Shandong Huarong General Group Corp. v. United States

SLIP OP . 03-135
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE : RICHARD K. EATON , JUDGE
____________________________________
:
SHANDONG HUARONG GENERAL GROUP :
CORPORATION AND LIAONING MACHINERY :
IMPORT & EXPORT CORPORATION , :
:
PLAINTIFFS , :
:
V. : COURT NO . 01-00858
: PUBLIC VERSION
UNITED STATES , :
:
DEFENDANT. :
____________________________________:
[Antidumping determination remanded.]
Decided: October 22, 2003
Hume & Associates, PC (Robert T. Hume), for Plaintiffs.
Peter D. Keisler, Assistant Attorney General, Civil Division, United States Department of
Justice; David M. Cohen, Director, Civil Division, Commercial Litigation Branch; Patricia M.
McCarthy, Assistant Director, International Trade Section, Civil Division, Commercial
Litigation Branch (Paul D. Kovac); Linda S. Chang, Office of the Chief Counsel for Import
Administration, United States Department of Commerce, of counsel, for Defendant.
OPINION AND ORDER
EATON, Judge: This matter is before the court on the motion of plaintiffs Shandong Huarong
General Group Corporation (“Huarong”) and Liaoning Machinery Import and Export
Corporation (“LMC”) (collectively the “Companies”) for judgment upon the agency record
pursuant to USCIT R. 56.2. By their motion, the Companies contest certain aspects of the United
States Department of Commerce’s (“Commerce” or the “Department”) ninth administrative
COURT NO . 01-00858 PAGE 2
review of heavy forged hand tools (“HFHTs”) from the People’s Republic of China (“PRC”), see
Heavy Forged Hand Tools From the P.R.C., 66 Fed. Reg. 48,026 (ITA Sept. 17, 2001) (final det.)
(“Final Results”), covering the period of review (“POR”) February 1, 1999, through January 31,
2000. Id. at 48,026. The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c)
(2000) and 19 U.S.C. § 1516a(a)(2)(A)(i)(I) (2000). For the reasons set forth below the court
remands this matter for further action in conformity with this opinion.
BACKGROUND
On February 14, 2000, Commerce published a notice of opportunity to request
administrative reviews of the antidumping order covering HFHTs from the PRC. See
Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation, 65 Fed. Reg.
7348, 7349 (ITA Feb. 14, 2000) (opportunity request admin. rev.). In response, several PRC
entities—including the Companies—requested administrative reviews. See HFHTs, Finished or
Unfinished, With or Without Handles, From the P.R.C., 65 Fed. Reg. 66,691, 66,692 (ITA Nov.
7, 2000) (prelim. results and prelim. partial rescission of antidumping duty admin. revs.)
(“Preliminary Results”). Specifically, Huarong “requested that the Department conduct an
administrative review of its exports of HFHTs within the bars/wedges class or kind of
merchandise,” and LMC “requested that the Department conduct an administrative review of its
exports of HFHTs within the bars/wedges class or kind of merchandise . . . .” Id. at 66,692.1
1
During the POR Huarong also had sales of axes/adzes to the United States. See
Prelim. Results, 66 Fed. Reg. at 66,692; Pls.’ Conf. Mem. Supp. Mot. J. Agency R. (“Pls.’
Mem.”) at 5 n.2 (“Huarong reported in its June 12, 2000, questionnaire response that it did not
have access to the required information to participate in the review with respect to axes/adzes,
(continued...)
COURT NO . 01-00858 PAGE 3
Commerce then commenced its investigation and distributed standard nonmarket economy
(“NME”)2 country antidumping questionnaires.
LMC timely filed its initial questionnaire response. See LMC Sections A & C
Questionnaire Resp., Pub. R. Doc. 22, Conf. R. Doc. 2.3 In doing so, LMC provided sales data
and information about its sales process. As to sales, LMC claimed that it sold all of its
bars/wedges to a single United States customer (“the Buyer”). See Conf. R. Doc. 2, Ex. 1 (sales
quantity); id., Ex. 14 (customer identity).4 As to its sales process, LMC stated the following:
“Customers provide purchase orders and LMC confirms these orders,” Pub. R. Doc. 22 at A-10;
it “[did] not use resellers,” id. at A-11; all of its sales “are based on purchase orders,” id.; “no
affiliate was involved in the sale of the subject merchandise to the U.S. during the POR,” id.; and
1
(...continued)
and in its September 18, 2000, [response] that its supplier factory refused to respond. In the
Preliminary Results, Commerce found that Huarong’s supplier failed to act to the best of its
ability in responding to the questionnaires with respect to axes/adzes, and therefore assigned
adverse facts available.”). Because the Companies do not take issue with Commerce’s
determination as to these sales, the court does not address Commerce’s determination in this
respect.
2
A “nonmarket economy” country is defined as “any foreign country that the
administering authority determines does not operate on market principles of cost or pricing
structures, so that sales of merchandise in such country do not reflect the fair value of the
merchandise.” 19 U.S.C. § 1677(18)(a). “Any determination that a foreign country is a
nonmarket economy country shall remain in effect until revoked by the administering authority.”
19 U.S.C. § 1677(18)(c)(i).
3
In this response, LMC requested a company-specific antidumping duty margin
and provided evidence of its independence from government control. See Pub. R. Doc. 22 at A-
2.
4
LMC identified the Buyer as [[ ]]. See Conf. R. Doc. 2,
Ex. 14.
COURT NO . 01-00858 PAGE 4
although its PRC supplier5 (“the Supplier”) of the subject merchandise “knew the ultimate
destination [of the subject merchandise] because it arranged the shipments,” id. at A-15, “[t]here
was no understanding restricting, discouraging, or prohibiting sales in the home market or
elsewhere. The supplier does not have the right to review LMC’s sales records and the supplier
does not provide after-sales service in the United States, participate in U.S. sales calls or
activities . . . .” Id.6 In support of these statements, LMC supplied representative samples of
invoices, packing lists, and other documentation. See, e.g., id., Ex. 6.
Commerce then directed LMC to complete Section D, the “Factors of Production
Questionnaire,” and to provide data about the factors of production for the subject merchandise
LMC sold. See LMC Section D Questionnaire Resp., Pub. R. Doc. 29, Conf. R. Doc. 8. In its
response, LMC stated that it “is a trading company and did not produce any subject
merchandise.” Pub. R. Doc. 29 at D-2. LMC further stated that “information relating to [the
manufacturer of the subject merchandise] is on the record in this proceeding and is not being
reproduced.” Id. at D-2–D-3. LMC further stated that its Supplier of the subject merchandise
“produced [all of the bars] shipped by LMC to the US market and entered during the POR.” Id.at D-3.7
5
LMC’s supplier of the subject merchandise was [[ ]].
6
In other words, it was clear from LMC’s questionnaire responses that it was
acknowledging itself to be the seller of this subject merchandise.
7
The Supplier supplied LMC with [[ ]] of the subject
merchandise that LMC claimed as sales to the Buyer. See Conf. R. Doc. 2, Ex. 12 (stating LMC
sold a total of [[ ]] pieces of subject merchandise); id. at D-3 (stating [[
(continued...)
COURT NO . 01-00858 PAGE 5
After reviewing LMC’s Sections A, C, and D responses, Commerce asked LMC to
provide additional information, which LMC did in a timely fashion. See, e.g., LMC Supp.
Questionnaire Resps. of: Aug. 23, 2000, Pub. R. Doc. 40, Conf. R. Doc. 12; Sept. 18, 2000, Pub.
R. Doc. 57, Conf. R. Doc. 20; Sept. 29, 2000, Pub. R. Doc. 70, Conf. R. Doc. 32; Feb. 26, 2001,
Pub. R. Doc. 88, Conf. R. Doc. 45; Apr. 9, 2001, Pub. R. Doc. 96, Conf. R. Doc. 52; May 11,
2001, Pub. R. Doc. 108, Conf. R. Doc. 62; and May 30, 2001, Pub. R. Doc. 116, Conf. R. Doc.
69. In general, these supplemental questionnaires focused on information relating to the various
factors of production used in the manufacture of the subject merchandise. In addition to this
material, in the questionnaire response submitted on September 18, 2000, LMC indicated that it
had reported all of its U.S. sales. See Pub. R. Doc. 57 at 3 (Q: “Please confirm that you have
reported all sales to the United States entered during the period of review (‘POR’).” A: “LMC
confirms that it has reported all sales of the subject merchandise that were exported by LMC and
entered U.S. customs during the POR.”).
For its part, Huarong also timely filed its initial questionnaire response. See Huarong
Sections A & C Questionnaire Resp., Pub. R. Doc. 23, Conf. R. Doc. 3.8 As with LMC, Huarong
provided sales data and information dealing with its sales process. See Pub. R. Doc. 23.
Huarong was instructed to “state the total quantity and value of merchandise under review that
you sold during the period of review (‘POR’) in the United States” and to “[e]xclude your U.S.
7
(...continued)
]] shipped by LMC to the US market during the POR.”).
8
In its questionnaire response, Huarong requested a company-specific antidumping
duty margin and provided evidence of its independence from government control.
COURT NO . 01-00858 PAGE 6
sales to affiliated resellers. Report instead the resales to the first unaffiliated customer.” Pub. R.
Doc. 23 at A-1. In response, Huarong stated that it “had no affiliated resellers” and submitted
data as to its claimed U.S. sales. See id.; id., Ex. 1 (quantity and value of sales).9 As to its sales
process, Huarong was instructed to provide information about how it structured certain sales to
the United States. See Pub. R. Doc. 28 at A-10–A-12. In response, Huarong stated that “[f]or
sales made through resellers during the POR, Huarong arranged the sale for export. Huarong
does not restrict any reseller’s volume or geographic area for distribution. Huarong neither
provides customer lists to resellers nor makes joint sales calls with resellers.” Pub. R. Doc. 28 at
A-11. See id. at A-18; id., Ex. 5 (contract). Included with Huarong’s questionnaire response was
a copy of what it identified in its questionnaire response as a “sales contract” between it and what
it identified as a “reseller” (the “Export Agent”).10 Finally, the questionnaire stated that “[i]f you
are aware that any of the merchandise that you sold to another company in your country was
ultimately shipped to the United States, or was at the time [of] the sale intended to be shipped to
the United States, please contact the official in charge within two weeks of receipt of this
questionnaire.” Pub. R. Doc. 23 at A-16. In response, Huarong stated that it “sold some subject
merchandise” through the Export Agent.11 Conf. R. Doc. 3 at A-16.
9
As to theses sales, Huarong claimed that it sold [[ ]] of subject
merchandise to several United States customers including [[ ]]. See
Conf. R. Doc. 3, Ex. 1 (total quantity and value of sales); Ex. 10 (breaking out sales by customer
code); Ex. 12 (identifying customer codes).
10
The Export Agent was [[ ]]. See Conf. R. Doc. 3,
Ex. 5.
11
Huarong also stated that [[ ]]. Conf. R. Doc. 3 at A-
16.
COURT NO . 01-00858 PAGE 7
Commerce then directed Huarong to submit a response to Section D of the questionnaire.
See Huarong Section D Questionnaire Resp., Pub. R. Doc. 28, Conf. R. Doc. 7. Section D
requested information concerning the various factors of production used to manufacture the
subject merchandise. In response, Huarong stated that it was not providing actual data for the
factors of production but, rather, data based on “caps.” See Pub. R. Doc. 28 at D-6. Huarong
further stated that it was providing data based on “caps” for the factors of production of steel
billet, paint, labor, electricity, and coal. See Pub. R. Doc. 28 at D-6–D13.
Thereafter, in order to clarify certain information, Commerce asked Huarong to submit
answers to several supplemental questionnaires. See, e.g., Huarong Supp. Questionnaire Resps.
of: Sept. 18, 2000, Pub. R. Doc. 59, Conf. R. Doc. 22; Sept. 29, 2000, Pub. R. Doc. 68, Conf. R.
Doc. 30; Apr. 9, 2001, Pub. R. Doc. 102, Conf. R. Doc. 50; and May 30, 2001, Pub. R. Doc. 117,
Conf. R. Doc. 70. As with LMC’s supplemental questionnaire responses, most of the
information solicited by Commerce dealt with various factors of production. However, in the
questionnaire response submitted on September 18, 2000, Huarong also stated that it had
reported all of its U.S. sales. See Pub. R. Doc. 59 at 5 (Q: “Please confirm that you have reported
all sales to the United States entered during the period of review (‘POR’).” A: “Huarong
confirms that it has reported all sales of the subject merchandise that were exported by Huarong
and entered Customs during the POR.”).
Commerce then published the Preliminary Results. Based on information provided by the
Companies in their original and supplemental questionnaire responses, Commerce determined
COURT NO . 01-00858 PAGE 8
that they were each preliminarily entitled to company-specific antidumping duty margins separate
from the PRC-wide antidumping duty margin. See Prelim. Results, 65 Fed. Reg. at 66,693.
Commerce calculated Huarong’s preliminary company-specific antidumping duty margin for
bars/wedges to be 0.44 percent, and calculated LMC’s preliminary company-specific
antidumping duty margin for bars/wedges to be 0.01 percent. Id. at 66,696. The PRC-wide
antidumping duty margin for bars/wedges was preliminarily calculated to be 139.31 percent. Id.
Commerce then notified the Companies that it would conduct verification of their
submitted sales and factors of production information. See Letter from Commerce to law firm of
Hume & Assoc. of 4/9/01, Pub. R. Doc. 100 (“LMC Sales Agenda”); Letter from Commerce to
law firm of Hume & Assoc. of 4/9/01, Pub. R. Doc. 98 (“Huarong Sales Agenda”). Included
with this notification was an outline of the information Commerce intended to review at
verification. See generally LMC Sales Agenda; Huarong Sales Agenda.
Commerce conducted verification of LMC’s questionnaire responses from April 23
through April 26, 2001. See Verification in Dalian, Liaoning, the P.R.C, of the Questionnaire
Resps. of LMC in the Antidumping Duty Admin. Rev. of HFHTs from the P.R.C., Conf. R. Doc.
73 (“LMC Verification Report”). In its verification report, Commerce noted that [[
]]. Id. Commerce also made the following “significant findings”: (1) “[u]pon arrival at
COURT NO . 01-00858 PAGE 9
verification [the Department] observed that LMC had prepared none of the documentation
requested in the [verification] outline”; and (2) that the “overwhelming majority of sales
activities of subject merchandise sales reported by LMC were actually performed by [[
]].” Id. In other words, it was only at verification,
and not before, that Commerce learned the actual nature of these transactions.
At sales verification, Commerce found that LMC was not the “seller” of the bars/wedges
but, rather, that “[f]or bar sales LMC’s role is largely one of processing documents for shipment
and processing receipt of payment.” LMC Verification Report at 5. After reviewing LMC’s
records, Commerce found that
LMC used U.S. importer records to prepare its sales listings to the
Department and thus did not have the database used as the source
of its response. However, it did have sales invoices for each sale
of subject merchandise reported to the Department and these
reconciled closely to the amounts reported to the Department.
Id. at 7.
Commerce then conducted verification of Huarong’s questionnaire responses from May 2
through May 9. See Verification in Dongping Town, Shandong Province, the P.R.C., of the
Questionnaire Resps. of Shandong Huarong Gen. Group Corp. in the Admin. Rev. of HFHTs
from the PRC, Conf. R. Doc. 74 (“Huarong Verification Report”). Again, as with LMC,
Commerce made certain “significant findings,” including that “[t]he overwhelming majority of
sales activities for subject merchandise sales reported by [[
COURT NO . 01-00858 PAGE 10
]].”12 Id. at 1. Indeed, Commerce
12
At verification, Commerce learned from Huarong officials the nature of
Huarong’s actual sales process for bars/wedges to the Buyer through the Export Agent.
Commerce found that
for [these sales] [the Buyer] contacts Huarong directly through a
purchase order. While this purchase order has [the Export Agent]
named as the recipient, both [the Export Agent] and Huarong
stated that Huarong is the only recipient of the purchase order. The
prices for these sales to [the Buyer] are based on a price agreement
between Huarong and [the Buyer]. Upon receipt of the order,
Huarong will directly send an order confirmation to [the Buyer]. If
[the Buyer] desires any changes in its order, be it quantity, price,
terms of sale or shipment instructions, it will contact Huarong
directly. Upon sending an order confirmation to [the Buyer],
Huarong sends production orders to its factory. Upon completion
of production, Huarong arranges shipment of the product to the
port. Huarong and not [the Export Agent] enter[s] the sale in its
accounts receivable ledger. Neither Huarong nor [the Export
Agent] directly arrange [sic] international ocean freight, but rather
a shipping forwarder arranges ocean shipment. However, Huarong
and not [the Export Agent] pays for any ocean freight and
insurance to the freight forwarder. It is at this point of shipment
from Huarong to the freight forwarder that Huarong first notifies
[the Export Agent] of the sale. Prior to this point [the Export
Agent] has no knowledge of the sale. [The Export Agent] is made
aware of the sale at this time as Huarong sends [the Export Agent]
a preliminary packing list on which [the Export Agent] creates an
official packing list. Huarong stated that [the Export Agent]’s
name should be on the packing list as it receives payment from [the
Buyer], rather than Huarong. . . . Upon receipt of payment from
[the Buyer], [the Export Agent] retains a . . . fee and sends
Huarong the remaining amount. Huarong records the entire
amount of the invoice in its accounts receivable and sales ledger
and records the agent fee provided to [the Export Agent] in its
agent fee expense ledger.
Huarong and not [the Export Agent] record [sic] [the Buyer’s]
sales in their [sic] sales ledgers, accounts receivable and inventory
records.
(continued...)
COURT NO . 01-00858 PAGE 11
determined that the [[ ]] were actually Huarong’s. See Application of
Adverse Facts Available to Shandong Huarong General Group Corp., Conf. R. Doc. 84 at 3
(“[T]he information reviewed at verification clearly demonstrates that Huarong records these
sales in its books and records [them] as sales to the U.S. customer in question.”). Finally,
Commerce determined that once the sales [[
]], there were no significant discrepancies in total sales quantity and value of
reconciliation data, or sales completeness, based on Huarong’s sales database. See id. at 7–9.
Commerce also discussed with Huarong officials the various factors of production for the
subject merchandise and its use of “caps.” Commerce stated that
[a]ccording to company officials, the consumption amounts
reported for the factors of production were based on what company
officials call “caps,” which are the company’s closest
approximation of the inputs used based on years of production
experience manufacturing the subject merchandise. Company
officials stated that they no longer had the worksheets showing
how they computed the “caps”; however, . . . the company
supported their reported “caps” with actual production and work
records from the POR.
Huarong Verification Report at 10–11. Although Commerce stated Huarong was unable to
supply the worksheets it used to calculate all of the “caps,” some data was available for the
inputs of electricity, paint, and coal. Using these data as its starting point, Commerce tested the
reasonableness of each reported “cap” for these factors of production. For the factor of
production “paint,” Commerce stated that “[t]he average consumption rates based on the
12
(...continued)
Huarong Verification Report at 6 (internal citations omitted).
COURT NO . 01-00858 PAGE 12
worksheets were significantly different and much greater than the amounts reported to the
Department.” Id. at 13. For the factor of production “electricity,” Commerce stated that the
“consumption rates based on company records all exceeded the consumption rates reported by
Huarong to the Department.” Id. at 15. For the factor of production “coal,” Commerce stated
that the “consumption rates based on company records all exceeded the consumption rates
reported by Huarong to the Department.” Id. Finally, Commerce stated that it was unable to
“reconcile certain factors of production to company cost records . . . due to time constraints . . . .”
Id. at 16.
After review and analysis of the questionnaire responses and the information gathered at
verification, Commerce determined that the use of facts available and adverse facts available was
warranted to determine the antidumping duty margins for both LMC and Huarong. See Final
Results, 66 Fed. Reg. at 48,028; see also Issues and Decision Mem. for the Admin. Revs. of
HFHTs from the P.R.C. — February 1, 1999 through January 31, 2000, Pub. R. Doc. 144
(“Decision Memo”). As to LMC, Commerce explained:
Pursuant to [19 U.S.C. §§ 1677e(a)(2)(A) and (C)], the Department
has determined that it is appropriate to apply the facts available for
purposes of determining the dumping margin for LMC in the
instant review. Pursuant to [19 U.S.C. § 1677e(a)(2)(A)], we have
determined that LMC has withheld significant information that was
requested by the Department such that the Department is unable to
calculate a dumping margin with respect to this company.
Pursuant to [19 U.S.C. § 1677e(a)(2)(C)], we further determined
that LMC has significantly impeded the Department’s ability to
accurately determine a margin of dumping for LMC in the instant
administrative review. . . .
Pursuant to [19 U.S.C. § 1677m(i)], the Department conducted an
COURT NO . 01-00858 PAGE 13
on-site verification of the information submitted by LMC at its
sales headquarters in the PRC. In analyzing LMC’s record
information pursuant to [19 U.S.C. § 1677m(e)], we have
determined significant portions of LMC’s reported data could not
be verified in accordance with [19 U.S.C. § 1677m(e)(2)]. Upon
arrival at verification, the Department discovered that LMC had
prepared none of the documentation requested in the April 9, 2001
sales verification outline. Moreover, during verification, it became
evident that LMC could not provide the information necessary to
verify its own submissions. As a consequence of our findings at
verification, pursuant to [19 U.S.C. § 1677m(e)(4)], we determined
that LMC did not act to the best of its ability in responding to the
Department’s requests for information. . . .
For the reasons discussed above, the application of [19 U.S.C. §
1677m(e)] does not overcome [19 U.S.C. § 1677e(a)]’s direction to
use facts otherwise available to determine a margin of dumping for
LMC in this administrative review. Thus the use of facts available
is warranted for LMC in this case. Moreover, we determine that,
due to the nature of LMC’s verification failures, and the
inadequacy of its cooperation, the integrity of LMC’s company
reported data on the whole is compromised. Therefore, we
determine that LMC has not adequately demonstrated its
entitlement to rates separate from the government entity. As a
consequence LMC will receive the PRC-wide entity rates.
Moreover, . . . the Department has determined, pursuant to [19
U.S.C. § 1677e(b)], that LMC did not cooperate by acting to the
best of its ability to comply with the Department’s requests for
information.
Final Results, 66 Fed. Reg. at 48,028 (emphasis in original). In support of its determination that
LMC “withheld” information, Commerce explained that
[t]he Department discovered at verification that LMC had reported
U.S. sales of bars in its sales database which were in fact sales by
another PRC company to the United States. . . . Because these
misreported sales constituted the bulk of LMC’s reported U.S.
sales, we have determined that LMC’s database is inadequate for
purposes of calculating a dumping margin for this respondent.
Decision Memo at 6–7. In support of its determination that LMC “significantly impeded” the
COURT NO . 01-00858 PAGE 14
investigation, Commerce explained that
LMC demonstrated at verification that it was fully aware of its lack
of any meaningful involvement in these sales from the beginning
of this review. Yet . . . LMC misreported the sales as its own in its
initial questionnaire response and in the ensuing supplemental
responses. As a consequence of LMC’s failure to accurately
describe the true nature of these sales in its questionnaire and
supplemental responses, the Department was unable to determine
that the sales were misreported until verification. As a direct result
of LMC misreporting its sales, the Department: 1) issued a
verification outline to LMC for purposes of reviewing the data
relevant to these transactions; 2) did not anticipate the need to
verify these transactions at another company’s facilities in the
PRC; and 3) incorrectly included these sales in the preliminary
dumping margin analysis for LMC. Thus, LMC’s
mischaracterization of these sales significantly impeded the
Department’s ability to accurately determine a margin of dumping
for LMC in the instant administrative review.
Id. at 10. As to Huarong, Commerce explained:
Pursuant to [19 U.S.C. §§ 1677e(a)(2)(A) and (C)], the Department
has determined that it is appropriate to apply the [f]acts available
for purposes of determining the dumping margin for Huarong in
the instant review. Specifically, Huarong failed to report the great
majority of its U.S. market sales to the Department. Thus,
pursuant to [19 U.S.C. § 1677e(a)(2)(A)], the Department has
determined that Huarong has withheld information that was
requested by the Department. . . . In addition, pursuant to [19
U.S.C. § 1677e(a)(2)(C)], we have determined that Huarong has
significantly impeded this review.
We further determine that Huarong has failed to satisfy several of
the requirements enunciated by [19 U.S.C. § 1677m(e)]. Pursuant
to [19 U.S.C. § 1677m(i)], the Department conducted an on-site
verification of Huarong’s data at Huarong’s headquarters in China.
Upon arrival at verification, the Department found that Huarong
had prepared almost no documents requested of it in the
Department’s verification outline. As a result of the verification
team having to devote extensive amounts of time to examining
issues pertaining to the unreported U.S. sales, and difficulties in
verifying the accuracy of the reported factors of production input
COURT NO . 01-00858 PAGE 15
levels, there was insufficient time for the verifiers to conduct a full
factors of production verification. As a consequence of our
findings at verification, we determined that Huarong did not act to
the best of its ability in responding to the Department’s requests for
information pursuant to [19 U.S.C. § 1677m(e)(4)].
For the reasons stated above, the application of [19 U.S.C. §
1677m(e)] does not overcome [19 U.S.C. § 1677e(a)]’s direction to
use facts otherwise available for purposes of determining a
dumping margin for Huarong. Thus, the use of facts available is
warranted for Huarong in this case. Moreover, we determine that,
due to the nature of Huarong’s verification failures, and the
inadequacy of its cooperation, the integrity of this company’s
reported data on the whole is compromised. Therefore, we
determine that Huarong has not adequately demonstrated its
entitlement to rates separate from the government entity. As a
consequence Huarong will receive the PRC-wide entity rates.
Final Results, 66 Fed. Reg. at 48,028. In support of its determination that Huarong “withheld”
information in its questionnaire responses, Commerce explained that
the Department has determined that Huarong failed to report the
great majority of its U.S. sales. Thus, Huarong has withheld
information that was requested by the Department. By not
including these sales in its U.S. sales database and misidentifying
these transactions as sales to another Chinese company, for resale
to the United States, Huarong failed to disclose the fact that it: 1)
negotiated the sales prices and terms with the U.S. customer; 2)
received the purchase order directly from the U.S. customer; 3)
issued the order confirmation directly to the U.S. customer; 4)
incurred brokerage and handling and marine insurance expenses
for the transactions in question; and 5) never transferred ownership
of these unreported sales to the named PRC reseller.
Decision Memo at 4. In support of its determination that Huarong “significantly impeded” the
investigation, Commerce explained that
[a]s a direct consequence of Huarong’s mischaracterization of, and
failure to report, the majority of its sales to the United States, the
Department[:] 1) did not solicit further information from Huarong
regarding these transactions in its supplemental questionnaires; 2)
COURT NO . 01-00858 PAGE 16
did not anticipate the need to address these sales at Huarong’s
verification and thus scheduled Huarong’s verification without
regard to these transactions; and 3) did not include these sales in
the preliminary dumping margin analysis for Huarong. Thus,
Huarong’s mischaracterization of these sales significantly impeded
the Department’s ability to accurately determine a margin of
dumping for Huarong in the instant administrative review. With
respect to the verification, we note that Huarong’s failure to report
these sales in its database and its mischaracterization of them as
sales to a PRC reseller resulted in the Department having to spend
an inordinate amount of the scheduled verification at Huarong on
sales issues, thus reducing the amount of time left and impeding
the progress of the factors of production portion of the
verification . . . . This, compounded by the failure of Huarong to
adequately prepare for verification, led to the Department’s
inability to reconcile factors of production to the company’s cost
records.
Id. at 6.
Commerce then determined that the use of adverse facts available was warranted as the
Companies did not cooperate by acting to the best of their abilities to comply with the
Department’s requests for information. See Final Results, 66 Fed. Reg. at 48,028 (“[A]s
discussed in detail in the Decision Memorandum and the Huarong AFA Memorandum, pursuant
to [19 U.S.C. § 1677e(b)], we have determined that Huarong did not cooperate by acting to the
best of its ability to comply with the Department’s requests for information.”); id. (“[A]s
discussed in detail in the Decision Memorandum and the LMC AFA Memorandum, the
Department has determined, pursuant to [19 U.S.C. § 1677e(b)], that LMC did not cooperate by
acting to the best of its ability to comply with the Department’s requests for information.”). In
the Decision Memo, Commerce summarized its adverse facts available reasoning:
Section [1677e(b) of Title 19] states that if the administering
COURT NO . 01-00858 PAGE 17
authority . . . finds that an interested party has failed to cooperate
by not acting to the best of its ability to comply with a request for
information from the administering authority . . . , the
administering authority . . . , in reaching the applicable
determination under this title, may use an inference that is adverse
to the interests of that party in selecting from among the facts
otherwise available. Adverse inferences are appropriate “to ensure
that the party does not obtain a more favorable result by failing to
cooperate than if it had cooperated fully” . . . . Such adverse
inference may include reliance on information derived from[:] (1)
the petition; (2) a final determination in the investigation under this
title; (3) any previous review . . . [;] or (4) any other information on
the record.
To examine whether the respondent “cooperated” by “acting to the
best of its ability” under [19 U.S.C. § 1677e(b)], the Department
considers, inter alia, the accuracy and completeness of submitted
information and whether the respondent has hindered the
calculation of accurate dumping margins.
* * * * *
[A]s discussed . . . the accuracy of Huarong’s and LMC’s
responses could not be substantiated at verification and the
Department determined that it is appropriate to use the facts
available for these two respondents. Neither Huarong or LMC
cooperated by acting to the best of their respective abilities to
comply with the Department’s requests for information. Huarong
failed to report a substantial portion of its U.S. sales, despite its
knowledge that these were U.S. sales subject to this review. In
addition, at verification, Huarong was unable to substantiate
numerous reported factor of production values. LMC misreported,
as the predominant portion of its U.S. sales database, transactions
for which it was not the seller . . . and at verification could not
substantiate the reported data with respect to these sales.
Decision Memo at 11–12, 13 (citations omitted). As a result of these findings, the Companies’
subject merchandise was assigned the PRC-wide antidumping duty margin of 47.88 percent. See
Final Results, 66 Fed. Reg. at 48,029 n.1 (“Based on the results of this review the following
companies are no longer eligible for separate rates . . . Huarong, and LMC.”).
COURT NO . 01-00858 PAGE 18
The Companies then commenced this action arguing that Commerce’s determination was
improper. Specifically, the Companies contend that Commerce’s determination to apply the
PRC-wide antidumping duty margin to their subject merchandise is not supported by substantial
evidence or otherwise in accordance with law.
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); Huaiyin Foreign Trade Corp. (30) v. United States, 322 F.3d
1369, 1374 (Fed. Cir. 2003) (quoting 19 U.S.C. § 1516a(b)(1)(B)(i) (2000)). “Substantial
evidence is ‘such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.’” Huaiyin, 322 F.3d at 1374 (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197,
229 (1938)). The existence of substantial evidence is determined “by considering the record as a
whole, including evidence that supports as well as evidence that ‘fairly detracts from the
substantiality of the evidence.’” Id. (citing Atl. Sugar, Ltd. v. United States, 744 F.2d 1556, 1562
(Fed. Cir. 1984)). “In reviewing the Department’s construction of a statute it administers, [the
court defers] to the agency’s reasonable interpretation of the antidumping statutes if not contrary
to an unambiguous legislative intent as expressed in the words of the statute.” Id. at 1374–75
(citing Timex V.I., Inc. v. United States, 157 F.3d 879, 881–82 (Fed. Cir. 1998)). Furthermore,
“[a]s long as the agency’s methodology and procedures are reasonable means of effectuating the
statutory purpose, and there is substantial evidence in the record supporting the agency’s
conclusions, the court will not impose its own views as to the sufficiency of the agency’s
COURT NO . 01-00858 PAGE 19
investigation or question the agency’s methodology.” Ceramica Regiomontana, S.A. v. United
States, 10 CIT 399, 404–05, 636 F. Supp. 961, 966 (1986), aff’d 810 F.2d 1137 (Fed. Cir. 1987)
(citing Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843 (1984); Abbott
v. Donovan, 6 CIT 92, 97, 570 F. Supp. 41, 46–47 (1983)).
DISCUSSION
I. Commerce’s use of facts available and adverse facts available for LMC’s sales data and
Huarong’s sales and factors of production data
A. Facts available
It is Commerce’s duty to implement “the basic purpose of the [antidumping]
statute—determining current margins as accurately as possible,” Rhone Poulenc, Inc. v. United
States, 899 F.2d 1185, 1191 (Fed. Cir. 1990), and it is Commerce’s “responsibility to prevent
circumvention of the antidumping law.” Queen’s Flowers de Colom. v. United States, 21 CIT
968, 972, 981 F. Supp. 617, 622 (1997) (citing Mitsubishi Elec. Corp. v. United States, 12 CIT
1025, 1046, 700 F. Supp. 538, 555 (1988)). In order that Commerce may comply with these
mandates, interested parties that choose to participate in an investigation must cooperate by
complying with Commerce’s requests for information. Reiner Brach GmbH & Co. KG v. United
States, 26 CIT __, __, 206 F. Supp. 2d 1323, 1333 (2002) (citing Sanyo Elec. Co. v. United
States, 22 CIT 304, 314, 9 F. Supp. 2d 688, 697 (1998); RHP Bearings v. United States, 19 CIT
133, 136, 875 F. Supp. 854, 857 (1995)) (“It is the interested party’s obligation to create an
accurate record and provide Commerce with the information requested to ensure an accurate
COURT NO . 01-00858 PAGE 20
dumping margin.”).13 Nonetheless, Commerce “shall not decline to consider information that is
submitted by an interested party and is necessary to the determination but does not meet all the
applicable requirements,” if it meets five statutory criteria. See 19 U.S.C. § 1677m(e)14; Borden,
13
By statute, where an interested party attempts to comply with Commerce’s
requests for information but Commerce finds such information is deficient, Commerce must
provide the interested party with an opportunity to remedy the deficiencies. See 19 U.S.C. §
1677m(d); NTN Bearing Corp. of Am. v. United States, 26 CIT __, __, 104 F. Supp. 2d 110, 141
(2000) (quoting Borden, Inc. v. United States, 22 CIT 233, 262, 4 F. Supp. 2d 1221, 1245 (1998),
aff’d sub nom. F.lli De Cecco di Filippo Fara S. Martino S.p.A. v. United States, 216 F.3d 1027(Fed. Cir. 2000), aff’d in part and rev’d in part on other grounds by Micron Tech., Inc. v. United
States, 243 F.3d 1301 (Fed. Cir. 2001)) (“Section 1677m, which was enacted as part of the
URAA, is ‘designed to prevent the unrestrained use of facts available as to a firm which makes
its best effort to cooperate with [Commerce].’”). Here, no party argues that the provisions of
subsection 1677m(d) apply to the instant action.
14
Subsection 1677m(e) of title 19 provides:
In reaching a determination under [19 U.S.C. § 1675] the
administering authority . . . shall not decline to consider
information that is submitted by an interested party and is
necessary to the determination but does not meet all the applicable
requirements established by the administering authority . . . if—
(1) the information is submitted by the deadline
established for its submission,
(2) the information can be verified,
(3) the information is not so incomplete that it
cannot serve as a reliable basis for reaching the
applicable determination,
(4) the interested party has demonstrated that it
acted to the best of its ability in providing the
information and meeting the requirements
established by the administering authority . . . with
respect to the information, and
(5) the information can be used without undue
(continued...)
COURT NO . 01-00858 PAGE 21
22 CIT at __, 4 F. Supp. 2d at 1246 (“[U]nder subsection (e), even if the initial information
submitted is ‘deficient’, and even if, after an opportunity to ‘remedy or explain,’ the Department
finds the information ‘not satisfactory,’ it still must use the information, rather than facts
available, so long as the criteria of subsection (e) have been met.” (emphasis in original)); see
also NTN Bearing, 26 CIT at __, 104 F. Supp. 2d at 141 (citing Borden, 22 CIT at __, 4 F. Supp.
2d at 1245); Steel Auth. of India v. United States, 25 CIT __, __, 149 F. Supp. 2d 921, 927
(2001); Branco Peres Citrus, S.A. v. United States, 25 CIT __, __ n.7, slip op. 01-121 at 22 n.7
(citing Statement of Administrative Action accompanying the Uruguay Round Agreements Act,
H.R. Doc. No. 103-826(I), at 865 (1994), reprinted in 1994 U.S.C.C.A.N 4040, 4195; Borden, 22
CIT at __, 4 F. Supp. 2d at 1245–46) (“[S]ection 1677m(e) is, on its face, inapplicable in
situations where . . . a party has failed to ‘demonstrate[] that it acted to the best of its ability in
providing the information and meeting the requirements established by [Commerce] with respect
to the information.’”). Finally, if, after soliciting information from interested parties and
allowing them an opportunity to remedy any deficiencies in such submissions, needed
information is not on the record, Commerce may then use facts available in order to complete its
investigation. See 19 U.S.C. § 1677e(a).15 As recently stated by the Court of Appeals for the
14
(...continued)
difficulties.
19 U.S.C. § 1677m(e). It is apparent from the inclusion of requirement (2) alone that this
provision is intended for use prior to verification.
15
Pursuant to 19 U.S.C. § 1677e:
If—
(continued...)
COURT NO . 01-00858 PAGE 22
Federal Circuit: “Under subsection (a), if a respondent ‘fails to provide [requested] information
by the deadlines for submission,’ Commerce shall fill in the gaps with ‘facts otherwise
available.’” Nippon Steel Corp. v. United States, 337 F.3d 1373, 1381 (Fed. Cir. 2003) (“Nippon
Fed. Cir.”) (emphasis added).
In the instant investigation, Commerce determined that the use of facts available was
warranted for LMC’s sales data, and for Huarong’s sales and factors of production data. As to
the Companies’ sales data Commerce determined that the use of facts available was warranted
because they each failed to properly provide this requested information in either their initial or
supplemental questionnaire responses. In support, Commerce determined that the Companies
had “mischaracterized” certain sales data in their responses and, therefore, pursuant to 19 U.S.C.
§ 1677e(a), the Companies “withheld” information and “significantly impeded” the investigation.
Furthermore, Commerce determined that the use of facts available was warranted as to
15
(...continued)
(1) necessary information is not available on the record, or
(2) an interested party or any other person—
(A) withholds information that has been requested
by the administering authority . . . under this
subtitle, . . . [or]
(C) significantly impedes a proceeding under this
subtitle, . . .
the administering authority . . . shall, subject to [19 U.S.C. §
1677m(d)], use the facts otherwise available in reaching the
applicable determination under this subtitle.
19 U.S.C. § 1677e(a).
COURT NO . 01-00858 PAGE 23
Huarong’s factors of production data because Commerce was unable to completely verify that
information.
The Companies argue that Commerce’s determination that the use of facts available was
warranted as to their sales, and as to Huarong’s factors of production data, was improper. The
Companies contend that
[t]he Department’s decision . . . was based primarily upon its
assertion that Plaintiffs withheld information that was requested by
the Department. The information they purportedly withheld was
that [[
]]. Commerce decided that Plaintiffs failed to act to the best
of their ability based on what occurred during their verifications.
Commerce further found that Plaintiffs impeded the investigation,
again because Plaintiffs reported that certain bars/wedges sales
were made by [[ ]].
Pls.’ Mem. at 9–10 (citations omitted). The Companies contend that “the record demonstrates
that Plaintiffs cooperated with the Department throughout the proceeding by answering all of
Commerce’s questionnaires and cooperating fully during the verification.” Id. at 10. The
Companies further argue that “regardless of who is deemed the seller, the Department had all the
data it needed from Plaintiffs to calculate accurate dumping margins for both of them.” Id.
1. The Companies did not provide requested information in their
questionnaire responses
The court first examines whether the Companies, by their questionnaire responses,
“create[d] an accurate record and provide[d] Commerce with the information requested to ensure
an accurate dumping margin.” Reiner Brach, 26 CIT at __, 206 F. Supp. at 1333. In other
COURT NO . 01-00858 PAGE 24
words, the court must determine whether the Companies had, prior to verification, completely
and accurately complied with Commerce’s requests for information. The court examines each
company in turn.
a. LMC
The record shows that Commerce solicited information about LMC’s sales data and sales
process. In response to questions about its sales process, LMC stated that
[t]he supplier knew the ultimate destination [of the subject
merchandise] because it arranged the shipments. There was no
understanding restricting, discouraging, or prohibiting sales in the
home market or elsewhere. The supplier does not have the right to
review LMC’s sales records and the supplier does not provide
after-sales service in the United States, participate in U.S. sales
calls or activities, or provide sales incentives to LMC’s customers.
LMC Section A Questionnaire Resp., Pub. R. Doc. 22 at A-15. This explication of LMC’s sales
process is accurate as far as it goes, but it is not fully responsive to the question asked. For
instance, the statement “the supplier knew the ultimate destination [of the subject merchandise]
because it arranged the shipments” fails to mention that the Supplier arranged all the terms of the
sale, including pricing, and that the Supplier ultimately received payment for the subject
merchandise. The statement “[t]here was no understanding restricting, discouraging, or
prohibiting sales in the home market or elsewhere” is misleading in that, while there is no
evidence that the Supplier could generally control LMC’s sales process, LMC had absolutely no
control over the transactions here at issue. The statement “[t]he supplier does not have the right
to review LMC’s sales records” may, again, be accurate as it relates to LMC’s own sales, but for
the transactions here at issue, LMC had no involvement with the sales process and did not, in
COURT NO . 01-00858 PAGE 25
fact, have the relevant records of the sales in its own sales database. Finally, the statement that
the Supplier “[did] not participate in U.S. sales calls or activities” is simply false as the Supplier
completely arranged the sales. In other words, although LMC identified the transactions at issue
as its own sales in its questionnaire responses, they were, in fact, not its own sales.
b. Huarong
As to Huarong, the record is clear that it did not accurately provide information in its
responses in several important respects. First, Huarong claimed that certain transactions were not
“sales” to the Buyer because it “resold” some merchandise “through” the Export Agent; yet the
Export Agent did not pay Huarong for the merchandise, and Huarong neither reported these
“sales” to Commerce nor recorded them as sales to the Export Agent on its sales ledgers.
Second, Huarong stated that it was uninvolved with the sales process of certain transactions; yet
the record shows that not only was the Buyer a pre-existing customer of Huarong’s, but the terms
of the sales were agreed upon directly by the Buyer and Huarong. In other words, although
Huarong did not identify certain transactions as its own sales to the Buyer, they were, in fact, its
own sales.
2. Commerce’s determination that it need not consider data submitted by the
Companies at verification to remedy missing information was proper
The court finds proper Commerce’s determination that it need not consider information
relating to the Companies’ sales data gathered during verification. Specifically, Commerce
found that it need not consider this information because, pursuant to 19 U.S.C. § 1677m(e)(4),
COURT NO . 01-00858 PAGE 26
the Companies were unable to show that they had acted to the best of their abilities in providing
the information prior to verification.
The Companies argue that they were acting to the best of their abilities to comply with
Commerce’s requests for information because: (1) pursuant to the statute, Commerce’s
regulations, and the antidumping questionnaire instructions they accurately identified who the
“seller” was for the transactions here at issue and, in any event, the identity of the “seller” was
inconsequential; (2) even assuming, arguendo, that it was relevant as to who the “seller” was in
the transactions here at issue, Commerce eventually came into possession of all relevant
information and was able to calculate an antidumping duty margin from that information; and (3)
they otherwise “cooperated” with Commerce’s requests for information. The court does not
agree.
Where two entities each apply for company-specific treatment, the actual seller of the
subject merchandise is relevant. With respect to the time at which Commerce came into
possession of the relevant information, the court finds Florex v. United States, 13 CIT 28, 705 F.
Supp. 582 (1989), instructive. In Florex,
[t]he questionnaire response was replete with other errors. In such
a situation [Commerce] is justified in finding a failure of
verification. Such a finding is essentially the same as a finding of
failure to respond at all. In fact, it may be worse because
[Commerce] had to expend time at verification to discover the
errors made in the response.
Florex, 13 CIT at 32, 705 F. Supp. at 588; see Maui Pineapple Co. v. United States, 25 CIT __,
COURT NO . 01-00858 PAGE 27
__, 264 F. Supp. 2d 1244, 1259 (2001) (discussing Florex, 13 CIT at 32, 705 F. Supp. at 588). In
the instant investigation Commerce was placed in a similar position. Specifically, at
verification—and not before—it became evident that the Companies, by their questionnaire
responses, did not accurately provide information about their sales and sales processes. As a
result, Commerce was compelled to expend a considerable amount of time discovering and
correcting these critical errors. Indeed, because of the amount of time spent correcting errors
Commerce was unable to complete the Companies’ verification within the scheduled dates.
Therefore, as the Companies misstated the seller for certain transactions of subject merchandise
in their questionnaire responses, they cannot show that they were acting to the best of their
abilities to supply requested information in those responses. 19 U.S.C. § 1677e(a)(4).
As to the Companies’ argument that Commerce eventually came into possession of all the
relevant documentation and should, therefore, have calculated individual margins based on such
collected data, it is incumbent upon parties that choose to participate in an antidumping duty
investigation to accurately provide information to Commerce in the first instance. Reiner Brach,
26 CIT at __, 206 F. Supp. 2d at 1333 (“It is the interested party’s obligation to create an accurate
record and provide Commerce with the information requested to ensure an accurate dumping
margin.”). Indeed, verification is not an opportunity to submit new answers to previously posed
questions, but is more like an audit of information previously submitted. See Bomont Indus. v.
United States, 14 CIT at 208, 209, 733 F. Supp. 1507, 1508 (1990) (“[V]erification is like an
audit, the purpose of which is to test information provided by a party for accuracy and
completeness.”). Because the Companies did not accurately supply requested information about
COURT NO . 01-00858 PAGE 28
their sales and sales processes in their questionnaire responses, presentation of this data to
Commerce at verification cannot serve as proof that they “acted to the best of their abilities” to
supply this information in their questionnaire responses.
Finally, the record does not support the Companies’ argument that they “cooperated” with
Commerce’s requests for information. Specifically, the Companies make much of their alleged
cooperation with Commerce during verification. See Pls.’ Mem. at 14 (“The record reflects . . .
that Plaintiffs fully cooperated during verification . . . .”). However, the Companies misstate
Commerce’s determination in this regard. The record shows that Commerce found the use of
facts available was warranted because the Companies failed to provide requested information and
impeded the investigation prior to verification, not that the Companies may or may not have
“cooperated” with Commerce at verification. See Decision Memo at 7 (stating use of facts
available was warranted as to LMC because “[t]he Department’s questionnaire specifically asks
respondents to ‘[s]tate the total quantity and value of the merchandise under review that you sold
during the period of review in the United States . . . .’” (bracketing and emphasis in original)); id.
at 4 (stating use of facts available was warranted as to Huarong because “[t]he Department’s
Section A questionnaire specifically asks respondents to provide ‘[t]he total quantity and value of
the merchandise under review that you sold during the period of review in the United
States . . . .’” (emphasis and second bracketing in original)).16 Thus, that the Companies may
16
The Companies also take issue with the Government’s position that they were not
fully forthcoming about the role of the Export Agent in this matter. The Companies state
[t]he Government asserts that the Plaintiffs appear to have tried to
(continued...)
COURT NO . 01-00858 PAGE 29
have cooperated with Commerce at verification cannot be evidence that they acted to the best of
16
(...continued)
take advantage of [[ ]]’s lower rate from a prior review when
paying cash deposits during the pendency of the current review,
and relies on a statement given by an [[
]] during verification that it believed the customer had the
bars sold through [[ ]] in order to avoid dumping penalties.
This is absurd for several reasons.
First of all, the company official’s statement was only conjecture,
and no one asked the customer why it had the shipments go
through [[ ]]. Second, the official retracted his statement. And
third, neither LMC nor Huarong attempted to avoid paying
dumping duties. To the contrary, both of them requested reviews
of the entries at issue, as the Government admits. If the Plaintiffs
sought to avoid paying dumping duties, they certainly would not
have requested these reviews, reported all their sales, and showed
all their records to Commerce, as they clearly did here. The
Government’s claim is preposterous.
Pls.’ Reply Br. in Resp. Mem. Def. Opp’n Pls.’ Mot. J. Agency R. Mem. (“Pls.’ Reply”) at 15
(footnotes omitted). The record contains evidence of a series of communications between
Huarong and the Buyer. See [[
]]. These
communications, sent on both Huarong’s and the Buyer’s letterhead, dealt with, among other
things, shipments of defective “Gorilla Bars.” See generally id. By these communications the
parties attempted to reach a settlement, and presented various reasons as to why the settlement
should be adjusted higher or lower. After discussion, Huarong stated:
[[
]]
Id., [[ ]] (text as in original, emphasis
added). In the immediately preceding segment [[
]] while Huarong’s was 34.00 percent. See HFHTs, Finished or
Unfinished, With or Without Handles, From the P.R.C., 63 Fed. Reg. 16,758, 16,767 (ITA Apr.
6, 1998) (final results).
COURT NO . 01-00858 PAGE 30
their abilities to supply requested information in their questionnaire responses.
3. Commerce’s determination that use of facts available was warranted for
LMC’s missing sales data was proper
Commerce determined that the use of facts available was warranted for LMC’s sales data
because LMC did not accurately provide that information in any of its questionnaire responses.
In support of its determination, Commerce stated that it was using facts available because,
pursuant to 19 U.S.C. §§ 1677e(a)(2) and (a)(4), LMC “withheld” information and “significantly
impeded” the investigation. See Final Results, 66 Fed. Reg. at 48,028.
a. LMC withheld information
The record shows that LMC did not accurately supply requested information in its
questionnaire responses. Specifically, LMC stated in its questionnaire responses that it sold
bars/wedges to a U.S. customer. At verification, however, it became evident that LMC was not
the actual seller. Indeed, at verification LMC at first continued to maintain that it was the seller
but, eventually, admitted it was not. See Decision Memo at 9 (“LMC acknowledged that it had
not purchased bars for resale to the United States; rather it acted more along the lines of a
processing agent for the relevant sales to the U.S. customer.”). Thus, because LMC did not
accurately provide requested sales information, Commerce’s determination that it “withheld”
information is sustained.
COURT NO . 01-00858 PAGE 31
b. LMC significantly impeded the investigation
As noted above, the record shows that LMC claimed to have certain sales when it had
none and did not accurately describe [[ ]]. Based
on this inaccurate information, Commerce scheduled LMC’s verification with the expectation
that LMC was the seller of subject merchandise to a U.S. customer. At verification Commerce
reasonably expected LMC to be in possession of the relevant original sales documents as to these
transactions. At verification, however, it became evident that LMC did not possess these
documents, and did not record the relevant sales in its sales database. Thus, because LMC did
not reveal its role in these sales until verification, and because it did not possess the requisite
sales information, Commerce’s determination that LMC “significantly impeded” the
investigation is sustained.
4. Commerce’s determination that the use of facts available was warranted
for Huarong’s missing sales data was proper
Commerce determined that the use of facts available was warranted for establishing
Huarong’s sales data because (1) Huarong did not accurately provide that information in any of
its questionnaire responses, and (2) because Commerce was required to spend nearly all of its
scheduled verification time tracking down sales data, the verifiers were unable to address matters
related to the factors of production data. In support of its determination, Commerce stated that it
was using facts available because, pursuant to 19 U.S.C. §§ 1677e(a)(2) and (a)(4), Huarong both
“withheld” information and “significantly impeded” the investigation. See Final Results, 66 Fed.
Reg. at 48,028.
COURT NO . 01-00858 PAGE 32
a. Huarong withheld information
The record shows that the questionnaires sent to Huarong specifically asked it to supply
information about “your” sales to the United States. In its responses, however, Huarong never
included information regarding the transactions here at issue even though Commerce specifically
requested this information. Thus, since Huarong had the information in its possession and did
not provide it, Commerce’s determination that it “withheld” information is sustained.
b. Huarong significantly impeded the investigation
Commerce was likewise justified in its determination that the use of facts available was
warranted as to Huarong’s sales data based on its finding that Huarong “significantly impeded”
the investigation. The record shows that Commerce, based on the information provided in
Huarong’s questionnaire responses, scheduled verification with the expectation that it would only
be verifying a small quantity of bar sales and various factors of production. However, because of
the inaccuracies in Huarong’s submitted sales data, Commerce spent its verification time
collecting this missing information. Therefore, because Commerce was unable to complete
verification of Huarong’s submitted data with respect to factors of production due to Huarong’s
actions, Commerce’s determination that Huarong “significantly impeded” Commerce’s
investigation is sustained.
5. Commerce’s determination that the use of facts available was warranted
for Huarong’s factors of production data was proper
Commerce was justified in its determination that the use of facts available was warranted
COURT NO . 01-00858 PAGE 33
as to Huarong’s factors of production data based on its finding that Huarong “significantly
impeded” the investigation. As noted above, the record shows that Commerce scheduled
verification with the expectation that it would only be verifying a small quantity of bar sales and
various factors of production. However, because of the inaccuracies in Huarong’s submitted
sales data, Commerce spent its verification time collecting this missing information, and was
thus unable to verify completely Huarong’s factors of production data. Final Results, 66 Fed.
Reg. at 48,028 (“As a result of the verification team having to devote extensive amounts of time
to examining issues pertaining to the unreported U.S. sales, and difficulties in verifying the
accuracy of the reported factors of production input levels, there was insufficient time for the
verifiers to conduct a full factors of production verification.”). In addition, Commerce’s
preliminary review of Huarong’s factors of production, based on “caps,” found that there were
significant discrepancies between Huarong’s questionnaire responses and the data it provided at
verification. See Huarong Verification Report at 13 (stating “[t]he average consumption rates
[for paint] based on the worksheets were significantly different and much greater than the
amounts reported to the Department.”); id. at 15 (“These consumption rates [for electricity] based
on company records all exceeded the consumption rates reported by Huarong to the Department.
We asked company officials to explain the discrepancy and they stated that they had no
explanation.”); id. (“These consumption rates [for coal] based on company records all exceeded
the consumption rates reported by Huarong to the Department.”). Therefore, because Commerce
was unable to complete verification of Huarong’s submitted data with respect to factors of
production due to Huarong’s actions, Commerce’s determination that the use of facts available
was warranted as to Huarong’s factors of production data because Huarong “significantly
COURT NO . 01-00858 PAGE 34
impeded” Commerce’s investigation is sustained.
6. Commerce’s determination that the use of adverse facts available was
warranted for the Companies’ sales data, and Huarong’s factors of
production data was proper
By statute, Commerce may find the use of adverse facts available is warranted where it
first finds that a respondent “has failed to cooperate by not acting to the best of its ability to
comply with a request for information . . . .” See 19 U.S.C. § 1677e(b)17; Nippon Fed. Cir., 337
F.3d at 1381 (“[S]ubsection (b) permits Commerce to ‘use an inference that is adverse to the
interest of [a respondent] in selecting from among the facts otherwise available,’ only if
Commerce makes the separate determination that the respondent ‘has failed to cooperate by not
17
Title 19 U.S.C. § 1677e(b) provides:
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 for information from [Commerce] . . . , [Commerce], 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,
(4) any other information placed on the record.
19 U.S.C. § 1677e(b)(1)–(4).
COURT NO . 01-00858 PAGE 35
acting to the best of its ability to comply.’” (bracketing in original)). The Court of Appeals for
the Federal Circuit stated that “[t]he focus of [1677e(b)] is respondent’s failure to cooperate to
the best of its ability, not its failure to provide requested information.” Nippon Fed. Cir., 337
F.3d at 1381 (emphasis in original). The court further stated that “the statutory mandate that a
respondent act to ‘the best of its ability’ requires the respondent to do the maximum it is able to
do.” Id. at 1382. The court continued:
[t]o conclude that an importer has not cooperated to the best of its
ability and draw an adverse inference under section 1677e(b),
Commerce need only make two showings. First, it must make an
objective showing that a reasonable and responsible importer
would have known that the requested information was required to
be kept and maintained under the applicable statutes, rules, and
regulations. Second, Commerce must then make a subjective
showing that the respondent under investigation not only has failed
to promptly produce requested information, but further that the
failure to fully respond is the result of the respondent’s lack of
cooperation in either: (a) failing to keep and maintain all required
records, or (b) failing to put forth its maximum efforts to
investigate and obtain the requested information from its records.
An adverse inference may not be drawn merely from a failure to
respond, but only under circumstances in which it is reasonable for
Commerce to expect that more forthcoming responses should have
been made; i.e., under circumstances in which it is reasonable to
conclude that less than full cooperation has been shown.
Id. at 1382–83 (citation omitted).18
Here, the Companies argue that Commerce’s determination to use adverse facts available
was improper because they
18
Although the subject of the Court of Appeals for the Federal Circuit’s analysis of
19 U.S.C. § 1677e(b) in Nippon Fed. Cir. was a United States importer, there is nothing in its
reasoning that would preclude its analysis from covering a PRC exporter.
COURT NO . 01-00858 PAGE 36
fully cooperated [with Commerce’s investigation] and that their
responses in nearly all instances reconciled to their books and
records. Plaintiffs never sought to mislead Commerce’s verifiers
but rather offered them upon arrival at Huarong’s headquarters
corrections to their prior submissions, explained the use of “caps”
and otherwise tried to give the verifiers everything they requested.
Where this was not possible, the company officials provided the
verifiers with all the written records they had available. . . .
Accordingly, there is no basis for Commerce’s determination . . .
for deriving an adverse inference in selecting which facts available
to use in calculating their margins.
Pls.’ Mem. at 20–21.
The court finds proper Commerce’s determination that the use of adverse facts available
was warranted as to the Companies’ sales data, and as to Huarong’s factors of production data,
because they each failed to act to the best of their ability to comply with Commerce’s requests for
information. First, there can be no doubt that reasonable and responsible sellers that request an
administrative review of an antidumping order will have accurate records of their sales. Indeed,
the administrative record shows that Huarong had such records and eventually produced them.
There can also be no doubt that a reasonable and responsible producer, seeking an administrative
review, will have accurate records of its factors of production. Second, the record shows that
LMC and Huarong did not make the maximum effort to produce the sales records in order to
respond to Commerce’s questionnaire requests. Rather, the information contained in the
questionnaire responses was inaccurate. In addition, it cannot be said that Huarong did the
maximum it could do to substantiate its use of “caps,” as it did not retain the worksheets upon
which the caps were based or make any effort to replicate them. As a result, Commerce has
satisfied the statutory showings for the use of adverse facts available as articulated by the Court
COURT NO . 01-00858 PAGE 37
of Appeals for the Federal Circuit. See Nippon Fed. Cir., 337 F.3d at 1382. Thus, the court
sustains Commerce’s determination that the use of adverse facts available was warranted as to
the Companies’ sales data and Huarong’s factors of production data.
II. Commerce’s determination that the Companies should receive the PRC-wide
antidumping duty margin based on their failure to provide evidence of their
independence from state control
Where an antidumping duty investigation involves an NME country, all exporters within
that country are presumed to be subject to government control. See Sigma Corp. v. United
States, 117 F.3d 1401, 1405–06 (Fed. Cir. 1997) (“[I]t was within Commerce’s authority to
employ a presumption of state control for exporters in a nonmarket economy, and to place the
burden on the exporters to demonstrate an absence of central government control. . . . Moreover,
because exporters have the best access to information pertinent to the ‘state control’ issue,
Commerce is justified in placing on them the burden of showing a lack of state control.” (citing
Zenith Elecs. Corp. v. United States, 988 F.2d 1573, 1583 (Fed. Cir. 1993)); see also Fujian
Mach. & Equip. Imp. & Exp. Corp. v. United States, 25 CIT __, __, 178 F. Supp. 2d 1305, 1329
(2001) (citing Manganese Metal From the P.R.C., 63 Fed. Reg. 12,440, 12,441 (ITA Mar. 13,
1998) (final results and partial rescission of admin. rev.)). While all NME exporters are
presumed to be subject to government control, an exporter may request and receive an
antidumping duty margin separate from the NME-wide antidumping duty margin by providing
evidence of its independence from government control. See Transcom, Inc. v. United States, 294
F.3d 1371, 1373 (Fed. Cir. 2002) (citing Sigma, 117 F.3d at 1405–06) (“Under the NME
presumption, a company that fails to demonstrate independence from the NME entity is subject
COURT NO . 01-00858 PAGE 38
to the countrywide rate, while a company that demonstrates its independence is entitled to an
individual rate as in a market economy.”); see also Huarong Section A Questionnaire Resp., Pub.
R. Doc. 23 at A-1 (“The Department presumes that a single weighted-average dumping margin is
appropriate for all exporters in a nonmarket economy country. The Department may, however,
consider requests for separate rates from individual exporters.”); LMC Section A Questionnaire
Resp., Pub. R. Doc. 22 at A-1 (same). Where an NME exporter successfully rebuts the NME
presumption by providing evidence of its independence from state control, Commerce may
assign such NME exporter a company-specific antidumping duty margin. However, where an
NME exporter fails to either: (1) rebut the nonmarket economy presumption of state control, or
(2) otherwise cooperate with the investigation19 by failing to “respond to Commerce’s
questionnaire for that review,” Commerce may then apply the NME-wide antidumping duty
margin to such exporter’s merchandise. See Sigma, 117 F.3d at 1411 (citing D&L Supply Co. v.
United States, 113 F.3d 1220, 1222 (Fed. Cir. 1997)) (stating Commerce has a “long-standing
practice of assigning to respondents who fail to cooperate with Commerce’s investigation the
highest margin calculated for any party in the less-than-fair-value investigation or in any
administrative review.”). Thus, an NME exporter may qualify for a company-specific
antidumping duty margin where it participates in the investigation, and: (1) requests a company-
19
This failure to cooperate with the investigation is distinct from the kind of failure
to cooperate by not acting to the best of one’s abilities found in 19 U.S.C. § 1677e(b). For the
failure to cooperate to serve as the basis for assignment of the country-wide rate it must be of the
sort found in Sigma Corp. v. United States, 117 F.3d 1401 (Fed. Cir. 1997), i.e., the failure to
respond to Commerce’s questionnaire. Sigma, 117 F.3d at 1411 (“Commerce stated that it was
using the antidumping margin assigned to Guandong as the margin for all other Chinese
exporters, who did not respond to Commerce’s questionnaire for that review.” (emphasis
added)).
COURT NO . 01-00858 PAGE 39
specific antidumping margin; and (2) provides evidence of its independence from government
control in both law and fact.
Here, the Companies participated in the administrative review and had, by their
questionnaire responses: (1) requested company-specific antidumping duty margins; and (2)
submitted evidence of their independence from government control with their questionnaire
responses. Based on these factors, Commerce preliminarily determined that the Companies had
provided sufficient evidence of their independence from government control and preliminarily
assigned them company-specific antidumping duty margins based on the sales and factors of
production data submitted in their questionnaire responses. See Prelim. Results, 65 Fed. Reg. at
66,696. After verification, however, Commerce determined that, using facts available and
adverse facts available, the Companies were not entitled to separate rates and, thus, assigned
them the PRC-wide antidumping duty margin.
The Companies argue that Commerce’s determination to reject their evidence of
independence from government control was improper:
Commerce’s decision to subject Plaintiffs to the all-PRC dumping
margin was wholly punitive and was made despite its having found
in the Preliminary Results that Plaintiffs fully responded to the
portions of the questionnaires regarding separate rates and
demonstrated the continued entitlement to separate rates.
Commerce fully verified these responses and found nothing to
contradict them.
Pls.’ Mem. at 4. The Companies further contend that they
provided all of the information that was necessary to establish their
COURT NO . 01-00858 PAGE 40
entitlement to separate rates. Commerce’s claim that . . . the
integrity of [their] reported data on the whole is compromised is
belied by the fact that Commerce fully verified Plaintiffs’ separate
rates responses and . . . Commerce fully verified Plaintiffs’
reported data.
Id. at 21.
The Government argues that Commerce’s determination was proper. The Government
contends that
[g]iven the nature and extent of the misrepresentations contained in
the responses, Commerce could no longer rely upon Plaintiffs’
responses to establish the nature of their relationship with the local
and national governments. Significantly, some of the
misrepresentations were in the separate rates responses themselves.
Thus, Commerce lawfully determined that Plaintiffs had not
adequately demonstrated entitlement to separate rates and should
therefore be considered part of the PRC-wide entity.
Def.’s Opp’n Pls.’ Mot. J. Agency R. (“Def.’s Resp.”) at 14–15 (citations omitted).20 In support,
the Government states that
[e]ven though Huarong and LMC received separate rates in
previous segments of these proceedings, it has long been
Commerce’s standard policy to conduct a separate rate inquiry
each time an NME respondent is subject to review. In accordance
with this policy, Huarong and LMC each submitted a facially
adequate separate rates questionnaire response and Commerce
preliminarily determined that these companies continued to be
20
The Government finds it significant that “some of the misrepresentations were in
the separate rates responses themselves.” Def.’s Resp. at 15. Although the Government never
specifically identifies what these “misrepresentations” were, presumably they were the
Companies’ assertions in their questionnaire responses that they were in possession of certain
documents, providing evidence of their independence from state control, that they were unable to
produce at verification. As is discussed infra, however, Commerce did not request—either at
verification or otherwise—that the Companies remedy this “deficiency” by providing such
information.
COURT NO . 01-00858 PAGE 41
entitled to separate rates. However, in the Final Results,
Commerce denied Plaintiffs separate rates because the nature of
their verification failures, including their lack of cooperation, cast
doubt upon the reliability of their entire responses.
Id. at 25 (citations and footnote omitted; emphasis added).
The Companies take issue with the Government’s position:
The separate rates issue is solely concerned with whether a
company is independent in law and in fact from the government of
China. Once a respondent establishes its independence from
government control, it is entitled to have its margin calculated
based on its reported sales and factors of production. . . .
[T]here is no connection in this case between the Plaintiffs’
independence from government control and the questions [[
]].
Pls.’ Reply at 15–16.
A. Facts available
The court does not find proper Commerce’s determination to reject the Companies’
separate rates evidence and, thus, assign them the PRC-wide antidumping duty margin based on
the presumption of state control. In support of its determination that the Companies would
receive the PRC-wide antidumping duty margin based on facts available, Commerce stated that
“due to the nature of [the Companies’] verification failures, and the inadequacy of [their]
cooperation, the integrity of [the Companies’] reported data on the whole is compromised.” See
66 Fed. Reg. at 48,028 (Huarong); id. (LMC) (same). This reasoning, however, cannot be the
basis for assigning the Companies the PRC-wide antidumping duty margin based on facts
COURT NO . 01-00858 PAGE 42
available, as it is clear the Companies did provide evidence of their entitlement to separate rates
and there is no indication that any necessary information was missing or incomplete. See Nippon
Fed. Cir., 337 F.3d at 1381 (“The focus of subsection (a) is respondent’s failure to provide
information.” (emphasis in original)). In other words, the findings that justified the use of facts
available and a resort to adverse facts available with respect to the Companies’ sales data and
factors of production, cannot be used to accord similar treatment to issues relating to the
Companies’ evidence of independence from state control. Specifically, the record shows that the
Companies each submitted evidence of their entitlement to separate rates with their questionnaire
responses, and at verification Commerce found such evidence was not “compromised.” In
addition, while the record shows that the Companies, by their questionnaire responses,
represented that they were in possession of all of the relevant documentation but at verification
were unable to produce all of the documents necessary to establish their entitlement to separate
rates, Commerce neither pressed them to produce such evidence nor otherwise requested that the
Companies rectify this “deficiency.” See LMC Verification Report at 2; Huarong Verification
Report at 2. Furthermore, the record also shows that Commerce seemingly determined that the
lack of such documentation was not dispositive with respect to the separate rates determination.
See LMC Verification Report at 2–3 (“LMC officials confirmed that [the Ministry of Foreign
Trade and Economic Cooperation] allowed it to operate independent from the government.
However, when asked, LMC officials were unable to produce the document that allowed it to
operate independently. The Department notes, however, that this document has been cited in
previous periods of review for this case.”); Huarong Verification Report at 2–3 (“Huarong
confirmed that the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) allowed it
COURT NO . 01-00858 PAGE 43
to operate independent from the government. However, when asked, Huarong was unable to
produce the document that allowed it to do so. The Department notes, however, that this
document has been cited in previous periods of review for this case.”). Thus, because the
Companies did provide evidence of their independence from government control and Commerce:
(1) verified such information; (2) did not request the Companies to remedy any deficiencies in
their separate rates information; and (3) did not find the lack of such information dispositive with
respect to the separate rates determination, the court cannot sustain Commerce’s determination
that the Companies should be assigned the PRC-wide antidumping duty margin based on facts
available.
B. Adverse facts available
For the Final Determination, Commerce determined that the use of adverse facts available
was warranted as to the Companies’ separate rates information and, therefore, they would receive
the PRC-wide antidumping duty margin. In support of its determination, Commerce reasoned
that because the integrity of the Companies’ data was “compromised,” they “[had] not adequately
demonstrated [their] entitlement to a rate separate from the PRC-wide entity.” Decision Memo
at 11 (LMC); id. at 6 (Huarong). The court cannot sustain Commerce’s determination in this
regard. Specifically, the Court of Appeals for the Federal Circuit has stated that, pursuant to 19
U.S.C. § 1677e(b), Commerce must make certain showings before it may resort to adverse facts
available. See Nippon Fed. Cir., 337 F.3d at 1382. Here, the record shows that the Companies
apparently kept records sufficient to satisfy Commerce of their independence from state control
and supplied such records to Commerce in a timely fashion. Because findings with respect to
COURT NO . 01-00858 PAGE 44
data Commerce found to be “compromised”—i.e., the Companies’ sales data and Huarong’s
factors of production data—are distinct from those related to state control, it is difficult to see
how Commerce’s determination with respect to the sales and factors of production data can form
the basis for the use of adverse facts available with respect to independence from state control.
Historically, Commerce has exercised its ability to parse respondents’ questionnaire responses
and apply adverse facts available only to a portion of a determination. See Kao Hsing Chang
Iron & Steel Corp. v. United States, 26 CIT __, __, slip op. 02-142 (Dec. 6, 2002) (sustaining use
of partial adverse facts available for “missing production quantity data for . . . [cost of production
and constructed value] databases.” (bracketing in original)); Torrington Co. v. United States, 25
CIT __, __, 146 F. Supp. 2d 845, 885 (2001) (remanding action where determination was based
on partial adverse facts available as to the factor of production “packing expenses” and it was
“unclear” what action Commerce took in arriving at that determination). Commerce has
exercised this ability in the context of NME investigations. See Pac. Giant, Inc. v. United States,
26 CIT __, __, slip op. 02-140 at 4 (Dec. 2, 2002) (sustaining application of “partial adverse
inference” to NME company’s “labor” factor of production). Similar treatment would appear to
be appropriate here. The Companies supplied the requested information and Commerce has not
adequately demonstrated a sufficient reason to disregard the Companies’ submissions of
evidence of their entitlement to separate antidumping duty margins and resort to adverse facts
available.
COURT NO . 01-00858 PAGE 45
CONCLUSION
On remand, Commerce shall revisit, in a manner consistent with this opinion, its
determination that the Companies were to receive the PRC-wide antidumping duty margin.
Specifically, Commerce shall: (1) consider the separate rates evidence submitted by the
Companies, (2) determine whether the assignment of separate rates for the Companies is
warranted, i.e., that the Companies have demonstrated an absence of state control both in law and
in fact, and (3) if Commerce finds that the assignment of separate rates is warranted, calculate
separate antidumping duty margins for Huarong and LMC. In the event Commerce continues to
find that the Companies should receive the PRC-wide antidumping duty margin, it shall make
specific showings with explicit and complete references to the record with respect thereto. Such
remand results are due within ninety days of the date of this opinion, comments are due thirty
days thereafter, and replies to such comments eleven days from their filing.
______________________________
Richard K. Eaton
Dated: October 22, 2003
New York, New York