Zhejiang Zhaofeng Mechanical and Electronic Co. v. United States

Slip Op 19-167
UNITED STATES COURT OF INTERNATIONAL TRADE
ZHEJIANG ZHAOFENG
MECHANICAL AND ELECTRONIC
CO., LTD.,
Plaintiff,
v.
Before: Jennifer Choe-Groves, Judge
UNITED STATES,
Court No. 18-00004
Defendant,
and
THE TIMKEN COMPANY,
Defendant-Intervenor.
OPINION
[Sustaining the U.S. Department of Commerce’s Remand Results.]
Dated: December 18, 2019
Adams C. Lee, Harris Bricken McVay Sliwoski, LLP, of Seattle, WA, for Plaintiff Zhejiang
Zhaofeng Mechanical and Electronic Co., Ltd.
Kelly A. Krystyniak, Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, D.C., for Defendant United States. With her on the brief
were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and L. Misha
Preheim, Assistant Director. Of counsel was James H. Ahrens, II, Attorney, Office of the Chief
Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of
Washington, D.C.
Geert M. De Prest, Schagrin Associates, of Washington, D.C., and William A. Fennell, Stewart
and Stewart, of Washington, D.C., for Defendant-Intervenor The Timken Company. With them
on the briefs were Terence P. Stewart, Patrick J. McDonough, Lane S. Hurewitz, and Shahrzad
Noorbaloochi. Nicholas J. Birch also appeared.
Consol. Court No. 18-00004 Page 2
Choe-Groves, Judge: This action arises from the U.S. Department of Commerce’s
(“Commerce”) administrative review of the antidumping order on tapered roller bearings from
the People’s Republic of China. Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, from the People’s Republic of China, 83 Fed. Reg. 1,238 (Dep’t Commerce Jan. 10,
2018) (final results of antidumping duty administrative review and rescission of new shipper
review; 2015–2016) (“Final Results”). Before the court are the Final Results of Redetermination
Pursuant to Court Remand, April 25, 2019, ECF No. 58 (“Remand Results”). For the following
reasons, the court sustains the Remand Results.
ISSUES PRESENTED
The court reviews the following issues:
1. Whether Commerce’s determination to grant Zhaofeng a separate rate is
supported by substantial evidence; and
2. Whether Commerce’s decision to use an inference adverse to the interests of
Zhaofeng in selecting from facts otherwise available is supported by substantial
evidence and is in accordance with the law.
BACKGROUND
The court presumes familiarity with the facts and procedural history and discusses only
those facts relevant to the review of the Remand Results. Zhejiang Zhaofeng Mech. and Elec.
Co., Ltd., v. United States, 42 CIT __, 355 F. Supp. 3d 1329 (2018) (“Zhaofeng I”).
In the underlying administrative proceeding, Commerce became aware of irregularities in
Zhaofeng’s submissions when The Timken Company (“Timken” or “Defendant-Intervenor”)
submitted comments identifying discrepancies in a verification exhibit. Pet’r’s Pre-Preliminary
Cmts. 1–3, PD 181, bar code 3576832-01 (May 31, 2019). Zhaofeng acknowledged the
Consol. Court No. 18-00004 Page 3
discrepancies, but averred that they were the result of clerical errors and that a review of
Zhaofeng’s U.S. sales invoice would resolve the discrepancies. Remand Results at 3 & nn.6–7
(citing Zhaofeng’s Case Br. 3–4, PD 184, bar code 3604752-01 (Aug. 17, 2017)); see also
Zhaofeng Cmts. at 4. Commerce obtained the corresponding entry documentation from U.S.
Customs and Border Protection (“CBP”) and set a schedule for submitting rebuttal factual
information. Remand Results at 3; see also Entry Documents Placed on the Record, Opportunity
to Submit Rebuttal Factual Information and Final Date for Rebuttal Br., bar code 3617066-01
(Sept. 7, 2017). When Commerce compared the entry documents to Zhaofeng’s verification
exhibit, Commerce identified several differences, including that “the number of line items, all
product codes, and most individual quantities did not match,” although “the invoice number,
customer name, and total sales value were the same for each set of records.” Remand Results at
3–4 & n.8; see also Final Analysis Mem., bar code 3659982-01 (Jan. 2, 2018) (“Final Analysis
Mem.”) (comparing Zhaofeng’s verification exhibit with the invoice filed by the importer).
In Zhaofeng I, the court concluded that Commerce could not disregard a respondent’s
separate rate information as “tainted” just because there were deficiencies in the respondent’s
sales or factors of production data. 42 CIT at __, 355 F. Supp. 3d at 1333–34. The court
remanded to Commerce for reconsideration of Zhaofeng’s separate rate status. Id. at 1335.
On remand, Commerce granted Zhaofeng a separate rate. Remand Results at 5. In
determining Zhaofeng’s dumping margin, Commerce reassessed the discrepancies between
Zhaofeng’s reconciliation worksheet and the invoice in the entry documents. See id. at 2–4, 6–
22. In addition to the differences in the identification of goods as subject merchandise or non-
subject merchandise, Commerce noted that the invoice in the entry documents contained a
greater number of product codes and pieces, but the invoice reflected the same total value that
Consol. Court No. 18-00004 Page 4
was reported in the corresponding verification exhibit. Id. at 7. Commerce recognized that the
discrepancies involved a single sale, but assessed that the sale represented a significant quantity
and value relative to Zhaofeng’s reported sales of subject merchandise. Id. at 2–4, 7, n. 20. As a
result, Commerce found that “Zhaofeng withheld information from Commerce, . . . failed to
provide information in the form and manner requested, by failing to report a significant quantity
of its U.S. sales, . . . that Zhaofeng significantly impeded the proceeding by withholding sales
information and misleading Commerce at verification, and then by providing additional false
information to dismiss the inconsistencies found subsequent to verification.” Id. at 8. Because
Commerce determined that Zhaofeng failed to cooperate to the best of its ability, Commerce
calculated a rate using an adverse inference to facts otherwise available (“adverse facts
available” or “AFA”). Id. at 9; 19 U.S.C. § 1677e. Commerce assigned Zhaofeng a dumping
margin of 92.84 percent, which was the AFA rate previously assigned in the June 1, 2006
through May 31, 2007 review of this proceeding. Remand Results at 10; see Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, from the People’s Republic of China, 74
F.R. 3,987, 3,988–89 (Dep’t Commerce Jan. 22, 2009) (final results of antidumping duty
administrative review).
Timken filed comments in support of the Remand Results. Timken’s Cmts. on Final
Results of Redetermination Pursuant to Court Remand, May 13, 2019, ECF No. 62 (“Timken
Cmts.”). Zhaofeng filed comments in opposition. Pl.’s Reply Cmts. on DOC Remand
Redetermination, June 10, 2019, ECF No. 63 (“Zhaofeng Cmts.”). Defendant and Timken filed
reply comments. Def.’s Resp. to Pl.’s Cmts. on Remand Redetermination, Aug. 5, 2019, ECF
No. 79 (“Def.’s Resp.”); Reply Br. of Def.-Intervenor Timken, Aug. 5, 2019, ECF No. 80. The
Parties filed a joint appendix. J.A., Aug. 19, 2019, ECF No. 84.
Consol. Court No. 18-00004 Page 5
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to 19 U.S.C. § 1516a(a)(2)(B)(iii) (2012) and 28
U.S.C. § 1581(c). 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 the
law. 19 U.S.C. § 1516a(b)(1)(B)(i).
ANALYSIS
I. Commerce’s Decision to Grant Zhaofeng Separate Rate Status
On remand, Commerce granted Zhaofeng a separate rate. See Remand Results at 5. The
Parties do not contest Commerce’s grant of a separate rate to Zhaofeng. Zhaofeng Cmts. at 2;
Def.’s Resp. at 3; Timken Cmts. at 2. Because Commerce examined Zhaofeng’s information and
determined that it satisfied the de jure and de facto criteria to obtain a separate rate, the court
sustains the Remand Results as to Zhaofeng’s separate rate status. See Remand Results at 5.
II. Commerce’s Application of Adverse Facts Available to Zhaofeng
If an interested party: (1) “withholds information that has been requested,” (2) “fails to
provide such information by the deadlines for submission of the information or in the form and
manner requested,” (3) “significantly impedes a proceeding,” or (4) “provides such information
but the information cannot be verified,” then Commerce may rely on facts otherwise available.
19 U.S.C. § 1677e(a)(2)(A)–(D). If a party fails to cooperate to the best of its ability, 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).
The U.S. Court of Appeals for the Federal Circuit has interpreted 19 U.S.C. § 1677e
subsections (a) and (b) to have different purposes. See Mueller Comercial de Mexico, S. de R.L.
De C.V. v. United States, 753 F.3d 1227, 1232 (Fed. Cir. 2014); 19 U.S.C. § 1677e(a)–(b).
Consol. Court No. 18-00004 Page 6
Subsection (a) applies “whether or not any party has failed to cooperate fully with the agency in
its inquiry.” Mueller, 753 F.3d at 1232. Subsection (b) applies only when Commerce makes a
separate determination that the respondent failed to cooperate “by not acting to the best of its
ability.” Id. A party fails to cooperate to the best of its ability when it does not “conduct
prompt, careful, and comprehensive investigations of all relevant records that refer or relate to
the imports in question to the full extent of [its] ability to do so.” Nippon Steel Corp. v. United
States, 337 F.3d 1373, 1382 (Fed. Cir. 2003) (noting that “intentional conduct, such as deliberate
concealment or inaccurate reporting . . . evinces a failure to cooperate.”); see also Essar Steel
Ltd. v. United States, 678 F.3d 1268, 1276 (Fed. Cir. 2012). When making an adverse inference,
Commerce may rely on information derived from the petition, a final determination in the
investigation, a previous administrative review, or any other information placed on the record.
See 19 U.S.C. § 1677e(b)(2); 19 C.F.R. § 351.308(c).
A. Application of Facts Available
First, Zhaofeng argues that the record does not support application of facts available.
Zhaofeng contends, inter alia, that the sale involved non-subject merchandise, that Zhaofeng’s
information is consistent with Commerce’s verification, and that Commerce cannot identify
discrepancies in other transactions. 1 Zhaofeng’s Cmts. at 5–15. Second, Zhaofeng contends
that: (1) Commerce cannot show that Zhaofeng withheld any information, (2) Commerce did not
explain how Zhaofeng failed to provide timely information or in the form and manner requested,
1
Plaintiff’s reliance on Zhaofeng’s verification is misplaced, as the verification occurred before
the discovery of the discrepancies. Micron Tech. v. United States, 117 F.3d 1386, 1396 (Fed.
Cir. 1997) (“Verification is a spot check and is not intended to be an exhaustive examination of a
respondent’s business.” (internal citation omitted)); 19 U.S.C. § 1677m(i); 19 C.F.R. § 351.307–
351.308.
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(3) that Zhaofeng did not significantly impede the investigation, and (4) that Zhaofeng provided
verifiable information. Id. at 16–18.
Defendant counters that Zhaofeng’s verification and CBP entry documents contained
inconsistencies, that Zhaofeng did not adequately explain its discrepancies, and that Zhaofeng
did not supplement the record to show that issues raised by the transaction were an isolated
occurrence. Def.’s Resp. at 14–16. Timken adds that Zhaofeng’s transaction contained other
discrepancies beyond the reporting of subject and non-subject merchandise, including that the
quantity and line items in Zhaofeng’s CBP entry documents were inconsistent with Zhaofeng’s
sales reconciliation worksheet. Timken Cmts. at 5–6.
Plaintiff’s arguments are not persuasive. Commerce identified differences between
Zhaofeng’s sales verification worksheet and the corresponding CBP entry documents as to the
number of line items, product codes, and individual quantities identified in the respective
documents. Remand Results at 6–7 & nn. 18–20; see also Final Analysis Mem. at 4. Even if, as
Zhaofeng contends, “the sales verification worksheet correctly identified this sale as a non-
subject sale even though the line item product codes [were] incorrectly identified for this
transaction,” Zhaofeng’s explanation does not resolve how the sales totals between the
documents match despite differences in quantity and line items. See Zhaofeng’s Cmts. at 6.
Because the sales reconciliation was a critical link between Zhaofeng’s sales of subject
merchandise and Zhaofeng’s accounting records, Commerce could conclude reasonably that
Zhaofeng’s sales database was unreliable.
Based on the identified discrepancies in the record, Commerce found that Zhaofeng
withheld information and failed to provide information in the form and manner requested “by
failing to report a significant quantity of its U.S. sales,” and that “Zhaofeng significantly
Consol. Court No. 18-00004 Page 8
impeded the proceeding by withholding sales information and misleading Commerce at
verification.” Remand Results at 8 (citing 19 U.S.C. § 1677e(a)(2)(A)–(C)). The court
concludes that Commerce’s findings under 19 U.S.C. § 1677e(a) were supported by substantial
evidence.
B. Application of Adverse Facts Available
Plaintiff argues that the record does not support the application of AFA 2 and that
Commerce’s application of AFA was not in accordance with the law because Commerce may not
apply total AFA if Zhaofeng would not have received a benefit by submitting an inaccurate
verifications sales reconciliation worksheet. 3 Zhaofeng’s Cmts. at 2, 18–20; see also Statement
of Administrative Action at 870, H.R. Rep. 103–316, reprinted in 1994 U.S.C.C.A.N. 4040, 4199
(“SAA”). Defendant avers that Commerce’s Remand Results are supported by substantial
evidence and are in accordance with the law. Defendant also responds that the benefit inquiry
focuses on the significance of the issues and whether a correction is available, not whether a
benefit would have been received. Def.’s Resp. at 18.
Plaintiff’s arguments lack merit. First, when applying AFA, Commerce assessed that the
discrepancies undermined the credibility of Zhaofeng’s U.S. sales database. Remand Results at
25–26; Final Analysis Mem. at 1–2. Because Commerce identified discrepancies in the sales
reconciliation, and the sales reconciliation was an important link between Zhaofeng’s sales of
subject merchandise and Zhaofeng’s accounting records, Commerce could reasonably draw an
inference that Zhaofeng’s U.S. sales database was not credible. See Ad Hoc Shrimp Trade
2
Zhaofeng also contends that the record does not support application of neutral or partial facts
available. Zhaofeng’s Cmts. at 5.
3
Zhaofeng further argues that Commerce’s application of AFA was arbitrary. Plaintiff
misapprehends the standard of review for this action. Compare 19 U.S.C. § 1516a(b)(1)(A) with
19 U.S.C. § 1516a(b)(1)(B)(i).
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Action Comm. v. United States, 802 F.3d 1339, 1357 (Fed. Cir. 2015) (noting that
“misrepresentations may reasonably be inferred to pervade the data in the record beyond that
which Commerce has positively confirmed as misrepresented” (internal quotation marks
omitted)).
Second, as to benefit, Commerce may apply AFA if a respondent does not cooperate “to
the best of [its] ability, regardless of motivation or intent.” Nippon Steel Corp., 337 F.3d at
1383. This standard “does not require perfection and recognizes that mistakes sometimes
occur,” but “it does not condone inattentiveness, carelessness, or inadequate record keeping.”
Papierfabrik August Koehler SE v. United States, 843 F.3d 1373, 1379 (Fed. Cir. 2016) (quoting
Nippon Steel Corp., 337 F.3d at 1382). In this case, Commerce addressed the issue of benefit
and found that Zhaofeng sought to “mislead Commerce and conceal multiple sales of subject
merchandise.” Remand Results at 25; see also SAA at 4199. This finding was supported by the
discrepancies in the sales reconciliation, including the identification of a previously unnamed
U.S. customer and a different quantity of merchandise for sale at issue. Remand Results at
25–26.
On remand, Commerce assigned Zhaofeng a dumping margin of 92.84 percent. Id. at 10.
Under 19 U.S.C. § 1677e(d), if Commerce uses an inference that is adverse to the interests of a
party under 19 U.S.C. § 1677e(b)(1)(A) in selecting among the facts otherwise available, then
Commerce may use a dumping margin from any segment of the proceeding under the
antidumping order. 19 U.S.C. § 1677e(d)(1)(B). Because Commerce assigned Zhaofeng the
same AFA rate previously assigned in the June 1, 2006 through May 31, 2007 review of this
proceeding, Commerce’s determination of Zhaofeng’s dumping margin is in accordance with the
Consol. Court No. 18-00004 Page 10
law. see id.; Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the
People’s Republic of China, 74 F.R. at 3,988–89.
Because Commerce could conclude reasonably that Zhaofeng failed to act to the best of
its ability, Commerce could apply AFA in this action. See Papierfabrik August Koehler SE v.
United States, 843 F.3d at 1379. For these reasons, the court concludes that Commerce’s
decision to apply AFA was supported by substantial evidence and is in accordance with the law.
CONCLUSION
For the foregoing reasons, the court sustains Commerce’s Remand Results. Judgment
will be entered accordingly.
/s/ Jennifer Choe-Groves
Jennifer Choe-Groves, Judge
Dated: December 18, 2019
New York, New York