Hubbell Power Systems, Inc. v. United States , 884 F. Supp. 2d 1283 ( 2012 )

Slip Op. 12- 123
UNITED STATES COURT OF INTERNATIONAL TRADE
HUBBELL POWER SYSTEMS, INC.,
Plaintiff,
GEM YEAR INDUSTRIAL CO., Ltd.,
Before: Jane A. Restani, Judge
Consolidated Plaintiff,
Consol. Court No. 11-00474
v.
UNITED STATES,
Defendant,
and
VULCAN THREADED PRODUCTS INC.,
Intervenor Defendant.
OPINION AND ORDER
[Commerce’s Final Results remanded in antidumping duty review matter.]
Dated: September 20, 2012
Kevin M. O'Brien and Christine M. Streatfeild, Baker & McKenzie, LLP, of
Washington, DC, argued for Plaintiff Hubbell Power Systems, Inc. With them on the brief were
Michael E. Murphy and Kevin J. Sullivan.
Peter J. Koenig, Squire, Sanders & Dempsey, LLP, of Washington, DC, for
Consolidated Plaintiff Gem Year Industrial Co., Ltd.
Jane C. Dempsey, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of Washington, DC, argued for Defendants. With her on the brief
were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and
Patricia M. McCarthy, Assistant Director. Of counsel on the brief was Daniel J. Calhoun,
Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of
Commerce, of Washington, DC.
Court No. 11-00474 Page 2
Frederick P. Waite and Kimberly R. Young, Vorys, Sater, Seymour and Pease,
LLP, of Washington, DC, argued for the Intervenor Defendant.
RESTANI, Judge:
This action challenges the Department of Commerce’s (“Commerce”) final results
rendered in the first antidumping (“AD”) review of certain steel threaded rods (“STR”) from the
People’s Republic of China (“PRC”). See Certain Steel Threaded Rod from the People’s
Republic of China: Final Results and Final Partial Rescission of Antidumping Duty
Administrative Review, 76 Fed. Reg. 68,400 (Dep’t Commerce Nov. 4, 2011) (“Final Results”).
Plaintiff Hubbell Power Systems, Inc. (“Hubbell”) and Gem Year Industrial Co., Ltd., (“Gem
Year”) (collectively “Plaintiffs”) moved for judgment on the agency record.1 See Pls.’ Joint Br.
in Supp. of Mot. for J. on the Agency R. Pursuant to Rule 56.2 (“Pls.’ Br.”). The Government
and Vulcan Threaded Products (“Vulcan”) filed briefs in opposition. Def.’s Resp. to Pls.’ Joint
Mot. for J. Upon the Agency R. (“Def.’s Br.”); Def.-Intrvr.’s Resp. Br. in Opp’n to Pls.’ Joint
Mot. for J. Upon the Agency R. (“Vulcan Br.”). For the reasons set forth below the court
remands this matter for further action in conformity with this opinion.
BACKGROUND
In April 2009, Commerce published an AD duty order on STR from the PRC.
Certain Steel Threaded Rod from the People’s Republic of China: Notice of Antidumping Duty
Order, 74 Fed. Reg. 17,154 (Dep’t Commerce Apr. 14, 2009). The PRC-wide entity received a
rate of 206.00%. Id. at 17,156. Gem Year did not participate in the original AD investigation
1
This action was consolidated with Court No. 11-00480, in which Gem Year is the
plaintiff, making Gem Year a consolidated plaintiff here. Order at 2, March 14, 2012, ECF No.
27.
Court No. 11-00474 Page 3
and thus, did not receive its own rate. Id. at 17,156; see also Certain Steel Threaded Rod from
the People’s Republic of China: Preliminary Results of the First Administrative Review and
Preliminary Rescission, in Part, 76 Fed. Reg. 26,696, 26,704 (Dep’t Commerce May 9, 2011)
(“Preliminary Results”).
In May 2010, Commerce began the first administrative review for the period of
review (“POR”) of October 8, 2008 through March 31, 2010. Initiation of Antidumping and
Countervailing Duty Administrative Reviews, 75 Fed. Reg. 29,976, 29,978 (Dep’t Commerce
May 28, 2010) (“Initiation Notice”). Gem Year is a PRC producer and exporter of STR. Gem
Year’s Section C and D Response (Nov. 23, 2012), App. of Exs. for Pls.’ Joint Br. in Supp. of
their Mot. for J. on the Agency R. Pursuant to Rule 56.2 (“Pls.’ App.”), Tab 6 at 2; Gem Year
Separate Rate Application (Aug. 3, 2010), Pls.’ App. Tab 4 at 6–7.
Gem Year requested to be reviewed as a voluntary or mandatory respondent so
that it could obtain its own rate. Gem Year Request to be Reviewed (Apr. 1, 2010), Pls.’ App.
Tab 1 at 1; Gem Year’s Request to be a Voluntary Respondent (Apr. 21, 2010), Pls.’ App. Tab 3.
Gem Year voluntarily submitted quantity and volume data to Commerce. Gem Year Comments
on Respondent Selection (June 7, 2010), Pls.’ App. Tab 2 at 3. U.S. Customs and Border
Protection (“CBP” or “Customs”) data did not list Gem Year as an exporter of STR during the
POR. CBP Data for Respondent Selection (June 7, 2010), Vulcan App. Tab 5 at Attach. 1.
In August 2010, Gem Year submitted a separate rate application in order to
establish its independence from the PRC government. See Gem Year Separate Rate Application
(Aug. 3, 2010), Pls.’ App. Tab 4. In September 2010, Commerce selected Gem Year as one of
two mandatory respondents because, based on the sales data submitted by Gem Year, Gem Year
Court No. 11-00474 Page 4
was the second-largest exporter during the POR. Selection of Respondents for Individual
Review (Sept. 24, 2010), Def.’s Confidential App. in Supp. of its Opp’n to Pls.’ Mot. for J. upon
the Agency R. (“Def.’s App.”) Tab 1 at 5–6. Throughout the review, Gem Year submitted its
questionnaire responses to Commerce. Preliminary Results, 76 Fed. Reg. at 26,696–97.
In November 2010, Commerce notified Gem Year that the record did not contain
evidence that Gem Year made a sale to the United States during the POR that resulted in
suspension of liquidation and warned that the review could be rescinded as a result. Request for
Proof of Suspended Entry (Nov. 5, 2010), Def.’s App. Tab 2 at 2. Gem Year submitted entry
documentation that purportedly showed relevant entries between October 2008 and April 2009.
Gem Year Submission (Nov. 12, 2010), Pls.’ App. Tab 8. Gem Year later stated that the
unaffiliated U.S. importer, Hubbell, had made an error and, as a result, the suspension of
liquidation did not occur and all of the entries during the POR had been liquidated. Pls.’ Br. 4;
see also Gem Year Letter Regarding Liquidation Status of POR Entries (Nov. 17, 2010), Vulcan
App. Tab 20 at 1.
In December 2010, Commerce stated its intention to rescind Gem Year’s review
because there was no evidence that Gem Year made a sale to the United States during the POR
that resulted in suspension of liquidation pursuant to the AD order on STR. See Replacement
Respondent Selection Memorandum (Dec. 7, 2010), Vulcan App. Tab 22 at 2–3. Commerce
replaced Gem Year with a different mandatory respondent, who refused to cooperate, leaving
one cooperating mandatory respondent, RMB Fasteners Ltd. and IFI & Morgan Ltd. (“RMB/IFI
Group”). Id. at 3; Preliminary Results, 76 Fed. Reg. at 26,697.
In May 2011, Commerce confirmed its intention to rescind Gem Year’s review
Court No. 11-00474 Page 5
because the record lacked evidence of suspended entries. Preliminary Results, 76 Fed. Reg. at
26,697. In November 2011, Commerce published the Final Results, in which Commerce
calculated a de minimis dumping margin for the cooperating mandatory respondent, calculated
an all-other’s rate of 55.16%, and applied a 206.00% rate to the PRC-wide entity.2 Final
Results, 76 Fed. Reg. at 68,404; see also Certain Steel Threaded Rod from the People’s Republic
of China: Issues and Decision Memorandum for the Final Results of the 2008–2010
Administrative Review, A-570-932, POR: 10/08/08–3/31/10, at 2–7 (Oct. 31, 2011), available at
http://ia.ita.doc.gov/frn/summary/prc/2011-28649-1.pdf (last visited July 19, 2012) (“Issues and
Decision Memorandum”). The Final Results also affirmed Commerce’s decision to rescind Gem
Year’s review and noted Gem Year’s ineligibility for separate rate consideration. Final Results,
76 Fed. Reg. at 68,402. The result under Commerce’s approach is that the PRC-wide rate will be
the deposit rate for Gem Year until it is permitted to establish its separate entity status. See id. at
68,404.
2
Because the only available rates here were either de minimis or based on facts available
(“FA”), Commerce determined the all-other’s rate by using the rate calculated in the most recent
segment of the proceedings that was not de minimis, zero, or based on FA. Final Results, 76
Fed. Reg. at 68,402–03. The 55.16% rate was calculated for the RMB/IFI Group during the
original less than fair value investigation and is the only calculated rate in any segment of these
proceedings. Id.; see Certain Steel Threaded Rod from the People's Republic of China: Final
Determination of Sales at Less Than Fair Value, 74 Fed. Reg. 8907, 8909–10 (Dep’t Commerce
Feb. 27, 2009).
The 206.00% PRC-wide rate is based on adverse facts available (“AFA”) and was the
highest percent margin alleged in the Petition. Final Results, 76 Fed. Reg. at 68,403.
Court No. 11-00474 Page 6
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to 28 U.S.C. § 1581(c). The court will not
uphold Commerce’s final determination in an AD review if it is “unsupported by substantial
evidence on the record, or otherwise not in accordance with law . . . .” 19
U.S.C. § 1516a(b)(1)(B)(i).
DISCUSSION
I. Review of Gem Year
Plaintiffs argue that Commerce’s decision to rescind the review of Gem Year was
not supported by substantial evidence or in accordance with the law and request a remand for a
full review of Gem Year. Pls.’ Br. 8. Plaintiffs argue that (1) Commerce’s policy against
reviewing liquidated entries is inconsistent with the law and (2) that a full review is required to
determine Gem Year’s cash deposit rate. Defendants rebut both arguments by relying on
Allegheny Ludlum Corp. v. United States, 346 F.3d 1368 (Fed. Cir. 2003). Def.’s Br. 10–12.
A. Commerce’s policy
Plaintiffs argue that the recision of Gem Year’s review is not consistent with the
statute and Commerce’s regulation. Pls.’ Br. 8–13. Defendant argues that Commerce acted in
accordance with its policy of not conducting reviews of liquidated entries, which Defendant
argues was upheld by the Federal Circuit in Allegheny Ludlum. Def.’s Br. 9.
Commerce has not explained how its decision to ignore Gem Year’s
merchandise is consistent with the statute or its regulation, especially in the Non-Market
Court No. 11-00474 Page 7
Economy (“NME”) context.3 The statute requires Commerce to conduct a review of “each
entry” of subject merchandise that occurred during the period of review. 19 U.S.C. § 1675(a).
Here, Commerce has not disputed that Gem Year’s subject merchandise entered the United
States during the period of review. Commerce has not explained how it reconciles its obligation
to review entries with its refusal to review Gem Year’s merchandise, which clearly entered the
United States during the POR.
Commerce’s singular explanation is that one of the primary purposes of an
administrative review is to determine final assessment rates for entries suspended from
liquidation.4 Although this is one purpose of a review, Commerce has not considered that
reviews have other functions that are wholly unrelated to liquidation, especially in the NME
context. Administrative reviews for NMEs determine individual rates, a PRC-wide rate, and an
all-other’s rate for assessment and deposit purposes. See, e.g., Final Results, 76 Fed. Reg. at
68,402–03. Under the statute, the all-other’s rate is intended to be calculated based on the
3
The court does not doubt that Commerce has a general policy of not reviewing
liquidated entries and that it has applied that practice in the past. See Certain Tissue Paper
Products from the People’s Republic of China: Preliminary Results and Partial Rescission of
Antidumping Duty Administrative Review, 73 Fed. Reg. 18,497, 18,500 (Dep’t Commerce Apr.
4, 2008) (“Tissue Paper Preliminary Results”) (noting past practice of not reviewing liquidated
entries and citing reviews). The parties have not provided, and the court has been unable to find,
any instance where this policy was subject to judicial review.
4
Commerce does not provide an explanation for this policy in the current review but
cites to Tissue Paper. In Tissue Paper, Commerce rescinded the review of a respondent that
lacked suspended entries. Tissue Paper Preliminary Results, 73 Fed. Reg. at 18,500. Commerce
noted that “one of the Department’s primary functions in the course of an administrative review
is to determine the appropriate antidumping duty margin to apply to subject merchandise, for the
purpose of directing CBP to liquidate suspended entries of subject merchandise at that rate.” Id.
(citing 19 U.S.C. § 1675(a)(2)(C)).
Court No. 11-00474 Page 8
weighted average of non-de minimis and non-FA dumping margins of the respondents
individually examined.5 19 U.S.C. § 1673d(c)(5)(A). Whether the entries of the individually
examined respondents have been liquidated does not appear to be relevant under the statute to
the determination of the all-other’s rate. Furthermore, in NME reviews, respondents not
individually examined must demonstrate independence from state control in order to receive the
all-other’s rate and avoid a prohibitive PRC-wide rate. There are, therefore, multiple functions
and purposes of reviews, especially in the NME context, that are not directly related to
liquidation.
Here, Gem Year would have been individually examined but for premature
liquidation of its entries. The exclusion of one of the largest exporters of subject merchandise is
likely to result in a less accurate all-other’s rate, especially when the only other mandatory
respondent received a de minimis rate. Commerce has not explained how its decision not to
review Gem Year’s entries is consistent with its statutory obligation to review entries or how its
policy can be justified in light of Commerce’s NME methodology.
Commerce’s regulation permits it to rescind a review of an individual exporter “if
the Secretary concludes that, during the period covered by the review, there were no entries,
exports, or sales of the subject merchandise, as the case may be.” 19 C.F.R. § 351.213(d)(3).
5
Because Commerce often restricts its reviews to one or two companies or requests for
reviews are withdrawn based on “settlements” with the petitioners, it is sometimes difficult to
obtain an average of non-de minimis and non-FA rates. Commerce then reverts to some other
“reasonable” method under 19 U.S.C. § 1673d(c)(5)(B). Although this calculation methodology
is set out in the part of the statute dealing with initial investigations, there appears to be no
reason why it would not be applicable to reviews of the orders arising from such investigations.
If Commerce has a reason for deviating from this approach in administrative reviews, it has not
explained it.
Court No. 11-00474 Page 9
Defendant has not disputed that Gem Year had exports and sales of subject merchandise or that
its subject merchandise entered the United States during the POR. Thus, Gem Year does not
seem to lack “entries, exports, or sales of the subject merchandise” and Commerce’s recision of
the review is not consistent with the regulation. Although Commerce appears to interpret
“entries” to mean “liquidated entries” for purposes of the statute and regulation, Commerce has
never formally articulated this position or provided an explanation for it that would make the
meaning of its regulation clear to the parties affected by it.
Vulcan argues that if Commerce reviewed liquidated entries, importers would
have no incentive to properly classify the merchandise upon entry and this would disrupt the
U.S. retrospective system. Vulcan Br. 21. Commerce did not supply this explanation on the
record, and thus, it cannot support Commerce’s policy. Regardless, Commerce has chosen to
address potentially unlawful conduct by referring the matter to Customs for investigation and
enforcement. Commerce cannot now argue that its chosen enforcement method is ineffective.
At least in theory, Custom’s enforcement powers would seem effective at deterring importers
from mis-classifying entries, because Customs is authorized in non-intentional conduct cases to
collect as a penalty up to four times the duties that should have been paid and higher penalties in
the event of fraud, in addition to collecting the duties owed. 19 U.S.C. § 1592(c), (d).
Moreover, once Commerce refers the entries to Customs for investigation and
enforcement, assessment of duties on the entries becomes an open issue. If Customs establishes
a violation of 19 U.S.C. § 1592 has occurred, the statute provides that Customs “shall require
that such lawful duties, taxes, and fees be restored . . . .” Id. § 1592(d). Thus, even if the entries
were prematurely liquidated without the assessment of full duties, Customs will require the
Court No. 11-00474 Page 10
delinquent importer to pay the duties owed on those entries. It is, therefore, not futile for
Commerce to calculate a rate for liquidated entries because the liquidation will not bar collection
of the duties in such a case. If Customs establishes liability under 19 U.S.C. § 1592, the
calculated rate will be used to assess duties and determine penalties.
Contrary to Defendant’s argument, Allegheny Ludlum did not uphold the policy
Commerce applied in this case, and it does not control the disposition of this case. Allegheny
Ludlum differs from this case in at least two significant respects. First, Allegheny Ludlum
involved a market economy country, and thus, the Federal Circuit did not address aspects that
are unique to NME reviews, such as PRC entity rates, non-PRC entity separate rates, and PRC-
entity cash deposit rates that may prevent importation entirely. See 346 F.3d at 1369. Unlike in
Allegheny Ludlum, the review here would not only determine Gem Year’s rate, it would also
determine whether Gem Year is entitled to a separate rate, which has significant implications for
the subsequent POR.
Second, in Allegheny Ludlum, there were no entries of subject merchandise
during the period of review, liquidated or otherwise. See id. at 1374 (holding lawful
“Commerce’s regulatory policy of rescinding annual reviews and hence not updating cash
deposit rates where there are no entries during the period of review . . .”) (emphasis added).
Allegheny Ludlum addressed the relationship between pre-POR entries and POR sales; it did not
address the implications of liquidated POR entries versus suspended entries. See id. at 1370. In
Allegheny Ludlum, the exporter had POR sales. Id. at 1370–71. In contrast, Gem Year argues
that it is entitled to a review because it has POR entries. See Pls.’ Reply 2. Thus, unlike in
Allegheny Ludlum, Gem Year’s argument is supported by the text of the statute, which refers
Court No. 11-00474 Page 11
exclusively to entries and not to sales. 19 U.S.C. § 1675(a)(2); see also Allegheny Ludlum, 346
F.3d at 1371 (noting the plain language of the statute refers exclusively to entries).6 Allegheny
Ludlum, therefore, did not address the determinative issue here of whether, in a NME case,
Commerce may decline to review entries of subject merchandise that entered during the POR,
but were not suspended from liquidation.
At oral argument, Defendants stated that there is no practical difference in
calculating rates for exporters with merchandise tied to liquidated entries versus suspended
entries. Commerce cannot justify its policy of not reviewing liquidated entries from a practical
standpoint, and it cannot square its practice with its own regulation or the statutory language.
Commerce’s reliance on Allegheny Ludlum fails to explain how its policy conforms to the
statute and regulation, especially in the NME context.
B. Cash deposit rate
Plaintiffs argue that even if the entry of Gem Year’s merchandise does not qualify
as an “entry” for purposes of assessing duties under the statute or regulation, Commerce should
complete Gem Year’s review because the review will set Gem Year’s cash deposit rate. Pls.’ Br.
10. Defendants argue that this argument is foreclosed by Allegheny Ludlum. Def.’s Br. 13.
Commerce attempts to justify its policy by noting that a primary purpose of a
review is to set the final assessment rates. See Tissue Paper Preliminary Results, 73 Fed. Reg. at
18,500 (citing 19 U.S.C. § 1675(a)(2)(C)). The statute is clear that a purpose of the review is to
set future cash deposit rates. 19 U.S.C. § 1675(a)(2)(C). Thus, the statute recognizes the cash
6
The court is not called upon here to determine if 19 C.F.R. § 351.213(d)(3) is
consistent with the view of the statute expressed in Allegheny Ludlum.
Court No. 11-00474 Page 12
deposit rates are an important aspect of administrative review.
In Allegheny Ludlum, the plaintiff argued that an administrative review was
required in order to update the cash deposit rate. 346 F.3d at 1372. The Federal Circuit rejected
this argument stating that “where there are no entries . . . during a period of review there is no
subject merchandise and thus nothing to review and no basis for revising cash deposit rates - so
Commerce need not (indeed, cannot) conduct a review).” Id. Merchandise must enter during the
POR in order to qualify as subject merchandise. See id. Because the entries in Allegheny
Ludlum occurred prior to the POR, the exporter’s merchandise was not “subject merchandise.”
Id. at 1371–72. Thus, in Allegheny Ludlum, there were neither entries nor subject merchandise,
and under such circumstances, the Federal Circuit found that Commerce need not update the
cash deposit rate. Id. at 1373. Here, Defendant does not dispute that Gem Year’s merchandise
entered during the POR or that it qualifies as subject merchandise. Thus, the lack of subject
merchandise and entries is not at issue and data are available for Commerce to determine Gem
Year’s deposit rate, even if Customs ultimately will not be able to assess antidumping duties on
the entries.
NME methodology has a significant impact on an exporter’s interest in obtaining
a calculated cash deposit rate during a review, which was not at issue in Allegheny Ludlum. In
Allegheny Ludlum, the exporter had an existing deposit rate that was based on its own data and
was calculated in the prior administrative review. Id. at 1371. The result of rescinding the
review was that the exporter would continue to pay a deposit rate based on its one-year-old data.
In contrast, the result of rescinding the review of Gem Year is that Gem Year will pay the PRC-
wide rate of 206%. Here, the PRC-wide entity rate is an AFA rate derived from the petition and
Court No. 11-00474 Page 13
is not based on the verified behavior of any company under review. Final Results, 76 Fed. Reg.
at 68,403. Although the interest in Allegheny Ludlum of obtaining an updated rate was
insufficient to require a full review in the light of the lack of entries, Gem Year’s significantly
greater interest in obtaining a separate deposit rate and the potential application of an unrelated
and import-prohibiting PRC-rate is sufficient to require a review of Gem Year, which does have
entries.
Commerce has not adequately explained how its decision to rescind Gem Year’s
review is consistent with the statute and regulation, especially in the context of prohibitive PRC-
wide deposit rates. Thus, Gem Year, as an exporter not found to be responsible for the behavior
of its importer, is entitled to a review. At this late stage, the parties may choose to resolve this
matter by agreeing not to reopen the investigation to complete a full examination of Gem Year
and instead may merely choose to apply the all-others rate for Gem Year, as explained below.
II. Separate Rate Application
Plaintiffs argue in support of their alternative claim for relief that Commerce
cannot ignore Gem Year’s separate rate application merely because Gem Year was not part of
the review and request that the court remand for a complete separate rate analysis. Pls.’ Br.
16–20. Defendant does not address this issue on the merits and instead argues that Gem Year
failed to present a justiciable case or controversy. Def.’s Br. 18–20. Vulcan argues that a
respondent must have suspended entries in order to be eligible to participate in a review and
qualify for a separate rate. Vulcan Br. 27–30.
Constitutional justiciability is not lacking in this case. Plaintiffs stated that the
rescission of Gem Year’s review and the application of the PRC-wide entity deposit rate of
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206% prevents Gem Year and Hubbell from buying and selling subject merchandise. The
application of a rate that prevents a company from buying and selling is an injury in fact,
regardless of whether the rate is for cash deposit or final assessment purposes. Furthermore, a
remand would provide an effective remedy because it could modify the prohibitive cash deposit
rate currently applicable to Gem Year’s future entries. Cf. PPG Indus., Inc. v. United States, 660
F. Supp. 965, 968 (CIT 1987) (finding dispute over future deposit rates moot when subsequent
review already set new deposit rates). The court, therefore, turns to the merits.
In refusing to consider Gem Year’s application, Commerce stated that it had
“determined that Gem-Year does not meet the requirements to participate in this review.
Therefore, the Department is not assessing Gem Year’s eligibility for a separate rate in the
context of this review.” Preliminary Results, 76 Fed. Reg. at 26,698. Commerce explained that
“if a respondent is not eligible to participate in a review as a mandatory respondent, it is also not
eligible to become a separate rate respondent.” Issues and Decision Memo 6.
All PRC exporters are presumed by Commerce to be part of the PRC-wide entity
until an exporter establishes independence from state control. Sigma Corp v. United States, 117
F.3d 1401, 1405–06 (Fed. Cir. 1997) (upholding Commerce’s presumption of state control for
NME-exporters). The presumption of state control, although upheld more than a decade ago,
may not have a current factual basis.7 See, e.g., Qingdao Taifa Grp. Co. v. United States, 760 F.
Supp. 2d 1379, 1382 (CIT 2010). Assuming arguendo that the presumption is valid and in
accordance with law, Commerce may apply it only if it provides respondents with the
7
The court need not address this issue because Plaintiffs have not challenged the
presumption itself but merely argued Gem Year was denied its right to rebut the presumption.
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opportunity to rebut the presumption. Sigma, 117 F.3d at 1405.
The statute does not provide for this separate rate process as part of an
administrative review process. See 19 U.S.C. § 1675(a)(1)(B). Instead, Commerce has made the
choice to insert the separate rate process it has established into the administrative review process.
Commerce has not suggested that the statute prevents a separate rate analysis of Gem Year or
that the liquidation of entries has any bearing whatsoever on the separate rate analysis.
Commerce has merely stated that an exporter is not eligible for a separate rate analysis unless the
exporter is part of the review. Commerce cannot justify its policy merely by re-stating its own
policy choice.
The court has treated the review process of administratively examining sales and
the separate rate process as two distinct inquires. For instance, the failure of an exporter to fully
cooperate in another aspect of the administrative review does not permit Commerce to avoid
conducting a full separate rate analysis if the exporter supports its request for status separate
from the PRC. See Shandong Huarong Gen. Grp. Corp. v. United States, 27 CIT 1568, 1594
(2003) (stating that Commerce’s finding that an exporter failed to cooperate in a review cannot
be used to assume respondent failed to establish independence from government control).
Commerce must base its separate rate analysis on the record evidence specific to the question of
whether the company is subject to state control. See Foshan Shunde Yongjian Housewares &
Hardware Co. v. United States, 2011 Ct. Intl. Trade LEXIS 123, at *47 (CIT Oct. 12, 2011)
(remanding denial of separate-rate status when finding was “not based on record evidence
specific to the question of whether the company is subject to state control”). Moreover,
Commerce cannot disregard record evidence of independence when applying the presumption of
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state control. See E. Sea Seafoods, 703 F. Supp. 2d at 1355 (“Commerce’s application of the
presumption of state control, without considering abundant record evidence rebutting that very
presumption, pushed legal fiction into the realm of legal fantasy.”). These cases demonstrate
that Commerce cannot use unrelated findings in a review to avoid a separate rate analysis. If
Commerce declines to grant Gem Year separate rate status, it must do so based on the record
evidence, or the lack of record evidence, related specifically to Gem Year’s status.
Here, Commerce improperly used its findings as to whether it would examine
Gem Year’s sales as a substitute for a separate rate analysis and ignored record evidence related
to Gem Year’s separate rate status. This is not a case where it is merely hypothetical whether
Gem Year can establish entitlement to a separate rate. Here, Gem Year timely submitted a 606
page separate rate application. Gem Year’s Separate Rate Application (Aug. 3, 2010), C.R. 14,
Pls.’ App. Tab 4. Commerce has not suggested that there was any defect in the application.8
Commerce cannot ignore this record evidence merely because it labels the separate rate
application process part of the administrative review process.
Defendant argues, without any regard to reality, that Commerce merely rescinded
the review and did not apply the PRC-wide entity rate to Gem Year and thus, there is no
8
Vulcan argues that permitting a full review or a separate rate analysis of Gem Year is
insufficient to protect its interests. The domestic industry is not harmed by Commerce’s review
of a large exporter of subject merchandise because this will lead to more accurate dumping
margins. Moreover, the domestic industry is not harmed in any legally cognizable sense when
an exporter that can establish its independence from state control is relieved from paying the
PRC-wide entity deposit rate.
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presumption for Gem Year to rebut. Def.’s Br. 19 n.3.8 The application of the 206% rate is
based solely on a presumption that Gem Year is part of the PRC-wide entity, and therefore, Gem
Year must have the opportunity to rebut the presumption. Transcom Inc v. United States, 182
F.3d 876, 883 (Fed. Cir. 1999) (“[A] party that is subject to the presumption has a right to
attempt to rebut it.”). Under the facts of this case, Gem Year has a right to attempt to rebut the
presumption of state control regardless of whether that assumption is used to determine the cash-
deposit rate or the final duty rate.
Furthermore, because this review sets a PRC-wide entity rate based on AFA,
which Gem Year challenges, and because that PRC-wide rate is applied to Gem Year for cash
deposit purposes, Commerce is essentially applying an AFA rate to Gem Year. In order to apply
an AFA rate to a party such as Gem Year, which seeks to comply with its requirements,
Commerce must determine either that Gem Year has failed to cooperate by not acting to the best
of its ability or that Gem Year’s separate rate application failed to rebut the presumption of state
control. 19 U.S.C. § 1677e(b).9 Here, Commerce did not make either finding. Moreover,
Commerce cannot rely on an unaffiliated party’s failure to cooperate to justify the application of
the AFA rate, unless the exporter is also found responsible for the behavior in some way. See 19
U.S.C. § 1677e(b) (noting that Commerce must determine that a party did not act “to the best of
8
Commerce’s view is that the 206% rate, which stems from the investigation, is not
subject to challenge because no one entitled to a review has challenged it. Final Results, 76 Fed.
Reg. at 68,403. In this case, Gem Year has challenged the continuation of the rate as the PRC-
wide rate for the administrative review. Commerce concedes that these issues are open if Gem
Year is reviewed. See Def.’s Br. 20 n.4.
9
Because Commerce does not view this as even a facts available situation it did not
comply with the other requirements of 19 U.S.C. § 1677e.
Court No. 11-00474 Page 18
its ability”) (emphasis added); see also SKF USA, Inc. v. United States, 675 F. Supp. 2d 1264,
1275–77 (CIT 2009) (finding unlawful the application of an AFA rate to a cooperative
respondent in order to encourage the compliance of an unaffiliated supplier). Here, Commerce
cannot use the unaffiliated importer’s failure to properly classify the entries as justification for
applying an AFA rate to Gem Year. See Nippon Steel Corp. v. United States, 337 F.3d 1373,
1382 (Fed. Cir. 2003) (requiring Commerce to examine respondent's actions and assess the
extent of respondent's abilities, efforts, and cooperation before applying adverse inferences); see
also Tianjin Magnesium Int’l Co. v. United States, 2011 Ct. Int’l Trade LEXIS 16, at *5–10
(2011) (rejecting the application of an AFA rate based on the actions of another party). And
Gem Year has not been found to be part of an entity subject to an AFA rate. The application of
the AFA rate to Gem Year at this stage is therefore inconsistent with the statute and unsupported
by the record.
Commerce has not made a finding that Gem Year failed to rebut the presumption
of state control or that it failed to cooperate, and Commerce cannot use its decision not to
examine Gem Year’s sales to avoid a separate rate analysis. Thus, Commerce has not justified
its refusal to consider Gem Year’s application and to apply the PRC-wide AFA rate to Gem
Year’s future entries.
III. AFA Rate
Plaintiffs argue that the 206% PRC rate is unlawful and unsupported by
substantial evidence. Pls.’ Br. 20–28. Defendant argues that Plaintiffs failed to present a
justiciable case or controversy because Commerce made no determination as to the appropriate
dumping rate for Gem Year’s entries. Def.’s Br. 19. Defendant further argues that Plaintiffs
Court No. 11-00474 Page 19
lack standing to challenge the PRC-wide entity rate because Gem Year has not been found to be
part of the PRC-wide entity and thus, technically, did not receive the PRC-wide rate. Def.’s Br.
19 n.3. According to Defendant, it just had its review rescinded. Id.This issue is justiciable and Plaintiffs have standing to challenge the PRC-wide
rate because, whatever strange logic is used by Defendant, that is the rate applied to Gem Year’s
entries going forward and Gem Year has requested a review. See 19 U.S.C. § 1675(a)(1); 19
C.F.R. § 351.212(a),(c). As explained above, Plaintiffs’ inability to export or import
merchandise as a result of Commerce’s actions in this case and the imposition of a 206% rate if
it can continue in the market satisfy the injury in fact requirement. However it gets there,
Commerce will impose a 206% rate and Gem Year may challenge that rate.
Although it is not the thrust of their action, Plaintiffs challenge the rate as both
unrelated to Gem Year and to the commercial reality of the industry. What specific evidence it
relies on has not been explained clearly, but it was not permitted to develop a record on this
point. The court, however, need not reach the merits of this issue at this stage in the proceedings
because Gem Year may be found to be separate from the PRC and its cash deposit rate may
change on remand. Furthermore, if Commerce, after reviewing the record, finds that Gem Year
is part of the PRC-wide entity and continues to impose a 206% rate, Commerce will consider
Gem Year’s challenge to that rate, as Commerce observes. See supra n.8.10
10
Whatever relief Hubbell obtains would be entirely derivative of Gem Year’s. It is
Gem Year, as the exporter, which is entitled to a review. Because Gem Year has requested the
review, the court need not examine what separate rights Hubbell might have.
Court No. 11-00474 Page 20
CONCLUSION
For the foregoing reasons, the court remands this matter to Commerce for, at a
minimum, a complete review of Gem Year’s separate rate application. If Gem Year is entitled to
a separate rate and the parties do not agree otherwise, Commerce will also conduct a full
examination of Gem Year’s sales. If Commerce determines that Gem Year is not entitled to a
separate rate, Commerce must consider Gem Year’s challenge to the 206% rate.
Commerce shall file its remand determination with the court within 60 days of
this date, unless a full review is undertaken. In such a case, Commerce will advise the court
within that period what additional time is required. The parties have 30 days thereafter to file
objections to the remand results, and the Government will have 15 days thereafter to file its
response.
/s/ Jane A. Restani
Jane A. Restani
Judge
Dated: This 20th day of September, 2012.
New York, New York.
ERRATA
Please make the following changes to Hubbell Power Systems, Inc v. United States, No.
11-00474, Slip Op. 12-123, dated September 20, 2012.
• page 17: Replace numbering of footnote 8 with footnote 9.
• page 17: Replace numbering of footnote 9 with footnote 10.
• page 19: Replace numbering of footnote 10 with footnote 11.
February 4, 2013