Echjay Forgings Pvt. Ltd. v. United StatesPublic version posted 10/08/2020.

Slip Op. 20-
UNITED STATES COURT OF INTERNATIONAL TRADE
ECHJAY FORGINGS PRIVATE LIMITED,
Plaintiff,
v.
THE UNITED STATES,
Before: Gary S. Katzmann, Judge
Defendant, Court No. 18-00230
and PUBLIC VERSION
COALITION OF AMERICAN FLANGE
PRODUCERS,
Defendant-Intervenor.
OPINION
[The court remands Commerce’s Final Determination for further explanation.]
Dated: October 8, 2020
Peter J. Koenig, Squire Patton Boggs (US) LLP, of Washington, DC, argued for plaintiff. With
him on the brief was Wojciech Maciejewski.
Geoffrey M. Long, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, argued for defendant. With him on the brief were
Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Tara K. Hogan,
Assistant Director. Of Counsel Daniel J. Calhoun, Assistant Chief Counsel, Office of Chief
Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce.
Cynthia C. Galvez, Wiley Rein LLP, of Washington, DC, argued for defendant-intervenor. With
her on the brief were Daniel B. Pickard and Stephanie M. Bell.
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PUBLIC VERSION
Katzmann, Judge: “All happy families are alike; each unhappy family is unhappy in its
own way,” so opens the classic, intense novel, Anna Karenina. 1 What can be said of the Doshi
family? Their saga is central to the case now before the court.
In assessing antidumping (“AD”) duties on foreign producers who sell goods in the
American market at below reasonable fair market value in violation of domestic trade laws, where
appropriate, the United States Department of Commerce (“Commerce”) is authorized by statute
and regulation to “collapse” multiple entities into a single entity to reflect their market relationship.
This case involves issues of collapsing affiliated entities exclusively owned by members of the
same, albeit estranged, family -- the Doshi family. All of the companies produce or have produced
in the past merchandise subject to Commerce’s AD investigation. Commerce collapsed the
entities, concluding they were affiliated, would not require substantial retooling of their facilities
to restructure production priorities, and had a significant potential to manipulate price or
production. Stainless Steel Flanges From India: Final Affirmative Determination of Sales at Less
Than Fair Value and Final Affirmative Critical Circumstance Determination, 83 Fed. Reg. 40,745
(Dep’t Commerce Aug. 16, 2018), P.R. 411 (“Final Determination”).
Plaintiff Echjay Forgings Private Limited (“Echjay”), an India-based stainless steel flanges
producer, brought an action against the United States (“Government”) to challenge Commerce’s
decision to collapse Echjay with three other companies into a single entity for the purposes of its
Final Determination. Defendant-Intervenor Coalition of American Flange Producers (“Coalition”)
joins the Government in support of Commerce’s decision. Mot. to Intervene as Def.-Inter., Dec.
19, 2018, ECF No. 10; Ct. Order Granting Mot., Dec. 20, 2018, ECF No. 14. The court concludes
that Commerce’s collapsing determination was not adequately explained based on the record
1
Leo Tolstoy, Anna Karenina (1877).
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evidence. Accordingly, the case is remanded to Commerce for further proceedings consistent with
this opinion.
BACKGROUND
I. Legal and Regulatory Framework
Dumping occurs when a foreign company sells goods in the United States at a lower price
than the company charges for the same product in its home market. Sioux Honey Ass’n v. Hartford
Fire Ins. Co., 672 F.3d 1041, 1046 (Fed. Cir. 2012). This practice constitutes unfair competition
because it permits foreign producers to undercut domestic companies by selling products below
reasonable fair market value. Id. at 1046–47. To address the harmful impact of such unfair
competition, Congress enacted the Tariff Act of 1930, as amended, 2 which empowers Commerce
to investigate potential dumping and, if necessary, to issue orders instituting duties on subject
merchandise. Id. Pursuant to 19 U.S.C. § 1673, Commerce imposes AD duties on foreign goods
if they are being or are likely to be sold in the United States at less than fair value and the
International Trade Commission determines that the sale of the merchandise at less than fair value
materially injures, threatens, or impedes the establishment of an industry in the United States. See
also Diamond Sawblades Mfrs. Coal. v. United States, 866 F.3d 1304, 1306 (Fed. Cir. 2017);
Shandong Rongxin Imp. & Exp. Co. v. United States, 42 CIT __, __, 331 F. Supp. 3d 1390, 1394
(2018). “Sales at less than fair value are those sales for which the ‘normal value’ (the price a
producer charges in its home market) exceeds the ‘export price’ (the price of the product in the
United States).” Apex Frozen Foods v. United States, 862 F.3d 1322, 1326 (Fed. Cir. 2017)
(quoting Union Steel v. United States, 713 F.3d 1101, 1103 (Fed. Cir. 2013)). The amount of the
2
Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of Title
19 of the U.S. Code, 2018 edition.
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AD duty is “the amount by which the normal value exceeds the export price (or the constructed
export price) for the merchandise.” 19 U.S.C. § 1673; see also Shandong Rongxin, 331 F. Supp.
3d at 1394.
“In some instances, Commerce will treat related entities as a single entity for purposes of
[AD] calculations.” Prosperity Tieh Enter. Co. v. United States, 965 F.3d 1320, 1323 (Fed Cir.
2020) (citing Carpenter Tech. Corp. v. United States, 510 F.3d 1370, 1373 (Fed. Cir. 2007)). “The
purpose of collapsing multiple entities into a single entity is to prevent affiliated entities from
circumventing [AD] duties by ‘channel[ing] production of subject merchandise through the
affiliate with the lowest potential dumping margin.’” Prosperity Tieh, 965 F.3d at 1323 (quoting
Slater Steels Corp. v. United States, 27 CIT 1255, 1261, 279 F. Supp. 2d 1370, 1376 (2003)
(“Slater Steels I”)). Although the AD duty statute does not directly address collapsing,
“Commerce’s collapsing practice is a permissible construction of the statute, and thus in
accordance with the law.” Koenig & Bauer-Albert AG v. United States, 24 CIT 157, 159–60, 90
F. Supp. 2d 1284, 1287–88. See also id. at 1277–78; Hontex Enters., Inc. v. United States, 27 CIT
272, 289–90, 248 F. Supp. 2d 1323, 1338 (2003) (“Hontex Enters. I”) (noting that Commerce’s
collapsing practice, as specified in its regulations, has been upheld as a reasonable interpretation
of the AD statute). The principal regulation promulgated by Commerce governing collapsing of
companies, 19 C.F.R. § 351.401(f), provides:
(1) In general. In an antidumping proceeding under this part, the Secretary will
treat two or more affiliated producers as a single entity where those producers have
production facilities for similar or identical products that would not require
substantial retooling of either facility in order to restructure manufacturing
priorities and the Secretary concludes that there is a significant potential for the
manipulation of price or production.
(2) Significant potential for manipulation. In identifying a significant potential for
the manipulation of price or production, the factors the Secretary may consider
include:
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(i) The level of common ownership;
(ii) The extent to which managerial employees or board members of one
firm sit on the board of directors of an affiliated firm; and
(iii) Whether operations are intertwined, such as through the sharing of sales
information, involvement in production and pricing decisions, the sharing
of facilities or employees, or significant transactions between the affiliated
producers.
19 C.F.R. § 351.401(f) (2019). See also Prosperity Tieh, 965 F.3d at 1323 (“Commerce’s practice
of collapsing entities is governed by 19 C.F.R. § 351.401(f)”).
Under Section 351.401(f), three requirements must be satisfied in order for Commerce to
collapse entities: Commerce must determine that (1) the companies are affiliated, (2) they share
“production facilities for similar or identical products that would not require substantial retooling
of either facility in order to restructure manufacturing priorities,” and (3) there is “a significant
potential for the manipulation of price or production” between the affiliated companies. Carpenter
Tech. Corp., 510 F.3d at 1373. See also Prosperity Tieh, 965 F.3d at 1323; Dongkuk Steel Mill
Co. v. United States, 29 CIT 724, 733, 27 I.T.R.D. (BNA) 1890 (2005). In determining whether to collapse
entities, Commerce looks for “relatively unusual situations, where the type and degree of
relationship is so significant that [it finds] there is a strong possibility of price manipulation.”
Koyo Seiko Co. v. United States, 31 CIT 1512, 1535, 516 F. Supp. 2d 1323, 1346 (2007) aff’d,
551 F.3d 1286 (Fed. Cir. 2008) (“Koyo Seiko II”) (quoting Nihon Cement Co. v. United States,
17 CIT 400, 426–27, 15 I.T.R.D. (BNA) 1558 (1993)).
A. Affiliation
With respect to the first condition for collapsing, that the producers must be “affiliated,”
that term is set forth in 19 U.S.C § 1677(33), codifying the Tariff Act of 1930 as amended by the
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Uruguay Round Agreements Act (“URAA”). 3 Subsections (A), (F), and (G) of that statute are
relevant to this dispute:
The following persons shall be considered to be ‘‘affiliated’’ or ‘‘affiliated
persons’’:
(A) Members of a family, including brothers and sisters (whether by the whole or
half blood), spouse, ancestors, and lineal descendants.
...
(F) Two or more persons directly or indirectly controlling, controlled by, or under
common control with, any person.
(G) Any person who controls any other person and such other person.
For purposes of this paragraph, a person shall be considered to control another
person if the person is legally or operationally in a position to exercise restraint or
direction over the other person.
19 U.S.C § 1677(33) (2018).
The Statement of Administrative Action (“SAA”) accompanying the URAA clarifies the
purpose of affiliation as to family members.
The traditional focus on control through stock ownership fails to address adequately
modern business arrangements, which often find one firm “operationally in a
position to exercise restraint or direction” over another in the absence of an equity
relationship. A company may be in a position to exercise restraint or direction for
example, through corporate or family groupings, franchise or joint venture
agreements, debt financing, or close supplier relationships in which the supplier or
buyer becomes reliant upon the other.
Uruguay Round Agreements Act, Statement of Administrative Action, accompanying H.R. 103–
5110 at 838 (1994), reprinted in 1994 U.S.C.C.A.N. 3773. 4
3
The statute does not address the consequences of finding entities affiliated in terms of calculating
the dumping margin. Jinko Solar Co. v. United States, 41 CIT __, __, 229 F. Supp. 3d 1333, 1344
(2017).
4
The SAA “shall be regarded as an authoritative expression by the United States concerning the
interpretation and application of the Uruguay Round Agreements and this Act in any judicial
proceeding in which a question arises concerning such interpretation or application.” 19 U.S.C. §
3512(d).
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Commerce’s regulation, 19 C.F.R. § 351.102(b)(3), adopts the definition of “affiliated”
and “affiliated persons” set forth in 19 U.S.C § 1677(33). The regulation further clarifies
“affiliated persons” with reference to the statutory definition.
Affiliated persons; affiliated parties. ‘‘Affiliated persons’’ and ‘‘affiliated parties’’
have the same meaning as in section 771(33) of the Act [19 U.S.C § 1677(33)]. In
determining whether control over another person exists, within the meaning of
section 771(33) of the Act, the Secretary will consider the following factors, among
others: Corporate or family groupings; franchise or joint venture agreements; debt
financing; and close supplier relationships. The Secretary will not find that control
exists on the basis of these factors unless the relationship has the potential to impact
decisions concerning the production, pricing, or cost of the subject merchandise or
foreign like product.
19 C.F.R. § 351.102(b)(3). Commerce further defines “person” as “any interested party as well as
any other individual, enterprise, or entity, as appropriate.” 19 C.F.R. § 351.102(b)(37).
B. “No substantial retooling” Requirement
To collapse entities pursuant to Section 351.401(f), Commerce must additionally find the
collapsed “producers have production facilities for similar or identical products that would not
require substantial retooling of either facility in order to restructure manufacturing priorities.” 19
C.F.R. § 351.401(f). This factor “requires similarity in the products produced, not in the facilities
that produced them.” Viraj Group v. United States, 476 F.3d 1349, 1356 (Fed. Cir. 2007).
Commerce may look to the cost of retooling in determining whether retooling would be substantial.
See, e.g., id. at 1358–59 (affirming Commerce’s finding that the retooling would not be substantial
based on the cost of retooling in relation to the company’s historical capital expenditure and
financial resources); Slater Steels Corp. v. United States, 28 CIT 340, 350–51, 316 F. Supp. 2d
1368, 1378–79 (2004) (“Slater Steels II”) (holding that a given cost of retooling, as a proportion
of a company’s fixed asset value, would not on its own qualify as substantial). The Federal Circuit
has held that companies may satisfy the “no substantial retooling” requirement when they do not
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possess production facilities themselves but use the same subcontractor’s facilities and the
subcontracted production would also enable the collapsed companies to shift production quantities
among themselves. Carpenter Tech. Corp., 510 F.3d at 1373–74. Commerce may also collapse
non-producers, such as exporters, following Section 351.401(f) to the extent that the regulations
are applicable. See Hontex Enters. I, 248 F. Supp. 2d at 1342–43.
C. Potential for Manipulation
Finally, to determine whether the third collapsing requirement under Section 351.401(f),
has been met -- that there be “a significant potential for the manipulation of price or production,”
Commerce “may consider” the following factors enumerated in Section 351.401(f)(2): “(i) the
level of common ownership; (ii) the extent to which managerial employees or board members of
one company sit on the board of director for an affiliated company; (iii) whether operations are
intertwined.” Prosperity Tieh, 965 F.3d at 1323 (citing 19 C.F.R. § 351.401(f)(2)). No one factor
alone is dispositive, but Commerce must consider these factors in light of the totality of the
circumstances. Id.; Zhaoqing New Zhongya Aluminum Co. v. United States, 39 CIT __, __, 70 F.
Supp. 3d. 1298, 1306 (2015); Koyo Seiko II, 31 CIT at 1535, 516 F. Supp. 2d at 1346. In
evaluating the potential for manipulation, Commerce considers both actual manipulation in the
past and possibility of future manipulation. Antidumping Duties; Countervailing Duties, 62 Fed.
Reg. 27,296, 27,346 (Dep’t Commerce May 19, 1997) (“Preamble”).
II. Facts and Procedural History of the Case
A. Commerce’s Investigation into the Doshi Companies
On September 11, 2017, Commerce initiated an AD duty investigation of stainless steel
flanges (the “subject merchandise”) imported from India and China, upon the petition by Coalition.
Stainless Steel Flanges From India and the People’s Republic of China: Initiation of Less-Than-
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PUBLIC VERSION
Fair-Value Investigation, 82 Fed. Reg. 42,649 (Dep’t Commerce Sept. 11, 2017), P.R. 18. The
period of investigation (“POI”) was July 1, 2016 through June 30, 2017. Id. at 42,649. Commerce
selected Echjay as one of the mandatory respondents 5 to the investigation and issued Echjay a
questionnaire. Mem. from C. Canales to E. Yang, re: Respondent Selection (Dep’t Commerce
Oct. 3, 2017), P.R. 29. Commerce requested information on certain companies with regards to
their affiliation with Echjay: Echjay Industries Private Limited (“Echjay Industries”), Echjay
Forging Industries Private Limited (“EFIPL”), and Spire Industries Private Limited (“Spire”)
(together with Echjay, the “Doshi Companies”). See id.
In its response to Commerce, Echjay explained that all Doshi Companies are owned by
members of the same Doshi family but that it was not affiliated with any of the other Doshi
5
In CVD investigations or administrative reviews, Commerce may select mandatory respondents
pursuant to 19 U.S.C. § 1677f-1(e)(2), which provides:
If the administering authority determines that it is not practicable to determine
individual countervailable subsidy rates under paragraph (1) because of the large
number of exporters or producers involved in the investigation or review, the
administering authority may --
(A) determine individual countervailable subsidy rates for a reasonable
number of exporters or producers by limiting its examination to --
(i) a sample of exporters or producers that the administering
authority determines is statistically valid based on the information
available to the administering authority at the time of selection, or
(ii) exporters and producers accounting for the largest volume of the
subject merchandise from the exporting country that the
administering authority determines can be reasonably examined; or
(B) determine a single country-wide subsidy rate to be applied to all
exporters and producers.
The individual countervailable subsidy rates determined under subparagraph (A) shall be used to
determine the all-others rate under section 1671d(c)(5) of this title.
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Companies due to past and ongoing family partitions. Letter from Echjay to Sec’y of Commerce,
re: Echjay’s Resp. to Sec. A of Original AD Duty Questionnaire at 8–10 (Oct. 31, 2017), C.R. 14–
23, P.R. 47–55 (“Echjay Questionnaire Resp.”). The following summarizes Echjay’s contentions
regarding the Doshi family divisions: Prior to 1983, the Doshi family owned Echjay Industries
which had two manufacturing units in India. Letter from Echjay to Sec’y of Commerce, re:
Echjay’s Resp. to 2nd Suppl. Sec. A AD Duty Questionnaire at 5–6, P.R. 120–131 (“Echjay’s
Suppl. Questionnaire Resp.”). In 1983, a family partition and legal separation agreement divided
the two manufacturing units, with Echjay Industries retaining one facility and Echjay being created
to retain another. Id. at 6. Since the 1983 partition, Echjay has been owned and managed by the
Sarvadaman Doshi family. Id. at 6–8. This legal separation ended all common ownership, and
the two companies became “full-fledged competitor[s].” Echjay Questionnaire Resp. at 8. Echjay
later acquired a second manufacturing unit. Id. at 9. A second family partition then occurred
within the Sarvadaman Doshi family in [[ ]]. Id. At that time, Sarvadaman Doshi’s brothers,
Deepak Doshi and Nagin Doshi, created EFIPL and retained one manufacturing unit from Echjay.
Id. At the time of the separation, an interim legal order was put into place to bar interference of
the Sarvadaman Doshi family and the Deepak Doshi family in their respective companies. Id.
After that separation, the Deepak Doshi family also created Spire, in which the Sarvadaman Doshi
family has never had ownership or participation. Id. at 11. Legal agreements, finalized by the
Bombay High Court in [[ ]], retroactively separated Echjay from EFIPL, and
members of the family group controlling EFIPL resigned from directorship of Echjay [[ ]]
to eliminate sharing of managerial employees. Id. at 9–10. Shares held in each other’s company
were “still pending to be transferred” but, per the legal agreements, neither family could control,
intervene in the operations, or hold the shares on behalf of each other. Id. at 10.
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Thus, by the time of the POI and Commerce’s investigation, the Doshi family fractured
into three camps -- the original Doshi family owning Echjay Industries, the Sarvadaman Doshi
family owning Echjay, and the Deepak Doshi family owning EFIPL and Spire. Echjay
acknowledged that Echjay Industries may have exported subject merchandise during the POI. Id.
at 8. However, as Echjay reported, EFIPL and Spire both ceased production of subject
merchandise years prior to the POI. Id. at 10–11. Neither EFIPL nor Spire produced or sold
subject merchandise during the POI. Id. Echjay reported that it had no supply of input, sharing of
facilities, or other instances of intertwined operations with other Doshi Companies; Echjay
functioned independently. Id. at 8–12.
Based on this response, Commerce requested additional information from Echjay,
including supporting documentation on production of subject merchandise of Echjay Industries,
EFIPL, and Spire. Letter from C. Canales to Echjay, re: Commerce Suppl. Questionnaire to Echjay
at 7 (Dep’t Commerce Nov. 27, 2017), P.R. 91. Commerce also asked Echjay to address that
Spire’s website indicated that it produced forged products and flanges, contrary to Echjay’s
assertions. Id. In its response, Echjay reviewed the history of the Doshi family and the Doshi
Companies, laying out three separate family groups owning and controlling the Doshi Companies.
Echjay’s Suppl. Questionnaire Resp. at 5–8. Echjay also highlighted for each partition the family
agreements and court-approved scheme of arrangements. Id. Echjay stated that it had limited
information of other Doshi Companies due to the “hostile separation” and specified its efforts in
collecting certain organizational information Commerce required. Id. at 8–9. With regard to status
of production, Echjay restated that EFIPL and Spire had already closed down their plants and had
disposed, or were disposing, of the equipment for the production of subject merchandise. Id. at
13–15. Echjay included the closure letter of EFIPL’s plant as well as photographs and projected
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design showing the construction of a residential complex at the plant’s location. Id. at 13–14.
Echjay also provided Spire’s audited financials, a letter from Spire, and [[
]], suggesting that Spire’s plant was dysfunctional and [[
]]. Id. at 14–15, 22. Echjay further claimed that Spire was in the process of updating
its website to reflect the change. Id. at 15, 30. Echjay noted that, according to a letter from Echjay
Industries, it exported “very small quantities” of subject merchandise to the United States prior to
but none during the POI. Id. at 12.
B. Commerce’s Determination
Commerce published its preliminary determination on March 28, 2018, finding Echjay
affiliated with the rest of the Doshi Companies and collapsing them into a single entity for the AD
investigation. See Stainless Steel Flanges From India: Preliminary Affirmative Determination of
Sales at Less Than Fair Value, Preliminary Affirmative Determination of Critical Circumstances,
Postponement of Final Determination, and Extension of Provisional Measures, 83 Fed. Reg.
13,246 (Dep’t Commerce Mar. 28, 2018), P.R. 339 (“Preliminary Determination”); Mem. from J.
Maeder to G. Taverman, re: Decision Mem. for the Preliminary Determination in the Less-Than-
Fair-Value Investigation of Stainless Steel Flanges from India at 9, (Dep’t Commerce Mar. 19,
2018), P.R. 327 (“PDM”); Mem. from J. Hancock to J. Doyle, re: Affiliation Mem. of Echjay,
Echjay Industries, EFIPL, and Spire (Dep’t Commerce Mar. 19, 2018), C.R. 339–41, P.R. 346
(“Preliminary Affiliation Memo”). Commerce collapsed the Doshi Companies because it found
that they were affiliated through common ownership by the Doshi family, had similar production
facilities that would not require substantial retooling to shift manufacturing priorities, and had a
significant potential for manipulation of prices or production. Preliminary Affiliation Memo at 9–
13.
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Echjay challenged Commerce’s determination to collapse it with each of the other Doshi
Companies in its case brief. Letter from Echjay to Sec’y of Commerce, re: Stainless Steel Flanges
from India; Echjay Case Br. (May 25, 2018), P.R. 393 (“Echjay Case Br.”). Nevertheless,
Commerce maintained its decision to collapse the entities for the purposes of its AD investigation
in its Final Determination. 83 Fed. Reg. at 40,746; Mem. from J. Doyle to J. Maeder, re: Issues
and Decision Mem. for the Final Determination of the AD Duty Investigation of Stainless Steel
Flanges from India at 14–27 (Dep’t Commerce Aug. 10, 2018), P.R. 406 (“IDM”).
Echjay initiated this litigation on November 8, 2018 and filed a complaint on December 8,
2018. Summons, ECF No. 1; Compl., ECF No. 7. Echjay challenges Commerce’s decision to
collapse the Doshi Companies in its Final Determination as not supported by substantial evidence
or otherwise in accordance with law. Echjay Opening Br., June 25, 2019, ECF No. 26 (“Pl.’s
Br.”). The Government and Coalition respond that the Final Determination should be affirmed.
Def.’s Resp. to Pl.’s Mot. for J. on the Agency R., Sept. 23, 2019, ECF No. 30 (“Def.’s Br.”);
Resp. Br. of Def.-Inter., Sept. 23, 2019, ECF No. 33 (“Def.-Inter.’s Br.”). Echjay replied on
November 12, 2019. Pl. Echjay Reply to Opp’n Br., ECF No. 36 (“Pl.’s Reply). The parties
provided written responses to the court’s questions in advance of oral argument. Ct.’s Letter re:
Questions for Oral Arg., June 11, 2020, ECF No. 50; Ct.’s Letter re: Suppl. Questions for Oral
Arg., June 17, 2020, ECF No. 54; Pl.’s Resp. to the Ct.’s Questions, June 22, 2020, ECF No. 59;;
Def.’s Resps. to the Ct.’s Questions in Advance of Oral Arg., June 24, 2020, ECF No. 63; Def.-
Inter.’s Resp. to Ct.’s Questions for Oral Arg., June 23, 2020, ECF No. 62. Oral argument was
held on July 13, 2020. ECF No. 64. The parties then filed post-argument submissions on July 16,
2020. Echjay Further Comments, ECF No. 67; Def.-Inter.’s Subm’n of Suppl. Comments, ECF
No. 66.
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JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction over this action pursuant to 28 U.S.C. § 1581(c) and 19 U.S.C.
§ 1516a(a)(2)(B)(iv), (vi). The standard of review in this action is set forth in 19 U.S.C. §
1516a(b)(1)(B)(i): “[t]he 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.” In reviewing for substantial evidence, the court “must do more than create a suspicion of
the existence of the fact to be established,” N.L.R.B. v. Columbian Enameling & Stamping Co.,
306 U.S. 292, 300 (1939), and search for “such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion,” Consol. Edison Co. v. N.L.R.B., 305 U.S. 197, 229
(1938). “[T]he agency must examine the relevant data and articulate a satisfactory explanation for
its action including a ‘rational connection between the facts found and the choice made.’” Motor
Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins., 463 U.S. 29, 43 (1983) (citing Burlington Truck
Lines v. United States, 371 U.S. 156, 168 (1962)).
DISCUSSION
Echjay challenges Commerce’s decision to collapse the Doshi Companies on four bases --
on each of the three collapsing prongs and as inconsistent with other Commerce determinations.
First, Echjay contends that Commerce wrongly interpreted the statute governing affiliation, 19
U.S.C. § 1677(33), to find companies owned by different individuals in a family affiliated. Pl.’s
Br. at 5. Echjay also contends that substantial evidence does not support the determination that
the Doshi family was “a person” under Section 1677(33) and thus that the Doshi Companies were
affiliated. Id. at 10. Second, Echjay argues that two of the Doshi Companies -- EFIPL and Spire
-- do not have relevant production facilities and thus would require substantial retooling contrary
to Commerce’s finding. Id. at 24–28. Third, Echjay states that it has no common ownership,
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common managerial employees, or intertwined operations with other Doshi Companies, and
therefore there is no potential for manipulation. Pl.’s Br. at 32–33. Lastly, Echjay argues that
Commerce’s decision to collapse is unlawfully inconsistent with a prior AD determination and the
countervailing duty (“CVD”) determination concurrent with the AD determination at issue here.
Pl.’s Br. at 30–32, 33.
While the court holds that Commerce’s interpretation of the affiliation statute was
permissible, the court concludes that Commerce did not determine the Doshi family to be a
“person” under Section 1677(33)(F) based on substantial evidence. Further, the court concludes
that Commerce did not find Echjay, EFIPL, and Spire could shift manufacturing priorities without
substantial retooling of the production facilities based on substantial evidence. With respect to the
third prong of the collapsing analysis, the court determines that Commerce did not find a “potential
for manipulation” based on substantial evidence. Lastly, the court concludes that Commerce did
not explain the apparent inconsistency between its determination to collapse Echjay and Echjay
Industries in the Final Determination with its contrary decision in its prior AD determination.
Therefore, the court remands to Commerce its decision to collapse Echjay with the Doshi
Companies in its Final Determination for further explanation of its collapsing determination based
on substantial record evidence.
I. Commerce’s Decision to Find The Doshi Companies Affiliated Through the
Doshi Family Grouping Was Based on a Permissible Statutory Interpretation,
But Unsupported By Substantial Evidence.
In analyzing the first collapsing prong, Commerce found the Doshi Companies to be
affiliated “pursuant to § 771(33)(A) and (F) of the Act,” referring to 19 U.S.C. § 1677(33)(A) and
(F). Preliminary Affiliation Memo at 4; IDM at 18. Citing to the SAA, Ferro Union v. United
States, 23 CIT 178, 193, 44 F. Supp. 2d 1310, 1325 (1999), and agency practice in other cases,
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Commerce concluded that “person” in § 1677(33)(F) can be interpreted to encompass a “family.”
PDM at 7; IDM at 20. Based on the submission of Echjay, Commerce summarized the evidence
that, in relation to Sarvadaman Doshi, Chairman and Managing Director for Echjay, his uncle
owned Echjay Industries, his brother Deepak Doshi owned EFIPL, and his brother Nagin Doshi
owned Spire. Preliminary Affiliation Memo at 4. Commerce thus found the owners of the Doshi
Companies to be to be members of the same family group and thus “affiliated family members”
pursuant to Section 1677(33)(A). Id. at 4. Commerce then found the Doshi family a “person” as
the only shareholders and senior managers of the Doshi Companies and with control over the major
decisions of the Doshi Companies under Section 1677(33)(F). Id. at 4–6. In this way, Commerce
found the Doshi Companies to be affiliated as under common control by the Doshi family.
A. Commerce Properly Interpreted Section 1677(33)(F) to Include a Family
as a “Person” For Purposes of Affiliation.
Echjay first challenges Commerce’s interpretation of Section 1677(33)(F). Pl.’s Br. at 4–
20. Echjay contends that a family grouping is not “a person” within the meaning of Section
1677(33)(F). Pl.’s Br. at 5. Rather, Echjay contends that the common meaning of the word “family
grouping” suggests that it is “a group of persons.” Id. Echjay argues that there is no reason for
Commerce to interpret the singular “person” in Section 1677(33) in the plural to facilitate statutory
intent. Id. at 5–6 (citing First Nat’l Bank in St. Louis v. Missouri, 263 U.S. 640, 657 (1924)).
Treating a family as a person under Section 1677(33)(F), Echjay further argues, would leave
redundant Section 1677(33)(A) that provides for affiliation among family members. Id. at 6–8.
The Government counters that Commerce reasonably interpreted the language of
Section 1677(33)(F) through Commerce’s regulation, 19 C.F.R. § 351.102(b)(37), which defines
“person” as including “any interested party as well as any other individual, enterprise, or entity, as
appropriate.” Def.’s Br. at 7, 10–11. The Government notes that the court previously upheld this
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interpretation and that Commerce has made similar findings based on this interpretation in other
determinations. Def.’s Br. at 11–12 (citing Ferro Union, 44 F. Supp. 2d at 1324, 1326; Certain
Crystalline Silicon Photovoltaic Products from the People’s Republic of China, 79 Fed. Reg.
76,970 (Dep’t Commerce Dec. 23, 2014): Aluminum Extrusions from the People’s Republic of
China, 76 Fed. Reg. 18,524 (Dep’t Commerce Apr. 4, 2011)). Coalition makes similar arguments
to rebut Echjay’s claims. See Def.-Inter.’s Br. at 12–13.
The court concludes that Commerce’s interpretation of the statute to include treating a
family as an entity or an enterprise and thus a “person” is a permissible interpretation. In reviewing
Commerce’s interpretation of statutes, the court must apply the two-step test laid out in Chevron,
U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). See also Apex
Frozen Foods Priv. Ltd., 862 F.3d at 1329. Under Chevron, the court first asks “whether Congress
has directly spoken to the precise question at issue.” 467 U.S. at 842. If yes, “that is the end of the
matter,” and the court “must give effect to the unambiguously expressed intent of Congress.” Id.
at 842–43. However, “if the statute is silent or ambiguous with respect to the specific issue, the
question for the court is whether the agency’s answer is based on a permissible construction of the
statute.” Id. at 843. Deference to the agency’s interpretation of a statute is only required by
Chevron when that interpretation is reasonable. Koyo Seiko Co. v. United States, 36 F.3d 1565,
1573 (Fed. Cir. 1994) (“Koyo Seiko I”). Section 1677(33)(A) specifies that “[m]embers of a
family, including brothers and sisters (whether by whole or half blood), spouse, ancestors, and
lineal descendants” shall be considered as “affiliated persons.” 19 U.S.C. § 1677(33)(A). Further,
Section 1677(33)(F) specifies that “[t]wo or more persons directly or indirectly controlling,
controlled by, or under common control with, any person” are also affiliated. Id. at § 1677(33)(F).
Here, Commerce used these two provisions to conclude that the Doshi Companies were affiliated
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through common control by the Doshi family, as an entity or “person.” Preliminary Affiliation
Memo at 4. Because the affiliation statute does not directly speak to whether “person”
encompasses family groupings, the court will defer to a reasonable interpretation of the statute by
Commerce. See Chevron, 467 U.S. at 842–43; Koyo Seiko I, 36 F.3d at 1573.
The court previously addressed Commerce’s interpretation of the affiliation statute in
relation to families in Ferro Union v. United States. 44 F. Supp. 2d at 1326. Ferro Union held that
Commerce may interpret a “family” as a “person” for purposes of Section 1677(33)(F) to establish
affiliation. Id.. There, the court upheld Commerce’s finding of affiliation among a series of
companies through common control of several families, even though there were no common
individuals in control of some of the affiliated companies. Id. at 1320–21, 1326. In its analysis,
the court noted that there is no statutory definition of “person” in Section 1677(33) or the general
definitions section of the URAA. Id. at 1326. Further, the court explained that Section 1677(33)
was amended by the URAA and its accompanying SAA, and that the SAA indicated an intent to
“permit a more sophisticated analysis [of affiliation] which better reflects the realities of the
marketplace” and to find control “through corporate or family grouping,” to which Commerce’s
interpretation of Section 1677(33)(F) gave effect. Id. at 1323, 1326 (citing SAA at 838).
Furthermore, Commerce’s regulations define “person” as “any interested party as well as any other
individual, enterprise, or entity, as appropriate.” 19 C.F.R. § 351.102(b)(37). The court in Ferro
Union concluded that considering a family as a “person” complied with Commerce’s regulations
as “a family can reasonably be considered an ‘entity’ or an ‘enterprise’ because family members
likely share a common interest.” 44 F. Supp. 2d at 1326.
The court agrees with the conclusion of Ferro Union and holds that Commerce permissibly
interpreted Section 1677(33) to include a family grouping as a “person” for purposes of affiliation.
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See also Dongkuk Steel Mill, 29 CIT at 732 (“The court finds that Ferro Union’s conclusion that
Commerce’s interpretation of section 1677[(33)](F) was reasonable under Chevron should not be
disturbed because it complies with the statutory framework.”); Zhaoqing New Zhongya
Aluminum, 70 F. Supp. 3d at 1304 (“[T]he decision in Ferro Union Inc. supports the proposition
that the singular person in the statute can be interpreted in the plural to facilitate statutory intent.”).
Finally, the court is not persuaded by Echjay’s argument that Commerce’s inclusion of a
family grouping as a person would leave subsection (A) redundant. See Pl.’s Br. at 6–8. Echjay
claims that, because family members are defined as ‘affiliates’ in subsection (A), they cannot then
be viewed as one person for purposes of subsection (F). Id. However, as explained, Commerce
relied on both subsection (A) and subsection (F) to reach its conclusion that the Doshi Companies
were affiliated. Preliminary Affiliation Memo at 4–5; IDM at 4–5, 18–19. In short, Commerce’s
determination did not render subsection (A) redundant. It is also not obvious that Commerce’s
interpretation of a “person” for the purposes of subsection (F) necessarily bears any implication
on subsection (A) when the interpreted term “person” does not appear in subsection (A).
B. Commerce’s Determination that the Doshi Family Was a “Person” Under
Section 1677(33)(F) Was Not Based on Substantial Evidence.
Echjay also challenges Commerce’s application of the affiliation statute to the Doshi
family. Echjay disputes Commerce’s determination by arguing that Commerce failed to “analyze
[the] ‘nature of the relationships among’ the persons in a family, and justify its finding by
substantial evidence.” Pl.’s Br. at 9 (quoting Ferro Union, 44 F. Supp. 2d at 1320). Thus, Echjay
contends that had Commerce analyzed the relationships among the Doshi family members,
Commerce could not conclude based on substantial evidence that a family that has divided joint
assets through hostile, legally binding separation agreements, constitutes a family that could
commonly control the Doshi Companies. Id. at 10. The Government and Coalition respond that
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Commerce’s analysis under Section 1677(33)(A) supports the conclusion that Doshi family
members are affiliated persons and thus constitute a “person” that controls the Doshi Companies
under Section 1677(33)(F). See Preliminary Affiliation Memo at 4–5; IDM at 20; Def.’s Br. at
11; Def.-Inter.’s Resp. to Ct.’s Questions for Oral Arg. at 1–2.
Commerce’s determination that the Doshi Family constituted a “person,” pursuant to a
reasonable interpretation of the statute that a family grouping may be a “person,” must also be
based on substantial evidence. See Fujitsu Gen. Ltd v. United States, 88 F.3d 1034, 1038 (Fed.
Cir. 1996) (quoting 19 U.S.C. § 1516a(b)(1)(B)). Subsection (A) provides that “members of a
family” are “affiliated persons,” and thus Commerce correctly concluded that the owners of the
Doshi Companies were affiliated persons as Echjay acknowledged that the Doshi Companies were
each owned by members of the same Doshi family. Echjay Questionnaire Resp. at 6–7; see also
Ferro Union, 44 F. Supp. 2d at 1325 (holding that uncles and nephews would be included in the
statute’s definition of “family”). However, this conclusion alone does not support that a family
grouping constitutes a “person” that may control multiple companies in accordance with
Section 1677(33)(F). On that point, Commerce’s regulation implementing the affiliation statute
provides further explanation. The regulation states, “[i]n determining whether control over another
person exists, within the meaning of section 771(33) of the Act, . . . [t]he Secretary will not find
that control exists on the basis of these factors [, including family groupings,] unless the
relationship has the potential to impact decisions concerning the production, pricing, or cost of the
subject merchandise or foreign like product.” 19 C.F.R. § 351.102(b)(3). Further, Commerce
defines a “person” to be “any interested party as well as any other individual, enterprise, or entity,
as appropriate.” 19 C.F.R. § 351.102(37). Thus, in order to consider a family grouping to be a
“person” capable of collective control, Commerce must also find that family grouping to share a
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common interest or consist of relationships that could impact business decisions of family owned
companies. See also Ferro Union, 44 F. Supp. 2d at 1326 (“Commerce concluded that anyone
with the same surname was a member of the same family. On remand, Commerce should inform
itself of the nature of the relationships among these people in order to assure itself that it has
properly determined that the persons involved are family members as contemplated by the
statute.”). In this way, a family grouping could constitute an entity or person that controls related
companies for purposes of affiliation under Section 1677(33)(F).
The court concludes that Commerce did not adequately explain that the Doshi family
constitutes a person such that it collectively controlled the Doshi Companies and that those
companies were affiliated in light of the record evidence. Echjay presented legal documentation
showing hostile family partitions among the owners of the Doshi Companies, resulting in the
splitting of family assets. IDM at 16; Echjay Questionnaire Resp. at 6–8. This legal separation
prevents various Doshi family members from interfering in, controlling, or participating in the
business of other family members. Echjay Questionnaire Resp. at 6–8. For this reason, Echjay
argued that the owners of the Doshi Companies were not one family grouping, but several. Id. at
6–8. Commerce responded to this point by explaining: “the partition between shareholders of
Echjay and Echjay Forgings has not been finalized. Moreover, the current family partition does
not preclude cooperation among family members in the future [and] this ownership structure
provides the family grouping the ability and financial incentive to coordinate their actions to act
in concert with each other.” IDM at 25. However, this explanation fails to address the Sarvadaman
Doshi family relationship with the original Doshi family, whose assets were divided pursuant to a
separation agreement from 1983. Further, that the transfer of shareholdings between Echjay and
EFIPL had not been finalized, as Commerce alludes to, does not explain how the operative
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separation agreements barring Echjay from interfering in or controlling EFIPL or Spire would not
be effective.
Admittedly, the court in Ferro Union doubted whether Commerce should be required to
distinguish families due to estranged family members, because “[n]either the statute, nor the
regulations, provide for an exception to family for members who are estranged,” and such a finding
“would invite parties in administrative reviews to assert subjective criteria for determining familial
relationships” and is thus “not administrable.” 44 F. Supp. 2d at 1325. However, the objective
evidence of legal separation agreements that Echjay provided alleviates that concern here. Thus,
Commerce may not automatically find affiliated family members to be a person under subsection
(F) but must instead address the evidence presented by Echjay. Without fully examining and
addressing the evidence of the family partitions, Commerce’s finding that the Doshi family was a
“person” capable of collectively controlling the Doshi Companies pursuant to Section 1677(33)(F)
was not based on substantial evidence. See CS Wind Viet. Co. v. United States, 832 F.3d 1367,
1373 (Fed. Cir. 2016) (holding that the substantiality of evidence must account for anything in the
record that reasonably detracts from its weight).
II. Commerce’s Finding that EFIPL and Spire Would Not Require Substantial
Retooling to Restructure Manufacturing, Exporting, and Selling Priorities Was
Not Based on Substantial Evidence.
As has been noted, with respect to the second prong required for collapsing entities,
Commerce determined that the Doshi Companies “would require no substantial retooling in order
to restructure manufacturing, exporting, and selling priorities” among themselves. IDM at 24.
Commerce found that Echjay Industries satisfies the “no substantial retooling” requirement as it
had a production facility and had exported subject merchandise to the United States before [[
]] the POI [[ ]]. Preliminary Affiliation Memo at 9. While
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Commerce did not find EFIPL to produce and sell subject merchandise at the time of the decision
or during the POI, Commerce concluded that EFIPL satisfied the “no substantial retooling”
requirement based on the evidence that it had produced and sold subject merchandise prior to the
POI. Id. at 11. Although record evidence did not demonstrate that Spire exported subject
merchandise to the United States at that time, Commerce found that Spire met the “no substantial
retooling” requirement based on the evidence that Spire was a producer of identical products at the
time of investigation and had sold subject merchandise in the past. Id. at 10. Commerce noted
that Spire’s website still listed stainless steel products, contrary to Echjay’s claim that Spire had
closed down its plant and Echjay’s assurance that the website would be updated, which supported
Commerce’s finding that Spire was a producer of identical products. Id. In short, Commerce
concluded that EFIPL and Spire were producers of subject merchandise based on their past
production and thus met the “no substantial retooling” prong of Commerce’s collapsing analysis. 6
Echjay disputes the finding as to EFIPL and Spire, Pl.’s Br. at 24–29. Echjay argues that
EFIPL and Spire were not producers of subject merchandise during the period of investigation.
Pl.’s Br. at 24. It claims that Commerce did not consider the evidence it submitted showing that
there were no production facilities at the original plant locations and no revenue from subject
merchandise. Id. at 24–28. Echjay contends that Spire’s website, relied on by Commerce, was
outdated and Commerce’s examination of the website fell outside of the POI. Id. at 27; Pl.’s Reply
at 5. Echjay also suggests that Commerce could have visited the former manufacturing sites of
6
Commerce may determine that collapsing affiliated non-producers is appropriate when there is
“significant potential for the manipulation of price or production.” Hontex Enters., Inc., v. United
States, 28 CIT 1000, 342 F. Supp. 1225, 1231 (2004) (“Hontex Enters. II”). However, both the
Government and the Coalition clarified that the Doshi Companies were collapsed as producers
rather than non-producers. Def.’s Resps. to the Ct.’s Questions in Advance of Oral Arg. at 15;
Def.-Inter.’s Resp. to Ct.’s Questions for Oral Arg. at 17.
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EFIPL and Spire during its verification in India but instead made speculative claims about the two
companies. Pl.’s Br. at 29; Pl.’s Reply at 5. Echjay concludes that there is no reason to find that
EFIPL and Spire meet the “no substantial retooling” requirement simply because they have
produced subject merchandise in the past. Pl.’s Br. at 24. The Government responds that
Commerce’s findings were based on substantial evidence because of evidence of their past
production and Spire’s website. Def.’s Br. at 13–15.
Commerce’s determination that EFIPL and Spire would not require substantial retooling
to shift manufacturing priorities towards the subject merchandise does not satisfy the court’s
review for substantial evidence. First, Commerce’s finding that EFIPL satisfies the “no substantial
retooling” requirement is supported only by the evidence that EFIPL produced subject
merchandise prior to the POI. IDM at 23–24. The caselaw demonstrates a much higher bar for a
substantial evidence showing that no substantial retooling is required. In Viraj Group v. United
States, the Federal Circuit upheld Commerce’s finding that no substantial retooling was required
among collapsed companies. 476 F.3d at 1358–59. The court reviewed evidence provided by
Commerce that the production facilities of one company could be retooled to make a product
identical to that produced by the other companies, including the existing production facilities and
the equipment to be added. Id. The court then confirmed Commerce’s finding that the retooling
would not be substantial based on the cost of retooling in relation to the company’s historical
capital expenditures and financial resources. Id. Similarly, in Slater Steels II, Commerce on
remand referenced only the cost of retooling with company’s financials to further support its
determination that the retooling would not be “substantial.” 316 F. Supp. 2d at 1378–80. There,
the court ruled that a given cost of retooling, as a proportion of a company’s fixed asset value, may
not on its own qualify as “substantial.” Id.
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Commerce acknowledged that EFIPL did not produce subject merchandise during the POI
and record evidence supported EFIPL’s statement that it had closed its plants. IDM at 23–24. In
light of these assertions, Commerce did not address whether EFIPL’s facilities would require
retooling to produce similar products to Echjay, nor how much retooling would be required.
Echjay and EFIPL submitted photographs and design plans showing that EFIPL’s manufacturing
facilities were removed and there was ongoing construction to repurpose the site as a residential
complex. See Echjay’s Suppl. Questionnaire Resp. at 14–15. Given the record evidence, it is
reasonable to conclude that, for EFIPL to shift production of subject merchandise, EFIPL would
have to build the production facilities anew, incurring the upfront cost like any other new market
entrant, costs that would likely be substantial. See also Slater Steels I, 279 F. Supp. 2d at 1376–
77 (rejecting Commerce’s finding of no substantial retooling where the affiliated companies did
not have the production capability to produce the finished subject merchandise, only inputs).
Commerce did not explain with sufficient clarity what linked its finding of EFIPL’s past
production to its conclusion that EFIPL satisfied the “no substantial retooling” requirement, and
is thus not supported by substantial evidence. See Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43–44.
Second, with regard to Spire, Commerce relied on the record evidence that Spire’s website
continued to include products similar to the subject merchandise, in addition to evidence of past
production. IDM at 24. Similar to EFIPL, Commerce acknowledged that the record evidence did
not demonstrate that Spire exported subject merchandise at the time of investigation but noted that
Spire had produced it in the past. Id. Commerce also concluded that the website information
demonstrated that Spire was a producer of subject merchandise at the time of investigation, and
that the website continued to list subject merchandise even after Echjay stated that it would be
updated. Preliminary Affiliation Memo at 10; IDM at 24. Commerce did not explain how website
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information adequately established Spire as a current producer, in light of other record evidence
showing that it no longer had production facilities. Thus, Commerce’s determination that Spire
satisfied the “no substantial retooling” requirement did not address important factors and evidence
raised by Echjay nor offer an adequate explanation of its conclusion in light of the record evidence.
See SKF USA Inc. v. United States, 263 F.3d 1369, 1382 (Fed. Cir. 2001); Motor Vehicle Mfrs.
Ass’n, 463 U.S. at 43.
In sum, substantial evidence does not support Commerce’s finding that EFIPL and Spire
would not require substantial retooling to restructure manufacturing, exporting and selling
priorities. 7
III. Commerce’s Finding of the Significant Potential for Manipulation Was Not
Based on Substantial Evidence.
In determining the potential for manipulation -- the third prong of the collapsing decision
-- Commerce looks to the following factors: the level of common ownership, the extent to which
managerial employees or board members of one firm sit on the board of directors of an affiliated
firm, and intertwined operations. 19 C.F.R. § 351.401(f)(2). Commerce considers the totality of
circumstances so that none of the factors above is dispositive of determining the potential for
7
The court does not address the issue of the application of adverse inferences alluded to by Echjay,
the Government, and Coalition in various filings. While Echjay contested Commerce’s finding of
“non-cooperation and application of adverse facts available” in its complaint, Compl. ¶ 6, Echjay
does not explicitly pursue its arguments on non-cooperation and adverse inference findings in the
opening brief and thus waived such contentions. See SmithKline Beecham Corp. v. Apotex Corp.,
439 F.3d 1312, 1319 (Fed. Cir. 2006) (“Our law is well established that arguments not raised in
the opening brief are waived.”). Both the Government and the Coalition emphasize Echjay’s
failure in providing “complete and accurate responses” to Commerce’s questions with regard to
the other Doshi Companies. Def.’s Resps. to the Ct.’s Questions in Advance of Oral Arg. at 13–
14; Def.-Inter.’s Resp. to Ct.’s Questions for Oral Arg. at 14. However, Commerce did not
specifically apply an adverse inference to support its collapsing determination, and Commerce’s
discussion of adverse inferences occurred in separate sections in both the PDM and IDM. See
PDM at 9; IDM at 28–29.
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manipulation. Koyo Seiko II, 31 CIT at 1535, 516 F. Supp. 2d at 1346. Here, Commerce found a
significant potential for future manipulation among the Doshi Companies based on the level of
common ownership and common board members or managers by the Doshi family collectively.
IDM at 24–26. Commerce observed that the Doshi family owned and controlled the Doshi
Companies, and therefore found common ownership among the Doshi Companies. Id. at 24–25.
Commerce noted that the ownership structure provided the Doshi family the ability and financial
incentive to coordinate and positioned the Doshi family to have significant influence over the
production and sales decisions of each of the entities involved in the production and sales of subject
merchandise. Id. at 25. Commerce determined that the fractured relationships within the Doshi
family should not alter the finding because a current family partition does not preclude future
cooperation. Id. Commerce then found overlap among the managerial employees or board
members among the Doshi Companies, as “the Doshi family grouping serves as board members
and directors” on each of the Doshi Companies. Id. Commerce also noted that one Doshi family
member sat on the boards of both EFIPL and Spire. Id. at 26. Commerce concedes that the third
factor of intertwined operations is not present but non-dispositive considering the totality of the
circumstances. Id.
Echjay disputes Commerce’s finding that there is a potential for manipulation among the
Doshi companies because it rejects Commerce’s conclusion that the Doshi family is properly
considered one cohesive family grouping. Pl.’s Br. at 21–22. Echjay argues that there is no
common ownership, as separate siblings and their spouses own separate companies and common
family ownership alone is insufficient to support collapsing because it does not indicate common
control. Id. Echjay also reports that no individual works in both Echjay and any of the other Doshi
Companies and thus there are no shared managerial employees to support finding potential for
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manipulation between Echjay and the rest of the Doshi Companies. Id. The Government contends
that Commerce’s finding was based on substantial evidence. Def.’s Br. at 15–18. The Government
argues that “[n]either the statute, nor the regulations, provide for an exception to family for
members who are estranged.” Id. at 16 (quoting Ferro Union, 44 F. Supp. 2d at 1325). The
Government also emphasizes that Commerce considers the totality of circumstances in finding a
significant potential for manipulation. Id. at 17. Coalition argues that Commerce’s finding of a
potential for manipulation correctly contributed to the totality of the circumstances and rejects the
idea that a partition would preclude the ability or incentive to coordinate their future actions. Def.-
Inter.’s Br. at 27.
Here, Commerce’s finding that there is a potential for manipulation depends upon the
assumption that the Doshi family is a person or entity that acts as a cohesive unit. For the reasons
discussed above regarding affiliation, Commerce has not explained how this assumption is
warranted based on the record evidence. Therefore, Commerce’s finding that there is a potential
for manipulation among the Doshi Companies also fails to be supported by substantial evidence.
On the first factor, the court concludes that Commerce did not adequately explain its
finding of common management among the Doshi Companies. The court finds persuasive the
conclusion of the court in a similar case, Jinko Solar Co. v. United States, 41 CIT __, __, 229 F.
Supp. 3d 1333 (2017) (“Jinko I”). In that case, the court refused to affirm Commerce’s conclusion
that a family grouping’s collective indicia of control supported a finding of common management.
Id. at 1344. The court there noted that, while the affiliation statute leaves Commerce discretion to
define “persons” broadly to include a “family,” Commerce’s regulation on common management
has defined the inquiry much more narrowly “to require Commerce to compile a list of managers
or board members on one firm and compare them to the board of directors of an affiliated firm.”
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Id. at 1344 n.12. The court in Jinko I held that, while “nothing precludes Commerce from
considering that members of a family unit sit on the boards of two sets of entities as reflecting a
potential for manipulation . . . if Commerce wishes to rely upon board memberships and
management positions held by a family grouping, it must so state and explain how this factor
creates a significant potential for the manipulation of price or production or reconsider its
determination.” Id. at 1345.
The court agrees with Jinko I and concludes that Commerce must explain why a different
factor it relied upon justifies its finding of potential for manipulation. Here, Commerce provided
the explanation that it “find[s] the Doshi family grouping to be a ‘person’ which owns and controls
[the Doshi Companies], and as the Doshi family grouping serves as board members and directors
of these companies, [Commerce] find[s] that there is overlap among the managerial employees or
board members of the various companies, in accordance with 19 [C.F.R.] [§] 351.401(f)(2)(ii).”
IDM at 25–26. Commerce must state that it relied upon the shared management through a family
grouping to find potential for manipulation and explain how the evidence supports this conclusion.
See Jinko I, 229 F. Supp. 3d at 1345. It would also need to address the partitions and hostility
among the owners of the Doshi Companies raised by Echjay and explain whether the family
relationships here are “beyond normal commercial considerations” and “out of common interest,”
as the court noted in Jinko Solar Co. v. United States, 41 CIT __, __, 279 F. Supp. 3d 1253, 1260
8
(2017) (“Jinko II”). Commerce did not provide sufficient explanation on this point or any
8
On remand, the court found Commerce satisfied this requirement after explaining “the
enumerated and non-enumerated factors that it considered, and why each was relevant” in finding
the potential for manipulation. Jinko Solar II, 279 F. Supp. 3d at 1260. Commerce clarified that
the family as a whole played a prominent role in the management of the companies and the family
relationship created potential “to make decisions based on considerations ‘beyond normal
commercial considerations’ and ‘out of common interest.’” Id. at 1260. The court confirmed
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additional path to justify linking the Doshi Companies’ management to the potential for
manipulation. Commerce’s assertion -- that “the current family partition does not preclude
cooperation among family members in the future,” IDM at 25 -- does not affirmatively support the
potential for manipulation; rather it is simply an argument that the possibility cannot be eliminated.
Therefore, Commerce’s finding on shared management does not support its finding of potential
manipulation.
Regarding the common ownership factor, caselaw supports Commerce’s finding of
common ownership by a family grouping to support finding significant potential for manipulation.
See Zhaoqing New Zhongya Aluminum, 70 F. Supp. 3d at 1304–05 (while “a different person
owns each of the three companies,” the family grouping as a whole held controlling ownership in
all three companies and common ownership by the family was “a positive indicator of the
significant potential for manipulation”); Catfish Farmers of America v. United States, 33 CIT
1258, 1265, 641 F. Supp. 2d 1362, 1371 (2009) (affirming a finding of common ownership where
the family members were “the only shareholders, and the largest shareholders” in each of the
collapsed companies and thus concluded that the companies “have the ability or incentive to
coordinate their actions in order to direct the companies to act in concert with each other”). While
Commerce stated that the Doshi family in aggregate own a majority of the Doshi Companies,
which indicates the ability and financial incentive to coordinate and manipulate production and
sales, this conclusion requires the predicate analysis that the Doshi family is in fact an intact family
grouping. As noted above, however, Commerce did not address the partitions that included legal
separation agreements. Thus, while the Government is correct that there may not be an exception
Commerce’s explanation noting that family relationships are indeed “beyond the scope of a normal
commercial relationship.” Id. at 1260.
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for estranged family members, Commerce still must provide a level of explanation of its decision
that shows a rational connection between the facts found and its conclusion. See Motor Vehicle
Mfrs. Ass’n, 463 U.S. at 43. Commerce has not done so here.
As the Federal Circuit recently noted, “[w]hen Commerce promulgated 19 CFR §
351.401(f), it emphasized that collapsing requires a ‘significant’ potential for manipulation,” not
merely “any potential for price manipulation.” Prosperity Tieh, 965 F.3d at 1323 (quoting
Preamble, 62 Fed. Reg. at 27,345) (emphasis original). In sum, on remand Commerce must
consider the record evidence of the family partition and also explain its impact on the potential for
manipulation among the Doshi Companies. 9
IV. Commerce’s Decision to Collapse the Echjay and Echjay Industries Is Arbitrary
and Capricious as it is Inconsistent with the Prior Decision Not to Collapse, But
Not Inconsistent with the Concurrent CVD Decision Not to Find Cross-
Ownership.
Finally, Echjay challenges Commerce’s decision as inconsistent with (1) its prior decision
not to collapse Echjay with Echjay Industries in Certain Forged Stainless Steel Flanges From India;
Final Results of Antidumping Duty Administrative Review, 71 Fed. Reg. 29,314 (Dep’t
Commerce May 22, 2006) (“Flanges 2006”); and (2) its determination that there is no cross-
ownership between Echjay, Echjay Industries, and Spire in the concurrent CVD investigation,
Stainless Steel Flanges from India: Final Affirmative Countervailing Duty Determination and
9
Echjay suggests that, under the statutory scheme, Commerce should deal with any future
manipulation retroactively through the annual administrative review process, rather than
speculating about future manipulation in the original AD investigation. Pl.’s Br. at 32–33; Pl.’s
Reply at 6–7. The Government argues that Commerce’s practice is to consider both actual, past
manipulation and the potential for future manipulation in its investigation, rather than to examine
manipulation retroactively. Def.’s Br. at 17 (citing Preamble, 62 Fed. Reg. at 27,346).
Commerce’s practice to consider both current and future manipulation in the initial investigation
complies with the § 351.401(f) regulation and does not clearly contradict with the overall purpose
of the AD statute to determine margins as accurately as possible. See Yangzhou Bestpak Gifts &
Crafts Co. v. United States, 716 F.3d 1370, 1379 (Fed. Cir. 2013).
Court No. 18-00230 Page 32
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Final Affirmative Determination of Critical Circumstances, 83 Fed. Reg. 40,748, and
accompanying Issues and Decision Mem. C-533-878 (“Flanges CVD IDM”). Pl.’s Br. at 30–31,
33. The court concludes that on remand Commerce must address and explain any inconsistency
with its Flanges 2006 determination.
A. Inconsistency with Flanges 2006
Echjay argues that, in its 2006 AD investigation into the same subject merchandise,
Commerce determined not to collapse Echjay and Echjay Industries because a significant potential
for manipulation did not exist. Pl.’s Br. at 31 (citing Flanges 2006). Echjay argued to Commerce
and here that there was no factual change in the relationship of Echjay and Echjay Industries with
regard to company ownership or management, but that Commerce’s treatment of this relationship
did change. Echjay Case Br. at 6–7; Pl.’s Br. at 31; Pl.’s Reply at 8. Thus, Echjay argues that
Commerce’s determination to collapse the entities in this investigation was “unlawful.” Pl.’s Br.
at 30.
The Government counters that Flanges 2006 is not controlling because “each proceeding
and segment of proceeding stands its own record.” Def.’s Br. at 18 (citing Peer Bearing Co.-
Changshan v. United States, 32 CIT 1307, 1310, 587 F. Supp. 2d 1319, 1325 (2008)). Coalition
also contends that Echjay bears the burden of building the record in each investigation. Def.-
Inter.’s Br. at 22. The Government and Coalition each characterize the inconsistency claim in the
current case as regarding a factual determination, which Commerce has substantial discretion over,
rather than a legal determination. Def.’s Resps. to the Ct.’s Questions in Advance of Oral Arg. at
17–18; Def.-Inter.’s Resp. to Ct.’s Questions for Oral Arg. at 19–20. Facts also changed, the
Government suggests: Commerce found Echjay and Echjay Industries did not meet the “no
substantial retooling” requirement in Flanges 2006, but that it did in this investigation because
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both companies produced and sold subject merchandise during the POI. Def.’s Br. at 19. The
Government also claims EFIPL and Spire, created after the investigation of Flanges 2006, to be
new factual elements, id., though Echjay claims the two companies are irrelevant for the
consistency argument, Pl.’s Reply at 7. The Government concludes that the facts above render the
current determination “fundamentally different” from Flanges 2006 and thus is not inconsistent.
Def.’s Br. at 19.
“[C]onsistency has long been a core interest of administrative law, and inconsistent
treatment is inherently significant.” DAK Americas LLC v. United States, 44 CIT __, __, Slip
Op. 20-80 at 18 (June 4, 2020) (citing Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944);
Chisholm v. Def. Logistics Agency, 656 F.2d 42, 47 (3d Cir. 1981)). “[W]here an agency departs
from prior determinations, it is appropriate to compel the agency to explain whether: (1) good
reasons prompt that departure; or (2) the prior determinations are inapposite such that it is not in
fact a departure at all.” Id. at 20. Though Commerce may enjoy wide latitude in its application of
the AD and CVD statute and prior determinations are not legally binding in same way as case law
through stare decisis, DAK Americas, Slip Op. 20-80 at 18–19, nn. 9–10 (citations omitted), its
discretion is limited by the need to provide an adequate explanation for any deviation from its past
practice and interpretations. SKF USA Inc., 263 F.3d at 1382 (“[A]n agency action is arbitrary
when the agency offer[s] insufficient reasons for treating similar situations differently.”).
Commerce’s explanation of its different determinations regarding the same entities does
not meet the stated standard. In its 2006 investigation, Commerce found Echjay and Echjay
Industries to be affiliated but decided not to collapse them based on the findings that 1) Echjay and
Echjay Industries had production facilities that would require substantial retooling to restructure
manufacturing priorities, and 2) Echjay and Echjay Industries had no significant potential for
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PUBLIC VERSION
manipulation. Certain Forged Stainless Steel Flanges From India; Preliminary Results of
Antidumping Duty Administrative Review, 71 Fed. Reg. 11,379, 11,383 (Dep’t Commerce Mar.7,
2006). Here, Commerce departed from Flanges 2006 regarding the second two collapsing prongs.
See IDM at 24–25. Echjay did not dispute Commerce’s departure on the finding regarding the “no
substantial retooling” requirement but challenged its departure of the finding of potential for
manipulation. Echjay Case Br. at 6–7; Pl.’s Br. at 30–32. Echjay argued to Commerce that the
same relationship between Echjay and Echjay Industries that led Commerce to conclude there was
no potential for manipulation in Flanges 2006 was unchanged in this investigation. Echjay Case
Br. at 7. Commerce neither met the burden to “reasonably address” Echjay’s challenge or the
requirement that it sufficiently distinguish its past decisions. Commerce discussed the relevance
of Flanges 2006 only with reference to the determination on the “no substantial retooling
requirement,” which Echjay did not dispute, and did not mention how Flanges 2006 impacts its
decision as to the potential for manipulation. IDM at 23–27; Preliminary Affiliation Memo at 9–
12. Contrary to the Government’s assertion, the addition of EFIPL and Spire does not facially
concern the relationship between Echjay and Echjay Industries, and the Government provided no
additional justification for why it should. See Def.’s Br. at 19. Commerce did not distinguish the
relevant facts that would otherwise support a differential finding in this case from Flanges 2006
and failed to provide good reasons that prompted the departure in this case. Therefore, this aspect
of its decision is arbitrary and capricious, and Commerce must explain any inconsistency on
remand. See SKF USA Inc., 263 F.3d at 1382. 10
10
The Government cites Peer Bearing Co.-Changshan, 587 F. Supp. 2d at 1325, and Shandong
Huarong Machinery Co. v. United States, 29 CIT 484, 491, in support of its contention that each
proceeding and segment of proceeding stands its own record” and that Flanges 2006 is not
controlling in this case. Def.’s Br. at 18. Both of the cases cited address a scenario in which the
investigated parties failed to establish an adequate record for Commerce’s administrative review
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B. Inconsistency with Concurrent CVD Determination
Echjay also challenges Commerce’s decision to collapse as inconsistent with the lack of
finding cross-ownership in the CVD investigation. Pl.’s Br. at 33. Commerce determined that
Echjay, Echjay Industries, and Spire are collapsed but not cross-owned. In the CVD
determination, Commerce found Echjay to be cross-owned with EFIPL, but it did not mention
Echjay Industries or Spire. Mem. from J. Maeder to G. Taverman, re: Decision Mem. for the
Preliminary Determination in the Countervailing Duty Investigation of Stainless Steel Flanges
from India (Dep’t Commerce Jan. 16, 2018) (West) (“Flanges CVD PDM”); Flanges CVD IDM. 11
Notably, Commerce found cross-ownership “because of the substantial ownership positions held
by family members.” Flanges CVD PDM. Echjay argues that collapsing determinations in AD
investigations and cross-ownership determinations in CVD investigations have the same goal -- to
avoid manipulation of trade laws and prevent companies from selling through its affiliates with a
lower duty margin. Pl.’s Br. at 33. Thus, Echjay argues that the different determinations regarding
collapsing and cross-ownership in these investigations was “unlawful.” Pl.’s Br. at 33.
The Government and Coalition explain that these two determinations serve different
purposes and are governed by different regulations. Def.’s Br. at 19–21; Def.-Inter.’s Br. at 28.
The court agrees with the Government and Coalition’s argument that the cross-ownership
determination in CVD investigations bears no weight on the finding of collapsing in Echjay’s AD
and held that the investigated parties could not rely on the record in previous investigations or
administrative reviews. Peer Bearing Co.-Changshan, 587 F. Supp. 2d at 1324–25; Shandong
Huarong Mach. Co., 29 CIT at 490–91. Here, Echjay did not rely on the record in Flanges 2006
to establish its claim but provided record evidence indicating the same factual situation. See
Echjay Case Br. at 7.
11
Neither memoranda are on the record for this case but are otherwise available to the court
through submission in another case (IDM), see Bebitz Flanges Works Pvt. Ltd. v. United States,
44 CIT _, 433 F. Supp. 3d 1297 (2020), and open database (PDM and IDM).
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investigation. The collapsing decision in AD investigations is governed by 19 C.F.R. § 351.401(f),
while the cross-ownership finding in CVD investigations is determined by 19 C.F.R. §
351.525(b)(6). Cross-ownership is found “between two or more corporations where one
corporation can use or direct the individual assets of the other corporation(s) in essentially the
same ways it can use its own assets.” 19 C.F.R. § 351.525(b)(6)(vi); see Fabrique de Fer de
Charleroi v. United States, 25 CIT 567, 166 F. Supp. 2d 593, 600–04 (2001). The standard is
normally met when “there is a majority voting ownership interest between two corporations or
through common ownership of two (or more) corporations.” 19 C.F.R. § 351.525(b)(6)(vi).
“Different standards applied to the same facts may reasonably lead to different outcomes. Thus,
there is no inconsistency between Commerce’s decision to treat the companies as a single entity
in the [AD] proceeding but not in the CVD investigation.” Zhaoqing New Zhongya Aluminum
Co., 70 F. Supp. 3d at 1307. Lastly, Commerce made positive determinations in both collapsing
and cross-ownership between Echjay and EFIPL and did not address the cross-ownership issue
regarding Echjay Industries and Spire. Even if the court were to accept Echjay’s interpretation,
Commerce’s decisions contained no facially inconsistent analyses or reasoning that could support
remanding the AD collapsing determinations as to Echjay Industries and Spire. Therefore, the
court dismisses Echjay’s claim as to inconsistency between the AD and CVD investigations.
CONCLUSION
The Final Determination is remanded to Commerce for further proceedings consistent with
this opinion. On remand, Commerce should explain based on the record evidence why the Doshi
family should be viewed as a “person” within Section 1677(33)(F), why EFIPL and Spire would
not require substantial retooling in light of the evidence raised by Echjay, why there is a potential
for manipulation between the Doshi Companies, and address any inconsistency with its Flanges
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2006. Commerce shall file with this court and provide to the parties its remand results within 90
days of the date of this order; thereafter, the parties shall have 30 days to submit briefs addressing
the revised final determination to the court, and the parties shall have 15 days thereafter to file
reply briefs with the court.
SO ORDERED.
/s/ Gary S. Katzmann
Gary S. Katzmann, Judge
Dated: October 8, 2020
New York, New York