commerce’s decision to collapse the two
companies, pursuant to Commerce’s regulations, is
supported by substantial evidence.
29 CIT at ___ and 391 F.Supp.2d at 1325 n. 13 (emphasis in
original; internal quotation marks deleted).
Because the antidumping laws, along with agency
implementing regulations, alone establish the criteria for
determining whether parties are affiliated, their resemblance
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to, or possible overlap with, U.S. or foreign GAAP standards are
not of conclusive moment. As the ITA succinctly stated in
Notice of Final Determination of Sales at Less Than Fair Value;
Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products
From Brazil, 64 Fed.Reg. 38,756, 38,769 (July 19, 1999),
the similarity between the Brazilian GAAP’s definition
of a “related party” and the Act’s definition of an
“affiliated party” is irrelevant. A similarity in the
definition of two words does not necessarily give them
the same meaning, especially when applied in different
circumstances.
In concurring therewith, this court cannot disagree with the
ITA’s conclusion in the review at bar that
a finding of affiliation by the [ITA] does not
necessarily mean that such an affiliation should be
reflected in Ta Chen’s financial statements.
Decision Memorandum, p. 8. The agency properly determined that
those financial statements’ failure to list affiliated entities
as “related parties” does not render them inherently unreliable.
Moreover, the ITA’s decision to rely upon audited,
home-country GAAP-compliant financial statements in gathering
cost-of-production data was in accordance with the law16 and
16
See 19 U.S.C. §1677b(f)(1)(A), which provides that cost
of production and constructed value
shall normally be calculated based on the records of
the exporter or producer of the merchandise, if such
(footnote continued)
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agency practice17. In fact, the Court of International Trade
has consistently upheld Commerce’s reliance on a firm’s
expenses as recorded in the firm’s financial
statements, as long as those statements were prepared
in accordance with the home country’s GAAP and do not
significantly distort the firm’s actual costs.
FAG U.K. Ltd. v. United States, 20 CIT 1277, 1290, 945 F.Supp. 260,
271 (1996)(citations omitted). See also Laclede Steel Co. v.
United States, 18 CIT 965, 974-975 (1994); URAA-SAA, p. 834.
Commerce is generally given the benefit of “wide
latitude” in the verification procedure it chooses to implement.
Pohang Iron and Steel Co. v. United States, 23 CIT 778, 796
(1999), citing American Alloys, Inc. v. United States, 30 F.3d
1469, 1475 (Fed.Cir. 1994). Accordingly, the court
defers to the agency’s sensibility as to the depth of
the inquiry needed. In the absence of evidence in the
record suggesting the need to examine further the
records are kept in accordance with the generally
accepted accounting principles of the exporting
country (or the producing country, where appropriate)
and reasonably reflect the costs associated with the
production and sale of the merchandise.
17
See, e.g., ITA Final Determination of Sales at Less Than
Fair Value: Canned Pineapple Fruit From Thailand, 60 Fed.Reg.
29,553, 29,559 (June 5, 1995) (“the Department’s practice is to
adhere to an individual firm's recording of costs in accordance
with GAAP of its home country if the Department is satisfied
that such principles reasonably reflect the costs of producing
the subject merchandise”).
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supporting evidence itself, the agency may accept the
credibility of [a] document at face value.
Id. at 797.
The administrative record shows that the ITA was
satisfied that Ta Chen’s financial statements reasonably
reflected its costs of production.18 The court finds no error in
the ITA’s reliance thereon.
C
A claim that two entities are affiliated within the
19
meaning of 19 U.S.C. §1677(33)(F) and (G) turns on whether one
entity “controls” another. The statute provides that
a person shall be considered to control another person
if the person is legally or operationally in a position
to exercise restraint or direction over the other
person.
18
See, e.g., Decision Memorandum, pp. 7-8. Although the ITA
did not exhaustively explain its decision to rely on the
financial statements at issue, its decisional path in this regard
is “reasonably discernable” from the record. See, e.g., Wheatland
Tube Co. v. United States, 161 F.3d 1365, 1369-70 (Fed.Cir.
1998).
19
To repeat, those subsections state that affiliated
persons are:
(F) Two or more persons directly or indirectly
controlling, controlled by, or under common control
with, any person.
(G) Any person who controls any other person and
such other person.
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19 U.S.C. §1677(33). ITA regulations further provide:
. . . In determining whether control over another
person exists . . ., the Secretary will consider the
following factors, among others: corporate or family
groupings; franchise or joint venture agreements; debt
financing; and close supplier relationships. The
Secretary will not find that control exists on the
basis of these factors unless the relationship has the
potential to impact decisions concerning the
production, pricing, or cost of the subject merchandise
or foreign like product. The Secretary will consider
the temporal aspect of a relationship in determining
whether control exists; normally, temporary
circumstances will not suffice as evidence of control.
19 C.F.R. §351.102(b).
In TIJID, Inc. v. United States, 29 CIT ___, 366
F.Supp.2d 1286 (2005), plaintiff TIJID alleged that it was
affiliated with another party pursuant to subsections 1677(33)(F)
and (G). In reviewing the ITA’s underlying negative affiliation
determination, the court held that, to find affiliation under 19
U.S.C. §1677(33)(F),
two elements must be satisfied . . .. First, two
parties must be legally or operationally in a position
to exercise restraint or direction over a third party.
. . . Second, the relationship with the third party
must have the potential to impact decisions concerning
the production, pricing, or cost of the subject
merchandise.
29 CIT at ___, 366 F.Supp.2d at 1293, citing Mitsubishi Heavy
Indus., Ltd. v. United States, 23 CIT 326, 335-36, 54 F.Supp.2d
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1183, 1192 (1999). The court additionally found that 19 C.F.R.
§351.102(b) was a “reasonable [agency] interpretation” of section
1677(33)’s requirement that a person considered to control
another person be “legally or operationally in a position to
exercise restraint or direction over the other person” whereby
control over another
exists only when “the relationship has the potential to
impact decisions concerning the production, pricing, or
cost of the subject merchandise or foreign like
product.”
29 CIT at ___, 366 F.Supp.2d at 1298, quoting 19 C.F.R.
§351.102(b) (emphasis added). Because the potential to affect
decisions concerning the production, pricing, or cost of subject
merchandise is the sine qua non of “control”, as reasonably
interpreted by the ITA, such potential must be established for a
finding of affiliation-by-control “within the meaning of section
771(33) of the Act”. 19 C.F.R. §351.102(b).
Although the party responding to an ITA investigation
has the burden of creating an adequate record, e.g., NSK Ltd. v.
United States, 20 CIT 361, 369, 919 F.Supp. 442, 449 (1996);
Zenith Elecs. Corp. v. United States, 988 F.2d 1573, 1583
(Fed.Cir. 1993), the TIJID court clarified that, in
order for Commerce to find that affiliation exists, the
party alleging affiliation must successfully
demonstrate that [the] elements [of affiliation] have
been fulfilled.
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29 CIT at ___, 366 F.Supp.2d at 1293 (emphasis added). In that
case, a party alleging affiliation “failed to demonstrate that
[companies under its purported control] were involved in sales of
the subject merchandise.” 29 CIT at ___, 366 F.Supp.2d at 1295.
The court held that, given the absence of such proof, the ITA
“reasonably concluded that [those companies] did not have the
potential to impact decisions concerning the subject
merchandise.” Id.This court does not read the ITA Preamble as altering
this paradigm. Rather, the relevant portion relied upon by the
domestic industry simply clarifies that, should the agency
determine that a “control relationship” exists,
the respondent will have to demonstrate that the
relationship does not have the potential to affect the
subject merchandise or foreign like product.
62 Fed.Reg. at 27,298. It does not obviate the requirement that
a party alleging affiliation affirmatively make its case based
20
upon the record created by the respondent . Rather, the
20
While the domestic industry’s asserted frustration
regarding what it perceives to be an incomplete record may be
understandable, it is up to the ITA to “assure itself that it
has asked questions sufficient to provide it with enough
information to make [an] affiliation determination[.]” Ta Chen
Stainless Steel Pipe, Ltd. v. United States, 23 CIT 804, 820
(1999). To that end, the agency “has an obligation to make
(footnote continued)
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Preamble announces agency policy21 to allow a respondent the
opportunity to offer evidence demonstrating lack of control
following an agency determination that a “control relationship”
exists. Such an approach was employed by the ITA in the case at
bar.
Because a party must prove each element of its
22
allegations concerning affiliation , the ITA’s analysis of the
[questionnaire] questions affected by affiliation issues clear,
in light of its own recognition that affiliation is a complex
concept[.]” Id.21
Although the Court of Appeals for the Federal Circuit
(“CAFC”) has not decided the question generally of whether a
regulatory preamble is an agency determination entitled to
Chevron deference, see, e.g., Alloy Piping Prods., Inc. v. Kanzen
Tetsu Sdn. Bhd., 334 F.3d 1284, 1290 (Fed.Cir. 2003), the Court
of International Trade has held specifically with regard to this
preamble that,
although it was issued after the notice-and-comment
rulemaking procedure that went into 19 CFR § 351.107,
[it] is a policy statement, and not an agency
interpretation that holds the “force of law”, such as
would be entitled to deference[.]
Tung Mung Dev. Co. v. United States, 25 CIT 752, 769 (2001).
22
In its reply brief, the domestic industry for the first
time asserts that the ITA, in determining affiliation-by-
control, has established a “policy” of first considering whether
an entity is “legally or operationally in a position to exercise
restraint” over another, and only thereafter reaching the
question of whether the relationship of the entities in question
has the “potential to impact decisions relating to subject
merchandise.” Reply Brief by Alloy Piping, p. 3. The domestic
industry rests this argument upon statements made by the ITA in
the agency’s papers filed with the court in TIJID. Id., citing
TIJID, Inc. v. United States, 29 CIT at ___, 366 F.Supp.2d at
1298-99.
(footnote continued)
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domestic industry’s affiliation-by-control claims23 herein did no
violence to the statutory scheme. And the court finds no error
in the ITA’s conclusion that no further affiliation analysis was
necessary concerning companies alleged to be affiliated with Ta
Chen by virtue of “control” pursuant to subsections 1677(33)(F)
Notwithstanding the fact that arguments raised for the first
time in a reply brief are not properly before the court, see,
e.g., United States v. Ford Motor Co., 463 F.3d 1267, 1276-
77 (Fed.Cir. 2006), reh’g denied (Nov. 22, 2006), this court does
not view the isolated statement of agency procedure referred to
in TIJID as establishing a practice to which the ITA must adhere
in subsequent proceedings. See Ranchers-Cattlemen Action Legal
Found. v. United States, 23 CIT 861, 884-85, 74 F.Supp.2d 1353,
1374 (1999) (“An action . . . becomes an ‘agency practice’ when a
uniform and established procedure exists that would lead a party,
in the absence of notification of change, reasonably to expect
adherence to the established practice or procedure”); Shandong
Huarong Machinery Co. v. United States, 30 CIT at ___, 435
F.Supp.2d at 1282 n. 23 (2006)(two prior determinations are not
enough to constitute an agency practice binding the ITA).
Moreover, having rejected the domestic industry’s burden-shifting
argument, the court notes that the order in which the elements of
control are addressed by the ITA has no impact upon the
dispositive question of whether a party “successfully
demonstrate[s] that [the] elements [of affiliation] have been
fulfilled.” TIJID, Inc. v. United States, 29 CIT at ___, 366
F.Supp.2d at 1293.
23
The domestic industry identifies its subsection 33(F)
control-based affiliation claims as pertaining to AMS
California, Millennium, South Coast, Stainless Express 1, PFP,
DNC, Billion, AMS Corp., KSI Steel, Inc., K Sabert, Inc., Sabert
Investments, Inc., Becmen, LLC, Becmen Specialty Steels, Inc.,
Becmen Trading International, Inc., Southstar, NASTA, Hsieh
Family Trust, and LPJR Investments. See Intervenor-Defendants’
Brief, pp. 15-16.
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and (G) when it could not find
evidence on the record demonstrating that [those]
companies’ business activities [were] related to the
production or sale of subject merchandise during the
POR [or] . . . that the relationship between [those]
companies and Ta Chen had the potential to impact
production or pricing decisions of subject merchandise.
Decision Memorandum, p. 35.
The ITA’s individual determinations as to whether
companies alleged to be affiliated with Ta Chen by virtue of
control had activities related to the production or sale of
subject merchandise are additionally supported by substantial
evidence. The agency is presumed to have considered all record
evidence and comments thereon in reaching its determinations,
absent some showing to the contrary. See, e.g., Bethlehem Steel
Corp. v. United States, 28 CIT ___, ___, 316 F.Supp.2d 1309,
1316-17 (2004).
The record shows that, for each alleged Ta Chen
affiliate, the ITA considered and weighed evidence probative of
whether that entity was involved with the subject merchandise.
See Decision Memorandum, pp. 20-36. It reveals adequate evidence
to support the agency’s individual determinations, despite the
existence of some conflicting evidence. Hence, the court will
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not disturb the ITA’s determinations, for it is unquestionably
the “role of the expert factfinder . . . to decide which side’s
evidence to believe.” Nippon Steel Corp. v. United States, 458
F.3d at 1359. See also Hercules, Inc. v. United States, 11 CIT
710, 721, 673 F.Supp. 454, 466 (1987)(“Clearly, it is within
Commerce’s discretion to make reasonable interpretations of the
evidence and to determine [its] overall significance”)(internal
quotation omitted).
D
The ITA’s analysis of those entities alleged to be Ta
Chen affiliates within the meaning of 19 U.S.C. §1677(33)(A)-(E),
however, cannot withstand similar scrutiny. In Crawfish
Processors Alliance v. United States, 477 F.3d 1375, 1379-80
(Fed.Cir. 2007), the court held that the standard for affiliation
set forth in 19 U.S.C. §1677(33)(E) is unambiguous. In the
administrative review underlying that matter, the ITA considered
possible affiliation between the Fujian and Pacific Coast
corporations. The
record show[ed] that Fujian owned and exercised more
than 5% of Pacific Coast’s public shares during the
[POR], an amount sufficient to establish affiliation
[per 19 U.S.C. §1677(33)(E)]. . . . Nonetheless,
Commerce discounted the evidence of ownership because
the record showed no evidence of Fujian making a
transfer of cash or merchandise into Pacific Coast.
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477 F.3d at 1378. The appellants contended therein that the ITA
had erroneously interpreted the affiliation statute to require
the transfer of cash or merchandise to show direct or indirect
ownership of 5% or more of the shares of an organization. The
CAFC agreed, holding that subsection (33)(E)
clarifies, in quite broad terms, that owning,
controlling, or holding, “directly or indirectly,” over
5% of an entity’s stock constitutes “affiliation.”
This court detects no ambiguity in that standard. .
. . To prove affiliation, neither the statute nor the
regulations require evidence of the transfer of cash or
merchandise to prove that a person directly or
indirectly owns at least 5% of an organization’s
shares. Likewise, neither the statute nor the
regulations require the transfer of cash or merchandise
to show that a person holds, with power to vote, 5% or
more of the outstanding voting stock of an
organization. . . . [W]hen requiring Fujian and
Pacific Coast to provide evidence that “the
merchandise sold by Pacific Coast originated from
Fujian,” . . . Commerce made demands beyond the
requirements of the statute.
Id. at 1380-81. See also Mitsubishi Heavy Indus., Ltd. v. United
States, 22 CIT 541, 572, 15 F.Supp.2d 807, 832 (1998) (ITA’s
affiliation analysis erroneous because it required a greater
showing than mandated by statute).
Similarly, this court discerns no ambiguity in 19
U.S.C. §1677(33)(A)-(E). The first four lettered subsections
plainly do not premise affiliation upon “control”. In fact, that
word is nowhere found therein. The same cannot be said of
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subsection (E), which refers to “owning, controlling, or holding”
stock or shares in a second organization. Nevertheless, as
Crawfish Processors Alliance makes clear, control is not
indispensable to a finding of affiliation under subsection (E);
proof of ownership or holding the requisite amount of stock may
suffice24. See 477 F.3d at 1381. This court concurs with the
reading of section 1677(33) articulated in Hontex Enterprises,
Inc. v. United States, 27 CIT 272, 291, 248 F.Supp.2d 1323, 1339
(2003), to wit, that entities
are “affiliated” where they share either certain
relationships, such as by family, shared company
officers, directors, partners, employer/employee
status, or cross-ownership of voting stock, see 19
U.S.C. § 1677(33)(A)-(E), or share any other
relationship by which one entity is “legally or
operationally in a position to exercise restraint or
direction over the other”.
Emphasis added; footnote, citations omitted. Cf. China Steel
Corp. v. United States, 27 CIT at 724, 264 F.Supp.2d at 1350-51;
Plaintiff’s Brief, pp. 7-8, 13. The plain and unambiguous
24
The court also notes that subsection (E), on its face,
does not contemplate a situation whereby a person exercises
“control over another person [] within the meaning of section
771(33) of the Act”. 19 C.F.R. §351.102(b). Rather, it deals
with the control of stock or shares. This contrasts sharply with
the language of subsections (F) and (G), which refer to “[t]wo or
more persons . . . controlling . . . any person” and “[a]ny
person who controls any other person and such other person”,
respectively.
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language25 of 19 U.S.C. §1677(33) instructs that, to successfully
prove affiliation under subsections (A)-(E), a party need only
show the existence of one of the standards specified therein.
The statute does not require that a party show that entities
allegedly affiliated by virtue of those subsections be either
involved with or related to the production or sale of subject
merchandise or in a relationship that has the potential to impact
production or pricing decisions of subject merchandise. And the
ITA erred in requiring the petitioners to make such a showing in
the review herein. See Antidumping Duties; Countervailing
Duties, 61 Fed.Reg. 7,308, 7,311 (Feb. 27, 1996)(“the statute
provides that if any one of the factors in section 771(33) is
present, the Department is required to find that persons are
affiliated”)(emphasis added).
25
Although the defendant argues that “statutory
interpretations articulated by Commerce during its antidumping
proceedings are entitled to judicial deference” under Chevron
U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837(1984), the court does not read the administrative record at bar
as containing any particular agency interpretation of 19 U.S.C.
§1677(33). In any event, because Congress has “directly spoken”
to the precise question at issue, “that is the end of the
matter; for the court, as well as the agency, must give effect
to the unambiguously expressed intent of Congress.” Id. at 842-
43. See also Dus & Derrick, Inc. v. U.S. Sec’y of Agric., 31
CIT ___, ___, 469 F.Supp.2d 1326, 1333 (2007).
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IV
Despite the ITA’s analytical misstep(s), the record,
such as it is, provides little indication that administrative
reconsideration thereof will necessarily lead to a modification
of plaintiff’s antidumping-duty rate. If, as the plaintiff and
the defendant assert, the entities allegedly affiliated with Ta
Chen within the meaning of 19 U.S.C. §1677(33)(A)-(E) were in
fact uninvolved with the subject merchandise, a finding on remand
of affiliation would not have any impact thereon. And a court
need not require an agency redetermination if doing so “would be
‘futile’ by virtue of having no effect on the result of the
case.” E.g., Ammex, Inc. v. United States, 28 CIT ___, ___, 341
F.Supp.2d 1308, 1314 n. 12 (2004).
Nonetheless, both the agency and the court are
constrained to give effect to the unambiguously-expressed intent
of Congress, and the court therefore hesitates to conclude that
agency reconsideration of the domestic industry’s unsatisfied
affiliation claims would be futile. The ITA has discretion on
remand to request and evaluate new data. See, e.g., NTN Bearing
Corp. of America v. United States, 25 CIT 118, 124-25, 132
F.Supp.2d 1102, 1107-08 (2001)(citations omitted). And it is
not absolutely certain that affirmative affiliation determina-
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tions on remand would have no effect upon the plaintiff’s
antidumping-duty rate. For instance, such a finding could cause
the agency to scrutinize affiliated-entity sales data26, leading
to identification of affiliated-party transactions involving
subject merchandise. The propriety of such steps can only be
determined by the ITA, which must reconsider on remand the
“complex affiliation issues” presented by this case.
A
In view of the foregoing, intervenor-defendants’
Motion for Judgment on the Agency Record should be granted to the
extent of remand to the ITA to complete its analysis
concerning those entities affiliated with Ta Chen within the
26
Such action is contemplated by the Department of
Commerce’s Import Administration Antidumping Manual (1997),
chapter 8, page 96 of which notes that, in
order to identify the manufacturer, producer or
exporter of the merchandise, [the ITA] require[s] the
recipients of [its] questionnaires to see that
affiliated companies also report their sales. . . .
[I]t is necessary for respondents to report sales by
affiliated companies to ensure that [the ITA’s] . . .
review covers the applicable U.S. and home market sales
of the class or kind of merchandise. We cannot ensure
that we have adequately investigated applicable sales
of the merchandise subject to investigation unless
affiliates companies’ sales are reported.
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meaning of 19 U.S.C. §1677(33)(A)-(E)27. Plaintiff’s request for
related relief, on the other hand, should be, and it hereby is,
denied.
The defendant may have until August 3, 2007 to carry
out that analysis and report the results thereof to the court and
the parties, which may comment thereon on or before August 17,
2007.
So ordered.
Decided: New York, New York
May 30, 2007
/s/ Thomas J. Aquilino, Jr.
Senior Judge
27
The domestic industry’s papers assert, and the
administrative record so indicates, that it relied upon
subsection (33)(A) in pressing affiliation arguments regarding
PFP, DNC, and Billion; upon subsection (33)(B) regarding AMS
California, Millennium, South Coast, KSI Steel, Inc., K Sabert,
Inc., Sabert Investments, Inc., Southstar, Estrela 1 and Estrela
2; upon subsection (33)(D) regarding Stainless Express 1,
Becmen, LLC, Becmen Specialty Steels, Inc., Becmen Trading
International, Inc., and Southstar; and upon subsection (33)(E)
regarding AMS California and AMS North Carolina 1 and 2. See
Intervenor-Defendants’ Brief, pp. 15-16.