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


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  •                           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