Ellwood City Forge Co. v. United States

Slip Op. No. 23-113
UNITED STATES COURT OF INTERNATIONAL TRADE
ELLWOOD CITY FORGE CO.,
ELLWOOD NATIONAL STEEL CO.,
ELLWOOD QUALITY STEELS CO.,
and A. FINKL & SONS,
Plaintiffs,
v. Before: Stephen Alexander Vaden,
Judge
UNITED STATES,
Court No. 21-00007
Defendant,
and
BHARAT FORGE LTD.,
Defendant-Intervenor.
OPINION
[Granting Plaintiffs’ Motion for Judgment on the Agency Record and remanding to
Commerce with instructions to comply with Regents]
Dated: August 11, 2023
Jack A. Levy, Cassidy Levy Kent (USA) LLP, of Washington, DC, for Plaintiffs
Ellwood City Forge Co., Ellwood National Steel Co., Ellwood Quality Steels Co., and
A. Finkl & Sons. With him on the brief were Thomas M. Beline, Myles S. Getlan,
James E. Ransdell, IV, and Nicole Brunda.
Sarah E. Kramer, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, for Defendant United States. With her on
the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General,
Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, W. Mitch
Purdy, Of Counsel, Office of the Chief Counsel for Trade Enforcement and
Compliance, U.S. Department of Commerce.
Court No. 21-00007 Page 2
Lizbeth R. Levinson, Fox Rothschild LLP, of Washington, DC, for Defendant-
Intervenor Bharat Forge Limited. With her on the brief was Brittany Renee Powell
and Ronald M. Wisla.
Vaden, Judge: Plaintiffs Ellwood City Forge Co., Ellwood National Steel Co.,
Ellwood Quality Steels Co., and A. Finkl & Sons (collectively, Ellwood City) challenge
Defendant Department of Commerce’s (Commerce) Final Determination as modified
by the results following the requested voluntary remand in its antidumping
investigation of forged steel fluid end blocks from India. Pls.’ Revised Mot. for J. on
the Agency R. at 1 (Pls.’ Revised Mot.), ECF No. 33; see Forged Steel Fluid End Blocks
from India: Final Negative Determination of Sales at Less Than Fair Value (Negative
Determination), 85 Fed. Reg. 80,003 (Dec. 11, 2020); Final Results of
Redetermination Pursuant to Court Remand (Remand Results), ECF No. 29. Ellwood
City argues that substantial evidence fails to support Commerce’s determination that
Defendant-Intervenor Bharat Forge Ltd. (Bharat) did not dump forged steel fluid end
blocks at less than fair value and that Commerce did not comply with its statutory
obligation to conduct on-site verification. Pls.’ Revised Mot. at 1–3, ECF No. 42. For
the reasons set forth below, the Court GRANTS Plaintiffs’ Motion for Judgment on
the Agency Record and REMANDS the case to Commerce for further proceedings
consistent with this opinion.
Court No. 21-00007 Page 3
BACKGROUND
The products at issue in this case are forged steel fluid end blocks produced in
India for import into the United States. Commerce described the covered
merchandise in its announcement of the investigation’s initiation:
The products covered by this investigation are forged steel
fluid end blocks (fluid end blocks), whether in finished or
unfinished form, and which are typically used in the
manufacture or service of hydraulic pumps.
The term ‘‘forged’’ is an industry term used to describe the
grain texture of steel resulting from the application of
localized compressive force. Illustrative forging standards
include, but are not limited to, American Society for
Testing and Materials (ASTM) specifications A668 and
A788. . . .
The products covered by this investigation are: (1) Cut-to
length fluid end blocks with an actual height (measured
from its highest point) of 8 inches (203.2 mm) to 40 inches
(1,016.0 mm), an actual width (measured from its widest
point) of 8 inches (203.2 mm) to 40 inches (1,016.0 mm),
and an actual length (measured from its longest point) of
11 inches (279.4 mm) to 75 inches (1,905.0 mm); and (2)
strings of fluid end blocks with an actual height (measured
from its highest point) of 8 inches (203.2 mm) to 40 inches
(1,016.0 mm), an actual width (measured from its widest
point) of 8 inches (203.2 mm) to 40 inches (1,016.0 mm),
and an actual length (measured from its longest point) up
to 360 inches (9,144.0 mm). . . .
A fluid end block may be imported in finished condition
(i.e., ready for incorporation into a pump fluid end
assembly without further finishing operations) or
unfinished condition (i.e., forged but still requiring one or
more finishing operations before it is ready for
incorporation into a pump fluid end assembly). Such
finishing operations may include: (1) Heat treating; (2)
milling one or more flat surfaces; (3) contour machining to
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custom shapes or dimensions; (4) drilling or boring holes;
(5) threading holes; and/or (6) painting, varnishing, or
coating.
Forged Steel Fluid End Blocks from the Federal Republic of Germany, India, and
Italy: Initiation of Less-Than-Fair-Value Investigations (Initiation of Investigations),
85 Fed. Reg. 2,394, 2,399 (Jan. 15, 2020).
I. The Disputed Final Determination
On December 19, 2019, Ellwood City petitioned Commerce to initiate an
antidumping investigation into the importation of forged steel fluid end blocks from
Germany, India, and Italy. Initiation of Investigations, 85 Fed. Reg. 2,394. Bharat,
an Indian producer and exporter of fluid end blocks, was selected as a respondent in
the petition that initiated the investigation. Id. at 2,397–98. Commerce sent Bharat
a standard antidumping questionnaire on January 22, 2020. Decision Memorandum
for the Preliminary Negative Determination at 3 (PDM), J.A. at 4,179, ECF No. 43.
The agency issued further supplemental questionnaires to Bharat from March to July
2020; and Bharat, with the grant of some extensions, submitted timely responses. Id.Bharat’s responses were vital to Commerce’s determination of the
antidumping margin because there is no domestic Indian market for fluid end blocks.
Consequently, Commerce calculated the dumping margin using the constructed value
of the goods in question, encompassing Bharat’s costs of production, sales figures,
general and administrative expenses, and profits. See 19 U.S.C. § 1677b(e); PDM at
4, J.A. at 4,180, ECF No. 43; Commerce Antidumping Questionnaire at Section D
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(Jan. 22, 2020), J.A. 80,098–117, ECF. No. 44. In response to Bharat’s answers to
Commerce’s initial questionnaire, Ellwood City filed comments challenging Bharat’s
submissions and alleging that Bharat had failed to cooperate. Deficiency Comments
Concerning Section D Questionnaire Response of Bharat Forge (Section D Deficiency
Comments) at 1–43, J.A. 83,140–83 (Apr. 7, 2020), ECF No. 44; Petitioners’
Comments in Advance of the Preliminary Determination at 11–38 (Jan. 24, 2020),
J.A. at 83,228–66, ECF No. 44.
During the period in which Bharat submitted its questionnaire responses, the
World Health Organization classified COVID-19 as a pandemic. WHO Director-
General’s opening remarks at the media briefing on COVID-19 - 11 March 2020,
WORLD HEALTH ORGANIZATION (Mar. 11, 2020), https://bit.ly/3Ed8Fdj. On March 15,
2020, the Department of Commerce issued an agency-wide memo prohibiting all
travel not “mission-critical and pre-approved by senior bureau leadership.” DEP’T OF
COMMERCE, All Hands: Coronavirus Update (3-16-20),
https://bit.ly/commercecoronavirus. The Centers for Disease Control issued a Level
4 travel advisory, urging all U.S. citizens to avoid international travel on March 31,
2020. CENTERS FOR DISEASE CONTROL AND PREVENTION, Global Level 4 Health
Advisory: Do Not Travel (Mar. 31, 2020). During this period, Petitioners repeatedly
noted that there was uncertainty surrounding Commerce’s ability to conduct an
effective on-site verification. See, e.g., Section D Deficiency Comments at 2, J.A. at
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83,141, ECF No. 44; Deficiency Comments on Bharat Forge Limited’s Supplemental
Section A Questionnaire Response at 2 (Apr. 27, 2020), J.A. at 87,573, ECF No. 44.
On March 26, 2020, Commerce postponed issuance of the results of the
preliminary investigation until July 16, 2020. See Forged Steel Fluid End Blocks
from the Federal Republic of Germany, India and Italy: Postponement of Preliminary
Determinations in the Less-Than-Fair-Value Investigations, 85 Fed. Reg. 17,042(Mar. 26, 2020). Based on the initial information gathered from Bharat, Commerce
issued a Preliminary Negative Determination of Sales at Less Than Fair Value with
the preliminary dumping margin for Bharat set at zero. Forged Steel Fluid End
Blocks from India: Preliminary Negative Determination of Sales at Less Than Fair
Value, Postponement of Final Determination (Preliminary Determination), 85 Fed.
Reg. 44,517–18 (July 23, 2020). Commerce also stated that it “intends to verify the
information relied upon in making its final determination concerning the estimated
weighted-average dumping margin calculated for Bharat.” Id. at 44,518.
In response to Commerce’s preliminary determination, Ellwood City filed
comments proposing two alternatives: Either (1) Commerce should disregard
Bharat’s inaccurate cost allocations, cancel verification, and apply adverse inferences
drawn from facts otherwise available to the entirety of Bharat’s submissions, or (2)
Commerce should ask questions Ellwood City suggested “in the event that Commerce
conducts verification or issues a verification outline.” Petitioners’ Comments
Following Preliminary Determination at 19–25, J.A. at 83,321–27, ECF No. 44.
Court No. 21-00007 Page 7
Instead of performing on-site verification, Commerce issued what it called a
“Questionnaire in Lieu of Verification” to Bharat on September 2, 2020.
Questionnaire in Lieu of Verification, J.A. at 83,332–38, ECF. No. 44. Ellwood City
expressed misgivings about Commerce’s decision, noting that Commerce’s
questionnaire “contains significantly fewer topics than complete sales and cost
verification agendas.” Petitioners’ Opposition to Second Extension at 3 (Sept. 11,
2020), J.A. at 87,606, ECF No. 44. Even Bharat expressed some concerns about the
process by reaching out to Commerce and suggesting the possibility of conducting a
“virtual verification” via teleconference. Bharat Possibility of Virtual Verification to
Respond to Questions at 1– 2 (Oct. 7, 2020), J.A. at 87,616–17, ECF No. 44.
Bharat submitted its responses to the questionnaire on September 15, 2020.
Bharat Response to Questionnaire in Lieu of On-Site Verification, J.A. at 87,367, ECF
No. 44. Bharat sought to answer Commerce’s request for more specificity
surrounding its cost centers 1 by providing Exhibit D-71. Id. at 6–8, Ex. D-71. The
exhibit provided a detailed breakdown of location-specific costs with subcategories
including general and administrative expenses and manufacturing costs such as
1 The Oxford English Dictionary defines cost centers as follows:
(a) Chiefly Accounting a part of an organization to which costs may be charged
for accounting purposes; (b) Business a section of an organization that adds to
costs and does not generate revenue directly; frequently in contrast to profit
centre.
OXFORD ENGLISH DICTIONARY (Aug. 2023), https://tinyurl.com/33jh6mx9.
Court No. 21-00007 Page 8
forging and machining. Id. at Ex. D-71. Commerce asked Bharat about these cost
centers because properly allocating costs to the production of the subject merchandise
is essential to the accurate calculation of the constructed value of the goods. See 19
U.S.C. § 1677b(e).
On October 16, 2020, Ellwood City filed its administrative case brief and again
charged that Bharat had falsified evidence and had “failed verification.”
Administrative Case Brief at 12, J.A. at 83,444, ECF No. 44 (emphasis in original).
It argued that Bharat’s new submissions revealed that the company had intentionally
misreported the costs allocated to fluid end block production in its original
submissions. Id. at 12–13. Ellwood City also argued that Bharat had underreported
its general and administrative expenses. Id. at 18–26. To illustrate its argument,
Ellwood City compared the revised Exhibit D-71 with Bharat’s previous submissions
and claimed that Bharat had left general and administrative expenses from two cost
centers out of its allocation ratio. Id. This omission, according to Ellwood City,
artificially lowered Bharat’s general and administrative expenses attributable to
fluid end block production. Id. at 25. Lower production costs make a finding of
dumping less likely by lowering the value against which Commerce compares U.S.
sales prices.
Bharat filed its rebuttal brief on October 29, 2020. Rebuttal Brief of Bharat
Forge Limited, J.A. at 90,018, ECF No. 44. Bharat contended that it had submitted
no new information but rather had simply provided a further breakdown of cost
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allocations of the previously reported cost centers. Id. at 3–4. Because Ellwood City
misunderstood Bharat’s calculation method, Bharat asserted that Ellwood City had
also mistakenly concluded that Bharat had underreported its costs. Id. at 5–7.
Bharat claimed that it did nothing more than calculate its general and administrative
expenses by following the Department’s standard methodology and instructions. Id.
at 7–10.
On November 23, 2020, Ellwood City requested that Commerce strike the
allegedly new information that Bharat had submitted in its rebuttal brief. See
Petitioners’ Request to Strike Portions of Bharat Forge’s Rebuttal Brief at 1–9, J.A.
at 90,050–58, ECF No. 44. Commerce held a hearing via video teleconference to allow
both parties to present their cases to the Department on November 16, 2020. In re
Forged Steel Fluid End Blocks from India (Hearing) at 1, J.A. at 83,537, ECF No. 44.
In that hearing, counsel for Ellwood City complimented Commerce’s use of a
questionnaire in lieu of verification, stating “thankfully, you have issued verification
questionnaires to Bharat Forge, and conducted what is in effect a virtual
verification.” Id. at 12. Throughout the hearing, Ellwood City’s counsel referred to
the questionnaire as a “verification questionnaire” and argued that Bharat had
“failed to satisfy the objectives set out in Commerce’s verification questionnaire.” Id.
at 16, 18–22, 25.
Nonetheless, in its final Issues & Decision Memorandum (IDM), Commerce
stated that it “was unable to conduct on-site verification of the information relied
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upon in making its final determination in this investigation, as provided for in section
782(i) of the Act.” IDM at 2, J.A. at 83,613, ECF No. 44. Commerce then relied on
the unverified information as facts otherwise available under 19 U.S.C. § 1677e(a)(2)
to calculate Bharat’s dumping margin. Id. It refused Ellwood City’s invitation to
apply adverse inferences to the entire record. Instead, Commerce only drew adverse
inferences to fill selected gaps in Bharat’s submissions — net weight reporting,
certain component costs, and sales of two particular products — because in these
instances Bharat failed to provide the information Commerce requested. Id. at 3-4,
8–10. The agency, however, relied on the remainder of Bharat’s submitted data
because “in general, Bharat complied with our requests for information, acted to the
best of its ability to be transparent in its response, and supplied supporting
information that was in greater detail than that contained in prior submissions.” Id.
at 5. Commerce thus rejected Ellwood City’s claims that Bharat underreported its
production costs and its general and administrative expenses. Id. at 5–7. Because of
the limited application of adverse inferences, Bharat retained its zero percent
dumping margin from the preliminary determination. See Final Negative
Determination, 85 Fed. Reg. at 80,004.
II. The Present Dispute
Ellwood City filed suit on January 8, 2021. See Summons, ECF No. 1. It
challenged the legality of Commerce’s failure to perform verification, alleged that
Commerce unlawfully accepted new information in Bharat’s rebuttal brief, and
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asserted that substantial evidence does not support Commerce’s acceptance of
Bharat’s cost allocations and expense calculations. See Compl. ¶¶ 23–39, ECF No. 8;
Pls.’ Mot. for J. on Agency Record (Pls.’ Mot.) at 17–18, 32–44, ECF No. 22.
Commerce moved for a voluntary remand “to reconsider its position on the
questionnaire in lieu of on-site verification and subsequent application of facts
available in this investigation.” Def.’s Resp. and Mot. for Voluntary Remand (Mot.
for Remand) at 5–6, ECF No. 24. The Court granted Commerce’s Motion on October
29, 2021. Order Granting Voluntary Remand (Remand Order), ECF No. 28. The
Court gave Commerce 150 days to reconsider its decision and permitted Commerce
“at its discretion to perform on-site verification, which would moot all procedural
issues created by the agency’s decision to short-circuit verification.” Id. at 5. The
Court also noted that travel restrictions to India were now significantly relaxed so
that on-site verification was once again possible. Id. Commerce had two options on
remand under Supreme Court precedent: It could either give a fuller explanation of
its reasoning at the time it made its decision, or it could take new agency action. Id.
Commerce — after taking the full 150 days — published its Remand Results.
Final Results of Redetermination Pursuant to Court Remand (Remand Results), ECF
No. 29. The agency did not perform on-site verification, nor did it take new action to
verify the information on the record. Instead, Commerce “reconsidered our use of a
questionnaire in lieu of on-site verification and no longer find that we were unable to
verify Bharat’s information.” Id. at 4. Because of this new determination, the agency
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no longer needed to rely on facts otherwise available for its final determination
because it could rely on the now “verified” information. Id. Commerce also rejected
Ellwood City’s comments arguing that it did not comply with the remand by failing
to conduct on-site verification. Id. at 7. It asserted that the verification statute gives
it discretion in its procedures and that Ellwood City was pleased with the
questionnaire during the investigation. Id. at 7–8. Because the agency could not
have conducted an on-site verification in this investigation during the pandemic, it
did not do so now and did not issue a verification report. Id. at 8–9.
On March 11, 2022, Ellwood City filed a Revised Motion for Judgment on the
Agency Record, arguing that the Remand Results constitute a new agency action
because they provide a new rationale. Pls.’ Revised Mot. at 22, ECF No. 34 (noting
that the agency’s current position is “the direct opposite of Commerce’s prior
position”). It also asserts that substantial evidence does not support Commerce’s
finding of a de minimis dumping margin for Bharat because Bharat underreported
its costs and general and administrative expenses. Id. at 2–3.
Commerce filed its response brief on May 10, 2022. Def.’s Resp., ECF. No. 38.
The agency argues that it complied with the Remand Order and denies that it took
new agency action. Id. at 24. Instead, it states that the “change in characterization
regarding the verification questionnaire through the remand determination did not
change the action taken by the agency” but simply “reconsidered and clarified [the]
determination.” Id. Defendant-Intervenor Bharat filed its corrected response brief
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on May 23, 2022, contending that administrative exhaustion bars Ellwood City’s
argument that Commerce failed to comply with the verification statute. Def-Int.’s
Resp. at 2–5, ECF No. 40. Ellwood City responded in its reply brief that exhaustion
does not apply because Commerce’s voluntary remand reopened the issue of
verification. Pls.’ Reply at 12–16, ECF No. 41.
The Court held oral argument on October 20, 2022. ECF No. 47. Counsel for
the Government maintained the position that Commerce had not taken new agency
action on remand; instead, “it considered itself expounding on its previous reasoning.”
Transcript (Tr.) at 6:6–7, ECF No. 49. Government counsel also affirmed that there
was no reason that the Supreme Court’s holding in Regents would not apply in the
context of a voluntary remand. Id. at 24:14–16 (Ms. Kramer: “Your Honor, I don’t
necessarily see a distinction in applying it to an involuntary versus a voluntary
remand.”).
Counsel was unable to explain another oddity. Commerce’s position here is
the exact opposite of its position in another case currently before the Court presenting
the same legal issue. See Bonney Forge Corp. v. United States, Case No. 20-03837.
In that case — argued five days after this case — Commerce took the position that it
had taken new agency action when it found on remand that it had properly complied
with the verification requirement. See Remand Results, ECF No. 61, Case No. 20-
03837. Agency counsel offices and the requirement that the Department of Justice
manage all litigation for cabinet departments exist so that the Government does not
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take contradictory positions on similar legal questions. That consultation process
completely failed in these cases. In the future, Commerce should settle on one legal
position before arriving in court rather than trying to literally have it both ways. Cf.
Acquisition 362 LLC v. United States, 59 F.4th 1247, 1251–52 (Fed. Cir. 2023) (“In
the future, we expect Commerce will be both more specific and complete than it was
initially about the sequence of government and party actions leading to the challenges
presented to the CIT and on appeal.”).
STANDARD OF REVIEW
Federal Circuit precedent allows for an agency to request a voluntary remand
— without confessing error — to reconsider its position. SKF USA Inc. v. United
States, 254 F.3d 1022, 1029 (Fed. Cir. 2001). Although the scope of issues Commerce
may reconsider in its remand can be broad, Supreme Court precedent limits the
procedural avenues available to the agency. An agency has two options on remand:
First, the agency can offer a “fuller explanation of the
agency’s reasoning at the time of the agency action” . . . .
This route has important limitations. When an agency’s
initial explanation “indicate[s] the determinative reason
for the final action taken,” the agency may elaborate later
on that reason (or reasons) but may not provide new ones.
Alternatively, the agency can “deal with the problem
afresh” by taking new agency action. An agency taking this
route is not limited to its prior reasons but must comply
with the procedural requirements for new agency action.
Dep’t of Homeland Sec. v. Regents of the Univ. of California, 140 S. Ct. 1891, 1907-08
(2020) (Regents) (internal citations omitted); accord SKF, 254 F.3d at 1028 (“In the
second situation, in which the agency seeks to defend its decision on grounds not
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previously articulated by the agency . . . . we generally decline to consider the agency’s
new justification for the agency action[.]”); Timken Co. v. United States, 894 F.2d 385,
389 (Fed. Cir. 1990) (“[A]gency action cannot be sustained on post hoc rationalizations
supplied during judicial review.”) (citations omitted).
“The court reviews remand determinations for compliance with the court’s
order.” Nakornthai Strip Mill Public Co. Ltd. v. United States, 32 CIT 1272, 1274
(2008) (citations omitted); accord Ad Hoc Shrimp Trade Action Comm. v. United
States, 992 F. Supp. 2d 1285, 1290 (CIT 2014), aff’d, 802 F.3d 1339 (Fed. Cir. 2015).
“Deviation from the court’s remand order in the subsequent administrative
proceedings is itself legal error, subject to reversal on further judicial review.”
Sullivan v. Hudson, 490 U.S. 877, 886 (1989). The Court may also issue a further
remand order when the remand results are not supported by substantial evidence or
otherwise in accord with the law. See Nippon Steel Corp. v. ITC, 494 F.3d 1371, 1379
(Fed. Cir. 2007).
DISCUSSION
Commerce Failed to Comply with Regents
The primary issue facing the Court is whether Commerce complied with
Regents. The agency could comply by either taking new agency action or giving
further explanation of its original decision. However, Commerce in its Remand
Results and briefing does not even cite Regents. Instead, it contradictorily asserts
the following: (1) Commerce determines that it had verified Bharat’s submissions
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when it sent the original questionnaire in lieu of verification; (2) it rescinds its
application of facts otherwise available, relying on the newly verified information in
making its Final Determination; and (3) it maintains that these reversals of its prior
positions “did not change the action taken by the agency.” Def.’s Resp. at 24, ECF
No. 38. Ellwood City counters that Commerce took new agency action because the
Remand Results “reversed Commerce’s ‘prior reasons’ with respect to verification.”
Pls.’ Reply at 9, ECF No. 41 (citation omitted). Commerce thus had to comply with
the requirements of new agency action and verify the information on which it relied
in making its final determination. Id. at 10. The Court finds that the case must be
REMANDED back to the agency to comply with Regents because Commerce failed
to do so here.
Regents gives an agency two paths on remand: (1) The agency can offer a fuller
explanation of its reasoning at the time it made the decision in question; or (2) the
agency can take new agency action and provide new reasoning for that action. 140 S.
Ct. at 1907–08. When offering a fuller explanation on remand, an agency may only
refer to the agency’s reasoning “at the time of the agency action” and “may not provide
new [reasons] to prevent ‘post hoc rationalization.’” Id. (citations omitted).
Alternatively, when taking new agency action, an agency “is not limited to its prior
reasons but must comply with the procedural requirements for new agency action.”
Id. at 1908. For example, “when an agency rescinds a prior policy its reasoned
analysis must consider the ‘alternative[s]’ that are ‘within the ambit of the existing
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[policy].’” Id. at 1913 (quoting Motor Vehicle Mfrs. Assn. of United States, Inc. v. State
Farm Mut. Automobile Ins. Co., 463 U.S. 29, 43 (1983)). And, when deviating from
consistent past practice or policy, an agency “must be cognizant that longstanding
policies may have ‘engendered serious reliance interests that must be taken into
account.’” Id. (quoting Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2126
(2016) (quoting FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515, (2009))).
These two paths offered by Regents map onto the Federal Circuit’s opinion in
SKF, which explains the five different approaches an agency may adopt when agency
action is subject to judicial review. 254 F.3d at 1027–1030. First, an agency may
defend its decision on “the grounds articulated by the agency,” and a remand does not
normally come into play. Id. at 1028. Second, an agency seeks to defend its decision
“on grounds not previously articulated by the agency,” and here, the court’s obligation
is to “decline to consider the agency’s new justification.” Id. at 1028. This second
situation accords with Regents, which extended the bar on post hoc rationalizations
from the famed Chenery case to include agency justifications on remand. See Sec. &
Exch. Comm’n v. Chenery Corp., 332 U.S. 194, 196 (1947); Regents, 140 S. Ct. at 1907–
08. Third, an agency may “seek a remand because of intervening events outside of
the agency’s control, for example, a new legal decision or the passage of new
legislation.” SKF, 254 F.3d at 1028. In this case, Regents requires that the agency
take new agency action if it is to change its position in light of the intervening event.
Regents, 140 S. Ct. at 1907–08. Fourth, “even if there are no intervening events, the
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agency may request a remand (without confessing error) in order to reconsider its
previous position.” SKF, 254 F.3d at 1029. Regents also requires that the agency
take new agency action if it wishes to change its previous position in this situation.
Regents, 140 S. Ct. at 1907–08. Fifth, when an agency admits that it has erred and
wishes for a remand to change its previous decision, here too an agency must comply
with all the procedural requirements of new agency action under Regents. See SKF,
254 F.3d at 1029.
Commerce has failed to comply with either pathway offered by Regents. In its
briefs and at oral argument, the Government claimed that the agency had simply
given a fuller explanation of its original decision in its Remand Results. See Def.’s
Resp. at 24, ECF No. 38; Tr. at 6:6–7, ECF No. 49. If this were an accurate description
of what occurred, the agency is guilty of an “impermissible post hoc rationalization.”
Regents, 140 S. Ct at 1908 (internal quotation marks omitted). Its Remand Results
purporting to clarify the original action taken instead contradict and reverse
Commerce’s original position. Compare IDM at 2, J.A. at 83,613, ECF No. 44
(explaining that Commerce “was unable to conduct on-site verification of the
information relied on in making its final determination in this investigation, as
provided for in section 782(i) of the Act”), with Remand Results at 4, ECF No. 29
(stating that the agency “reconsidered our use of a questionnaire in lieu of on-site
verification and no longer find that we were unable to verify Bharat’s information”).
Commerce did not further explain the rationale of its original decision; it switched to
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a new rationale for an entirely different position. Cf. Regents, 140 S. Ct. at 1907-08.
In short, Commerce took new agency action without complying with the procedural
requirements for that action. Cf. Tr. at 6:6–7, ECF No. 49 (“Yes, Your Honor, it [the
agency] considered itself expounding on its previous reasoning.”). Regents requires
Commerce to make that decision “afresh” and to explain why the prior questionnaire
it sent was sufficient and no additional verification was needed in the post-pandemic
world of 2022, i.e., during the remand period. Commerce also failed to discuss why
its departure from its past practice of on-site verification did not harm Plaintiffs’
reliance interests or why it rejected other alternatives, as Regents demands. Compare
Regents, 140 S. Ct. at 1913 (explaining that an agency “must consider the
‘alternative[s]’ that are ‘within the ambit of the existing [policy],’” explain why it did
not choose those alternatives, and that “serious reliance interests . . . must be taken
into account”) (alternations in original, citations omitted), with Remand Results at 9,
ECF No. 29 (considering only the possibility of an on-site verification, ignoring other
alternatives such as a virtual verification, and failing to discuss reliance interests).
Commerce’s own decisions have greatly complicated its legal position. When
first brought to court, Commerce declined to defend its original decision on the merits.
It instead asked for a voluntary remand to reconsider its verification decision. That
allowed Plaintiffs to assert an argument they may well have otherwise waived — that
the verification process was insufficient. Compare Remand Results at 7–8 (quoting
Plaintiffs thanking the agency for issuing a verification questionnaire), with Ellwood
Court No. 21-00007 Page 20
City Forge Co. v. United States, No. 1:21-00077, 2023 CIT LEXIS 113, at *12 (CIT
July 24, 2023) (holding that, when an agency asks for a voluntary remand, it typically
“obviate[es] any concern that failure to exhaust” by the plaintiff prohibits the agency
from considering the question on which it seeks remand). Commerce then chose to
reverse its prior position, but it ignored this Court’s admonition to follow the Supreme
Court’s Regents opinion and disclaimed that it was making a new decision. See, e.g.,
Remand Order at 5, ECF No. 28 (“As the Regents Court noted, Commerce has two
options on remand.”). An agency is free to reverse its prior position, but it may only
do so by taking new agency action. Having chosen to reverse itself and now assert
that it did verify Bharat’s information, Commerce cannot short circuit the procedural
requirements for new agency action: (1) an explanation for why it now chooses not to
do on-site verification, (2) an explanation for the range of other alternatives the
agency considered within the ambit of on-site verification and why it rejected them,
and (3) an explanation for why its decision to use only questionnaires did not violate
any legitimate reliance interests on Plaintiffs’ part. Regents, 130 S. Ct. at 1907-08,
1913. Because Commerce ignored Regents, its Remand Redetermination is not
supported by substantial evidence, fails to comply with the law, and therefore must
be returned to the agency.
CONCLUSION
Commerce has changed its mind regarding whether it verified the information
it received from Bahrat during its investigation of imports of fluid end blocks from
Court No. 21-00007 Page 21
India. Unfortunately, it did not follow the necessary procedural prerequisites that
must follow a decision to reverse course. Consequently, it is:
ORDERED that Plaintiffs’ Motion for Judgment on the Agency Record is
GRANTED;
The Court REMANDS the case for up to 150 days for Commerce to comply
with the requirements of the Regents decision; and it is
ORDERED that Defendant shall supplement the administrative record with
all documents considered by Commerce in reaching its decision in the Second Remand
Redetermination; and it is further
ORDERED that Plaintiffs shall have 30 days from the filing of the Second
Remand Redetermination to submit comments to the Court;
ORDERED that Defendant shall have 15 days from the date of Plaintiffs’ filing
of comments to submit a response; and
ORDERED that Defendant-Intervenor shall have 15 days from the date of
Defendant’s filing of comments to submit a response.
SO ORDERED.
/s/ Stephen Alexander Vaden
Judge
Dated: August 11, 2023
New York, New York