Deosen Biochemical Ltd. v. United States , 307 F. Supp. 3d 1364 ( 2018 )

Slip Op. 18-32
UNITED STATES COURT OF INTERNATIONAL TRADE
DEOSEN BIOCHEMICAL LTD., DEOSEN
BIOCHEMCIAL (ORDOS) LTD., DEOSEN
USA, INC., AND A.H.A. INTERNATIONAL
CO., LTD.,
Plaintiffs,
v. Before: Richard W. Goldberg, Senior Judge
Court No. 17-00044
UNITED STATES,
Defendant,
and
CP KELCO US, INC.,
Defendant-Intervenor.
OPINION AND ORDER
[The court sustains the determinations of the U.S. Department of Commerce.]
Dated: April 2, 2018
Chunlian Yang, Kenneth G. Weigel, Alston & Bird LLP, of Washington, D.C., for
plaintiffs.
Kelly A. Krystyniak, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, D.C., for defendant. With her on the brief were Chad A.
Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and L. Misha
Preheim, Assistant Director. Of counsel on the brief was Brandon J. Custard, Office of the Chief
Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of
Washington, D.C.
Matthew L. Kanna, Arent Fox LLP, of Washington, D.C., for defendant-intervenor.
Goldberg, Senior Judge: Plaintiffs Deosen Biochemical Ltd. (“Deosen Zibo”), Deosen
Biochemical (Ordos) Ltd. (“Deosen Ordos”), Deosen USA Inc. (“Deosen USA”), and A.H.A.
Court No. 17-00044 Page 2
International Co., Ltd. (“AHA”) challenge the final results issued by the U.S. Department of
Commerce (“Commerce” or “the Department”) in its administrative review of the antidumping
duty on xanthan gum from the People’s Republic of China.
Plaintiffs filed two separate complaints challenging Commerce’s findings as they relate
to two separate periods of review: July 19, 2013 through June 30, 2014 (“AR1”), Complaint, No.
17-00044 (“AR1”) ECF No. 5 (Mar. 9, 2017), and July 1, 2014 through June 30, 2015 (“AR2”),
Complaint, No. 17-00045 (“AR2”) ECF No. 2 (Mar. 10, 2017). The two complaints assert that
Commerce cannot lawfully apply to Plaintiffs the China-wide rate of 154.07%, the imposition of
which was based primarily on a business arrangement that spanned both periods of review. See
Resp. to Suppl. Questionnaire, AR2 P.R. 45 (Oct. 9, 2015), ECF No. 43. As a result, both
complaints and Commerce’s ultimate decision will be analyzed collectively by the court.1
Specifically, Plaintiffs dispute the application of facts otherwise available (“FA”) and
adverse facts available (“AFA”) under 19 U.S.C. §§ 1677e(a) and (b), see Post-Prelim. Results
Mem., AR1 P.R. 333 (Aug. 5, 2016), ECF No. 47, as well as the resultant rate imposed by
Commerce. See Xanthan Gum from the People’s Republic of China, 82 Fed. Reg. 11,428,
11,429–30 (Dep’t Commerce Feb. 23, 2017) (final results) (“Final Results”) and accompanying
Issues & Decision Mem. (“I&D Mem.”).2 On review of Plaintiffs’ motions for summary
judgment, Mot. for J. on Agency R., AR1 & AR2 ECF Nos. 32 (Aug. 23, 31, 2017), the court
sustains Commerce’s application of FA and AFA as well as the resultant separate rate of
154.07%.
1
The court has entered a substantially identical opinion in Deosen Biochemical Ltd. v. United States, Court
No. 17-00045.
2
The Final Results covered only AR1; however, in AR2 Commerce imposed the same rate for the same
reasons. See Xanthan Gum from the People’s Republic of China, 82 Fed. Reg. 11,434, 11,435 (Dep’t Commerce
Feb. 23, 2017) (final results) and accompanying Issues & Decision Mem.
Court No. 17-00044 Page 3
BACKGROUND
Commerce initiated an antidumping duty investigation in July 2012, Xanthan Gum from
Austria and the People’s Republic of China, 77 Fed. Reg. 39,210 (Dep’t Commerce July 2,
2012) (initiation), and published the results roughly a year later. Xanthan Gum from the
People’s Republic of China, 78 Fed. Reg. 43,143 (Dep’t Commerce July 19, 2013) (am. final
determination). After receiving requests for review of that order, Commerce initiated the first
administrative review. Initiation of Antidumping and Countervailing Duty Administrative
Reviews, 79 Fed. Reg. 51,548 (Dep’t Commerce Aug. 29, 2014) (initiation).
AHA was chosen as a mandatory respondent, Selection of Resp’ts Mem., AR1 P.R. 24 at
5 (Sept. 23, 2014), and was issued a questionnaire. AHA Questionnaire, AR1 P.R. 27 (Sept. 25,
2014). Based on AHA’s responses, Commerce then sent questionnaires to Deosen Zibo and
Deosen Ordos in order to gather more information on sales reported by AHA. Deosen
Questionnaire, AR1 P.R. 133 (Feb. 26, 2015). The questionnaires requested that the entities
describe, and provide documentation relating to, “agreement(s) for sales in the United States
(e.g., long-term purchase contract, short-term purchase contract, purchase order, order
confirmation).” AHA Questionnaire, AR1 P.R. 27 at A-7; AHA Questionnaire, AR2 P.R. 30 at
A-7 (Sept. 29, 2015); Deosen Questionnaire, AR2 P.R. 96 at A-7 (Nov. 13, 2015).
Plaintiffs submitted several responses to Commerce’s questionnaires. See Deosen’s Sec.
A Resp., AR1 P.R. 165 at 16–18 (Mar. 24, 2014); AHA’s Sec. A Resp., AR1 P.R. 57 at 15–16
(Oct. 27, 2014); AHA’s Sec. A Resp., AR2 P.R. 113 at 16–18 (Nov. 23, 2015); see also
Deosen’s Sec. A Resp., AR2 P.R. 121 (Dec. 9, 2015). Each response indicated that sales were
made pursuant to purchase orders made by customers of the Deosen entities. Commerce then
Court No. 17-00044 Page 4
sent a supplemental questionnaire, to which Plaintiffs responded on May 7, 2015. Deosen’s Sec.
A. Suppl. Resp., AR1 P.R. 192 (May 7, 2015). In that response, Plaintiffs further explained the
relationship between Deosen Zibo and AHA, providing that “the vast majority of Deosen Zibo’s
US sales were made through AHA International Co., Ltd. to Deosen’s US customers” and that
“AHA purchased the subject merchandise from Deosen and resold it to Deosen USA . . . .” Id. at
6. None of these responses included information on any formal agreements made between
Plaintiffs.
Thereafter, the Department delayed announcing its final determinations so that it could
“further examine[] the relationship between Deosen and AHA with respect to the sales at issue,”
Deferral of the Final Results, AR1 P.R. 310 at 4 (Feb. 9, 2016), and sent Plaintiffs a
supplemental questionnaire. Suppl. Questionnaire, AR1 P.R. 312 (Mar. 4, 2016).
On March 21, 2016, Plaintiffs disclosed, for the first time, two documents detailing an
arrangement between Deosen Zibo and AHA covering the period of March 13, 2013 to February
28, 2015, under which AHA agreed to export xanthan gum on behalf of Deosen Zibo. Resp. to
Suppl. Questionnaire, AR1 P.R. 317, Ex. 7 (Mar. 21, 2016) (“Export Service Agreements”).3
On August 5, 2016, Commerce made preliminary findings on the significance of the
Export Service Agreements. See Post-Prelim. Results Mem., AR1 P.R. 333 (Aug. 5, 2016).
Commerce determined that the documents showed “that Deosen controlled the sales through
AHA, that Deosen assumed all responsibilities for the sales, and that Deosen bore the risk of any
losses associated with those sales.” Id. at 6. Thus, the Department found that “Deosen’s sales to
AHA and AHA’s sales to Deosen’s U.S. customers were not a legitimate sales process, as
claimed by Deosen and AHA, but instead were sales made and controlled by Deosen.” Id. at 7.
The Export Service Agreements were later disclosed in AR2 as well. See Resp. to Req. for Submissions,
3
AR2 P.R. 287, Ex. 7 (July 19, 2016).
Court No. 17-00044 Page 5
As a result, Commerce decided that not only had Plaintiffs withheld the Export Service
Agreements, they had also impeded the investigation both by providing inconsistent statements
contradicted by the Export Service Agreements and by structuring their business arrangement in
such a way as to omit necessary information from the record. See id. at 7–9 (citing 19 U.S.C.
§ 1677e(a)(2)).
In its final decision, Commerce determined that not only was FA appropriate, see id., but
also that AFA was warranted because Plaintiffs had “failed to cooperate by not acting to the best
of [their] ability to comply with a request for information” in violation of 19 U.S.C.
§ 1677e(b)(1). I&D Mem. cmt. 1. Three specific reasons gave rise to the FA conclusion:
Plaintiffs 1) withheld the Export Service Agreements, 2) organized their business arrangement in
such a manner so as to impede the investigation, and 3) provided inconsistent information. Id.
Withholding the Export Service Agreements and not revealing the business arrangement were
particularly relevant because, in Commerce’s view, those details “could have an effect on U.S.
prices” and the information that was provided was “artificially constructed and [did] not provide
a reliable basis upon which to calculate a dumping rate.” Id. Additionally, Commerce
determined that, at a minimum, “submit[ting] misleading information” and continuing to be “not
forthcoming with key aspects” of the business relationship both were indicators that Plaintiffs
had not acted to the best of their abilities, thus justifying the imposition of AFA. Id.
Ultimately, even though Plaintiffs were otherwise entitled to a separate rate, see id. cmt.
3, Commerce imposed the China-wide rate of 154.07% to Plaintiffs, “the highest dumping
margin alleged in the petition,” id., as a result of the Department’s AFA determination. See Final
Results at 11,429–30.
Court No. 17-00044 Page 6
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction over this action pursuant to 28 U.S.C. § 1581(c) and will
sustain Commerce’s determinations unless they are “unsupported by substantial evidence on the
record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).
DISCUSSION
In enacting 19 U.S.C. § 1677e, Congress set out a two-step process with which
Commerce must comply if it is to invoke AFA. First, the Department must identify a
justification for the application of FA and, only then, if there is a determination that a party has
not acted to “the best of its ability,” may Commerce apply AFA. 19 U.S.C. § 1677e(b)(1). Here,
Commerce permissibly imposed an AFA rate of 154.07% and, as such, the Department’s Final
Results are sustained.
a. Adverse Facts Available
Commerce has the ability to “use [] facts otherwise available” when a party to a
proceeding: A) withholds information requested by the Department, B) fails to provide requested
information by a specified deadline or in a specified form, C) “significantly impedes a
proceeding,” or D) provides information that cannot be verified. See 19 U.S.C. § 1677e(a)(2).
This statute provides Commerce with the ability to fill in “informational gaps” with FA when
those gaps arise out of one of the four circumstances described in 19 U.S.C. § 1677e(a)(2). See
Özdemir Boru San. ve Tic. Ltd. Sti. v. United States, 41 CIT __, __, 273 F. Supp. 3d 1225, 1231
(2017) (citing Nippon Steel Corp. v. United States, 337 F.3d 1373, 1381 (Fed. Cir. 2003)). Only
once one of these conditions has been met and the Department has deemed FA appropriate may
Commence evaluate whether or not to impose AFA. If the Department determines that “an
Court No. 17-00044 Page 7
interested party has failed to cooperate by not acting to the best of its ability to comply with a
request for information,” Commerce may:
[U]se an inference that is adverse to the interests of that party in selecting from
among the facts otherwise available; and [] is not required to determine, or make
any adjustments to, a countervailable subsidy rate or weighted average dumping
margin based on any assumptions about information the interested party would
have provided if the interested party had complied with the request for information.
19 U.S.C. § 1677e(b)(1). In other words, if the party withheld requested information and did not
“put forth its maximum effort” to comply with that request, see Nippon Steel Corp., 337 F.3d at
1382, the Department can apply AFA.
The court’s review probes whether the Department’s finding that requested information
was withheld is supported by substantial evidence, and its imposition of AFA was in accordance
with law. See Changzhou Wujin Fine Chem. Factory Co. v. United States, 701 F.3d 1367, 1377
(Fed Cir. 2012) (applying the substantial evidence standard to agency findings of fact and the
“arbitrary and capricious (or contrary to law) standard” to agency reasoning).
Here, Commerce asked for “agreement(s) for sales in the United States,” see, e.g., AHA
Questionnaire, AR1 P.R. 27 at A-7, and when it became apparent that the Export Service
Agreements had been withheld, Commerce determined that the application of FA was
appropriate under 19 U.S.C. § 1677e(a)(2). I&D Mem. cmt. 1. Then, because Commerce also
determined that Plaintiffs had failed to act to the best of their ability to produce the Export
Service Agreements, Commerce imposed an AFA rate of 154.07%. Final Results at 11,429.
Substantial evidence supports Commerce’s conclusion that Plaintiffs withheld requested
information under 19 U.S.C. § 1677e(a)(2)(A). “The mere failure of a respondent to furnish
requested information—for any reason—requires Commerce to resort to other sources of
information to complete the factual record . . . .” Nippon Steel Corp., 337 F.3d at 1381.
Court No. 17-00044 Page 8
As an initial matter, the Export Service Agreements were clearly requested. As the
Export Service Agreements laid out an “agreement for sales in the United States,” the documents
should have been produced in response to Commerce’s original questionnaire.4 Next, the
information contained within the Export Service Agreements was withheld. Although Plaintiffs
generally described their arrangement, Commerce requested—but was not furnished with—
documentation regarding that arrangement. Commerce found that, “[c]ontrary to Deosen’s
claims, the [Export Service Agreements] [did] not merely confirm the explanations of the
relationship given in the questionnaire response but provide[d] the Department with specific
details regarding the arrangement between AHA and Deosen which clearly show just how
limited AHA’s role was in the sales that Deosen reported as AHA’s.” I&D Mem. cmt. 1. As
there were discrepancies between the previous representations and the details found within the
Export Service Agreements, Commerce’s finding that Plaintiffs withheld requested information
under 19 U.S.C. § 1677e(a)(2)(A) is supported by substantial evidence. Once it became clear
that those sales agreements had been withheld, Commerce was entitled to apply FA.
Commerce’s second justification for applying FA, impeding an investigation under 19
U.S.C. § 1677e(a)(2)(C), is likewise supported by substantial evidence. Commerce’s application
of FA under 19 U.S.C. § 1677e(a)(2)(A) serves as a distinct ground for applying FA so as to
make this separate finding, to an extent, moot. In any event, as this court has previously stated,
the parties’ arranging a principal-agent relationship for the purposes of obtaining a lower rate
may act as an impediment to a proceeding. See Tianjin Machinery Import & Export Corp. v.
United States, 31 CIT 1416, 1422–24, 2007 WL 2701368, at *5–6 (2007). As in Tianjin,
Indeed, Plaintiffs appear to concede that the Export Service Agreements were requested by Commerce in
4
the original questionnaire. See Mot. for J. on Agency R., AR1 & AR2 ECF Nos. 32 at 21 (Aug. 23, 31, 2017)
(suggesting that the withholding of the document was the result of an “accidental omission.”).
Court No. 17-00044 Page 9
Plaintiffs only fully revealed their agency scheme designed to obtain the lower cash deposit rate
after the fact. Whereas Plaintiffs at one point described “Deosen’s U.S. sales of subject
merchandise [as] AHA’s sales,” the Export Service Agreements revealed “that these were
actually sales made and controlled by Deosen.” I&D Mem. cmt. 1. As a result, substantial
evidence supports Commerce’s determination that Plaintiffs impeded the Department’s
investigation by concealing the true nature of Plaintiffs’ relationship with one another.
Plaintiffs’ arguments to the contrary are unavailing.5
The court now turns to Commerce’s imposition of AFA and whether the Department’s
determination that Plaintiffs had “failed to cooperate by not acting to the best of [their] ability to
comply with a request for information,” 19 U.S.C. § 1677e(b)(1), was in accordance with law.
“Compliance with the ‘best of its ability’ standard is determined by assessing whether
respondent has put forth its maximum effort to provide Commerce with full and complete
answers to all inquiries in an investigation.” Nippon Steel Corp., 337 F.3d at 1382. Commerce
asked for sales agreements four times across two administrative reviews; each time, Plaintiffs
withheld key responsive documents. Instead, the Export Service Agreements were produced as
“new factual information” in response to the Department’s supplemental questionnaire. See
Resp. to Suppl. Questionnaire, AR1 P.R. 317 at 1 (Mar. 21, 2016).
5
Plaintiffs maintain that Commerce impermissibly relied on “Deosen’s and AHA’s actions to structure
sales of Deosen’s subject merchandise in such a way to avoid payment of the proper antidumping duty cash deposits
at the appropriate rate.” See I&D Mem. cmt. 1. However, not only does this assertion misstate the Department’s
view but it also overlooks Commerce’s primary reason for applying FA. Plaintiffs inaccurately characterize
Commerce’s FA decision as an attempt by Commerce to “punish Plaintiffs for arranging their sales to use a lower
cash deposit rate[, which] was not in accordance with law.” See Mot. for J. on Agency R. 17, AR1 ECF No. 32
(Aug. 23, 2017); see also Mot. for J. on Agency R. 17, AR2 ECF No. 32 (Aug. 31, 2017) (“In an effort to distract
from its use of AFA to punish Plaintiffs for using the lower cash deposit rate, Commerce attempts to justify its
actions by reciting the statute.”). In actuality, Commerce determined that Plaintiffs’ business arrangement—and the
concealment thereof—impeded the investigation by leaving the record devoid of certain material information. See
I&D Mem. cmt. 1 (“The record demonstrates that Deosen and AHA significantly impeded the proceeding by
engaging in a scheme to avoid the applicable cash deposit rate, resulting in necessary information not being
available on the record to calculate an accurate dumping margin.” (emphasis added)). Contrary to Plaintiffs’
assertions, Commerce did not conclude that the arrangement itself impeded the investigation.
Court No. 17-00044 Page 10
While Plaintiffs argue that their “unintentional omission due to a good faith
misunderstanding of a question cannot be the basis for applying AFA,” Mot. for J. on Agency R.
23, AR1 ECF No. 32 (Aug. 23, 2017), they mistakenly construe the statute as both requiring
Commerce to 1) excuse such “unintentional omissions” and 2) make a showing of bad faith. It
does neither. See Nippon Steel Corp., 337 F.3d at 1382–83 (holding that the statute does not
“condone inattentiveness, carelessness, or inadequate record keeping” and “does not contain an
intent element.”).
Rather, Commerce must only show that a reasonable importer would have known to
preserve the requested documentation and that Plaintiffs failed to produce the requested
information because they did not put forth their maximum effort. See id. Certainly, as here,
repeated requests for and avoiding production of certain documents can constitute failure to
cooperate to the best of Plaintiffs’ ability. See id. at 1383 (sustaining Commerce’s AFA decision
when it requested data that respondent repeatedly failed to—but ultimately did—produce). By
withholding a requested document despite multiple requests for its production, Plaintiffs failed to
act to the best of their abilities. Therefore, we sustain Commerce’s imposition of AFA as it was
in accordance with law.
Accordingly, Commerce’s determinations that FA and AFA were available are supported
by substantial evidence and in accordance with law. As such, those determinations are sustained
and the court must next consider whether Commerce’s chosen AFA rate was appropriate.
b. Commerce’s Selected AFA Rate
Plaintiffs also argue that Commerce’s selected AFA rate, the China-wide rate, was not in
accordance with law because Commerce had already determined that Plaintiffs were entitled to a
separate rate. So long as Commerce’s reasoning is not arbitrary and capricious, the court will
Court No. 17-00044 Page 11
sustain the Department’s chosen AFA rate. See Changzhou Wujin Fine Chem. Factory Co., 701
F.3d at 1377.
“In antidumping duty proceedings involving merchandise from a nonmarket economy
country, [] Commerce presumes all respondents are government-controlled and therefore subject
to a single country-wide rate.” Ad Hoc Shrimp Trade Action Comm. v. United States, 802 F.3d
1339, 1353 (Fed. Cir. 2015). If a respondent is able to rebut this presumption, it may be entitled
to a separate rate. See id.
Regardless of any separate rate analysis, the imposition of AFA may rely on information
derived from the petition, final determinations in the investigation, previous reviews, or any
other information placed on the record. 19 U.S.C. § 1677e(b)(2). Further, Commerce has the
discretion to select the highest rate on the record, 19 U.S.C. § 1677e(d)(2), and the resultant rate
need not “reflect[] an alleged commercial reality of the interested party,” 19 U.S.C.
§ 1677e(d)(3)(B). Commerce “may employ [such] inferences . . . to ensure that the party does
not obtain a more favorable result by failing to cooperate than if it had cooperated fully.” See
Viet I-Mei Frozen Foods Co. v. United States, 839 F.3d 1099, 1110 (Fed Cir. 2016).
Plaintiffs contend that because they were initially found to be entitled to a separate rate
by Commerce, the Department is precluded from using the China-wide rate as part of AFA.
Plaintiffs’ position ignores the plain language of the statute, which gives Commerce the
discretion to impose the highest rate on the record. See 19 U.S.C. § 1677e(d)(2); see also Viet I-
Mei Frozen Foods Co., 839 F.3d at 1109–10 (upholding Commerce’s AFA selection of the
Vietnam-wide rate despite the finding of respondent’s eligibility for a separate rate). Plaintiffs
claim to find support in this court’s ruling in Shenzhen Xinboda Industrial Co. v. United States,
40 CIT __, __, 180 F. Supp. 3d 1305, 1317 (2016). Yet, that case is inapposite as it
Court No. 17-00044 Page 12
contemplated Commerce’s rejection of separate rate information. See id. at 1316. That is not at
issue here. The question of separate rates is entirely detached from the imposition of AFA such
that a party’s entitlement to a separate rate does not eliminate the power of Commerce to choose
from available numbers on the record, including the country-wide rate. See 19 U.S.C.
§§ 1677e(b)(2), (d)(2).
Tellingly, Plaintiffs cite to cases decided before Congress’s amendments to the Trade
Preferences Extension Act of 2015, Pub. L. No. 114-27, § 502, 129 Stat. 362, 383–84 (2015).
See Yantai Xinke Steel Structure Co. v. United States, Slip Op. 12-95, 2012 WL 2930182, at *14
(CIT July 18, 2012); Gerber Food (Yunnan) Co. v. United States, 29 CIT 753, 771–72, 387 F.
Supp. 2d 1270, 1287 (2005). It was these amendments that granted Commerce the discretion to
apply the highest rate on the record and in which Congress also made clear that the Department
was not required to impose an AFA rate that reflected alleged commercial realities. See 19
U.S.C. § 1677e(d)(2), (3); see also generally Özdemir Boru San. ve Tic. Ltd. Sti., 41 CIT __, 273
F. Supp. 3d 1225 (discussing the import of the amendments). Plaintiffs conveniently disregard
the broad discretion Congress granted to Commerce.
Ultimately, Commerce acted in accordance with law in imposing the China-wide rate
despite its contemporaneous determination that Plaintiffs had established their entitlement to a
separate rate. AFA permits Commerce to choose from among the options available on the
record; that Plaintiffs had established their entitlement to a separate rate as an initial matter did
not eliminate the China-wide rate as an option when the Department deemed AFA appropriate.
As a result, this court sustains Commerce’s chosen AFA rate.
Court No. 17-00044 Page 13
CONCLUSION AND ORDER
For the foregoing reasons, upon consideration of the parties’ motions for summary
judgment and all papers and proceedings herein, it is hereby:
ORDERED that Commerce properly applied FA under 19 U.S.C. § 1677e(a)(2)(A) and
(c), AFA under 19 U.S.C. § 1677e(b)(1), and a rate of 154.07%; it is further
ORDERED that Plaintiffs’ Rule 56.2 Motion for Judgment on the Agency Record is
DENIED.
Dated: April 2, 2018 /s/ Richard W. Goldberg
New York, New York Richard W. Goldberg
Senior Judge