Fine Furniture (Shanghai) Ltd. v. United States

Slip Op. 12 - 113
UNITED STATES COURT OF INTERNATIONAL TRADE
FINE FURNITURE (SHANGHAI)
LIMITED, et al.,
Plaintiffs,
and
HUNCHUN FOREST WOLF INDUSTRY
COMPANY LIMITED, et al.,
Plaintiff-Intervenors,
Before: Donald C. Pogue,
v. Chief Judge
UNITED STATES, Consol. Court No. 11-005331
Defendant,
and
THE COALITION FOR AMERICAN
HARDWOOD PARITY,
Defendant-Intervenor.
OPINION AND ORDER
[affirming, in part, and remanding, in part, the Department of
Commerce’s Final Determination]
Dated: August 31, 2012
Kristin H. Mowry, Jeffrey S. Grimson, Jill A. Cramer,
Susan L. Brooks, Sarah M. Wyss, and Keith F. Huffman, Mowry &
Grimson, PLLC, of Washington, DC, for the Plaintiffs Fine
Furniture (Shanghai) Ltd.; Great Wood (Tonghua) Ltd.; and Fine
Furniture Plantation (Shishou) Ltd.
1
This action was consolidated with portions of the
complaints from Court Nos. 12-00009, 12-00017, and 12-00022.
Order, Apr. 5, 2012, ECF No. 50.
Consol. Ct. No. 11-00533 Page 2
Francis J. Sailer, Mark E. Pardo, Andrew T. Schutz,
and Kavita Mohan, Grunfeld Desiderio Lebowitz Silverman &
Klestadt, LLP, of Washington, DC, for the Consolidated Plaintiffs
Baroque Timber Industries (Zhongshan) Co., Ltd.; Riverside
Plywood Corp.; Samling Elegant Living Trading (Labuan) Ltd.;
Samling Global USA, Inc.; Samling Riverside Co., Ltd.; Suzhou
Times Flooring Co., Ltd.; Shanghai Eswell Timber Co., Ltd.;
Shanghai Lairunde Wood Co., Ltd.; Shanghai New Sihe Wood Co.,
Ltd.; Shanghai Shenlin Corp.; Vicwood Industry (Suzhou) Co. Ltd.;
Xuzhou Shenghe Wood Co., Ltd.; and A&W (Shanghai) Woods Co., Ltd.
Gregory S. Menegaz, J. Kevin Horgan, and John J.
Kenkel, deKieffer & Horgan, PLLC, of Washington, DC, for the
Plaintiff-Intervenors Changzhou Hawd Flooring Co., Ltd.; Dunhua
City Jisen Wood Industry Co., Ltd.; Dunhua City Dexin Wood
Industry Co., Ltd.; Dalian Huilong Wooden Products Co., Ltd.;
Kunshan Yingyi-Nature Wood Industry Co., Ltd.; and Karly Wood
Product Ltd.
Jeffrey S. Neeley, Michael S. Holton, and Stephen W.
Brophy, Barnes, Richardson & Colburn, of Washington, DC, for
Plaintiff-Intervenors Hunchun Forest Wolf Industry Co. Ltd.;
Dunhua City Dexin Wood Industry Co., Ltd.; Nanjing Minglin Wooden
Industry Co., Ltd.; Dalian Penghong Floor Products Co., Ltd.;
Dongtai Fuan Universal Dynamics, LLC; Zhejiang Fudeli Timber
Industry Co., Ltd.; Dunhua City Jisen Wood Industry Co., Ltd.;
Fusong Qianqiu Wooden Product Co., Ltd.; Power Dekor Group Co.,
Ltd.; Jiafeng Wood (Suzhou) Co., Ltd.; Jiangsu Senmao Bamboo and
Wood Industry Co., Ltd.; Shenyang Haobainian Wooden Co., Ltd.;
Guangzhou Pan Yu Kang Da Board Co., Ltd.; Nakahiro Jyou Sei
Furniture (Dalian) Co., Ltd.; Yixing Lion-King Timber Industry
Co., Ltd.; Guangzhou Panyu Southernstar Co., Ltd.; Dalian Kemian
Wood Industry Co., Ltd.; Kunshan Yingyi-Nature Wood Industry Co.,
Ltd.; Fu Lik Timber (HK) Co. Ltd.; Puli Trading Ltd.; Zhejiang
Shiyou Timber Co., Ltd.; Shanghai Lizhong Wood Products Co.,
Ltd.; and Shenzhenshi Huanwei Woods Co. Ltd.
Daniel L. Porter, Matthew P. McCullough, Ross E.
Bidlingmaier, and William H. Barringer, Curtis, Mallet-Prevost,
Colt & Mosle LLP, of Washington, DC, for the Plaintiff-Intervenor
the Bureau of Fair Trade for Imports & Exports, Ministry of
Commerce, People’s Republic of China.
Alexander V. Sverdlov, Trial Attorney, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice, of
Washington, DC, for the Defendant United States. With him on the
briefs were Stuart F. Delery, Acting Assistant Attorney General,
Jeanne E. Davidson, Director, and Claudia Burke, Assistant
Consol. Ct. No. 11-00533 Page 3
Director. Of Counsel on the briefs was Jonathan Zielinksi,
Senior Attorney, Office of the Chief Counsel for Import
Administration, U.S. Department of Commerce.
Jeffrey S. Levin, Levin Trade Law, P.C., of Bethesda,
MD, and John B. Totaro, Jr., Neville Peterson, LLP, of
Washington, DC, for the Defendant-Intervenor the Coalition for
American Hardwood Parity.
Chief Judge Pogue: This is a consolidated action
seeking review of determinations made by the United States
Department of Commerce (“Commerce” or “the Department”) in the
countervailing duty (“CVD”) investigation of multilayered wood
flooring from the People’s Republic of China (“China”).2
Currently before the court is Plaintiffs’ Rule 56.2 Motion for
Judgment on the Agency Record. In their motion, Plaintiffs
challenge three aspects of Commerce’s Final Determination: (1)
Commerce’s use of adverse facts available (“AFA”) in determining
the benchmark rate for calculating the benefit Plaintiff Fine
Furniture received from the provision of electricity for less
than adequate remuneration; (2) Commerce’s inclusion of the Basic
Electricity Tariff in the calculation of the electricity subsidy
rate in the Final Determination without notice and opportunity to
2
Multilayered Wood Flooring from the People’s Republic of
China, 76 Fed. Reg. 64,313 (Dep’t Commerce Oct. 18, 2011) (final
affirmative countervailing duty determination) (“Final
Determination”), and accompanying Issues & Decision Memorandum,
C-570-971, POI 09, Admin R. Pt. 2 Pub. Doc. 20, available at
http://ia.ita.doc.gov/frn/summary/PRC/2011-26892-1.pdf (last
visited Aug. 28, 2012) (“I & D Mem.”) (adopted in the Final
Determination, 76 Fed. Reg. at 64,313).
Consol. Ct. No. 11-00533 Page 4
comment by respondents; and (3) the inclusion of Shanghai Eswell
Enterprise Co., Ltd. and Elegant Living Corporation on the list
of non-cooperating companies.
As explained below, the court (1) affirms Commerce’s
use of AFA in determining the benchmark for provision of
electricity at less than adequate remuneration; (2) affirms the
inclusion of the Basic Electricity Tariff as a component of the
electricity subsidy; and (3) remands the Final Determination to
Commerce to reconsider and remove or provide further explanation
for including Shanghai Eswell Enterprise Co., Ltd. and Elegant
Living Corporation on the list of non-cooperating companies.
The court has jurisdiction pursuant to
§ 516A(a)(2)(B)(i) of the Tariff Act of 1930, as amended, 19
U.S.C. § 1516a(a)(2)(B)(i) (2006)3 and 28 U.S.C. § 1581(c)
(2006).
BACKGROUND4
This case arises from Commerce’s initiation of a
countervailing duty investigation of multilayered wood flooring
from China, on November 18, 2010, following a petition from
3
All further citations to the Tariff Act of 1930, as
amended, are to Title 19 of the U.S. Code, 2006 edition.
4
The following summary of facts is provided as general
background to the investigation at issue in this case; facts
specific to the determinations challenged are included in the
discussion of the relevant challenge.
Consol. Ct. No. 11-00533 Page 5
Defendant-Intervenor the Coalition for American Hardwood Parity
(“CAHP”). See Multilayered Wood Flooring from the People’s
Republic of China, 75 Fed. Reg. 70,719, 70,719 (Dep’t Commerce
Nov. 18, 2010) (initiation of countervailing duty investigation).
In its investigation, and pursuant to 19 U.S.C. § 1677f-1(c)(2),
Commerce limited the mandatory respondents to three companies and
their affiliates: (1) Fine Furniture (Shanghai) Ltd., Great Wood
(Tonghua) Ltd., and Fine Furniture Plantation (Shishou) Ltd.
(collectively “Fine Furniture”); (2) Zhejiang Layo Wood Industry
Co., Ltd. and Jiaxing Brilliant Import & Export Co., Ltd.
(collectively “Layo”); and (3) Zhejiang Yuhua Timber Co., Ltd.
(“Yuhua”). Respondent Selection Memo, C-570-971, POI 09 (Dec. 30,
2010), Admin. R. Pt. 1 Pub. Doc. 193 at 4; Multilayered Wood
Flooring from the People’s Republic of China, 76 Fed. Reg.
19,034, 19,038–39 (Dep’t Commerce Apr. 6, 2011) (preliminary
affirmative countervailing duty determination) (“Preliminary
Determination”). In the Preliminary Determination, Commerce
assigned zero rates to Layo and Yuhua; a 2.25% rate to Fine
Furniture; a 2.25% all others rate for cooperating companies; and
a 27.01% rate for non-cooperating companies. Preliminary
Determination, 76 Fed. Reg. at 19,041–42. Following comments on
the Preliminary Determination, Commerce issued the Final
Determination on October 18, 2011. Final Determination, 76 Fed.
Reg. at 64,313. In the Final Determination, Commerce adjusted
Consol. Ct. No. 11-00533 Page 6
the subsidy rates as follows: Layo and Yuhua received de minimis
rates; Fine Furniture received a 1.50% rate; all other
cooperating respondents received a 1.50% rate; and all non-
cooperating respondents received a 26.73% rate. Final
Determination, 76 Fed. Reg. at 64,315–17.
STANDARD OF REVIEW
“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).
DISCUSSION
A countervailing duty is imposed on an import whenever
Commerce determines that “the government of a country or any
public entity within the territory of a country is providing,
directly or indirectly, a countervailable subsidy . . . .” 19
U.S.C. § 1671(a).5 To be countervailable, a subsidy must provide
a financial contribution to a specific industry, and the
respondent must benefit. See 19 U.S.C. § 1677(5)–(5A); Essar
Steel Ltd. v. United States, 34 CIT __, 721 F. Supp. 2d 1285,
5
To impose a countervailing duty, the International Trade
Commission must also find “material injury” to a domestic
industry, 19 U.S.C. § 1671(a); however, the ITC’s determination
is not at issue in this case.
Consol. Ct. No. 11-00533 Page 7
1292 (2010).
When investigating whether the statute requires
imposition of a countervailing duty order, Commerce often
requires both the respondent and the foreign government to submit
factual information. Essar Steel, 34 CIT at __, 721 F. Supp. 2d
at 1297 (“Typically, foreign governments are in the best position
to provide information regarding the administration of their
alleged subsidy programs, including eligible recipients. The
respondent companies, on the other hand, will have information
pertaining to the existence and amount of the benefit conferred
on them by the program.”). In addition, when determining whether
or not a subsidy is countervailable, Commerce relies on facts
placed on the record by interested parties.
When an interested party has failed to submit necessary
information, Commerce may make its determination on the basis of
facts otherwise available (“FOA”), and in certain circumstances
on the basis of AFA. 19 U.S.C. § 1677e(a)–(b).6 Before Commerce
may employ FOA, 19 U.S.C. § 1677m(d) provides respondents with an
opportunity to remedy or explain deficiencies in their
submissions. § 1677e(a); Reiner Brach GmbH & Co.KG v. United
States, 26 CIT 549, 555, 206 F. Supp. 2d 1323, 1330 (2002)
6
The statute authorizes Commerce to make use of FOA when
(1) the record lacks necessary information or (2) a respondent
withholds information, fails to provide information, impedes a
proceeding, or provides unverifiable information. § 1677e(a).
Consol. Ct. No. 11-00533 Page 8
(quoting Mannesmannrohren-Werke AG v. United States, 23 CIT 826,
837–38, 77 F. Supp. 2d 1302, 1313 (1999)). In addition, FOA are
only appropriate to fill gaps in the record evidence when
Commerce must rely on other sources to complete the record.
Zhejiang Dunan Hetian Metal Co. v. United States, 652 F.3d 1333,
1346 (Fed. Cir. 2011). When Commerce can independently fill in
the gaps, without the requested information, FOA and adverse
inferences are not appropriate. See id. at 1348; Gerber Food
(Yunnan) Co. v. United States, 29 CIT 753, 767–68, 387
F. Supp. 2d 1270, 1283 (2005). Nonetheless, if Commerce finds
“that an interested party has failed to cooperate by not acting
to the best of its ability to comply with a request . . .
[Commerce] may use an inference that is adverse to the interests
of that party in selecting from among the facts otherwise
available.” 19 U.S.C. § 1677e(b); Zhejiang, 652 F.3d at 1346.
I. Commerce Properly Applied AFA in Determining the Benchmark
for Provision of Electricity at Less than Adequate
Remuneration
A. Background
In the Final Determination, Commerce used adverse
inferences to determine that Plaintiff Fine Furniture received a
countervailable subsidy through the provision of electricity at
less than adequate remuneration (the “LTAR subsidy”). Final
Determination, 76 Fed. Reg. at 64,315. Commerce made recourse to
adverse inferences because the Government of China (“GOC”) failed
Consol. Ct. No. 11-00533 Page 9
to provide requested information in the form of provincial
electricity price proposals. I & D Mem. Cmt. 4 at 43–44.
The GOC did not provide a complete response to the
Department’s January 3, 2011 questionnaire regarding
the alleged provision of electricity for LTAR.
Specifically, the Department requested that the GOC
provide the original provincial price proposals for
2006 and 2008 for each province in which a mandatory
respondent or any reported “cross-owned” company is
located. Because the requested price proposals are
part of the GOC’s electricity price adjustment process,
the documents are necessary for the Department’s
analysis of the program. . . . Consequently, we
determine that the GOC has withheld necessary
information that was requested of it and, thus, that
the Department must rely on “facts available” in making
our final determination. Moreover, we determine that
the GOC has failed to cooperate by not acting to the
best of its ability to comply with our request for
information as it did not respond by the deadline
dates, nor did it explain to the Department’s
satisfaction why it was unable to provide the requested
information. Consequently, an adverse inference is
warranted in the application of facts available.
I & D Mem. at 2 (footnotes omitted). Using FOA and applying an
adverse inference, Commerce set a benchmark rate equal to the
highest rate reported in the provincial price schedules for
electricity. I & D Mem. at 3.
B. Analysis
The dispute between the parties centers on whether the
adverse inferences drawn against the non-cooperating party, the
GOC, are rendered impermissible when they are collaterally
adverse to the cooperating party, Fine Furniture. Fine Furniture
contends that the inferences drawn were impermissibly adverse to
Fine Furniture, who was a cooperating party in the investigation.
Consol. Ct. No. 11-00533 Page 10
Commerce, however, argues that it properly employed inferences
adverse to the GOC — the non-cooperating party — and that any
impact on Fine Furniture was simply collateral, which does not
render the inferences impermissible. Neither party contests the
fact that the GOC failed to provide necessary information to
Commerce.
Among the financial contributions that are potentially
countervailable is the provision of goods and services at less
than adequate remuneration. 19 U.S.C. § 1677(5)(E)(iv). In order
to determine if a benefit is provided at less than adequate
remuneration, the price paid is compared with a price set by
“prevailing market conditions for the good or service being
provided . . . in the country which is subject to the
investigation or review.” § 1677(5)(E). Commerce has promulgated
further regulations for determining this “benchmark” value. 19
C.F.R. § 351.511(a)(2)(i)–(iii) (2012)7; Essar Steel, 34 CIT at
__, 721 F. Supp. 2d at 1292.8
7
All subsequent citations to the Code of Federal
Regulations are to the 2012 edition, unless otherwise noted.
8
These regulations set up a three tier system for
determining the benchmark. First, “[t]he Secretary will normally
seek to measure the adequacy of remuneration by comparing the
government price to a market-determined price for the good or
service resulting from actual transactions in the country in
question.” 19 C.F.R. § 351.511(a)(2)(i). Second, if no market-
determined price is available from within the country in
question, then “the Secretary will seek to measure the adequacy
of remuneration by comparing the government price to a world
(footnote continued)
Consol. Ct. No. 11-00533 Page 11
In this case, no benchmarks consistent with 19 C.F.R.
§ 351.511(a)(2)(i)–(ii) were available.9 Therefore, Commerce
sought to value the benchmark by assessing the relationship of
the government price to market principles, pursuant to
§ 351.511(a)(2)(iii), but found that the GOC’s refusal to provide
the provincial price proposals prevented it from determining if
the prices were consistent with any market principles. I & D Mem.
Cmt. 4 at 43–44. Because it did not have the data to value a
benchmark, Commerce relied upon FOA, 19 U.S.C. § 1677e(a), in the
form of the provincial price schedules on the record. Because
8
(footnote continued)
market price where it is reasonable to conclude that such price
would be available to purchasers in the country in question.”
§ 351.511(a)(2)(ii). Finally, if neither an actual market-
determined price nor a world market price is available, “the
Secretary will normally measure the adequacy of remuneration by
assessing whether the government price is consistent with market
principles.” § 351.511(a)(2)(iii).
9
As all parties agree in their responses to the court’s
further briefing request, electricity in China cannot be valued
through actual transactions in the country, § 351.511(a)(2)(i),
because rates are set by the government, nor can electricity be
valued using a world market price, § 351.511(a)(2)(ii), because
it cannot be purchased on the world market. See Def.’s Resp. to
the Court’s June 25, 2012 Letter at 3, ECF No. 73; Pls.’ Letter
Br. at 3, ECF No. 74; see also Countervailing Duties, 63
Fed. Reg. 65,348, 65,377 (Dep’t Commerce Nov. 25, 1998) (final
rule) (“We will consider whether the market conditions in the
country are such that it is reasonable to conclude that the
purchaser could obtain the good or service on the world market.
For example, a European price for electricity normally would not
be an acceptable comparison for electricity provided by a Latin
American government, because electricity from Europe in all
likelihood would not be available to consumers in Latin
America.”).
Consol. Ct. No. 11-00533 Page 12
the necessary information was lacking as a result of the GOC’s
refusal to provide it, Commerce also applied an adverse inference
pursuant to 19 U.S.C. § 1677e(b).
Fine Furniture’s plea for the use of neutral facts in
calculating the benchmark is not without some persuasive force.
Often, the calculation of the benefit is drawn from the record
submissions of the respondent companies. See Essar Steel, 34 CIT
at __, 721 F. Supp. 2d at 1297 (“[T]he agency then attempts to
use information provided by the individual respondent companies
regarding the benefit, if any, conferred by the particular
program.”). Where the respondents have placed evidence on the
record consistent with the Department’s regulations for
calculating benchmarks, see 19 C.F.R. § 351.511(a)(2), Commerce
would be expected to consider such evidence. Furthermore, if an
alternative benchmark meeting such criteria were available on the
record and did not adversely affect a cooperative party, such a
benchmark would be superior to one which does adversely affect a
cooperative party.10
10
Commerce is correct that the inference drawn in this case
was not directly adverse to Fine Furniture. It is true that Fine
Furniture is adversely affected by the use of the highest rates
included in the provincial price proposals. However, the
inference drawn was prompted by the GOC’s failure to cooperate
and was adverse to the interests of the GOC. We do not treat the
GOC and Fine Furniture as a joint entity in making our
determination; rather, we acknowledge that, in the context of a
CVD investigation, an inference adverse to the interests of a
non-cooperating government respondent may collaterally affect a
(footnote continued)
Consol. Ct. No. 11-00533 Page 13
The problem for Fine Furniture is that there is no such
benchmark on the record in this case. Commerce employed FOA
because the lack of the provincial price proposals prevented it
from determining whether the electricity rates provided by
respondent companies were set pursuant to market principles.
§ 351.511(a)(2)(iii). Because the price proposals were necessary
to determine the benchmark rate, and the GOC refused to provide
them, Commerce also applied an adverse inference.11 Though Fine
Furniture was put on notice by the benchmark regulation, it did
not place on the record any alternative benchmarks consistent
10
(footnote continued)
cooperative respondent. While such an inference is permissible
under the statute, it is disfavored and should not be employed
when facts not collaterally adverse to a cooperative party are
available.
11
In the letter briefing requested by the court, Plaintiffs
argue that there was sufficient indicia in the record for
Commerce to determine that the provincial price schedules
reflected market-determined rates. Pls.’ Letter Br. at 3–4. When
reviewing Commerce’s determinations on a substantial evidence
standard, the court considers whether the determination is
supported by substantial evidence on the record as a whole. See
Gerald Metals, Inc. v. United States, 132 F.3d 716, 720 (Fed.
Cir. 1997). “[T]he possibility of drawing two inconsistent
conclusions from the evidence does prevent an administrative
agency’s finding from being supported by substantial evidence,”
Consolo v. Fed. Maritime Comm’n, 383 U.S. 607, 620 (1966), and
“[t]he court is not empowered to substitute its judgment for that
of the agency.” Citizens to Pres. Overton Park, Inc. v. Volpe,
401 U.S. 402, 416 (1971), abrogated on other grounds by Califeno
v. Sanders, 430 U.S. 99, 105 (1977). Though there is some
evidence on the record suggesting that the provincial price
schedules could reflect market-determined prices, the court will
not upset Commerce’s determination that the provincial price
proposals were a critical element in arriving at such a
conclusion.
Consol. Ct. No. 11-00533 Page 14
with § 351.511(a)(2).
Fine Furniture did propose what it terms a “neutral
benchmark,” which would be calculated by averaging all rates
within the same user category of the provincial price schedule as
Fine Furniture’s rate, and argued that its proposed benchmark
would be more appropriate. However, there is nothing to indicate
that Fine Furniture’s proposed neutral benchmark would more
accurately reflect a market-determined price for electricity.
Therefore, Fine Furniture’s proposed neutral benchmark is, in
fact, not a benchmark, see § 351.511(a)(2), because it fails to
establish the relationship that Fine Furniture’s electricity
rates bear to a market determined rate. In a situation such as
this, where an interested party “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), and that information was
necessary to the subsidy calculation, 19 U.S.C. § 1677e(a) —
thereby fulfilling the prerequisites for the use of both FOA and
adverse inferences — Commerce acted within its statutory
authority in applying both FOA and an adverse inference.
If the record contained evidence that met one of the
three regulatory requirements for setting a benchmark, Fine
Furniture may have been able to argue that Commerce should have
relied upon that record evidence. However, the neutral benchmark
requested by Fine Furniture does not meet this test. The neutral
Consol. Ct. No. 11-00533 Page 15
benchmark is no better proxy for a market determined rate than
the AFA benchmark. Without showing that the neutral benchmark
better complies with the statutory and regulatory requirements,
Fine Furniture is asking the court to substitute its judgment for
that of Commerce, but this is not the court’s role. Inland Steel
Indus., Inc. v. United States, 188 F.3d 1349, 1360–61 (Fed. Cir.
1999); Ad Hoc Shrimp Trade Action Comm. v. United States, 36 CIT
__, 828 F. Supp. 2d 1345, 1350 (2012).
Accordingly, because Commerce’s decision to apply AFA
in calculating the LTAR subsidy is consistent with the statute
and regulations, and because the court does not substitute or
displace Commerce’s judgment with regard to the weight or
credibility of the evidence, the use of AFA in setting the LTAR
subsidy benchmark is affirmed.
II. Commerce’s Failure to Provide Notice and Opportunity to
Comment on Inclusion of the Basic Electricity Tariff Was
Harmless Error
A. Background
In the Final Determination, Commerce included the Basic
Electricity Tariff (“BET”) in the calculation of the benefit for
the LTAR subsidy. I & D Mem. at 14. This cost was not included
in the calculation of the LTAR subsidy in the Preliminary
Determination. Id. Nor were Plaintiffs given any notice that
Commerce had decided to include the BET in calculation of the
LTAR subsidy prior to publication of the Final Determination.
Consol. Ct. No. 11-00533 Page 16
B. Analysis
Plaintiffs raise a procedural challenge to the
inclusion of the BET, arguing that Commerce’s failure to provide
notice and an opportunity for comment violated 19 U.S.C.
§ 1677m(g).12 Plaintiffs premise their argument, in large part,
on the contention that the BET was a separate subsidy from the
LTAR subsidy, and therefore, it required a separate subsidy
investigation.
Commerce responds that the BET is not a separate
subsidy, rather it is a component of the LTAR subsidy.
Therefore, according to Commerce, the inclusion of the BET in the
Final Determination was merely the correction of an oversight in
the Preliminary Determination.
Commerce’s response has weight because the BET is best
characterized as a component of the LTAR subsidy. The BET is an
element of respondents’ overall electricity payment; therefore,
it is reasonable for Commerce to include the BET in the
calculation of benefit under the LTAR subsidy. This
determination is also consistent with Commerce’s practice in
12
19 U.S.C. § 1677m(g) reads, in relevant part:
[Commerce] . . . before making a final determination
under section 1671d, 1673d, 1675, or 1675b of this
title shall cease collecting information and shall
provide the parties with a final opportunity to comment
on the information obtained by [Commerce] . . . upon
which the parties have not previously had an
opportunity to comment.
Consol. Ct. No. 11-00533 Page 17
other countervailing duty determinations regarding merchandise
from China.13
Nonetheless, our finding that the BET was an aspect of
the LTAR subsidy does not lead us to conclude that Commerce
followed proper procedure when it included the BET in the Final
Determination without first including it in the Preliminary
Determination or otherwise providing notice and an opportunity to
comment. To the contrary, Commerce should have included the BET
in the Preliminary Determination, thereby permitting Plaintiffs
an opportunity to challenge that determination at the
administrative level. Commerce did not do this. In this regard,
the inclusion of the BET was procedurally defective.14
13
See, e.g., Drill Pipe from the People’s Republic of
China, 76 Fed. Reg. 1971 (Dep’t Commerce Jan. 11, 2011) (final
affirmative countervailing duty determination) and accompanying
Issues and Decision Memorandum at 27, C-570-966, POI 09 (Jan. 11,
2011), available at
http://ia.ita.doc.gov/frn/summary/PRC/2011-392-1.pdf (last
visited Aug. 29, 2012); Pre-Stressed Concrete Steel Wire Strand
from the People’s Republic of China, 75 Fed. Reg. 28,557 (Dep’t
Commerce May 21, 2010) (final affirmative countervailing duty
determination) and accompanying Issues and Decision Memorandum at
33–34, C-570-946, POI 08 (May 14, 2010), available at
http://ia.ita.doc.gov/frn/summary/prc/2010-12292-1.pdf (last
visited Aug. 29, 2012).
14
The court need not decide whether the specific action
challenged here was a violation of 19 U.S.C. § 1677m(g). It is
sufficient to note that plaintiffs challenging agency action
before the Court of International Trade are required to exhaust
their administrative remedies. 28 U.S.C. § 2637(d) (2006);
Consol. Bearings Co. v. United States, 348 F.3d 997, 1003 (Fed.
Cir. 2003). When Commerce fails to provide an opportunity for
comment, it inhibits a plaintiff’s opportunity to exhaust its
(footnote continued)
Consol. Ct. No. 11-00533 Page 18
However, in the absence of a substantive challenge to
the inclusion of the BET, the procedural defect is harmless
error. See Cummins Engine Co. v. United States, 23 CIT 1019,
1032, 83 F. Supp. 2d 1366, 1378 (1999) (“In reviewing an agency’s
procedural error for which the law does not prescribe a
consequence . . . it is well settled that principles of harmless
error apply. . . . Under the rule of prejudicial error, or
harmless error analysis, the Court will not overturn an agency’s
action ‘if the procedural error complained of was harmless.’”
(quoting Barnhart v. United States Treasury Dep’t, 7 CIT 295,
302, 588 F. Supp. 1432, 1437 (1984))).
Because Plaintiffs do not raise any compelling
substantive arguments, the court finds no reason to remand the
case to Commerce for further explanation or proceeding.15
14
(footnote continued)
administrative remedies. While the court finds that it may hear
a challenge in such a case, see infra note 15, the procedural
defect may be relevant when the record is insufficiently
developed for the court to render a decision.
15
Plaintiffs would not have been barred from bringing
substantive claims before this court by the exhaustion of
administrative remedies doctrine. Prior case law supports the
court’s capacity to hear and decide a challenge on substantive
grounds that was not raised at the administrative level, when no
opportunity for comment was provided. See China Steel Corp. v.
United States, 28 CIT 38, 59, 306 F. Supp. 2d 1291, 1310 (2004)
(“[I]n determining whether questions are precluded from
consideration on appeal, the [Court of International Trade] will
assess the practical ability of a party to have its arguments
considered by the administrative body.” (citation omitted)); see
also Lifestyle Enter. v. United States, 35 CIT __, 768 F. Supp.
(footnote continued)
Consol. Ct. No. 11-00533 Page 19
Plaintiffs’ primary argument, that Commerce should have initiated
a separate investigation of the BET subsidy, is unavailing
because Commerce reasonably determined that the BET was merely an
element of the larger LTAR subsidy. Plaintiffs do not raise any
further substantive arguments in their letter brief to the court,
except for a fleeting reference to other non-included payments
purportedly analogous to the BET. Pls.’ Letter Br. at 6 (“Even
without the benefit of a proper investigation, however, there is
evidence to suggest that the BET is different from the other
electricity charges that Commerce found to be countervailable
subsidies.”). What has been provided is insufficient for the
court to conclude that Plaintiffs have a substantive claim
regarding the BET. Therefore, Commerce’s inclusion of the BET in
the benefit calculation for the LTAR subsidy in the Final
Determination without first addressing it in the Preliminary
Determination is harmless error.
15
(footnote continued)
2d 1286, 1300 n.17 (2011) (“A party, however, may seek judicial
review of an issue that it did not brief at the administrative
level if Commerce did not address the issue until its final
decision, because in such a circumstance the party would not have
had a full and fair opportunity to raise the issue at the
administrative level.”); Globe Metallurgical, Inc. v. United
States, 29 CIT 867, 873 (2005) (“The court has recognized certain
exceptions to the application of the exhaustion doctrine. One
such applicable exception arises when the respondent is not given
the opportunity to raise its objections at the administrative
level because Commerce did not address the issue until the final
determination.”).
Consol. Ct. No. 11-00533 Page 20
III. Inclusion of Elegant Living and Eswell Enterprise on the AFA
List Was Not Supported by Substantial Evidence
A. Background
In order to select mandatory respondents for the
instant CVD investigation, Commerce issued quantity and value
(“Q&V”) questionnaires to, inter alia, Shanghai Eswell Enterprise
Co., Ltd. (“Eswell Enterprise”), Elegant Living Corp. (“Elegant
Living”), and Times Flooring Co., Ltd. (“Times Flooring”).
Issuance of Q&V Questionnaires, C-570-971, POI 09 (Dec. 3, 2010),
Admin. R. Pt. 1 Pub. Doc. 91 attach. 1. When no company under
these names responded, Commerce placed these companies on the
list of non-cooperating companies that would receive an AFA rate.
Preliminary Determination, 76 Fed. Reg. at 19,042.
Following the Preliminary Determination, Plaintiffs
filed ministerial error allegations protesting the inclusion of
Eswell Enterprise, Elegant Living, and Times Flooring on the AFA
list. In the ministerial error allegations, Plaintiff Shanghai
Eswell Timber Co., Ltd. (“Eswell Timber”) argued that Eswell
Enterprise was its non-exporting parent company, Eswell Timber
Ministerial Error Comments, C-570-971, POI 09 (Mar. 25, 2011),
Admin. R. Pt. 1 Pub. Doc. 256 at 1–2 (“Eswell Allegation”), and
Plaintiff Samling Group argued that Elegant Living and Times
Flooring represented inaccurate listings of, respectively,
Baroque Timber Industries (Zhongshan) Co., Ltd., (“Baroque
Timber”) and Suzhou Times Flooring Co., Ltd., Samling Group
Consol. Ct. No. 11-00533 Page 21
Ministerial Error Allegation, C-570-971, POI 09 (Mar. 24, 2011),
Admin. R. Pt. 1 Pub. Doc. 255 at 2 (“Samling Allegation”).
In response to the ministerial error allegations,
Commerce requested additional information from Plaintiffs.
Ministerial Error Allegations Mem., C-570-971, POI 09 (Apr. 21,
2011), Admin. R. Pt. 1 Pub. Doc. 270 at 4; I & D Mem. Cmt. 6 at
47-48. Eswell Timber provided business and shareholder
information outlining Eswell Enterprise’s ownership of Eswell
Timber and a statement from Eswell Enterprise confirming that it
did not independently export subject merchandise. Eswell Timber
Questionnaire Resp., C-570-971, POI 09 (June 30, 2011), Admin. R.
Pt. 1 Pub. Doc. 326 at 5, attach. 1 (“Eswell Resp.”). Samling
Group provided information on its corporate and capital
structure, noting that, though no company under the name Elegant
Living existed within the Samling Group hierarchy, Baroque Timber
occasionally uses “Elegant Living” as a trade name. Samling Group
Questionnaire Resp., C-570-971, POI 09 (June 30, 2011), Admin. R.
Pt. 1 Pub. Doc. 325 exs. A, B (“Samling Resp.”); Samling 6/30
Questionnaire Public Version Narrative, C-570-971, ARP 09 (July
1, 2011), Admin. R. Pt. 1 Pub. Doc. 328 at 2 (“Samling Narrative
Resp.”).
Commerce eventually removed Times Flooring from the AFA
list but not Eswell Enterprise or Elegant Living. Final
Determination, 76 Fed. Reg. at 64,315-17; I & D Mem. Cmt. 6 at
Consol. Ct. No. 11-00533 Page 22
49. According to Commerce, although the strong similarities in
names and addresses shared by the “Times Flooring” companies
justified merging the two, Baroque Timber and Elegant Living did
not share equally dispositive similarities. I & D Mem. Cmt. 6 at
49. Commerce primarily justified its decision by relying on
evidence that separate companies within Samling Group used
“elegant living” as part of their names. Id.; Samling Resp.
ex. B. Therefore, Commerce reasons, since a company separate
from Baroque Timber potentially existed, a separate response
should have been filed on behalf of Elegant Living. See I & D
Mem. Cmt. 6 at 49. Likewise, Commerce concluded that Eswell
Enterprise was a separate company from Eswell Timber, and
therefore, it should have responded separately to the Q&V
questionnaire it received. Id.
B. Analysis
In the instant case, Commerce emphasizes Plaintiffs’
failure to submit information by the Q&V deadline as a failure to
cooperate, thereby justifying the application of AFA. Def.’s
Resp. at 26–27. And, certainly, setting and enforcing its own
deadlines is within Commerce’s discretion. See, e.g., Reiner
Brach, 26 CIT at 559, 206 F. Supp. 2d at 1334 (“Commerce has
broad discretion to establish its own rules governing
administrative procedures, including the establishment and
enforcement of time limits . . . .”); Yantai Timken Co. v. United
Consol. Ct. No. 11-00533 Page 23
States, 31 CIT 1741, 1755, 521 F. Supp. 2d 1356, 1371 (2007) (“In
order for Commerce to fulfill its mandate to administer the
antidumping duty law, including its obligation to calculate
accurate dumping margins, its must be permitted to enforce the
time frame provided in its regulations.”). Furthermore, this
Court has upheld Commerce’s enforcement of its regulatory
deadlines when it rejects new factual information submitted after
the applicable deadline and subsequently applies AFA. Hyosung
Corp. v. United States, 35 CIT __, Slip. Op. 11-34 at *9–11 (Mar.
31, 2011) (upholding Commerce’s use of adverse inferences when
the respondent failed to report that it did not have shipments of
subject merchandise in response to a Q&V questionnaire); see also
Uniroyal Marine Exps. Ltd. v. United States, 33 CIT __, 626 F.
Supp. 2d 1312, 1316–17 (2009); Yantai Timken, 31 CIT at 1755–56,
521 F. Supp. 2d at 1371; Reiner Brach, 26 CIT at 559, 206 F.
Supp. 2d at 1334.
Nevertheless, Commerce’s discretion in rejecting
untimely information is not absolute. Rather, as the Court of
Appeals has held, Commerce abuses its discretion when it refuses
to consider untimely “corrective” information. Timken U.S. Corp.
v. United States, 434 F.3d 1345, 1353–54 (Fed. Cir. 2006); NTN
Bearing Corp. v. United States, 74 F.3d 1204, 1208–09 (Fed. Cir.
1995). “[A] regulation which is not required by statute,” such
as the timeliness regulation, “may, in appropriate circumstances,
Consol. Ct. No. 11-00533 Page 24
be waived and must be waived where failure to do so would amount
to an abuse of discretion.” NTN Bearing Corp., 74 F.3d at 1207.
In addition, when considering correction of an error at the
preliminary results stage, the court “balance[s] the desire for
accuracy . . . with the need for finality at the final results
stage.” Timken, 434 F.3d at 1353–54. When a respondent seeks to
correct an error after the preliminary results but before the
final results, this court may require Commerce to analyze the new
information. See id.16
When considering whether a rejection of untimely
information amounts to an abuse of discretion, the court weighs
the burden of accepting late submissions and the need for
finality against the statute’s goals of accuracy and fairness.
See Grobest & I-Mei Indus. (Vietnam) Co. v. United States, 36 CIT
16The Court of Appeals recently held in PSC VSMPO-AVISMA v.
United States, Appeal No. 2011-1370, -1395 at *17 (Fed. Cir. July
27, 2012) that “[t]he role of judicial review is limited to
determining whether the record is adequate to support the
administrative action. A court cannot set aside application of a
proper administrative procedure because it believes that properly
excluded evidence would yield a more accurate result if the
evidence were considered.” However, PSC VSMPO-AVISMA is
distinguishable from the Court of Appeals’ prior holdings in NTN
Bearings and Timken. Whereas PSC VSMPO-AVISMA concerned
submission of factual information to supplement the record, NTN
Bearings and Timken concerned correction of errors at the
preliminary results stage. We do not read PSC VSMPO-AVISMA’s
holding that the court should not interfere with the creation of
the administrative record to be in tension with the court’s
responsibility to review Commerce’s consideration of errors for
abuse of discretion. Furthermore, in this case Commerce
requested new factual information to supplement the record, so
the concerns expressed in PSC VSMPO-AVISMA are not present.
Consol. Ct. No. 11-00533 Page 25
__, 815 F. Supp. 2d 1342, 1365 (2012); Fischer S.A. Comercio,
Industria & Agricultura v. United States, 34 CIT __, 700 F. Supp.
2d 1364, 1375–77 (2010). “Thus, while deferring to Commerce’s
necessary discretion to set and enforce its deadlines, the court
will review on a case-by-case basis whether the interests of
accuracy and fairness outweigh the burden placed on the
Department and the interest in finality.” Grobest, 36 CIT at __,
815 F. Supp. 2d at 1365. “Finality concerns only begin to
counterbalance accuracy concerns when [Commerce] reaches the
final results stage.” Fischer, 34 CIT at __, 700 F. Supp. 2d
at 1375.
In this case Commerce, following the Preliminary
Determination and in response to Plaintiffs’ ministerial error
allegations, sought additional evidence in support of Plaintiffs’
claims, which Plaintiffs subsequently placed on the record.
Commerce’s failure to take into account that evidence amounts to
an abuse of discretion where, as here, the concerns for accuracy
and fairness outweigh concerns of finality and agency burden.17
Furthermore, Commerce’s failure to take into account evidence on
the record that supported removing Elegant Living and Eswell
17
Because both the ministerial error allegations and the
new record evidence occurred prior to the Final Determination,
there are no significant finality concerns here. Nor does the
relatively small amount of new record evidence to be considered
present any concern with regard to agency burden. Cf. Fischer, 34
CIT at __, 700 F. Supp. 2d at 1376–77.
Consol. Ct. No. 11-00533 Page 26
Enterprise from the AFA list renders the determination
unsupported by substantial evidence. Universal Camera Corp. v.
NLRB, 340 U.S. 474, 488 (1951) (“The substantiality of evidence
must take into account whatever in the record fairly detracts
from its weight.”).
The record contains evidence that Elegant Living is a
misidentification of Baroque Timber. The Samling Group put
evidence on the record that Baroque Timber (1) uses “Elegant
Living” as a trade name and brand, (2) resides at the address
listed for Elegant Living, and (3) exports subject merchandise.
Samling Allegatin at 2; Samling Narrative Resp. at 1–2.
Furthermore, Samling Group submitted evidence demonstrating that
no company with the exact name of Elegant Living Corporation
exists within the company hierarchy. See Samling Resp. ex. B.18
In rejecting the evidence supporting Plaintiffs’ claim,
Commerce pointed to Samling’s annual report to demonstrate the
existence of several “Elegant Living” companies within Samling
Group, notably a company in the PRC owned by Baroque Timber and
named Shanghai Elegant Living Timber Products. I & D Mem. Cmt. 6
at 49. Commerce may be correct in asserting that because
“Elegant Living” could have identified multiple companies
separate from Baroque Timber, “additional Q&V Questionnaire
18
The court notes that the exact same evidence led Commerce
to remove Times Flooring from the AFA list. See I & D Mem. Cmt. 6
at 49.
Consol. Ct. No. 11-00533 Page 27
responses should have been submitted, even if they indicated ‘no
exports.’” Id. However, such argument simply ignores the
evidence indicating that the “Elegant Living” in the petition was
Baroque Timber, as well as evidence that no actual Elegant Living
Corporation exists.19 Failure to take this evidence into account
fails the substantial evidence test. If Commerce wishes to keep
an “Elegant Living” company on the AFA list, the interests of
accuracy and fairness demand that Commerce must either determine,
based on substantial evidence, that Elegant Living Corporation
does exist or determine what company within Samling Group, if
any, failed to cooperate.
Commerce has a stronger case for including Eswell
Enterprise, but not one which ultimately meets the substantial
evidence standard. A determination of affiliation or collapsing
falls to Commerce to decide and not to respondents in deciding
what information to supply. Cf. Reiner Brach, 26 CIT at 556–57,
206 F. Supp. 2d at 1331. Moreover, the Q&V questionnaire clearly
requested from the recipient, Eswell Enterprise, information
regarding exportation of subject merchandise. Q&V Questionnaire,
C-570-971, POI 09 (Dec. 3, 2010), Admin. R. Pt. 1 Pub. Doc. 90
19
Commerce does not contend in its briefs that Elegant
Living Corporation exists. In this sense, there is no dispute
between the parties as to the existence of Elegant Living; rather
they dispute the application of AFA. It is difficult to see how
leaving Elegant Living on the AFA list serves any purpose when no
such company exported or will export anything to the United
States.
Consol. Ct. No. 11-00533 Page 28
Attach. 1. The accompanying letter also warned that failure to
cooperate to the best of one’s ability could result in the use of
adverse inferences. Id. at 1. Thus, Eswell Enterprise could have
simply responded with “no exports.”
Had no further evidence regarding Eswell Enterprise
been placed on the record, our inquiry might end here. Cf.
Hyosung, 35 CIT at __, Slip. Op. 11-34 at *10–11. However,
unlike the facts of Hyosung, where Commerce rejected untimely new
information, in this case Commerce sought and permitted
Plaintiffs to place additional information on the record. This
includes evidence indicating that Eswell Enterprise is the parent
company of Eswell Timber and that Eswell Enterprise does not
independently export subject merchandise.
Commerce may not request and subsequently ignore record
evidence. As discussed above, Eswell Enterprises’s failure to
respond to the Q&V Questionnaire is not dispositive once a
correction is requested and new evidence is placed on the record.
Under these circumstances, Commerce must consider the evidence so
long as the concerns for accuracy and fairness outweigh those for
finality and agency burden — which they do here — and failure to
consider the evidence renders a determination unsupported by
substantial evidence.
Because the record contains evidence permitting
Commerce to determine that Elegant Living and Eswell Enterprise
Consol. Ct. No. 11-00533 Page 29
were not companies that belonged on the AFA list and Commerce
unjustifiably failed to take into account this evidence, the
court finds Commerce’s decision unsupported by substantial
evidence and remands for reconsideration.
CONCLUSION
In accordance with the foregoing opinion, the Final
Determination, is affirmed, in part, and remanded, in part.
Commerce’s decisions to use AFA in calculating the
value of the LTAR subsidy and the inclusion of the BET in the
Final Determination are affirmed. Commerce’s inclusion of
Elegant Living and Eswell Enterprises is remanded for
reconsideration or further explanation consistent with this
opinion.
Commerce shall have until October 30, 2012, to complete
and file its remand redetermination. Plaintiffs and Defendant-
Intervenors shall have until November 13, 2012, to file comments.
Plaintiffs, Defendant, and Defendant-Intervenors shall have until
November 27, 2012, to file any reply.
/s/ Donald C. Pogue
Donald C. Pogue, Chief Judge
Dated: August 31, 2012
New York, New York