Tianjin MacHinery Import & Export Corp. v. United States , 31 Ct. Int'l Trade 1416 ( 2007 )

Slip Op. 07-131
UNITED STATES COURT OF INTERNATIONAL TRADE
:
TIANJIN MACHINERY IMPORT & :
EXPORT CORP. and SHANDONG :
HUARONG MACHINERY CO., LTD., :
:
Plaintiffs, :
: Before: Richard K. Eaton, Judge
v. :
: Court No. 05-00522
UNITED STATES, :
: Public Version
Defendant, :
:
and :
:
AMES TRUE TEMPER, :
:
Deft.-Int. :
:
OPINION AND ORDER
[United States Department of Commerce’s final results of the
thirteenth administrative review of the antidumping duty order
covering imports into the United States of heavy forged hand
tools from the People’s Republic of China are sustained in part
and remanded.]
Dated: August 28, 2007
Hume & Associates, PC (Robert T. Hume), for plaintiffs.
Peter D. Keisler, Assistant Attorney General; Jeanne E. Davidson,
Director, Civil Division, Commercial Litigation Branch, United
States Department of Justice; Patricia M. McCarthy, Assistant
Director, Civil Division, Commercial Litigation Branch, United
States Department of Justice (Stephen C. Tosini); Office of Chief
Counsel for Import Administration, United States Department of
Commerce (Scott McBride), of counsel, for defendant.
Wiley Rein, LLP (Timothy C. Brightbill and Charles O. Verrill,
Jr.), for defendant-intervenor.
Court No. 05-00522 Page 2
Eaton, Judge: This matter is before the court on the USCIT
Rule 56.2 motion for judgment upon the agency record of
plaintiffs Tianjin Machinery Import & Export Corp. (“TMC”) and
Shandong Huarong Machinery Co., Ltd. (“Huarong”). By their
motion, plaintiffs challenge certain aspects of the United States
Department of Commerce’s (“Commerce” or the “Department”) final
results of its thirteenth administrative review of the four
antidumping duty orders applicable to imports into the United
States of heavy forged hand tools (“HFHTs”) from the People’s
Republic of China (“PRC”). See HFHTs, Finished or Unfinished,
With or Without Handles, From the PRC, 70 Fed. Reg. 54,897 (Dep’t
of Commerce Sept. 19, 2005) (final) (“Final Results”); see also
HFHTs, Finished or Unfinished, With or Without Handles From the
PRC, 56 Fed. Reg. 6622 (Dep’t of Commerce Feb. 19, 1991) (notice)
(“HFHTs Orders”).
Jurisdiction is had pursuant to 28 U.S.C. § 1581(c) (2000)
and 19 U.S.C. § 1516a(a)(2)(B)(iii) (2000). For the following
reasons, Commerce’s Final Results are sustained in part and
remanded.
BACKGROUND
Plaintiffs are producers and exporters of HFHTs in the PRC.
Their exports to the United States are subject to the HFHTs
Orders covering axes/adzes, bars/wedges, hammers/sledges and
Court No. 05-00522 Page 3
picks/mattocks. On February 27, 2004, plaintiffs (and defendant-
intervenor) asked Commerce to conduct an administrative review of
the HFHTs Orders, the thirteenth such review, for the period of
review February 1, 2003, to January 31, 2004 (“POR”). See HFHTs,
Finished or Unfinished, With or Without Handles, From the PRC, 70
Fed. Reg. 11,934, 11,935, 11,937 (Dep’t of Commerce Mar. 10,
2005) (prelim.) (“Preliminary Results”).
The Department initiated its review on March 26, 2004, and
published the Preliminary Results on March 10, 2005. Commerce
determined preliminarily that plaintiffs sold HFHTs at less than
normal value and further found appropriate the use of facts
otherwise available and adverse facts available (“AFA”) pursuant
to 19 U.S.C. § 1677e(a), (b). See id. at 11,934–35. In the
Final Results, Commerce confirmed its preliminary findings. See
Final Results, 70 Fed. Reg. at 54,898. Accordingly, the
Department assigned plaintiffs the following rates: Huarong’s and
TMC’s sales of axes/adzes — 174.58 percent; Huarong’s and TMC’s
sales of bars/wedges — 139.31 percent; TMC’s sales of
hammers/sledges — 45.42 percent; and TMC’s sales of
picks/mattocks — 98.77 percent. See id. at 54,899.
Before the court, plaintiffs raise two primary objections to
the Department’s conclusions in the Final Results and seek a
remand of this case. First, plaintiffs insist that Commerce was
not justified in its use of AFA. Second, in the event the court
Court No. 05-00522 Page 4
finds warranted the use of AFA, plaintiffs urge that Commerce
failed to support with substantial evidence its determination of
the AFA rates. See Pls.’ Mot. J. Agency R.(“Pls.’ Mem.”) 7–8.1
STANDARD OF REVIEW
When reviewing a final antidumping determination from
Commerce, the court “shall hold unlawful any determination,
finding, or conclusion found . . . to be unsupported by
substantial evidence on the record, or otherwise not in
accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).
“Substantial evidence is ‘such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.’” Huaiyin
Foreign Trade Corp. (30) v. United States, 322 F.3d 1369, 1374
(Fed. Cir. 2003) (quoting Consol. Edison Co. v. NLRB, 305 U.S.
1
In addition, plaintiffs contend that Commerce
erroneously included within the scope of the HFHTs Orders their
exports of the multi-use tough tool (“MUTT”) and thereby
calculated incorrectly the AFA rate for axes/adzes. See Pls.’
Mem. 8. The court, however, has since sustained Commerce’s
inclusion of the MUTT within the scope of the order applicable to
axes, adzes and similar hewing tools. See Olympia Indus., Inc.
v. United States, 30 CIT , , Slip Op. 06-110 at 2–3 (July 24,
2006) (not reported in the Federal Supplement) (“Because the
MUTT’s utility as a tool comes from its steel head with a sharp
blade that can be used for cutting and chopping, the court finds
that it is a hewing tool similar to an axe or adze and, thus,
sustains Commerce’s Final Scope Ruling.”). The 60-day period for
appealing that decision has come and gone without an appeal
having been filed. See Fed. R. App. P. 4(a)(1)(B) (“When the
United States or its officer or agency is a party, the notice of
appeal may be filed by any party within 60 days after the
judgment or order appealed from is entered.”).
Court No. 05-00522 Page 5
197, 229 (1938)). The court determines the existence of
substantial evidence “by considering the record as a whole,
including evidence that supports as well as evidence that ‘fairly
detracts from the substantiality of the evidence.’” Id. (quoting
Atl. Sugar, Ltd. v. United States, 744 F.2d 1556, 1562 (Fed. Cir.
1984)).
DISCUSSION
I. The Department’s Use of AFA
A. Application of AFA to “Agent” Sales
Where a respondent in an administrative review
“significantly impedes” a Commerce proceeding, the agency is
permitted to “fill[] gaps in the record” using facts otherwise
available. See Statement of Administrative Action, Uruguay Round
Agreements Act, accompanying H.R. Rep. No. 103-316, 656, 830–31
(1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4199; see also 19
U.S.C. § 1677e(a)(2)(C). Here, Commerce states that it used
facts available “because Huarong and TMC . . . significantly
impeded the instant proceeding.” Issues & Decision Mem. for the
13th Admin. Rev. of HFHTs from the PRC (Dep’t of Commerce Sept.
6, 2005) (“Issues & Dec. Mem.”) at 5. Specifically, the
Department claims that the “use of the ‘agent’ sales schemes by
[plaintiffs] impeded [its] ability to complete this
administrative review . . ., impose antidumping duties and issue
Court No. 05-00522 Page 6
instructions to [U.S. Customs and Border Protection (“Customs”)]
to assess the correct antidumping duties . . . .” Id. at 6
(citations omitted). In addition, Commerce decided to use AFA
because, in its view, each company failed to cooperate to the
best of its ability by not disclosing the true nature of the
agency relationship, i.e., that TMC was merely a vehicle by which
Huarong could export its goods to the United States at a lower
rate. See Def.’s Resp. Pls.’ Mot. J. Admin. R. (“Def.’s Resp.”)
8. In reaching its conclusion, Commerce found that the
companies’ relationship was such that TMC did nothing more than
forward its blank invoices to Huarong, thus enabling Huarong to
benefit from TMC’s lower dumping margin when making sales to the
United States.
The relevant section of the antidumping duty statute, 19
U.S.C. § 1677e, requires Commerce to undertake a bifurcated
analysis in determining whether to use facts otherwise available
and, if reliance on such facts is warranted, whether to use an
adverse inference in selecting from among those facts. First,
under the pertinent part of subsection 1677e(a):
If——
(1) necessary information is not
available on the record, or
(2) an interested party or other
person . . .
(C) significantly impedes
a proceeding under this
Court No. 05-00522 Page 7
subtitle, . . .
the administering authority . . . shall,
subject to section 1677m(d) of this title,
use the facts otherwise available in reaching
the applicable determination under this
subtitle.
19 U.S.C. § 1677e(a)(C). It is well settled that a party’s
intent is irrelevant to a decision to use facts available. See
Ferro Union, Inc. v. United States, 23 CIT 178, 199 n.44, 44 F.
Supp. 2d 1310, 1330 n.44 (1999) (“A respondent could impede a
review without intending to do so, for example, because it did
not understand the questions asked.”). Thus, subsection (a)
mandates the use of facts available when a respondent
significantly impedes Commerce’s investigation, irrespective of
the respondent’s intent.
Once it determines that the use of facts otherwise available
is required, Commerce may, if the conditions warrant, use an
inference adverse to the interests of the respondent in selecting
from those facts.2 The Court of Appeals for the Federal Circuit
2
Pursuant to subsection 1677e(b):
If the administering authority . . . 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 from the administering authority
. . ., the administering authority . . ., in
reaching the applicable determination under
this subtitle, may use an inference that is
adverse to the interests of that party in
selecting from among the facts otherwise
(continued...)
Court No. 05-00522 Page 8
in Nippon Steel Corp. v. United States, 337 F.3d 1373 (Fed. Cir.
2003), stated that, as distinguished from subsection (a),
subsection (b) permits Commerce to “use an
inference that is adverse to the interests of
[a respondent] in selecting from among the
facts otherwise available,” only if Commerce
makes the separate determination that the
respondent “has failed to cooperate by not
acting to the best of its ability to comply.”
The focus of subsection (b) is respondent’s
failure to cooperate to the best of its
ability, not its failure to provide requested
information.
Nippon Steel Corp., 337 F.3d at 1381 (quoting 19 U.S.C.
§ 1677e(b)) (alteration & emphasis in original). While the
statute does not define the phrase “to the best of its ability,”
the Federal Circuit has held those words to “require[] the
respondent to do the maximum it is able to do.” Id. at 1382.
2
(...continued)
available. Such adverse inference may
include reliance on 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
[periodic review] or determination
under section 1675b of this title
[countervailing duty injury
investigations], or
(4) any other information placed on
the record.
19 U.S.C. § 1677e(b).
Court No. 05-00522 Page 9
Here, the Department resorted to facts otherwise available
and drew an adverse inference from those facts in determining
plaintiffs’ dumping margins for their “agent” sales because it
found that plaintiffs: (1) significantly impeded the
administrative review by continuously misrepresenting the nature
of their “agency” relationship; and (2) failed to cooperate to
the maximum they were able to by not revealing the true nature of
their agency relationship.
Plaintiffs, however, maintain that they neither impeded the
review nor failed to act to the best of their ability to provide
Commerce with all data regarding their “agent” sales in the
requested form and manner. See Pls.’ Mem. 19–20. In making
their argument, plaintiffs point to their initial responses to
Commerce’s Section A Questionnaire:
Huarong reported that it made sales through
an agent. Huarong provided a copy of its
agent agreement. Huarong also included a
copy of previous verification reports where
similar “agent” sales were made. . . .
In addition, Huarong clearly indicated that
TMC was used as an agent. Likewise, TMC
properly identified that it acted as an agent
during this period of review. Additionally,
Huarong and TMC properly responded to all of
the [Department]’s interrogatories. For
example, Huarong provided 1) Copies of the
purchase orders, commercial invoices, and
proofs of order entry dates for all direct
sales of bars during the POR, 2) Copies of
the purchase orders, commercial invoices, and
proofs of order entry dates for all agent
sales of bars during the POR through TMC, and
Court No. 05-00522 Page 10
3) Copies of the purchase orders, commercial
invoices, and proofs of order entry dates for
all direct sales of scrapers during the POR.
Pls.’ Mem. 19–21 (footnotes omitted). Thus, plaintiffs insist
that they did not impede the review and “complied to the best of
[their] ability to answer all questions the [Department] posed.”
Pls.’ Mem. 21.
Plaintiffs further claim that they participated in a bona
fide agency relationship and thus did not undermine the
administrative review proceedings.
Commerce erred in stating [plaintiffs] used
agents in an attempt to circumvent payment of
antidumping duties. This is not correct
because [plaintiffs] reported their
respective agent sales and the information
required to calculate dumping margins.
Plaintiffs’ intent was never to have their
respective importers avoid dumping duties.
If Plaintiffs had the intent of circumventing
the antidumping duty order the Plaintiffs
would not have requested, and participated
in, the instant administrative review.
In addition, Commerce mistakes analyzing the
relationship of Plaintiffs and confounding
[sic] this with the separate issue of the
importer of record. Plaintiffs have
participated in this review giving forth
valid information regarding its agent sales
and relationship with various businesses.
Plaintiffs have never deceived Commerce nor
provided improper information. To the
contrary, Plaintiffs have been forthcoming
with all [their] dealings. No action taken
by the [plaintiffs] undermined Commerce’s
ability to “impose accurate antidumping
duties” . . . . Commerce, in fact, has not
pointed to a specific law that has been
violated.
Court No. 05-00522 Page 11
Pls.’ Mem. 23–24 (footnotes omitted).
With respect to Commerce’s use of an adverse inference in
selecting from among the facts otherwise available, plaintiffs
insist that they acted to the best of their ability in providing
Commerce with timely and complete responses to the questionnaires
regarding their “agent” sales and, thus, an adverse inference was
not supported by the record. See Pls.’ Mem. 24.
As previously noted, Commerce used facts otherwise available
to determine plaintiffs’ dumping margins for their agent sales
because it concluded that plaintiffs significantly impeded the
review by failing to disclose the true nature of their business
relationship. In reaching this conclusion, the Department
rejected plaintiffs’ general claim that, because they revealed
their involvement in an agency relationship, Commerce was
precluded from determining their dumping margins based on facts
otherwise available. In fact, Commerce provided specific reasons
for using facts available in determining plaintiffs’ margins for
their claimed agent sales. First, the Department maintained that
plaintiffs misrepresented the nature of their business
relationship throughout the administrative review:
After reviewing the record evidence, the
Department found that both Huarong and TMC
continually misrepresented the true nature of
their relationship with their principal or
“agent,” as appropriate, during the POR. In
their questionnaire responses, Huarong and
TMC claimed that their relationships with
their “agents” or principals were bona fide
Court No. 05-00522 Page 12
business arrangements. However, only through
issuing multiple supplemental questionnaires
to each [plaintiff] did the Department learn
that nearly all of the sales functions were
conducted by the principal, and that the
“agent’s” participation was limited, for the
most part, to supplying blank invoices to the
principal with an intention to circumvent the
order.
Issues & Dec. Mem. at 6. That is, because plaintiffs made it
appear in their initial Section A responses that their agent
sales were made pursuant to a legitimate agency relationship,
they impeded the investigation. Id. at 7.
The Department then justified its use of adverse inferences
in selecting from among the facts available in accordance with 19
U.S.C. § 1677e(b) when determining plaintiffs’ dumping margins:
“[T]he Department has determined that both Huarong and TMC failed
to cooperate by not acting to the best of their ability to comply
with [its] requests for information.” Id. In Huarong’s case,
Commerce found that
an adverse inference [was] warranted because
Huarong: (1) continually misrepresented the
true nature of its relationship with the
“agent” during the POR by portraying the
company as a bona fide “agent” for the vast
majority of Huarong’s “agent” sales; (2)
participated in an “agent” sales scheme in
order to avoid payment of the appropriate
cash deposit and assessment rate and
circumvent the antidumping duty order; and
(3) undermined [Commerce’s] ability to issue
instructions to [Customs] to assess accurate
antidumping duties.
Id. at 7–8. Likewise, for TMC, the Department concluded that
Court No. 05-00522 Page 13
an adverse inference [was] warranted because
TMC: (1) continually misrepresented the true
nature of its relationship with the principal
during the POR by portraying itself as a bona
fide “agent” for the vast majority of TMC’s
“agent” sales; (2) participated in an agent
sales scheme in order to avoid payment of the
appropriate cash deposit and assessment rate
and circumvent the antidumping duty order;
and (3) undermined [Commerce’s] ability to
issue instructions to [Customs] to assess
accurate antidumping duties.
Id. at 8. Thus, in the Final Results, Commerce applied AFA to
Huarong’s and TMC’s claimed agent sales of bars/wedges.
The court finds reasonable Commerce’s decision to determine
plaintiffs’ dumping margins for their claimed “agent” sales based
on AFA. First, pursuant to 19 U.S.C. § 1677e(a), the Department
acted reasonably in resorting to the facts otherwise available on
the record. By its Section A questionnaire response, Huarong
claimed that it “made some direct sales and some sales through an
agent,” and further insisted that “the agent sales [were]
exported by the agent and should be properly reported by the
agent.” Huarong Resp. to Apr. 14, 2004, Questionnaire, Sec. A
(May 11, 2004) (“Huarong Sec. A Resp.”) at A-2. In addition,
Huarong submitted a copy of the purported “agency” agreement.
See Huarong Sec. A Resp., Ex. 3; see also Mem. from James C.
Doyle, Dir., AD/CVD Operations, Import Administration to Barbara
E. Tillman, Acting Deputy Assistant Secretary for Import
Administration, Application of AFA to Huarong (ITA Feb. 28, 2005)
at 1–2 (“Huarong provided the Department with two copies of the
Court No. 05-00522 Page 14
“agent” contract with TMC, one which predates the [POR] and one
which was during the POR. According to the contract, TMC is to
act as Huarong’s ‘agent’ for certain sales and receive a
commission for its services.”) (internal citations omitted).
Plaintiffs fail to acknowledge, however, that Commerce
discovered, after the issuance of several supplemental
questionnaires, that the business relationship between Huarong
and TMC was nothing more than a scheme apparently directed toward
circumventing the antidumping duties applicable to Huarong’s
HFHTs sales to the United States. See Issues & Dec. Mem. at 6
(“[O]nly through issuing multiple supplemental questionnaires to
each [r]espondent did the Department learn that nearly all of the
sales functions were conducted by the principal, and that the
‘agent’s’ participation was limited, for the most part, to
supplying blank invoices to the principal . . . .”). Thus, while
the record shows that the companies reported an “agency”
arrangement, it is apparent that both Huarong and TMC withheld
the actual details of their arrangement, information over which
they had complete command. In other words, the mere statement
that sales were made through an agent when, in reality, the
agent’s role was simply to provide the principal with blank
invoices, is not enough to preclude Commerce from resorting to
facts otherwise available. Thus, the Department reasonably
concluded that Huarong’s and TMC’s failure to provide the details
Court No. 05-00522 Page 15
of their arrangement significantly impeded the review.
Huarong’s and TMC’s failure to disclose fully their true
business relationship in their initial questionnaire responses
further impeded the review by preventing Commerce from issuing
accurate liquidation instructions to Customs. Indeed, without
knowing the identity of the actual seller, any “assessment rate
calculated by the Department would be rendered meaningless
because it would not be applied to all appropriate entries.”
Issues & Dec. Mem. at 6; see also id. at 7 (“The record evidence
gathered by the Department demonstrates that the cash deposit and
assessment rates calculated by the Department for these ‘agent’
sales either would not have been the appropriate rate or would
not have been assessed by [Customs].”). Put another way, by
entering its merchandise using TMC’s invoice, Huarong avoided the
higher duties that would normally attach to its entries and
instead received the lower rate applicable to TMC’s entries.
It is apparent from the court’s review of the record that
plaintiffs’ failure to submit accurate and complete data in
response to the Department’s initial questionnaire prevented the
agency from considering correct sales data. Thus, the court
finds that the Department reasonably concluded that Huarong and
TMC significantly impeded the review and thus that the Department
was justified in its reliance on the facts otherwise available
Court No. 05-00522 Page 16
under 19 U.S.C. § 1677e(a).3
Given that the record supports using facts otherwise
available to determine plaintiffs’ dumping margins with respect
to their claimed “agent” sales, the court must now determine
whether the Department lawfully used an adverse inference when
selecting from among the facts otherwise available in accordance
with 19 U.S.C. § 1677e(b). Under that provision, Commerce may
use an adverse inference if the respondent “has failed to
cooperate by not acting to the best of its ability to comply with
a request for information . . . .” 19 U.S.C. § 1677e(b)
(emphasis added). Here, both Huarong and TMC possessed
information regarding the true nature of their purported “agency”
relationship that was material to Commerce’s determination of
their antidumping duty margins, yet both submitted that data only
after the issuance of several supplemental questionnaires. Thus,
as this Court has previously held, plaintiffs’ “failure initially
to provide the relevant information with respect to their
invoicing arrangement, information that was fully within their
command, justified Commerce’s application of AFA” to plaintiffs’
3
Plaintiffs have previously made these arguments before
this Court in litigation dealing with the twelfth administrative
review of the HFHTs Orders. See Shandong Huarong Mach. Co. v.
United States, 30 CIT , , 435 F. Supp. 2d 1261, 1269–70
(2006) (“[E]ven though the Companies ultimately disclosed the
circumstances surrounding their ‘agency’ relationships, their
failure to do so until after the issuance of several supplemental
questionnaires surely significantly impeded Commerce’s
investigation by requiring the agency to prolong its review.”).
Court No. 05-00522 Page 17
claimed “agent” sales. Shandong Huarong Mach. Co. v. United
States, 30 CIT __, __, 435 F. Supp. 2d 1261, 1270 (2006).
B. Company Specific Applications of AFA
In addition to applying AFA to Huarong’s and TMC’s “agent”
sales, Commerce also applied AFA to both companies with respect
to some of their remaining sales. Specifically, the Department
applied AFA to certain of Huarong’s sales of scrapers4 and to
certain of TMC’s sales of picks/mattocks.
1. Application of AFA to Huarong’s Scraper Sales:
Movement Expenses
As previously noted, the application of AFA is the product
of a two-step analysis. See 19 U.S.C. § 1677e(a), (b). In the
Final Results, the Department found warranted the use of facts
otherwise available in calculating the rate applicable to
Huarong’s scraper sales because, in its view, Huarong “withheld
information that [was] requested by the Department.”5 Issues &
Dec. Mem. at 22. Specifically, Commerce found that Huarong
failed to disclose that it shipped its merchandise to a
4
Scrapers are subject to the antidumping duty order
covering axes/adzes from the PRC. See Olympia Indus., Inc., 30
CIT at , Slip Op. 06-110 at 2–3.
5
Pursuant to 19 U.S.C. § 1677e(a)(2)(A), Commerce is
directed to rely on facts available when reaching its
determination if a respondent “withholds information that has
been requested by [Commerce] . . . .”
Court No. 05-00522 Page 18
distribution warehouse prior to shipping the goods to the United
States despite the Department’s repeated requests for that
information.
As Commerce correctly notes, under the statute, a respondent
is required to report those expenses “incident to bringing the
subject merchandise from the original place of shipment in the
exporting country to the place of delivery in the United
States . . . .” 19 U.S.C. § 1677a(c)(2)(A); see also Issues &
Dec. Mem. at 22 (“As has been established in prior administrative
cases, the respondent must report all movement expenses, which
includes transportation and other expenses, such as
warehousing.”). Reporting this information is important to the
dumping calculation because Commerce deducts from either
constructed export price or export price the amount of the
movement expenses. This deduction reduces the United States
price of respondent’s merchandise and, thus, increases its
dumping margin.
Here, Commerce asked Huarong twice to report the movement
expenses relating to its scraper sales, yet, Commerce found,
[i]n its questionnaire responses, . . .
Huarong reported that it did not ship the
subject merchandise from the factory to a
distribution warehouse, and, thus, did not
incur this movement expense. At
verification, however, the Department noted
that the loading notification notice for one
sale listed an unreported movement expense.
The Department asked for and received the
loading notification notice for other sales,
Court No. 05-00522 Page 19
which also listed this unreported movement
expense. Moreover, when Huarong was asked
about this expense, Huarong stated that this
expense is incurred for all merchandise even
though the Department noted that it was not
reported in Huarong’s U.S. sales database.
Accordingly, the Department was not aware
until it was discovered at verification that
Huarong had not reported further movement
expenses.
Issues & Dec. Mem. at 22; see also Verification of Sales and
Factors of Production for Huarong (ITA May, 17 2005) (“Huarong
Verification Rep.”) at 17. Thus, because Commerce did not learn
that Huarong incurred this movement expense until verification,
it concluded that Huarong withheld information. See Def.’s Resp.
12 (“Verification is meant to confirm the accuracy of data
already reported, not to re-start the period for providing
data.”).
In addition, the Department found that Huarong failed “to
put forth its maximum efforts to report and obtain information
from its records regarding all incurred movement expenses as
requested.” Issues & Dec. Mem. at 23. That is, Commerce found
justified the taking of an adverse inference in selecting from
among the facts otherwise available. See id.; see also 19 U.S.C.
§ 1677e(b). For the Department:
Huarong’s knowledge of this movement expense
and its decision not to report it, despite
repeated questionnaires, properly warrants
the use of AFA. A reasonable [r]espondent
would have reviewed the Department’s
questionnaires and its records and reported
the movement expenses. The [r]espondents
Court No. 05-00522 Page 20
cannot unilaterally decide what requested
information to provide. Accordingly, Huarong
did not cooperate to the best of its ability
with regard to the Department’s request for
information during the course of the
administrative review. It was only at the
Department’s request at verification that
Huarong acknowledged that this unreported
movement expense was incurred for all sales
of axes/adzes. Therefore, consistent with
the Department’s practice in cases where a
respondent fails to cooperate to the best of
its ability, and pursuant to [19 U.S.C.
§ 1677e(b)], the Department finds that the
use of partial AFA is warranted for Huarong’s
unreported movement expense.
Issues & Dec. Mem. at 23.
As a result of Huarong’s failure to provide the movement
expense data, Commerce
us[ed] as an adverse inference the highest
number of days, between the date of invoice
and the shipment date, as the time period in
which [the] expense . . . occurred for all
sales in which this movement expense was not
reported. Additionally, the Department
[valued] this unreported movement expense for
all sales with a publicly available Indian
surrogate value because there is no surrogate
value information on the record due to
Huarong’s failure to disclose this movement
expense.
Id.6
6
Specifically, Commerce stated that in calculating
Huarong’s rate for its scraper sales:
As an adverse inference, the Department
calculated the highest number of days [[
]], between the date of invoice and the
shipment date, from Huarong sales traced at
verification, as the period incurred for all
(continued...)
Court No. 05-00522 Page 21
Huarong contests both Commerce’s use of facts otherwise
available and its taking of an adverse inference in calculating
the dumping margin for certain of Huarong’s scraper sales. It
argues that the application of AFA was unjustified because it
“cooperated to the best of [its] ability by reporting [its] data
as completely and as accurately as possible as can be
demonstrated by the multiple questionnaire responses submitted as
per the Department’s requests.” Pls.’ Mem. 28. That is, Huarong
urges that Commerce lacked a sufficient basis for applying
partial AFA to its sales of scrapers under the axes/adzes order
because Huarong eventually complied fully with the Department’s
requests for information. See Pls.’ Mem. 28 (“The [p]laintiff[]
behaved responsibly and reported [its] sales and other data to
the best of [its] ability. [It] certainly did not refuse to
cooperate.”).
6
(...continued)
sales that did not report this movement
expense. The Department valued this
unreported movement expense with a publicly
available Indian surrogate value, which was
deflated to be reflective of the POR. The
Department took the surrogate value and
multiplied it by the [[ ]], which was
applied as the unreported movement expense
incurred for all Huarong’s sales of
axes/adzes.
Analysis for the Final Results of HFHTs from the PRC: Huarong
(ITA Sept. 6, 2005) (“Calculation Mem.”) at 9 (citations
omitted). In addition, Commerce provided the formula used in
calculating Huarong’s axes/adzes rate using partial AFA for the
unreported movement expense. See Calculation Mem. at 10–11.
Court No. 05-00522 Page 22
Huarong raises a final point in support of its claim that
partial AFA were not applicable. It contends that, “[i]f the
Department ha[d] concerns regarding the movement expenses of
these sales, . . . the Department should [have] request[ed]
further information from [r]espondents regarding these movement
expenses.” Issues & Dec. Mem. 21. In other words, the
Department should have voiced its concerns about the questioned
movement expense prior to verification.
Despite Huarong’s contentions, the court finds that the
record supports Commerce’s decision to use AFA. First, the court
finds reasonable the Department’s conclusion that Huarong
withheld requested information by not reporting all of its
incurred movement expenses. Here, the record confirms that
Commerce, through the issuance of several questionnaires,
repeatedly asked Huarong to report its movement expenses
associated with its sales to the United States of merchandise
under the axes/adzes order, yet the Department did not learn that
Huarong shipped its goods to a domestic warehouse until
verification. See HFHTs From PRC - Huarong’s Resp. to
Questionnaire Secs. C & D (June 9, 2004) at C-23 (“Huarong did
not ship to a distribution warehouse.”); see also HFHTs From PRC
- Huarong’s Resp. to Supplemental Sec. C Questionnaire (Aug. 13,
2004) at C-9. While Huarong officials revealed at verification
that the company shipped all of its axes/adzes to a domestic
Court No. 05-00522 Page 23
warehouse prior to exporting the goods to the United States, this
late revelation does not remedy Huarong’s multiple failures to
respond fully to Commerce’s questionnaires. See Bomont Indus. v.
United States, 14 CIT 208, 209, 733 F. Supp. 1507, 1508 (1990)
(“[V]erification is like an audit, the purpose of which is to
test information provided by a party for accuracy and
completeness.”). Thus, because the use of facts available
requires nothing more than a respondent’s failure to provide the
Department with requested information, Huarong’s failure to
report that it shipped its goods to a domestic warehouse prior to
shipping the merchandise to the United States justified
Commerce’s reliance on facts otherwise available.
Second, the court finds reasonable the Department’s taking
of an adverse inference in selecting from among those facts based
on Huarong’s failure to put forth its maximum effort in
responding to Commerce’s questions regarding the company’s
expenses incurred in transporting its scrapers from the factory
to the United States. In its responses to Sections C and D of
Commerce’s questionnaire, Huarong stated that it did not ship its
scrapers to a distribution warehouse. At verification, however,
Commerce discovered that, in fact, Huarong did ship its scrapers
to a domestic distribution warehouse prior to shipping the goods
Court No. 05-00522 Page 24
to the United States.7 Nothing prevented Huarong from providing
Commerce with the details of this unreported expense prior to
verification. See Tianjin Mach. Imp. & Exp. Corp. v. United
States, 28 CIT __, __, 353 F. Supp. 2d 1294, 1305 (2004) (“A
reasonable respondent acting to the best of its ability would
have ensured that the information set forth in its . . .
questionnaire response was comprehensive.”).
In addition, Huarong erroneously contends that, if Commerce
had concerns about Huarong’s reported (or unreported) movement
expenses, it should have asked for more information. When
Huarong submitted the response in which it stated that it did not
ship its merchandise to a domestic warehouse prior to moving the
goods to the United States, Commerce had no reason to doubt that
statement’s accuracy. As a result, it was not until
7
While verifying Huarong’s questionnaire responses:
Analysts noted that the “Loading
Notification” for [[ ]] states:
[[
]]. We asked
company officials about the [[
]] and they stated that the [[
]].
We note that Huarong reported for all sales
of scrapers in their Section C database that
the goods were not sent to a[] domestic
intermediate location . . ., including a
distribution warehouse, before the
merchandise was shipped to the United States.
Huarong Verification Rep. at 17.
Court No. 05-00522 Page 25
verification, when Commerce discovered that Huarong had not
disclosed the expense, that the Department could have been
expected to question the accuracy of Huarong’s response. Thus,
because it had no reason to believe there were domestic warehouse
expenses prior to verification, Commerce was under no obligation
to issue a supplemental questionnaire concerning Huarong’s
movement expenses.
It is evident, therefore, that Huarong, by withholding data
concerning its movement expenses, created a gap in the record
that Commerce rightly filled using facts otherwise available. It
is equally apparent that Huarong failed to cooperate by doing the
maximum it could do to respond completely to Commerce’s
questionnaires. As a result, the court sustains the Department’s
decision to account for Huarong’s unreported moving expense using
facts otherwise available and its accompanying decision to use an
adverse inference when selecting from among those facts.
2. Application of AFA to TMC’s Sales of
Picks/Mattocks: Supplier’s Factors of Production
Next, plaintiffs maintain that the Department unlawfully
applied AFA to TMC’s sales of picks/mattocks because of its
“inability to verify one of TMC’s supplier’s factors of
production of picks/mattocks . . . .” Pls.’ Mem. 29–30. Because
it was unable to verify this information, the Department first
applied facts available and then used an adverse inference when
Court No. 05-00522 Page 26
selecting from among those facts.
According to TMC, it had no control over the events that led
to its supplier’s factors of production data becoming
inaccessible. TMC makes the following representations:
On April 18, 2005, TMC officials informed the
Department that the Tianjin Tax Authority had
seized one of its suppliers accounting books
and records. This event was completely out
of TMC’s control. TMC officials could not
have anticipated that the Tianjin Tax
Authority would seize its supplier’s
accounting books and records for a random tax
audit. The Department confirmed this event
with the supplier’s general manager.
Moreover, because the relevant documents had
been seized, the supplier could offer no
alternative method to verify [its] factors of
production.
Pls.’ Mem. 30 (emphasis & footnotes omitted). Therefore, TMC
insists that it failed verification through no fault of its own,
and thus Commerce should not have applied AFA to TMC’s sales of
picks/mattocks.
The Department maintains that its decision to apply AFA in
response to TMC’s failure to provide its supplier’s factors of
production information for verification was reasonable. See
Issues & Dec. Mem. at 41 (“TMC provided factors of
production . . . data that the Department was unable to verify
for TMC’s sales of picks/mattocks.”). First, Commerce explains
its use of facts otherwise available:
On April 18, 2005, the day the Department
began verification, TMC notified the
Department that the books and records of its
Court No. 05-00522 Page 27
supplier of picks/mattocks, Dagang, were
seized by the Tianjin Tax Authority . . . .
On April 19, 2005 the Department conducted
verification at Dagang’s facilities to
confirm that these records were no longer in
the possession of Dagang and concluded that
Dagang’s [factors of production] were
unverifiable. As a result of the [Tianjin
Tax Authority]’s seizure of Dagang’s FY
2003–2004 books and records, the Department
was unable to verify TMC’s [factors of
production] data. In addition, as Dagang was
TMC’s sole supplier of picks/mattocks, the
Department does not have a verified [factors
of production] database upon which to
calculate a normal value. Therefore, the
Department must rely on the facts otherwise
available in order to determine a margin for
TMC . . . .
Id. (footnote omitted). Thus, for Commerce, while the Tianjin
Tax Authority’s (“TTA”) seizure of Dagang’s books and records
might have been outside of TMC’s control, it nevertheless created
a void in information necessary to the calculation of TMC’s
dumping margin that Commerce needed to fill with facts otherwise
available. See 19 U.S.C. § 1677e(a)(D).
With respect to its use of an adverse inference pursuant to
19 U.S.C. § 1677e(b), Commerce states:
We find that an adverse inference is
warranted in determining the facts otherwise
available because TMC failed to act to the
best of its ability for two reasons. First,
TMC failed to notify the department in a
timely manner that Dagang’s books and records
had been seized. TMC did not notify the
Department of the seizure until April 18,
2005. The TTA seized Dagang’s books and
records on April 1, 2005, and TMC learned of
the seizure on April 4, 2005. On April 4,
2005, the same date . . . TMC learned of the
Court No. 05-00522 Page 28
seizure, TMC requested that the Department
postpone verification so that TMC could
attend the “Canton Trade Fair.” Thus, we
have reason to question whether TMC
misrepresented the reason for the request to
postpone verification. In any event, on
April 5, 2005, TMC withdrew its request to
postpone verification, making no mention of
the seizure of Dagang’s books and records.
When asked why it had not informed the
Department of the seizure, TMC responded that
it was not “{their} concern.” As the
Department was verifying TMC’s [factors of
production], it was incumbent upon TMC to
inform the Department of any issue related to
the scheduled verification.
Second, TMC failed to provide any alternative
methodology to verify its factors of
production. In the verification outline
released to TMC, the Department advised TMC
to make available documents relating to its
reported [factors of production]. [19 U.S.C.
§ 1677m(c)(1)] provides that, if an
interested party is unable to submit the
information requested or in the requested
form, that party is required to notify the
Department promptly and must suggest a
reasonable alternative. As stated above, TMC
did not notify the Department in a timely
manner. Nor is there any evidence that TMC
made an effort to contact TTA to ascertain,
for example, how long the documents would be
held or whether the documents or copies could
be made available to the Department. In
addition, while the Department requested at
verification that Dagang provide an
alternative method of verifying its [factors
of production], neither TMC nor Dagang were
prepared to proffer alternatives.
Issues & Dec. Mem. at 41–42. Thus, (1) because it found that TMC
failed to notify the Department of the seizure until
approximately two weeks after it learned that the records were
taken, and (2) because neither TMC nor Dagang made any effort to
Court No. 05-00522 Page 29
obtain either the factors of production data itself or provide an
alternative information source, Commerce insists that the
application of AFA was justified. See Def.’s Resp. 14 (“An
adverse inference was warranted because a reasonable respondent
would have made some effort to ensure Commerce would be able to
verify the information that it had reported.”).
The court finds that the record supports Commerce’s
application of AFA in constructing TMC’s factors of production
for its sales of picks/mattocks. First, by failing to have
available for inspection information necessary to verify the
calculation of its dumping margin, TMC triggered the Department’s
use of facts otherwise available. See Nippon Steel Corp., 337
F.3d at 1383. That is, Commerce was unable to verify TMC’s
factors of production data and thus was required to determine
TMC’s dumping rate using facts available.
Second, the court’s review of the record reveals substantial
support for Commerce’s use of an adverse inference pursuant to 19
U.S.C. § 1677e(b). As previously noted, the Department may use
an adverse inference when selecting from among the facts
otherwise available if it determines that the respondent has
“failed to cooperate by not acting to the best of its ability to
comply with a request for information” from Commerce. 19 U.S.C.
§ 1677e(b). Here, the record makes clear that TMC became aware
of the seizure of Dagang’s factors of production data on April 4,
Court No. 05-00522 Page 30
2005. See Verification of Sales for TMC in the 13th Admin. Rev.
of HFHTs from the PRC (ITA May 23, 2005) at 12 (“TMC officials
stated that they did not know about this situation until April 4,
2005 when they were faxed copies of the ‘Notice on Tax
Investigation’ and ‘Notice on Holding Account Ledgers for Tax
Investigation.’”). Rather than inform the Department of this,
TMC instead asked that verification be postponed so that it could
attend a trade fair, a request that it subsequently withdrew.
TMC only made known the fact that Dagang’s books and records had
been seized at verification, which took place two weeks after TMC
concedes it learned of the seizure. See Issues & Dec. Mem. at
42.
Moreover, it is clear from the record that TMC neither made
any effort to secure from the TTA copies of the seized records,
nor attempted to suggest an alternative method for calculating
the factors of production as was its right under 19 U.S.C.
§ 1677m(c)(1).8 Indeed, Commerce stated that “[h]ad TMC provided
8
That subsection provides:
If an interested party, promptly after
receiving a request from the administering
authority . . . for information, notifies the
administering authority . . . that such party
is unable to submit the information requested
in the requested form and manner, together
with a full explanation and suggested
alternative forms in which such party is able
to submit the information, the administering
authority . . . shall consider the ability of
(continued...)
Court No. 05-00522 Page 31
the information in a timely manner the Department may have had
time to pursue any proposed alternatives, including, for example,
alternative methods of verifying TMC’s factors of production
data . . . .” Issues & Dec. Mem. at 42. Thus, it is apparent
that by failing to inform the Department of the seizure, and by
making no effort to obtain copies of the documents or suggest a
potential solution to the problem, TMC did not do the maximum it
was able to do to respond to Commerce’s request. See Nippon
Steel Corp., 337 F.3d at 1382.
Based on the foregoing, the court finds that Commerce’s
application of AFA to TMC’s sales of picks/mattocks is supported
by the record.9
III. AFA Rates for Bars/Wedges, Axes/Adzes and Picks/Mattocks
Huarong and TMC next claim that the rates imposed by the
Department on their sales of bars/wedges, axes/adzes and
8
(...continued)
the interested party to submit the
information in the requested form and manner
and may modify such requirements to the
extent necessary to avoid imposing an
unreasonable burden on that party.
19 U.S.C. § 1677m(c)(1).
9
Because the court finds Commerce’s application of AFA
to Huarong and TMC to be supported by substantial evidence and in
accordance with law, it further finds without merit plaintiffs’
contention that the Department should have instead applied
combination cash deposit rates to plaintiffs’ merchandise.
Court No. 05-00522 Page 32
picks/mattocks as a result of the application of AFA were
unreasonable. See Pls.’ Mem. 11–18.
A. AFA Rate for “Agent” Sales of Bars/Wedges
Plaintiffs insist that even if the application of AFA to
their sales of bars/wedges as a result of their purported
“agency” relationship is warranted, the rate applied as AFA is
not. For its part, Commerce maintains that the 139.31 percent
rate, which was taken from TMC’s calculated rate in the eighth
review of the HFHTs Orders, was reasonable. See Issues & Dec.
Mem. at 9; see also Def.’s Resp. 16–17. According to the
Department:
Because the AFA rate is based on TMC’s actual
sales data, it directly bears a “rational
relationship” to TMC. The Department also
finds that this rate “bears a rational
relationship” to Huarong’s commercial
activity because both Huarong and TMC export
identical products covered by the bars/wedges
order and compete for sales within the U.S.
market.
Issues & Dec. Mem. at 10. Thus, for Commerce, while the rate is
relevant to TMC because it was calculated using that company’s
sales data in an earlier review, the rate is equally applicable
to Huarong based on its participation in the same market as TMC.
In addition to the rate’s relevance, the Department further
states that
this rate is appropriate because it has been
upheld [in Shandong Huarong General Corp. v.
Court No. 05-00522 Page 33
United States, 25 CIT 1226, 177 F. Supp. 2d
1304 (2001)] as reflective of TMC’s recent
commercial activity in exporting bars/wedges
to the United States. This rate is also the
PRC-wide rate of 139.31 percent for
bars/wedges published in the most recently
completed administrative review of this
antidumping duty order. Moreover, this rate
is the highest rate in the proceeding and was
calculated using verified information
provided by TMC during the 8th administrative
review of the bars/wedges order.
Accordingly, the Department continues to find
that this rate, instead of other recently
calculated rates, offers a more adequate
incentive to induce Huarong and TMC to
cooperate in this proceeding.
Id.
For their part, plaintiffs argue that the 139.31 percent
rate “is punitive and does not reflect a reasonable dumping
margin.” Pls.’ Mem. 16. In support of its position, plaintiffs
rely on this Court’s decision in Shandong Huarong General Group
Corp. v. United States, 28 CIT , Slip Op. 05-129 (Sept. 27,
2005) (not reported in the Federal Supplement), remanding
Commerce’s decision to apply the 139.31 percent rate to the
companies’ sales of bars/wedges in the ninth administrative
review of the HFHTs Orders. In that case, the court concluded
that the 139.31 percent rate was both aberrational and punitive.
See id. at , Slip Op. 05-129 at 21. On remand, Commerce
lowered the 139.31 percent to 47.88 percent. The court sustained
this rate as both reliable and bearing a rational relationship to
the respondents. See Shandong Huarong Gen. Group. Co. v. United
Court No. 05-00522 Page 34
States, 31 CIT , , Slip Op. 07-4 at 8 (Jan. 9, 2007) (not
reported in the Federal Supplement) (“[T]he court finds that
Commerce has explained adequately the reliability and relevance
of the 47.88 percent rate with respect to the Companies’ sales of
bars and wedges.”). Plaintiffs cannot discern a difference
between the facts of that review and those presently before the
court. As a result, plaintiffs seek a remand of Commerce’s
decision to apply the 139.31 percent rate to their sales of
bars/wedges.10
Where Commerce relies on secondary information in
determining dumping margins, it is statutorily mandated to
“corroborate that information from independent sources that are
reasonably at their disposal.” 19 U.S.C. § 1677e(c). The
Federal Circuit has stated that “[i]t is clear from Congress’s
imposition of the corroboration requirement in 19 U.S.C.
§ 1677e(c) that it intended for an adverse facts available rate
to be a reasonably accurate estimate of the respondent’s actual
rate, albeit with some built-in increase intended as a deterrent
10
Plaintiffs further contend that Commerce is precluded
from using TMC’s calculated rate from the eighth review because
that rate was calculated using Indian data that plaintiffs insist
were distorted by subsidies. The court notes that: (1) plaintiff
put no actual evidence of subsidization on the record, either in
this review or during the eighth review; and (2) the issue of
subsidization was not raised during plaintiffs’ challenge to the
final results of the eighth review before this Court. See
Shandong Huarong Gen. Corp. v. United States, 25 CIT 1226, 177 F.
Supp. 2d 1304 (2001). As a result, plaintiffs are foreclosed
from making their claim now.
Court No. 05-00522 Page 35
to non-compliance.” F.Lli De Cecco Di Filippo Fara S. Martino
S.p.A. v. United States, 216 F.3d 1027, 1032 (Fed. Cir. 2000).
That is, “Congress could not have intended for Commerce’s
discretion to include the ability to select unreasonably high
rates with no relationship to the respondent’s actual dumping
margin.” Id. As this Court has held, “[a]n AFA rate must be
both reliable and bear and a rational relationship to the
respondent.” Shandong Huarong Gen. Group Corp., 31 CIT at ,
Slip Op. 07-4 at 9. In other words, Commerce may not simply
select as AFA the highest possible rate as punishment for a
respondent’s unwillingness to cooperate. See Gerber Food
(Yunnan) Co. v. United States, 31 CIT __, 491 F. Supp. 2d 1326,
1348 (2007) (“The statute does not permit Commerce to choose an
antidumping duty assessment rate as an adverse inference without
making factual findings, supported by substantial evidence.”)
(internal quotation marks & citation omitted); see also Shandong
Huarong Mach. Co., 30 CIT at , 435 F. Supp. 2d at 1274–75.
Finally, this Court has interpreted Congress’s intent as
requiring Commerce to select an AFA rate that is both reliable
and bears a rational relationship to the respondent, not just the
industry on the whole. See Shandong Huarong Gen. Group Corp., 31
CIT at , Slip Op. 07-4 at 7 (“[T]he law requires that an
assigned rate relate to the company to which it is assigned.”)
(internal quotation marks & citation omitted).
Court No. 05-00522 Page 36
Commerce has failed to meet these standards in making the
case for its use of the 139.31 percent rate for TMC’s and
Huarong’s sales of bars/wedges. With respect to the “agent”
sales, Commerce has no verified information from which to
calculate an actual rate. Thus, Commerce selected a rate from a
previous review. In support of its application of the 139.31
percent rate to TMC, Commerce relies solely on the evidence that
the rate was calculated for TMC using that company’s own verified
information in the eighth administrative review of the HFHTs
Orders (for the period of review 1998–1999). While Commerce has
shown that the rate, having been calculated using the
respondent’s own verified data, was reliable when calculated, it
has failed to explain how the rate is relevant to TMC’s sales
activity during the thirteenth review. Such an explanation is
particularly warranted here where there are more recent rates for
TMC that are lower. See, e.g., HFHTs From the PRC, 66 Fed. Reg.
48,026, 48,029 (Dep’t of Commerce Sept. 17, 2001) (final results)
(assigning TMC’s sales of bars/wedges between February 1, 1999,
and January 31, 2000, a rate of 0.56 percent); HFHTs From the
PRC, 64 Fed. Reg. 43,659, 43,671 (Dep’t of Commerce Aug. 11,
1999) (final results) (assigning TMC’s sales of bars/wedges
between February 1, 1997, and January 31, 1998, a rate of 47.88
percent). In failing to explain how the facts and circumstances
present here justify a higher rate than those earlier reviews,
Court No. 05-00522 Page 37
Commerce has failed in its duty to estimate “respondent’s actual
rate” during the POR. See De Cecco, 216 F.3d at 1032.
With respect to Huarong, the Department does nothing more
than state that, because Huarong is involved in the same industry
as TMC, the 139.31 percent rate is relevant to Huarong. In other
words, that rate is reflective of what Huarong’s rate would have
been had it complied, albeit with an increase intended to deter
future uncooperative behavior. As noted, Commerce must
demonstrate that the rate it selects as a result of the
application of AFA is both reliable and relevant to the
individual respondent, not simply the subject industry as a
whole. By merely noting that Huarong and TMC are participants in
the same industry, Commerce has not sufficiently explained how
the 139.31 percent rate relates to Huarong. In other words, the
Department has not articulated how the 139.31 percent rate is a
reasonable estimate of what Huarong’s rate would have been had it
complied together with a built-in increase as a deterrent.
Based on the foregoing, the court remands the issue to
Commerce with instructions to: (1) explain (a) how the 139.31
percent rate applied to TMC’s and Huarong’s sales of bars/wedges
is a reasonably accurate estimate of TMC’s actual rate with a
built-in increase to deter non-compliance and, in particular, how
that rate is more accurate than other rates calculated for TMC;
and (b) explain in detail how any rate assigned to Huarong is
Court No. 05-00522 Page 38
reliable and bears a rational relationship to the company itself;
or (2) reopen the record and calculate an AFA rate to be applied
to Huarong’s and TMC’s sales of bars/wedges, with an additional
amount to deter future non-compliance.
B. AFA Rate for Huarong’s Sales of Axes/Adzes
As discussed supra, the Department found warranted the
application of AFA to Huarong’s sales of axes/adzes based on the
company’s failure to report fully its movement expenses, i.e.,
that Huarong failed to report that it shipped its merchandise to
a domestic storage warehouse prior to shipping the goods to the
United States. Commerce, therefore, as it had in several prior
cases, used “as an adverse inference the highest number of days,
between the date of invoice and the shipment date, as the time
period in which [the movement expense] occurred for all sales in
which this movement expense was not reported.” Issues & Dec.
Mem. at 23. The Department further decided to “valu[e] this
unreported movement expense for all sales with a publicly
available Indian surrogate value because there is no surrogate
value information on the record due to Huarong’s failure to
disclose this movement expense.” Id. For the Department, this
method ensured that “Huarong’s margin for sales of axes/adzes was
calculated using Huarong’s information.” Def.’s Resp. 17. As a
result, certain of Huarong’s sales of axes/adzes received a
Court No. 05-00522 Page 39
calculated rate of 174.58 percent.
Plaintiffs do not contest the Department’s methodology
employed in calculating the unreported movement expense, rather
they contend that Commerce’s reliance on Indian surrogate data is
misplaced. Plaintiffs first state that Commerce is precluded by
its own past practice from using Indian surrogate data “because
of Indian subsidies.” Pls.’ Mem. 11.
In addition, plaintiffs maintain that the axes/adzes rate is
artificially inflated because of Commerce’s improper inclusion of
scraper sales. According to plaintiffs, “[t]he Department should
have excluded scrapers from the calculated PRC-Wide and AFA rate
for axes/adzes as these rates were based solely on Huarong’s
sales of scrapers.” Pls.’ Mem. 17. Plaintiffs apparently
contend that, had Commerce excluded Huarong’s scraper sales, here
the sales of the MUTT scraper, the AFA rate would be
substantially lower.
The court finds that the Department has supported with
substantial evidence its determination to use AFA to calculate
the rate applicable to Huarong’s sales of axes/adzes. In this
case, Huarong’s failure to report the movement expense resulted
in the absence from the record of a surrogate value for that
expense. That is, because it was not known that the expense had
been incurred, no party put a surrogate value on the record.
Commerce, therefore, relied on a publicly available Indian
Court No. 05-00522 Page 40
surrogate value to calculate the unreported movement expense.
While plaintiffs insist that the surrogate value Commerce
employed was distorted by subsidies, they have provided no
evidence to support their assertion. Thus, the court cannot
credit plaintiffs’ subsidy objection.
The court also finds no merit in Huarong’s assertion that
the inclusion of its sales of the MUTT scraper under the terms of
the order applicable to axes/adzes was in error and increased
artificially the AFA rate. This Court has held that the MUTT is,
in fact, subject to the terms of the axes/adzes order. See
Olympia Indus., Inc. v. United States, 30 CIT , , Slip Op.
06-110 at 2–3 (July 24, 2006) (not reported in the Federal
Supplement) (“Because the MUTT’s utility as a tool comes from its
steel head with a sharp blade that can be used for cutting and
chopping, the court finds that it is a hewing tool similar to an
axe or adze and, thus, sustains Commerce’s Final Scope Ruling.”).
Therefore, the court sustains as supported by substantial
evidence and otherwise in accordance with law Commerce’s
calculation of the 174.58 percent rate.
C. AFA Rate for TMC’s Sales of Picks/Mattocks
The Department selected 98.77 percent, “the highest margin
from this or any prior segment of the proceeding,” as an AFA rate
for TMC’s sales of picks/mattocks based on the company’s failure
Court No. 05-00522 Page 41
to have available for inspection at verification its sole
supplier’s factors of production data. Issues & Dec. Mem. at 43
(“The Department . . . has determined to use a rate calculated
for another respondent and the PRC-wide rate as AFA.”). The
selected rate was first “calculated in the 5th review and
corroborated in the Final Results of the 12th review as amended.”
Final Results, 70 Fed. Reg. at 54,899; see also HFHTs From the
PRC, 62 Fed. Reg. 11,813, 11,819 (Dep’t of Commerce Mar. 13,
1997) (final results) (fifth admin. rev.); HFHTs From the PRC, 69
Fed. Reg. 55,581 (Dep’t of Commerce Sept. 15, 2004) (final
results) (twelfth admin. rev.). In support of its decision not
to calculate a rate, Commerce explains that it “was unable to
conduct verification of the factors of production used in the
preliminary rate calculation.” Issues & Dec. Mem. at 43.
Further, Commerce maintains that its use of a previously
calculated rate as AFA “from the current or a prior segment of
the proceeding,” renders the rate reliable. See 19 U.S.C.
§ 1677e(c).
For their part, plaintiffs reassert their arguments that the
selected AFA rate was calculated using subsidized prices and
bears no relation to TMC.
While, for the reasons previously stated, the court does not
credit plaintiffs’ subsidy argument, it finds that Commerce has
not explained adequately why it selected the 98.77 percent rate
Court No. 05-00522 Page 42
to apply to TMC’s sales of picks/mattocks. As previously
mentioned, “[t]he statute requires Commerce to select an
antidumping duty rate that is a reasonably accurate estimate of
the respondent’s actual rate.” Gerber Food (Yunnan) Co., 31 CIT
at , 491 F. Supp. 2d at 1348–49 (internal quotation marks &
citations omitted). In addition, the rate must be both reliable
and relevant to the company to which the rate is assigned. Here,
because Dagang was TMC’s sole supplier of picks/mattocks, the
absence of that company’s factors of production data meant that
the Department did not have verified facts to rely on in
calculating an actual rate for TMC.
Commerce justifies the chosen rate’s reliability by stating
that it was calculated for another respondent in a prior segment
of these proceedings. This, however, is not sufficient for the
court to find that the selected rate was a reasonably accurate
reflection of what TMC’s actual rate would be during the POR.
This is particularly the case where there have been other lower
rates recently calculated for TMC’s sales of picks/mattocks.
See, e.g., HFHTs From the PRC, 69 Fed. Reg. 55,581 (Dep’t of
Commerce Sept. 15, 2004) (assigning a 4.76 percent rate to TMC’s
picks/mattocks for February 1, 2002, through January 31, 2003);
HFHTs From the PRC, 66 Fed. Reg. 48,026, 48,029 (Dep’t of
Commerce Sept. 17, 2001) (assigning a 0.02 percent rate to TMC’s
sales of picks/mattocks from February 1, 1999, through January
Court No. 05-00522 Page 43
31, 2000). The 98.77 percent rate, therefore, may not represent
a reasonable estimate of what TMC’s rate would have been had the
respondent cooperated, albeit with a built-in increase to deter
future non-compliance. See De Cecco, 216 F.3d at 1032. While
the record may not contain evidence sufficient to permit Commerce
to calculate an actual dumping margin for TMC, the Department
must nonetheless justify its decision to select a rate from a
prior review as an AFA rate. In other words, the absence of
verifiable evidence does not release Commerce from its obligation
to apply an AFA rate that is reasonable, bears a rational
relationship to the respondent and reasonably reflects what the
respondent’s actual rate would have been. Thus, Commerce must do
more than simply select a high rate from a prior review. On
remand, the Department is instructed to: (1) explain (a) how the
98.77 percent rate for TMC’s picks/maddocks is a reasonably
accurate estimate of TMC’s actual rate with a built-in increase
to deter non-compliance; and (b) why it did not select as an AFA
rate for TMC’s sales of picks/mattocks one of the previously
assigned lower rates, albeit with a built-in increase to deter
future non-compliance; or (2) reopen the record and obtain
evidence to support an actual calculated rate for TMC’s sales of
picks/mattocks.
Court No. 05-00522 Page 44
CONCLUSION
Based on the foregoing, the court remands Commerce’s Final
Results for further action in accordance with this opinion.
Remand results are due on November 28, 2007. Comments on those
remand results are due on December 28, 2007. Replies to such
comments are due on January 8, 2008.
______/s/ Richard K. Eaton
Richard K. Eaton
Dated: August 28, 2007
New York, New York