Gourmet Equipment (Taiwan) Corp. v. United States , 24 Ct. Int'l Trade 572 ( 2000 )

Slip Op. 00-78
UNITED STATES COURT OF INTERNATIONAL TRADE
:
GOURMET EQUIPMENT (TAIWAN) CORP., :
:
Plaintiff, : Court No. 99-05-00262
:
v. :
: Public Version
THE UNITED STATES, :
:
Defendant, :
:
and :
:
CONSOLIDATED INTERNATIONAL :
AUTOMOTIVE, INC., :
:
Defendant-Intervenor. :
________________________________ :
[Antidumping determination affirmed.]
Dated: July 6, 2000
Ablondi, Foster, Sobin & Davidow, P.C. (James Taylor,
Jr., Mitchell W. Dale, and Sarah M. Nappi) for plaintiff.
David W. Ogden, Acting Assistant Attorney General, David
M. Cohen, Director, Commercial Litigation Branch, Civil
Division, United States Department of Justice (Michele D.
Lynch), Robert E. Nielsen, Office of the Chief Counsel for
Import Administration, United States Department of Commerce,
of counsel, for defendant.
Nalls & Associates (Charles H. Nalls and Michael J.
Caridi) for defendant-intervenor.
OPINION
RESTANI, Judge: This matter is before the court on a
Motion for Judgment on the Agency Record, pursuant to USCIT
Court No. 99-05-00262 Page 2
Rule 56.2, by Gourmet Equipment (Taiwan) Corp. (“Gourmet”).
The determination under review is Chrome-Plated Lug Nuts from
Taiwan, 64 Fed. Reg. 17,314 (Dep’t Commerce 1999) (final
results of antidumping duty admin. rev.) [hereinafter “Final
Results”]. Gourmet argues that the United States Department
of Commerce (“Commerce” or “the Department”) erred in refusing
to conduct a verification of Gourmet’s reported cost and sales
data, despite Gourmet’s alleged independent substantiation of
the information submitted to Commerce. Gourmet also argues
that Commerce erred in applying total adverse facts available
to determine Gourmet’s dumping margin on the ground that the
information provided by Gourmet in its questionnaire responses
was unverifiable pursuant to both 19 U.S.C. §§ 1677e(a)(2)(D)
and 1677e(b) (1994).
Jurisdiction and Standard of Review
The court has jurisdiction pursuant to 28 U.S.C. §
1581(c) (1994). The court must uphold Commerce’s final
determination unless it is “unsupported by substantial
evidence on the record or otherwise not in accordance with
law.” 19 U.S.C. § 1516a(b)(1)(B) (1994).
Background
On October 30, 1997, Commerce published a notice of
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initiation of the sixth administrative review of an
antidumping duty order on chrome-plated lug nuts (“CPLN”) from
Taiwan. See Initiation of Antidumping and Countervailing Duty
Administrative Reviews, 62 Fed. Reg. 58,705 (Dep’t Commerce
1997). The period of review (“POR”) was September 1, 1996
through August 31, 1997. Id. Commerce sent questionnaires to
eighteen companies, including Gourmet. Chrome-Plated Lug Nuts
from Taiwan, 63 Fed. Reg. 53,875, 53,875 (Dep’t Commerce 1998)
(preliminary results of antidumping duty admin. rev.)
[hereinafter “Preliminary Results”]. Questionnaires sent to
seven of the companies were returned as undeliverable. Id.These firms received the “all others” rate of 6.93 percent,
which was established in the less than fair value (“LTFV”)
investigation. Id. Those firms that did not respond to the
questionnaire, or whose submissions were substantially
deficient, were given an adverse margin of 10.67 percent, the
highest rate from the LTFV investigation. Id. at 53,875-76.
Gourmet provided a timely response to Commerce’s
questionnaire on December 23, 1997. Questionnaire Response
(Dec. 23, 1997), P.R. Doc. 13, Pl.’s App., Tab 8. Commerce
sent Gourmet a supplemental questionnaire requesting audited
financial statements and additional information in order to
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reconcile the costs and sales reported in Gourmet’s
questionnaire response with its audited financial statements.
Supplemental Questionnaire (Feb. 11, 1998), at 1, P.R. Doc.
17, Pl.’s App., Tab 9, at 3. Gourmet responded that its
financial statements for the POR had not been audited, and
that although the statements provided to the Taiwanese
government as tax returns were prepared with an outside
accountant, there was no independent auditor’s statement and
at that point Gourmet could not submit one. Supplemental
Questionnaire Response (Mar. 9, 1998), at 1, P.R. Doc. 24,
Pl.’s App., Tab 10, at 8. Commerce perceived a discrepancy in
Gourmet’s responses and asked Gourmet to explain why it had
audited accounting records in previous reviews and not in the
sixth review. Supplemental Questionnaire (Mar. 31, 1998), at
1, P.R. Doc. 28, Pl.’s App., Tab 11, at 3. The Department
also asked Gourmet to explain why a verification in this POR
would lead to a different result from previous reviews. Id.Gourmet explained that the confusion arose from an translation
error, confusing the distinction in English between an auditor
and an accountant. Supplemental Questionnaire Response (Apr.
3, 1998), at 2, P.R. Doc. 29, Pl.’s App., Tab 12, at 2.
Although an accountant prepared Gourmet’s tax returns, Gourmet
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did not conduct an audit of its financial statements. Id.Gourmet stated that such an audit was not required of it under
Taiwanese law. Id. Because its tax returns were prepared
with the assistance of an outside accountant, Gourmet had
previously incorrectly stated that its financial statements
were audited on a yearly basis. Id. Gourmet asserted that a
verification in this review would differ from past reviews
because Gourmet had hired the accounting firm of Diwan, Ernst
& Young (“DE&Y”) to conduct a special audit of its accounting
records, and that DE&Y’s findings would constitute independent
substantiation of the data Gourmet had submitted. Id. at 4;
see Letter from DE&Y to Gourmet (Mar. 17, 1998), at Ex. S-1,
C.R. Doc. 4, P.R. Doc 26, Pl.’s App., Tab 16, at 6-7; Letter
from DE&Y to Gourmet (May 18, 1998), at Ex. 1, C.R. Doc. 9,
P.R. Doc. 42, Pl.’s App., Tab 18, at 7. Despite these
responses by Gourmet to Commerce’s questionnaires and the work
performed by DE&Y, Commerce determined that it could not
reconcile the data Gourmet submitted in its questionnaire
responses to its financial statements.1 Final Results, 64
1 Gourmet has acknowledged that it [ ]. Gourmet
admits that [ ]. Gourmet admits that [ ]. Futtner Memo.
(Oct. 7, 1998), at 1, C.R. Doc. 12, Pl.’s App., Tab 20, at 1.
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Fed. Reg. at 17,316. Commerce determined that Gourmet’s
responses were unverifiable and applied the highest available
rate of 10.67 percent to Gourmet based on total adverse facts
available. Id. at 17,316-17.
Discussion
I. Verification
On the basis of information on the record, Commerce
determined that Gourmet’s accounting system and the
information submitted in its questionnaire responses were
unreliable. Final Results, 64 Fed. Reg. at 17,316. Commerce
further determined that because Gourmet’s submissions were not
reconcilable to its financial statements, the information
submitted was unverifiable and applied facts otherwise
available. Id. Gourmet now challenges this determination.
Commerce’s statutory mandate is to calculate antidumping
duty margins as accurately as possible. Rubberflex SDN. BHD.
v. United States, 59 F. Supp.2d 1338, 1346 (Ct. Int’l Trade
1999) (citation omitted). In order to satisfy this
requirement, it is essential that a respondent provide
Commerce with accurate, credible, and verifiable information.
Where Commerce determines that information submitted in a
questionnaire response is unverifiable, 19 U.S.C.
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§1677e(a)(2)(D)2 authorizes Commerce, subject to 19 U.S.C.
§1677m(d) (1994)3, to substitute facts otherwise available.
The use of facts available provides the “only incentive to
foreign exporters and producers to respond to Commerce
questionnaires” in antidumping and countervailing duty
proceedings. Statement of Administrative Action, accompanying
H.R. Rep. No. 103-826(I), at 868, reprinted in 1994
U.S.C.C.A.N. 3773, 4198 (“SAA”).4
2 Section 1677e(a)(2) provides in relevant part:
If . . . an interested party or any other person . . .
(D) provides such information but the information cannot
be verified as provided in section 1677m(i) of this
title, the administering authority and the Commission
shall, subject to section 1677m(d) of this title, use the
facts otherwise available in reaching the applicable
determination under this subtitle.
3 Section 1677m(d) requires that Commerce provide
respondents with an opportunity to remedy any submissions
which Commerce determines to be deficient. See 19 U.S.C. §
1677m(d); Ta Chen Stainless Steel Pipe, Ltd. v. United States,
No. 97-08-01344, 1999 WL 1001194, at *12 (Ct. Int’l Trade Oct.
28, 1999). Commerce provided Gourmet with repeated
opportunities to establish that the information submitted was
verifiable.
4 The Statement of Administrative Action represents
“an authoritative expression by the Administration concerning
its views regarding the interpretation and application of the
Uruguay Round Agreements...The Administration understands that
it is the expectation of the Congress that future
(continued...)
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Gourmet argues that Commerce erred in determining that
its questionnaire responses were unverifiable, based solely on
the fact that Gourmet did not provide Commerce with audited
financial statements. Gourmet insists that Commerce could
have conducted a verification of its bank statements and tax
returns, which it had allegedly independently substantiated,
in place of audited financial statements.5 Gourmet insists
that Commerce’s practice is to accept sources other than
audited financial statements. In Collated Roofing Nails from
Taiwan, 62 Fed. Reg. 51,427 (Dep’t Commerce 1997) (notice of
final determination of sales at LTFV) [hereinafter “Collated
Roofing Nails”] Commerce stated that when a respondent does
not have audited financial statements, the Department “may use
the company’s tax return as an independent source to
substantiate the company’s questionnaire responses.” 62 Fed.
Reg. at 51,427. The independent source, however, must be
proven reliable and useable. In Collated Roofing Nails,
4(...continued)
Administrations will observe and apply the interpretations and
commitments set out in this statement.” SAA at 656, 1994
U.S.C.C.A.N. at 4040.
5 Apparently, if Gourmet had provided audited
financial statements, [ ]. See Gov’t Br. at 28; Pl.’s Reply
Br. at 12.
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Commerce was unable to reconcile one respondent’s unaudited
financial statement to its tax return, and therefore
determined that the unaudited financial statements were
unreliable and unusable, and therefore unverifiable. Id. at
51,427. For another respondent, the Department was able to
reconcile unaudited financial statements with a tax return and
determined that the information in the financial statements
was reliable. Id. at 51,437. The Department had also stated
in Fresh Cut Flowers from Mexico, 60 Fed. Reg. 49,569, 49,570
(Dep’t Commerce 1995) (final results of antidumping duty
admin. rev.) that respondents may be permitted to submit tax
returns as independent substantiation of their questionnaire
responses in the absence of audited financial statements. In
that determination, Commerce found that without an explanation
reconciling the data in respondent’s tax returns with its
financial statements, the tax returns could not be used to
independently substantiate the reported sales and costs,
rendering the entire questionnaire responses unusable. Id.The Department explained its practice in this review, stating
that:
The Department does not reject questionnaire responses
simply because the respondent does not have an audited
financial statement. In such situations, the Department
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looks to other financial records, prepared for purposes
independent of the antidumping proceeding, such as tax
statements, which attest to the veracity of a
respondent’s accounting system and information submitted
to the Department.
Final Results, 64 Fed. Reg. at 17,316 (emphasis added).
Gourmet contends that it did independently substantiate
the information in its questionnaire responses by hiring the
outside accounting firm, DE&Y, to conduct a special audit of
its financial system. Gourmet submits that DE&Y’s findings
constitute acceptable independent substantiation of the data
Gourmet submitted. See Supplemental Questionnaire Resp.,
(Apr. 3, 1998), at 4, P.R. Doc. 29, Def.’s App., Tab 6, at 4.
DE&Y’s “special audit,” however, does not provide
substantiation independent of the antidumping proceedings,
which is what Commerce is seeking. Under the facts of this
case, it was reasonable for Commerce to find that the audit
done solely for the purposes of the antidumping proceeding was
not sufficiently independent for the Department to be
confident that it would be reconciling the cost and sales
data.6 Here, DE&Y qualified its review of Gourmet’s records
by stating that, “We did not carry out an audit of Gourmet’s
6 [ ].
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management accounts or general ledger in accordance with
generally accepted auditing standards.” Letter from DE&Y to
Gourmet (Mar. 17, 1998), Pl.’s App., Tab 16, at 6.
Furthermore, DE&Y stated that “[i]n conducting our work we
have relied on the Corporation’s management accounts, general
ledger and supporting documentation obtained from Gourmet. We
therefore make no representation regarding the accuracy or
completeness of such information.” Id. As Commerce
suggests, DE&Y simply took the information Gourmet provided it
at face value.7
Commerce determined that Gourmet failed to demonstrate
that the information which it placed on the record accurately
reflected all of the relevant sales made by the company during
the period of review and its cost of production. Final
Results, 64 Fed. Reg. at 17,316. As DE&Y admitted, the work
it performed did not constitute an audit of Gourmet’s
accounting system. Letter from DE&Y to Gourmet, at Ex. S-1,
Pl.’s App., Tab 16, at 6. Its work was not itself
substantiation prepared for purposes other than antidumping
purposes nor was it an analysis of a reliable accounting
7 Having already determined that Gourmet’s financial
system [ ].
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system or records prepared for such purposes.8 Commerce’s
determination that the alleged independent substantiation by
DE&Y fell short of rendering Gourmet’s questionnaire responses
verifiable is reasonable and is supported by substantial
evidence.9 Cf. Certain Preserved Mushrooms from Chile, 63
Fed. Reg. 56,613, 56,616-17 (Dep’t Commerce 1998) (notice of
final determination of sales at LTFV) (where vast majority of
respondents information was accurate and verifiable, and
discrepancies were “specific and quantifiable,” Department was
able to reconcile reported costs to financial statements). In
this case, there was no substantiation of Gourmet’s data
independent from the antidumping investigation. Therefore,
Commerce’s resort to facts otherwise available pursuant to 19
U.S.C. § 1677e(a)(2)(D) was in accordance with law.
8 In two book situations, moreover, it seems that in
Commerce’s view at least one set must be prepared for an
independent purpose and be found reliable in order for the
information to be of any use to Commerce.
9 Gourmet complains that all that would have satisfied
Commerce was a complete independent audit, and that this is
beyond the requirements of the statute. See, e.g., 19 U.S.C.
§ 1677b(f)(1)(A) (1994) (costs to be calculated on the basis
of records kept by exporter or producer if records are kept in
accordance with generally accepted accounting principles of
exporting country). In light of [ ].
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II. Application of Total Adverse Facts Available
Gourmet also argues that Commerce’s resort to adverse
facts available is not supported by substantial evidence on
the record and is not otherwise in accordance with law because
Commerce failed to adhere to the statutory standard for
applying adverse facts available. Following a determination
that the use of facts available is authorized pursuant to 19
U.S.C. §1677e(a), subsection (b)10 further permits Commerce to
apply an adverse inference if Commerce makes the additional
finding that “an interested party has failed to cooperate by
10 Section 1677e(b) provides:
If the administering authority or the Commission (as
the case may be) 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 or the Commission, the administering authority or
the Commission (as the case may be), 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 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 or determination under section 1675b of this title, or
(4) any other information placed on the record.
19 U.S.C. §1677e(b).
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not acting to the best of its ability to comply with a request
for information.” 19 U.S.C. §1677e(b); see also Borden, Inc.
v. United States, 4 F. Supp.2d 1221, 1246 (Ct. Int’l Trade
1998). In making its determination that a respondent has been
uncooperative, Commerce is to consider the extent to which a
party may benefit from its own lack of cooperation. SAA at
870, 1994 U.S.C.C.A.N. at 4199. Commerce is required to
articulate the reasons for its conclusion that a party failed
to act to the best of its ability prior to applying adverse
facts available. Mannesmannrohren-Werke AG v. United States,
77 F. Supp.2d 1302, 1313-14 (Ct. Int’l Trade 1999). Commerce
cannot simply repeat its facts available finding under 19
U.S.C. §1677e(a) to support its use of adverse facts available
under 19 U.S.C. §1677e(b). Ferro Union, Inc. v. United
States, 44 F. Supp.2d 1310, 1329 (Ct. Int’l Trade 1999).
In this case Commerce stated that the basis for the
adverse finding was Gourmet’s continued failure to provide
verifiable data. Final Results, 64 Fed. Reg. at 17,316.
Commerce stated:
We believe that Gourmet has had sufficient notice of the
Department’s requirements for verifiable submissions and
ample opportunity to provide information that is
amendable to verification. Yet Gourmet has continued to
provide unverifiable data. Therefore, we determine that
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Gourmet has failed to cooperate by not acting to the best
of its ability, and thus we are using an adverse
inference in our application of facts available.
Id. Unlike Borden, Commerce determined in this case that
Gourmet had the ability to produce verifiable information and
failed to do so. Id. (“In this case, Gourmet possesses
relevant . . . financial statements.”) That reasoning
supports the Department’s conclusion that Gourmet failed to
comply to the best of its ability.
Gourmet insists that a finding that it failed to comply
to the best of its ability because of its continued failure to
provide verifiable information relies on an analysis of
Gourmet’s behavior in past reviews, which is not generally
permitted. See E.I. DuPont de Nemours & Co. v. United States,
No. 96-11-02509, 1998 WL 42598, at *11 (Ct. Int’l Trade Jan.
29, 1998) (“Commerce’s longstanding practice, upheld by this
court, is to treat each segment of an antidumping proceeding,
including the antidumping investigation and the administrative
reviews that may follow, as independent proceedings with
separate records and which lead to independent
determinations.”) (citation omitted). When Commerce is
judging a party’s ability to comply in the context of an
administrative review, as opposed to an initial investigation,
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it is not inappropriate for Commerce to consider that party’s
past behavior.11 Past participation may be relevant to notice,
knowledge and reliance issues. This does not violate the
independent nature of the proceedings, rather in the context
of this case it acknowledges that Gourmet had participated in
the investigation and several reviews and was familiar with
Commerce’s requirements.12
Normally Commerce may not require a party to change its
accounting system or provide information which it simply does
not have. See Borden, 4 F. Supp.2d at 1246-47. Commerce may,
however, require a party to provide financial statements which
are usable or suffer the consequences. Under appropriate
factual circumstances, the failure to provide such statements
can justifiably lead to the conclusion that a party failed to
11 The test of Gourmet’s ability to comply might have
rendered different results if Gourmet had made these efforts
in an original investigation. In that case, its ability to
comply would likely be measured against current capacity to
comply without judging the past behavior which rendered it
unable to comply. This is not the situation before the court.
12 It was within Gourmet’s ability to provide relevant
financial information. Final Results, 64 Fed. Reg. at 17,316.
Apparently, the only reason it did not provide audited
statements was because [ ].
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comply to the best of its ability.13 Gourmet argues, however,
that it did not have sufficient notice of what type of
information would satisfy Commerce, and that Commerce should
have told Gourmet from the outset that in this case only
audited financial statements would suffice, so that Gourmet
could avoid the expense of hiring DE&Y. Commerce’s initial
questionnaire asked for audited and unaudited financial
statements. See Questionnaire Response (Dec. 23, 1997), at A-
12, P.R. Doc. 13, Def.’s App., Tab 1, at 2. The supplemental
questionnaire further stated: “Unless there are compelling
reasons not to do so, it is generally the Department’s
practice to reconcile questionnaire responses to audited
financial statements.” Supplemental Questionnaire (Feb. 11,
1998) at 1, P.R. Doc. 17, Pl.’s App., Tab 9, at 3 (emphasis
added). It was in response to this questionnaire that Gourmet
informed Commerce of the special audit being performed by
DE&Y. Response to Supplemental Questionnaire (Mar. 9, 1998)
at 1, P.R. Doc. 24, Pl.’s App., Tab 10 at 8. Gourmet thus
incurred the expense of hiring DE&Y prior to presenting
Commerce with this alternate form of attempted substantiation.
13 [ ].
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The Department alleges, however, that it could not know
whether the special audit would constitute independent
substantiation until it saw the results of DE&Y’s work. For
its part, Gourmet should have known that Commerce’s preference
was to substantiate with audited financial statements, and
that “independent” meant information independent of the
antidumping investigation. Because the DE&Y audit was not a
full scale audit, and was not sufficiently independent,
Commerce found the special audit insufficient.
Although Gourmet responded to Commerce’s questionnaires,
it did not provide the kind of information Commerce required
to verify the questionnaire responses. In light of the fact
that it was within Gourmet’s capacity to provide the right
kind of information, Commerce’s determination that Gourmet
failed to comply to the best of its ability is in accordance
with law and supported by substantial evidence.
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Conclusion
For the foregoing reasons, the Court finds that Commerce
correctly applied 19 U.S.C. §§ 1677e(a)(2)(D) and 1677e(b).
Accordingly, the Final Results are affirmed in their entirety.
________________________
Jane A. Restani
Judge
Dated: New York, New York
This 6th day of July, 2000.
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