Baroque Timber Industries (Zhongshan) Co. v. United States , 971 F. Supp. 2d 1333 ( 2014 )

Slip Op. 14 - 35
UNITED STATES COURT OF INTERNATIONAL TRADE
BAROQUE TIMBER INDUSTRIES
(ZHONGSHAN) COMPANY, LIMITED, et Before: Donald C. Pogue,
al., Chief Judge
Plaintiffs, Consol. Court No. 12-000071
v.
UNITED STATES,
Defendant,
and
COALITION FOR AMERICAN HARDWOOD
PARITY, et al.,
Defendant-Intervenors.
OPINION
[remand redetermination affirmed in part and remanded in part]
Dated: March 31, 2014
Francis J. Sailer, Mark E. Pardo, Andrew T. Schutz,
Kavita Mohan, and John M. Foote, Grunfeld, Desiderio, Lebowitz,
Silverman & Klestadt, LLP, of Washington, DC, for Baroque Timber
1 This action was consolidated with court nos. 11-00452, 12-
00013, and 12-00020. Order, May 31, 2012, ECF No. 37. The
complaint filed by the Coalition for American Hardwood Parity in
court no. 11-00452 was heard and decided separately in Baroque
Timber Indus. (Zhongshan) Co., Ltd. v. United States, __ CIT __,
853 F. Supp. 2d 1290 (2012)(“Baroque I”), and Baroque Timber
Indus. (Zhongshan) Co., Ltd. v. United States, __ CIT __, 865 F.
Supp. 2d 1300 (2012)(“Baroque II”). The Coalition’s complaint
was ultimately dismissed. Baroque Timber Indus., 865 F. Supp. 2d
at 1311.
Consol. Court No. 12-00007 Page 2
Industries (Zhongshan) Co., Ltd.; Riverside Plywood Corp.;
Samling Elegant Living Trading (Labuan) Ltd.; Samling Global
USA, Inc.; Samling Riverside Co., Ltd.; and Suzhou Times
Flooring Co., Ltd.
Gregory S. Menegaz, James K. Horgan, and John J.
Kenkel, deKieffer & Horgan, PLLC, Washington, DC, for Zhejiang
Layo Wood Industry Co., Ltd.; Changzhou Hawd Flooring Co., Ltd.;
Dunhua City Jisen Wood Industry Co., Ltd.; Dunhua City Dexin
Wood Industry Co., Ltd.; Dalian Huilong Wooden Products Co.,
Ltd.; Kunshan Yingyi-Nature Wood Industry Co., Ltd.; and Karly
Wood Product Ltd.
Kristin H. Mowry, Daniel R. Wilson, Jeffrey S.
Grimson, Jill A. Cramer, Susan L. Brooks, Sarah M. Wyss, and
Rebecca M. Janz, Mowry & Grimson, PLLC, of Washington, DC, for
Fine Furniture (Shanghai) Ltd.; Great Wood (Tonghua) Ltd.; and
Fine Furniture Plantation (Shishou) Ltd.
Kristen S. Smith and Mark R. Ludwikowski, Sandler,
Travis & Rosenberg, PA, of Washington, DC, for Lumber
Liquidators Services, LLC; Armstrong Wood Products (Kunshan)
Co., Ltd.; and Home Legend, LLC.
Jeffrey S. Neeley, Michael S. Holton, and Stephen W.
Brophy, Barnes, Richardson & Colburn, Washington, DC, for
Zhejiang Yuhua Timber Co., Ltd.
Alexander V. Sverdlov, Trial Attorney, Commercial
Litigation Branch, Civil Division, United States Department of
Justice, of Washington, DC, for the United States. With him on
the brief were Stuart F. Delery, Principal Deputy Assistant
Attorney General, Jeanne E. Davidson, Director, and Claudia
Burke, Assistant Director. Of counsel on the brief were Shana
A. Hofstetter and Melissa M. Brewer, Attornies, International
Office of the Chief Counsel for Import Administration, U.S.
Department of Commerce, of Washington, DC.
Jeffrey S. Levin, Levin Trade Law, P.C., of Bethesda,
MD, for the Coalition for American Hardwood Parity.
Consol. Court No. 12-00007 Page 3
Pogue, Chief Judge: This consolidated action returns
to court,2 following remand3 and redetermination4 of the final
results of the antidumping duty investigation of multilayered
wood flooring from the People’s Republic of China (“PRC” or
“China”).5 Plaintiffs, cooperative non-investigated respondents
who have established their entitlement to a separate antidumping
duty rate, challenge the remand redetermination of that rate.6
2The court has jurisdiction pursuant to § 516A(a)(2)(B)(i)
of the Tariff Act of 1930, as amended, 19 U.S.C. §
1516a(a)(2)(B)(i) (2006) and 28 U.S.C. § 1581(c) (2006). All
further citations to the Tariff Act of 1930, as amended, are to
Title 19 of the U.S. Code, 2006 edition.
3 Baroque Timber Indus. (Zhongshan) Co., Ltd. v. United
States, ___ C.I.T. ___, 925 F. Supp. 2d 1332 (2013)(“Baroque
III”).
4 Final Results of Redetermination Pursuant to Court Order,
Nov. 14, 2013, ECF No. 132 (“Redetermination” or “Remand
Results”).
5 Multilayered Wood Flooring from the People’s Republic of
China, 76 Fed. Reg. 64,318 (Dep’t Commerce Oct. 18, 2011) (final
determination of sales at less than fair value) (“Final
Determination”) and accompanying Issues & Decision Memorandum,
A-570-970, POI Apr. 1, 2010 – Sept. 30, 2010 (Oct. 11, 2011) (“I
& D Memo”).
6 The Respondents who are party to this case include:
Baroque Timber Industries (Zhongshan) Co., Ltd.; Riverside
Plywood Corp.; Samling Elegant Living Trading (Labuan), Ltd.;
Samling Global USA, Inc.; Samling Riverside Co., Ltd.; Suzhou
Times Flooring Co., Ltd.; Zhejiang Layo Wood Industry Co., Ltd.;
Changzhou Hawd Flooring Co., Ltd.; Dunhua City Jisen Wood
Industry Co., Ltd.; Dunhua City Dexin Wood Industry Co., Ltd.;
Dalian Huilong Wooden Products Co., Ltd.; Kunshan Yingyi-Nature
Wood Industry Co., Ltd.; Karly Wood Product Ltd.; and, Fine
(footnote continued)
Consol. Court No. 12-00007 Page 4
Plaintiffs argue that the Department of Commerce’s (“the
Department” or “Commerce”) redetermination is flawed because the
Department’s legal interpretations are not in accordance with
the law and the Department’s factual conclusions are not
supported by a reasonable reading of the evidence.7
Plaintiffs are, in part, correct. Commerce has not
articulated a rational connection between the record evidence
and the rate applied to the separate rate companies, nor has
Commerce explained how its determination bears a relationship to
Plaintiffs’ economic reality. Accordingly, the court remands to
Commerce for further consideration in accordance with this
opinion.
BACKGROUND
I. Baroque III
This dispute originates in a petition by the Coalition
for American Hardwood Parity (“CAHP”) alleging that imports of
multilayered wood flooring from the PRC were being dumped in the
Furniture (Shanghai), Ltd. Respondents’ Mem. of Law in Supp. of
Mot. for J. on the Agency R. Pursuant to Rule 56.2, ECF No. 63
at 1 n.1.
7 See Comments in Opposition to Final Result of
Redetermination Pursuant to Court Order, ECF No. 134; Comments
of Fine Furniture (Shanghai) Limited on Department of Commerce
November 14, 2013 Final Results of Redetermination Pursuant to
Court Remand, ECF No. 136; Response to United States’ Remand
Redetermination of Separate Rate Appellants, ECF No. 138.
Consol. Court No. 12-00007 Page 5
United States. In response, Commerce initiated an antidumping
duty investigation for the period of April 1, 2010 through
September 30, 2010. Multilayered Wood Flooring from the People’s
Republic of China, 75 Fed. Reg. 70,714 (Dep’t Commerce Nov. 18,
2010) (initiation of antidumping duty investigation)
(“Initiation Notice”). Commerce indicated that it would select
mandatory respondents based on quantity and value (“Q&V”)
questionnaires. Id. at 70,717. Commerce requested Q&V data from
190 companies and received timely responses from 80.
Multilayered Wood Flooring from the People’s Republic of China,
76 Fed. Reg. 30,656, 30,657 (Dep’t Commerce May 26, 2011)
(preliminary determination of sales at less than fair value)
(“Preliminary Determination”). From these, Commerce selected
three mandatory respondents, the largest cooperating exporters
(by volume) of wood flooring, for the investigation: Zhejiang
Yuhua Timber Co., Ltd. (“Yuhua”), Zhejiang Layo Wood Industry
Co., Ltd. (“Layo”), and the Samling Group8 (“Samling”). Id. at
30,658; see also 19 U.S.C. § 1677f-1(c)(2)(B).9 Those companies
8 The Samling Group includes Baroque Timber Industries
(Zhongshan) Co., Ltd., Riverside Plywood Corp., Samling Elegant
Living Trading (Labuan) Ltd., Samling Global USA, Inc., Samling
Riverside Co., Ltd., and Suzhou Times Flooring Co., Ltd. Id. at
30,658, 30,660.
9 Fine Furniture (Shanghai) Ltd. (“Fine Furniture”),
Shanghai Lizhong Wood Products Co., Ltd. (“Lizhong”), Dun Hua
(footnote continued)
Consol. Court No. 12-00007 Page 6
that failed to respond to Commerce’s Q&V questionnaire were
treated as part of the PRC-wide entity. Preliminary
Determination at 30,661.10
In addition, because this was a non-market economy
(“NME”) investigation,11 Commerce invited those exporters and
producers seeking a separate rate to submit a separate-rate
status application.12 Commerce received timely-filed separate-
rate applications from 74 companies, all of which demonstrated
City Jisen Wood Co., Ltd., and Armstrong Wood Products also
requested to be treated as voluntary respondents. Preliminary
Determination at 30,658. Fine Furniture and Lizhong each
submitted unsolicited responses to sections A, C, and D of
Commerce’s original questionnaire. Id. Commerce did not grant
these companies voluntary respondent status. I&D Memo, cmt. 43
at 109 (“[P]ursuant to section 777A(c)(2) of the Act, the
Department exercised its discretion to limit its selection of
respondents to three producers/exporters.”) No party challenged
this decision.
10Commerce found that the PRC-wide entity was non-
responsive and that use of facts available and an adverse
inference (“AFA”) was appropriate. Preliminary Determination at
30,662. Commerce’s practice is to “select, as AFA, the higher
of the (a) Highest margin alleged in the petition, or (b) the
highest calculated rate of any respondent in the investigation.”
Id.
11See Preliminary Determination at 30,660; Final
Determination at 64,321.
12With this application, Commerce “assigns separate rates
in NME cases only if respondents can demonstrate the absence of
both de jure and de facto governmental control over export
activities.” Preliminary Determination at 30,660. The criteria
used to determine the absence of de jure and de facto control
are specified in the Preliminary Determination at 30,661.
Consol. Court No. 12-00007 Page 7
eligibility for separate rate status. Final Determination at
64,321.13
In its Final Determination, Commerce found that
multilayered wood flooring was being dumped in the United
States. Id. at 64,323–24. Commerce found a de minimis dumping
margin for Yuhua and assigned margins of 3.98 percent and 2.63
percent to Layo and Samling, respectively. Id. Commerce
assigned the AFA rate of 58.84 percent (the highest calculated
transaction-specific rate among mandatory respondents) to the
PRC-wide entity. Id. at 64,322. Commerce then assigned the
separate rate respondents a rate of 3.31 percent. Id. This rate
was the simple average of Layo and Samling’s margins. I&D Memo,
cmt. 11 at 51.14
13Of these, twelve companies were wholly foreign-owned, and
therefore eligible for a separate rate. Final Determination at
64,321. These twelve included separate rate respondents Fine
Furniture, Armstrong Wood Products (Kunshan) Co., Ltd., and
Kunshan Yingyi-Nature Wood Industry Co., Ltd., and mandatory
rate respondents Samling, Layo, and Yuhua. Preliminary
Determination at 30,661. Sixty-two companies (some joint
ventures between Chinese and foreign companies, others wholly-
Chinese-owned) demonstrated eligibility for separate rate
status. Id.
14Commerce declined to use the weighted average indicated
in 19 U.S.C § 1673d(c)(5)(A) because doing so would have risked
disclosure of proprietary information from Samling and Layo. Id.
(“Specifically, because there are only two respondents for which
a company-specific margin was calculated in this review, the
Department has calculated a simple average margin to ensure that
(footnote continued)
Consol. Court No. 12-00007 Page 8
Plaintiffs sought judicial review of the Final
Determination pursuant to 19 U.S.C. §§ 1516a(a)(2)(A)(i)(II) and
1516a(a)(2)(B)(i), and Commerce requested a voluntary remand.
The court affirmed in part and remanded in part. The court
affirmed Commerce’s rejection of Respondents’ late filed
surrogate financial statements. The court remanded to Commerce
for reconsideration the surrogate value (“SV”) determinations
for Layo’s plywood input and Samling’s HDF input; remanded for
reconsideration Commerce’s targeted dumping determination, in
light of any changes to the surrogate value determinations and
current standards; and remanded for further explanation or
reconsideration the surrogate value determination for Layo’s
core veneer, Layo’s HDF input, and Layo’s brokerage and handling
(“B&H”) fees to account for the cost of a letter of credit.
Baroque III, ___ C.I.T. at ___, 925 F. Supp. 2d at 1337; see
also Remand Results at 1-2.
II. Commerce’s Redetermination Pursuant to Remand
In its Redetermination, Commerce revised its findings
as required by Baroque III. Commerce (1) valued Layo’s plywood
input with an SV reflecting plywood thicknesses of 6.35 mm and
the total import quantity and value for each company is not
inadvertently revealed.”).
Consol. Court No. 12-00007 Page 9
12.7 mm; (2) valued Samling’s high-density fiberboard (“HDF”)
with Philippine Harmonized Tariff Schedule (“HTS”) category
4411.11; (3) valued Layo’s core veneer input with 2009 data
reported by the Global Trade Atlas for Philippine HTS category
4408.9090.06; (4) provided further explanation for Commerce’s
determination “to continue converting SV for [Layo’s] HDF using
the average density of HDF used by [Layo]”; (5) adjusted Layo’s
“B&H SV to remove letter of credit costs not incurred by
[Layo]”; and, (6) calculated Layo’s and Samling’s dumping
margins “using an average-to-average comparison method, rather
than the average-to-transaction comparison method.” Remand
Results at 2.
As a result of these changes, not only Yuhua, but also
Layo and Samling received dumping margins of zero. Id. at 26.15
15Plaintiffs do not contest Commerce’s six findings or the
rates assigned to mandatory respondents. See Response to United
States’ Remand Redetermination of Zhejiang Layo Wood Industry
Co., Ltd., ECF No. 137 at 1 (“As [Commerce] has recalculated a
de minimis final antidumping duty margin for Layo Wood, the
Court might consider this issue [Layo’s critique of Commerce’s
Redetermination] moot, particularly if the Court ultimately
determines to sustain [Commerce’s] de minimis
redetermination.”); Motion to Strike Section I(B) of Defendant-
Intervenor CAHP’s Remand Reply Comments of Alternative Motion
for Leave to File Comments in Response to CAHP’s Remand Reply
Comments, ECF No. 142. As no party contests these aspects of the
remand redeterminations, Commerce’s findings regarding the SV
determinations for Layo’s plywood input and Samling’s HDF input;
Commerce’s targeted dumping determinations; Commerce’s finding
(footnote continued)
Consol. Court No. 12-00007 Page 10
The changes to Layo and Samling’s SVs resulted in a new
calculated highest transaction-specific rate of 25.62 percent.
Commerce selected this rate as the revised AFA rate for the PRC-
wide entity. Id. at 27. Because all the mandatory rates were
zero, Commerce chose to recalculate the separate rate under 19
U.S.C § 1673d(c)(5)(B)’s “any reasonable method provision,”
taking a simple average of the three mandatory rates of zero and
the AFA rate. This resulted in a separate rate of 6.41 percent,
id., thereby increasing the separate respondents’ rate while
each of the components of that rate decreased.
regarding the SV determination for Layo’s core veneer, Layo’s
HDF input, and Layo’s brokerage and handling fees; and, the
resultant antidumping duty rates for Layo, Samling, and Yuhua
are AFFIRMED.
Plaintiffs’ motion to strike Defendant-Intervenor’s
(CAHP’s) arguments against these findings is therefore DENIED AS
MOOT. See Motion to Strike Section I(B) of Defendant-Intervenor
CAHP’s Remand Reply Comments of Alternative Motion for Leave to
File Comments in Response to CAHP’s Remand Reply Comments, ECF
No. 142; Motion of Zhejiang Layo Wood Industry Co., Ltd. to
Strike Portions of Coalition for Hardwood Parity’s Reply to
Comments on Remand Redetermination, ECF No. 143; Defendant-
Intervenor’s Response to Motion to Strike Portions of Reply to
Comments on Remand Redetermination, ECF No. 147.
Consol. Court No. 12-00007 Page 11
STANDARD OF REVIEW
The court will uphold Commerce’s determinations unless
they are “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.” Universal Camera Corp. v. N.L.R.B., 340 U.S. 474,
477 (1951) (quoting Consol. Edison Co. of New York v. N.L.R.B.,
305 U.S. 197, 229 (1938)). It must be “more than a scintilla,
and must do more than create a suspicion of the existence of the
fact to be established.” N.L.R.B. v. Columbian Enameling &
Stamping Co., 306 U.S. 292, 300 (1939). In making its judgment,
the court “looks to the record as a whole, including any
evidence that fairly detracts from the substantiality of the
evidence,” Gallant Ocean (Thailand) Co., Ltd. v. U.S., 602 F.3d
1319, 1323 (Fed. Cir. 2010) (internal quotation marks and
citation omitted),16 and determines “whether the evidence and
reasonable inferences from the record support [the agency’s]
16See also Universal Camera, 340 U.S. at 488 (“The
substantiality of evidence must take into account whatever in
the record fairly detracts from its weight.”); Nippon Steel
Corp. v. United States, 458 F.3d 1345, 1351 (Fed. Cir. 2006)
(“the substantial evidence standard requires review of the
entire administrative record”).
Consol. Court No. 12-00007 Page 12
finding.” Daewoo Elecs. Co. v. Int’l Union of Elec., Elec.,
Technical, Salaried & Mach. Workers, AFL-CIO, 6 F.3d 1511, 1520
(Fed. Cir. 1993) (internal quotation marks and citation
omitted).17 Commerce must provide a “rational connection between
the facts found and the choice made.” Burlington Truck Lines,
Inc. v. United States, 371 U.S. 156, 168 (1962). It must
“examine the record and articulate a satisfactory explanation
for its action.” Yangzhou Bestpak Gifts & Crafts Co., Ltd. v.
United States, 716 F.3d 1370, 1378 (Fed. Cir. 2013).
In essence, the substantial evidence standard asks
whether Commerce’s determination was reasonable. Nippon Steel,
458 F.3d at 1351 (quoting SSIH Equipment SA v. United States
ITC, 718 F.2d 365, 381 (Fed.Cir.1983) (Nies, J. additional
comments)).18
17While the “possibility of drawing two inconsistent
conclusions from the evidence does not prevent an administrative
agency's finding from being supported by substantial evidence,”
Consolo v. Federal Maritime Comm'n, 383 U.S. 607, 620 (1966),
“[t]here must be at least enough evidence to allow reasonable
minds to differ.” PAM, S.p.A. v. United States, 582 F.3d 1336,
1340 (Fed. Cir. 2009).
18Cf. Fuwei Films (Shandong) Co., Ltd. v. United States,
___ C.I.T. ___, 837 F. Supp. 2d 1347, 1350 (2012)
(“Fundamentally, though, ‘substantial evidence’ is best
understood as a word formula connoting reasonableness review.”).
Consol. Court No. 12-00007 Page 13
DISCUSSION
I. Commerce’s Methodology
A. The statutory provision allows Commerce to use “any
reasonable method.”
Otherwise lacking statutory guidance,19 Commerce
follows 19 U.S.C § 1673d(c)(5) (method for determining the
estimated all-others rate) when calculating the dumping margin
for separate rate respondents. Remand Results at 45.
Section 1673d(c)(5)(A) provides the general rule,20 but
when all of the weighted average dumping margins for
individually investigated exporters and producers are zero, de
minimis, or based entirely on facts available, an exception,
Section 1673d(c)(5)(B), applies and Commerce may use “any
reasonable method” to establish the separate rate.21
Amanda Foods (Vietnam) Ltd. v. United States, ___ C.I.T.
19
___, 714 F. Supp. 2d 1282, 1289 (2010) (“Amanda Foods II”)(“No
statutory or regulatory provision directly addresses the
methodology to be employed when calculating a dumping margin”
for separate rate companies).
The general rule provides that the separate rate is the
20
“estimated weighted average dumping margins established for
exporters and producers individually investigated, excluding any
zero and de minimis margins, and any margins [based entirely on
facts available].” 19 U.S.C. § 1673d(c)(5)(A).
21 19 U.S.C § 1673d(c)(5)(B) provides, in full:
If the estimated weighted average dumping margins
established for all exporters and producers
individually investigated are zero or de minimis
margins, or are [based on AFA], the administering
(footnote continued)
Consol. Court No. 12-00007 Page 14
Here, because on remand the mandatory respondents all
had weight-averaged dumping margins of zero, Commerce calculated
the separate rate margin under the Section 1673d(c)(5)(B) “any
reasonable method” provision. Remand Results at 45. Commerce
took a simple average of the three mandatory respondent zero
rates and the PRC-wide AFA rate. Id.
B. It is not per se unreasonable for Commerce to use a
simple average of zero and AFA rates to calculate the
separate rate.
Section 1673d(c)(5) does not say whether a simple
average of three zero percent mandatory respondent rates and the
PRC-wide AFA rate is reasonable. Because the statute does not
“directly address the precise question at issue,” the court is
authority may use any reasonable method to establish
the estimated all-others rate for exporters and
producers not individually investigated, including
averaging the estimated weighted average dumping
margins determined for the exporters and producers
individually investigated.
The Statement of Administrative Action (the “SAA,” which is
recognized by Congress as an authoritative expression concerning
the interpretation and application of the Tariff Act of 1930
under 19 U.S.C. § 3512(d)), provides that the “expected method”
under the exception is to “weight-average the zero and de
minimis margins and margins determined pursuant to the facts
available,” where “volume data is available,” but “if this
method is not feasible, or if it results in an average that
would not be reasonably reflective of potential dumping margins
for non-investigated exporters or producers, Commerce may use
other reasonable methods.” Uruguay Round Agreements Act, SAA,
HR. doc. No. 103-316 (1994), reprinted in 1994 U.S.C.C.A.N.
4040, 4201.
Consol. Court No. 12-00007 Page 15
left to decide whether Commerce’s interpretation is “a
reasonable construction of the statute.” Bestpak, 716 F.3d at
1377.22
Section 1673d(c)(5)(B)’s breadth and flexibility allow
for a contextual application of the statute.23 It follows that
there is “no legal error” inherent in using a simple average
rather than a weighted average. Bestpak, 716 F.3d at 1378. And,
as both “[Section] 1673d(c)(5)(B) and the SAA explicitly allow
Commerce to factor both de minimis and AFA rates [of
individually investigated exporters and producers] into the
calculation methodology.” Id. Accordingly, as a method “derived
from the relevant statutory language,” id. at 1378, it is not
per se unreasonable for Commerce to use a simple average of de
22Commerce’s interpretation “need not be the only
reasonable interpretation” nor the “most reasonable” nor that
which “the court might have preferred.” Koyo Seiko Co., Ltd. v.
United States, 36 F.3d 1565, 1570 (Fed. Cir. 1994) (citing
Zenith Radio Corp. v. United States, 437 U.S. 443, 450 (1978)).
It needs only to have been reasonable.
23See United States v. Eurodif S. A., 555 U.S. 305, 317-18
(2009) ( “[I]t is well settled that in reading regulatory and
taxation statutes, form should be disregarded for substance and
the emphasis should be on economic reality.” (internal quotation
marks and citation omitted)).
Consol. Court No. 12-00007 Page 16
minimis and AFA rates to calculate the separate rate antidumping
duty margin.24
II. Commerce’s Method is Not Supported by Substantial Evidence
A. Commerce’s chosen method must be reasonable as applied
in order to be supported by substantial evidence.
While Commerce’s chosen method may not be per se
unreasonable, it must still be reasonable as applied.25 In order
for an antidumping duty determination to be reasonable as
applied, Commerce must articulate a “rational connection between
the facts found and the choice made.” Burlington Truck Lines,
371 U.S. at 168. Commerce must “examine the record and
articulate a satisfactory explanation for its action.” Bestpak,
Cf. Bestpak, 716 F.3d at 1378 (“[T]his court finds that
24
the methodology used by Commerce — although somewhat
questionable — meets the statute's lenient standard of ‘any
reasonable method.’”).
See Thai Pineapple Canning Indus. Corp. v. United States,
25
273 F.3d 1077, 1085 (Fed. Cir. 2001) (“While various
methodologies are permitted by the statute, it is possible for
the application of a particular methodology to be unreasonable
in a given case when a more accurate methodology is available
and has been used in similar cases.”). Cf. Bestpak, 716 F.3d at
1378 (“Although Commerce may be permitted to use a simple
average methodology to calculate the separate rate, the
circumstances of this case renders a simple average of a de
minimis and AFA China-wide rate unreasonable as applied.”);
MacLean-Fogg Co. v. United States, ___ C.I.T. ___, 885 F. Supp.
2d 1337, 1339 (2012) (“Commerce was permitted to use the AFA
rate in calculating the all-others rate, provided it did so in a
reasonable manner.”).
Consol. Court No. 12-00007 Page 17
716 F.3d at 1378.26 At the very least, it must “cogently explain
why it has exercised its discretion in a given manner.” Motor
Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins.
Co., 463 U.S. 29, 48 (1983).27 A determination cannot be
considered reasonable if the agency has “entirely failed to
26 See also In re Sang Su Lee, 277 F.3d 1338, 1342 (Fed.
Cir. 2002) (The agency “must set forth its findings and the
grounds thereof, as supported by the agency record, and explain
its application of the law to the found facts.”).
27This language comes from discussion of the arbitrary and
capricious standard. Under the arbitrary and capricious
standard, the court seeks to determine whether an agency’s
decision was “based on a consideration of the relevant factors
and whether there has been a clear error of judgment.” Citizens
to Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971).
Like the substantial evidence standard, it requires that the
agency articulate a “rational connection between the facts found
and the choice made.” Bowman Transp., Inc. v. Arkansas-Best
Freight Sys., Inc., 419 U.S. 281, 285 (1974) (quoting Burlington
Truck Lines, 371 U.S. at 168). At the same time, arbitrary and
capricious as a standard “communicates a lesser review than
substantial evidence: suggesting a restrained critical mood or a
high tolerance for the risk of error.” Charles Koch, 3 Admin. L.
& Prac. § 9:25 (3d ed.); see also Abbott Labs. v. Gardner, 387
U.S. 136, 143 (1967) abrogated on other grounds by Califano v.
Sanders, 430 U.S. 99 (1977) (the substantial evidence test
“afford[s] a considerably more generous judicial review than the
‘arbitrary and capricious’ test”).
Accordingly, arbitrary and capricious review considers and
requires much of the same factual support and reasoning as
substantial evidence, but with a less searching review. Cf. In
re Sang Su Lee, 277 F.3d at 1342. It is therefore pertinent to
a substantial evidence review as the ‘very least’ an agency must
do for its determination to be rooted in fact and considered
reasonable.
Consol. Court No. 12-00007 Page 18
consider an important aspect of the problem” before it. Id. at
43.
When the problem is dumping, any method Commerce
employs must be “based on the best available information and
establish[] antidumping margins as accurately as possible.”
Shakeproof Assembly Components, Div. of Ill. Tool Works, Inc. v.
United States, 268 F.3d 1376, 1382 (Fed. Cir. 2001).28 While 19
U.S.C. § 1673d(c)(5)(B) allows Commerce to use “any reasonable
method,” it must be in service of calculating a margin
“reasonably reflective of potential dumping margins for non-
investigated exporters or producers.” 1994 U.S.C.C.A.N. 4040,
4201.29
See also Bestpak, 716 F.3d at 1379 (“An overriding
28
purpose of Commerce’s administration of antidumping laws is to
calculate dumping margins as accurately as possible.”); Parkdale
Int'l v. United States, 475 F.3d 1375, 1380 (Fed. Cir. 2007);
SNR Roulements v. United States, 402 F.3d 1358, 1363
(Fed.Cir.2005)( “Antidumping laws intend to calculate
antidumping duties on a fair and equitable basis.”); Rhone
Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed. Cir.
1990); Amanda Foods II, 714 F. Supp. 2d at 1292-93; U.S. Steel
Corp. v. United States, ___ C.I.T. ___, 712 F. Supp. 2d 1330,
1354-55 (2010); Yantai Oriental Juice Co. v. United States, 27
C.I.T. 477, 488 (2003).
Cf. Bestpak, 716 F.3d at 1380 (“[R]ate determinations for
29
nonmandatory, cooperating separate rate respondents must also
bear some relationship to their actual dumping margins.”);
Changzhou Wujin Fine Chem. Factory Co., Ltd. v. United States,
701 F.3d 1367, 1379 (Fed. Cir. 2012) (“the requirement that the
method be ‘reasonable’ imposes a duty on Commerce to select a
method appropriate for the circumstances.”); F.lli De Cecco Di
(footnote continued)
Consol. Court No. 12-00007 Page 19
Because judicial review of an administrative decision
must be made on the grounds relied on by the agency,30 if
Commerce has not articulated its reasoning sufficiently, the
court will require “such additional explanation of the reasons
for the agency decision as may prove necessary.” Camp v. Pitts,
411 U.S. 138, 142-43 (1973).
B. Commerce failed to articulate a rational connection
between facts found and choices made.
In its Redetermination, Commerce did not consider
whether use of an AFA rate, let alone use of the selected
transaction-specific margin, was merited in its separate rates
calculation. Nor did Commerce consider its responsibility to
determine a separate rate that bears some relationship to
respondents’ actual rates. Rather, Commerce explains that its
use of the AFA rate in the separate rate calculation is
Filippo Fara S. Martino S.p.A. v. United States, 216 F.3d 1027,
1032 (Fed. Cir. 2000) (“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.”).
30See Sec. & Exch. Comm'n v. Chenery Corp., 318 U.S. 80,
94-95 (1943) (“an administrative order cannot be upheld unless
the grounds upon which the agency acted in exercising its powers
were those upon which its action can be sustained”); Bowman
Transp., 419 U.S. at 285-86 (The court may not supply the
reasoned basis, but “will uphold a decision of less than ideal
clarity if the agency's path may reasonably be
discerned.”)(internal citations omitted).
Consol. Court No. 12-00007 Page 20
reasonable because Commerce needed to account for the non-
cooperating, PRC-wide companies in the investigation. Remand
Results at 46. Because some companies refused to respond to
Commerce’s requests for Q&V data, Commerce correctly notes that
it lacks a complete data set. Commerce suggests that because
any of the non-cooperating companies could or “may have been
selected” as a mandatory respondent, Commerce must account for
them in some way in the separate rate calculation. Commerce
suggests that it cannot be sure that the mandatory respondents
are reflective of the separate rate respondents. Id.31
While Commerce may draw reasonable inferences from the
failure of uncooperative respondents to provide evidence of the
size, quantity, and value of their sales, doing so does not
provide a rationale for the redetermination made here. The mere
presence of non-cooperating parties “fails to justify
[Commerce’s] choice of dumping margin for the cooperative
uninvestigated respondents.” Amanda Foods (Vietnam) Ltd. v.
United States, 33 C.I.T. 1407, 647 F. Supp. 2d 1368, 1381 (2009)
(“Amanda Foods I”).
31See also Defendant’s Response to Comments Upon the Remand
Redetermination, ECF No. 141; Defendant-Intervenor’s Reply
Comments Regarding Department of Commerce Final Results of
Redetermination Pursuant to Court Remand, ECF No. 140.
Consol. Court No. 12-00007 Page 21
Application of the AFA rate to non-cooperating parties
is a rebuttable presumption. See Rhone Poulenc, 899 F.2d at
1190-91. A rebuttable presumption is not evidence. New York
Life Ins. Co. v. Gamer, 303 U.S. 161, 170 (1938).32 Even if it
were, the fact that the AFA rate applies to other companies is
not evidence of dumping on the part of the separate rate
companies. Amanda Foods I, 647 F. Supp. 2d at 1381. Commerce
cannot use the AFA rate in calculating the separate rate for
cooperating parties without explanation. See Changzhou Wujin
Fine Chem. Factory, 701 F.3d at 1379.
Moreover, Commerce failed to make any connection
between the transaction-specific margin of 25.62 percent and
separate rate respondents’ pricing practices. Commerce did not
provide a rationale for how its use of this margin results in a
reasonably accurate separate rate. While Commerce’s concern
about incomplete Q&V data provides an explanation for its
decision to use a method other than the expected average of
individually investigated rates, that rationale has no
32See also Routen v. W., 142 F.3d 1434, 1439 (Fed. Cir.
1998) (“This court has never treated a presumption as any form
of evidence.”); Amanda Foods II, 714 F. Supp. 2d at 1295 (“a
rebuttable presumption with respect to the margins for some
companies may not by itself serve as substantial evidence
supporting the accuracy of margins assigned to wholly unrelated
companies.”).
Consol. Court No. 12-00007 Page 22
relationship to the use of the 25.62 percent transaction-
specific margin. Why, for example, would it not have been
appropriate to include a different or multiple transaction-
specific margins in order to get a more accurate rate?
Specifically, why this margin? How has Commerce done other than
“cherry-picked [a] single data point” and gratuitously added it
to the separate rate calculation?33 Why, on the factual record,
is this a reasonable way for Commerce to have exercised its
discretion? The Redetermination contains no consideration of
this aspect of the problem.
It is, of course, correct that, to calculate the
separate rate in the Redetermination, Commerce has moved from (a
modified application of) the general rule of 19 U.S.C §
1673d(c)(5)(A) to the exception in 19 U.S.C § 1673d(c)(5)(B),
reflecting changes in the mandatory rates. But Commerce has
failed to consider its responsibility to determine rates that
bear some relationship to respondents’ actual rates, to their
economic reality, rendering its chosen method unreasonable.
33See Changzhou Wujin Fine Chem. Factory, 701 F.3d at 1379
(finding Commerce had “cherry-picked the single data point” (a
transaction-specific margin) for the AFA, that “would have the
most adverse effect possible on cooperating voluntary
respondents,” when added to the separate rate calculation, “in a
situation where there was no need or justification for
deterrence”).
Consol. Court No. 12-00007 Page 23
Whether under the general rule or the exception, the mandatory
respondents are meant to be representative of the industry, and
therefore of the separate rate respondents. See 19 U.S.C. §
1677f-1(c)(2).34 Even under the exception, which allows for “any
reasonable method,” the expected method is an average of the
“estimated weighted average dumping margins determined for the
exporters and producers individually investigated.” 19 U.S.C. §
1673d(c)(5)(B).35 Commerce has exercised its discretion to not
34The statute provides that the mandatory respondents
should be “a sample of exporters, producers, or types of
products that is statistically valid based on the information
available to the administering authority at the time of
selection,” or “exporters and producers accounting for the
largest volume of the subject merchandise from the exporting
country that can be reasonably examined.” See 19 U.S.C. §§
1677f-1(c)(2)(A)-(B). The corresponding explanation from the
SAA provides that “Commerce will employ a sampling methodology
designed to give representative results based on the facts known
at the time the sampling method is designed. This important
qualification recognizes that Commerce may not have the type of
information needed to select the most representative sample at
the early stages of an investigation or review when it must
decide on a sampling technique.” 1994 U.S.C.C.A.N. 4040, 4200-01
(emphasis in original).
35 The Amanda Foods court found that:
When a statutory provision specifically lists
“averaging the [zero and de minimis] estimated
weighted average dumping margins determined for the
exporters and producers individually investigated” as
the sole provided example of “a reasonable method to
establish the estimated all-others rate” when all
mandatory respondents’ margins are zero or de minimis,
19 U.S.C. § 1673d(c)(5)(B), it is impermissible to
interpret this provision as expressing a preference
(footnote continued)
Consol. Court No. 12-00007 Page 24
use the expected method in favor of a method that takes into
account the absence of data from the PRC-wide entity. While the
use of the AFA rate in the calculation of the separate rate may
be reasonable in some circumstances (so long as supported by
substantial evidence), here the seemingly gratuitous inclusion
of this transaction-specific rate in the separate rate
calculation, to increase the resultant rate, is incongruous.
Upon remand, all relevant rates — mandatory, transaction-
specific and AFA — decreased, suggesting a decreased likelihood
of dumping.36 But Commerce made the choice to use a method that
increased the separate rate both from the zero that would have
resulted from the expected method and from the 3.31 percent in
against the use of such methodology in such
situations.
Amanda Foods II, 714 F. Supp. 2d at 1291.
36Cf. Yantai Oriental Juice, 27 C.I.T. at 487 (“Given these
facts it appears that Commerce strained to reach its result.
This is particularly puzzling given that in reaching its result
Commerce abandoned the methodology used in the Final
Determination (i.e., weight-averaging the estimated dumping
margins of the Fully–Investigated Respondents) even though that
method is specifically provided for in the statutory subsection
it purported to follow.”); Amanda Foods I, 647 F. Supp. 2d at
1381 (“Commerce, however, has not provided us with sufficient
evidence on the record which could justify ignoring the evidence
in favor of assigning a de minimis rate to Plaintiffs and which
would support as reasonable the alternative rate chosen. Nor has
Commerce articulated a clear justification for choosing the
dumping margins that it assigned.”).
Consol. Court No. 12-00007 Page 25
Commerce’s original determination. Commerce did not explain why
it made this choice or how the result was in any way reasonably
reflective of Plaintiffs’ economic reality.37
37Commerce would use Yangzhou Bestpak Gifts & Crafts Co.,
Ltd. v. United States for the proposition that its method is
reasonable because it is lawful to use a simple average of zero
and AFA rates to calculate the separate rate. Remand Results at
47. But while the Bestpak court held a simple average of de
minimis and AFA rates was not per se unreasonable, it also found
the method unreasonable in application. Bestpak, 716 F.3d at
1380. Commerce faces the same problem here.
Commerce would distinguish the instant case from Bestpak on
two grounds: First, here the AFA rate is better grounded in
economic reality. While the Bestpak AFA was based on a petition
rate, the AFA rate here is the “highest transaction-specific
margin calculated for a mandatory respondent,” and therefore
“reflects actual economic activity.” Remand Result at 48.
Second, the instant administrative record is fuller than the
Bestpak record. Id. at 48-49. Commerce would argue that these
show that the separate rate here is grounded in economic
reality.
But Commerce misunderstands Bestpak. The Bestpak court did
not require that the separate rate be grounded in economic
reality generally, or to the factual record generally, but
rather that it must bear some relationship to respondents’
economic reality and factual situation. Bestpak, 716 F.3d at
1380 (“[R]ate determinations for nonmandatory, cooperating
respondents must . . . bear some relationship to their actual
dumping margins.”). Commerce has not made this connection here.
Commerce has not shown how the method chosen reflects or has
some reasonable relationship to the economic reality of separate
rate companies. Commerce’s method is therefore still
unreasonable in application.
Commerce’s use here of its reasoning in Lined Paper
Products from India, Issues & Decision Mem., A-533-843, POR
Sept. 1, 2010 – Aug. 31, 2011 (Apr. 9, 2013) (adopted in 78 Fed.
Reg. 22,232 (Dep’t of Commerce Apr. 15, 2013)) (final results of
antidumping duty administrative review, 2010-11 cmt. 5 at 14,
(footnote continued)
Consol. Court No. 12-00007 Page 26
While it is true that under substantial evidence the
court “do[es] not make the determination,” it “merely vet[s] the
determination,” Nippon Steel, 458 F.3d at 1352, “that the scope
of such review is narrowly circumscribed is beside the point,”
Chenery, 318 US at 94, where, as here, Commerce’s
redetermination fails to articulate the required rational
connection between the facts found and the rate chosen. It
therefore fails substantial evidence review.
CONCLUSION
It is lawful for Commerce to draw reasonable
inferences from uncooperative companies’ failure to submit
evidence of the size, quantity, and value of their sales, and to
use a method reasonably derived from the relevant statutory
language. But substantial evidence asks a more specific
question, and requires a more specific explanation from
Commerce.38 At issue is whether Commerce’s determination was
fails here for the same reason: those arguments do not touch on
the separate rate respondents’ economic reality.
38Cf. In re Sang Su Lee, 277 F.3d at 1345 (“The board
cannot rely on conclusory statements when dealing with
particular combinations of prior art and specific claims, but
must set forth the rationale on which it relies.”).
Consol. Court No. 12-00007 Page 27
based on a reasonable reading of the record in context. Without
further explanation, the court cannot consider it so.39
Accordingly, this matter is affirmed in part and
remanded in part to Commerce for further consideration in
accordance with this opinion. Commerce shall have until May 8,
2014 to complete and file its remand redetermination. Plaintiffs
shall have until May 22, 2014 to file comments. Defendant and
Defendant-Intervenors shall have until June 6, 3014 to file any
reply.
IT IS SO ORDERED.
/s/ Donald C. Pogue _
Donald C. Pogue, Chief Judge
Dated: March 31, 2014
New York, NY
39 Cf. Changzhou Wujin Fine Chem. Factory, 701 F.3d at 1379.