GERBER FOOD (YUNNAN) CO., LTD. and

GREEN FRESH (ZHANGZHOU) CO., LTD. ,

Plaintiff s,

v. UNITED STATE S ,

Defendant, and COALITION F OR FAIR PRESERV

ED MUSHROOM TRADE ,

Defendent-Inte

rvenor. Slip Op. 05-84 UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: Timo thy C. St anceu, Judge Court No. 03-00544

OPINION

AND ORDER [Final results of antidumping administrative review apply ing “total adverse facts available ” remanded for further procee dings upon plaintiffs’ motion for judgment on agency record] Dated: July 18, 2005 Garvey Schuber t Barer ( Willia m E. Perry , Lizbeth R. Levinson and Ronald M. Wisla ) for plaintiff s. Peter D. Keisler , Assistant Attorney Gene ral, Barbara S. Williams , Attorney-in-Char ge, International Trade

Field Office, David M. Cohen , Director, Commercial Litiga tion Branch, Jeanne E. Davidson , Deputy Direc tor, Commercial Litigation Bra nch, Richard P. Schroeder , Trial Att orney, United Sta

tes Depa rtment of Justice; Scott D. McBride , Office of Chief C ounsel, United Sta

tes Depa rtment of Commerce , of coun sel, for defenda nt. Collier Sha nnon Scot

t, PLLC ( Michael J. Coursey and Adam H. Gordon ) for defendantintervenor. Stanceu, Judge: Pla

intiffs Ge rber Fo od (Yunna

n) Co., L td. (“Ge rber”) and Gre en Fre sh (Zhan gzhou) Co ., Ltd . (“Gre en Fre sh”) cha llenge certain aspects of a dec ision issue d in JulyCourt No. 03-00544 Page 2

2003 by the I

nternational Trade Administration, U.S. Department of Commerce (“ Commerce,” or the “Department”) in an antidumping proc eeding. The challenge d decision was the culmination of an administrative review of an order, issued in 1999, imposing antidumping duties on imports of preserved mushrooms imported from the People’s Republic of China (“China” or the “PRC”). Final Results and Partial Rescission of the New Shipper Review and Final Results and Partial Rescission of the Third Antidumping Duty Administrative Review for Certain Preserved Mushrooms From the People’s Republic of China , 68 Fed. Reg. 41,304 (July 11, 2003) (“

Final Resu lts ”). The administrative review pertained to imported pre served mushrooms from China that were subject to the antidumping duty order and that were entered f or consumption during the period of February 1, 2001 through January 31, 2002 ( “period of review”). Plaintiffs contend that Commerce exceeded its statutory authority, and fa

iled to support its decision with substantial evidence on the record, in resorting to what Commerc e terms “total adverse facts available” to deter mine the antidumping duty ra te Commerce would assess on imports of subject mushrooms associated with Gerber and Green Fresh for the period of review. Rely ing on sta tutory provision s allowing

it to “use a

n infere nce that is adverse to the in

terests of” a party

that “has failed to cooperate by not acting to the best of its ability to comply with a request for information”

in the re view pro ceeding , Commerc e rejected all da ta relevant to antidumpin

g duty assessme nt rates t hat Gerb er and G

reen F resh had

submitted i

n respons e to its informat ion reque sts. 19 U.S. C. § 1677e( b) (2000) ; see 19 U.S.C. §§ 1677e(a), 1677m(d)-(e) (2000). Although it had calculated preliminary antidumping duty assessment ra tes for Gerber and Gre en Fre sh of 1.17 percen t and 46.6 1 perce

nt, respe ctively

, Commerc e refus ed to cal culateCourt No. 03-00544 Page 3

final antidumping duty asse ssment rates for Gerber and Gree n Fresh based on the information the two companies had submitted, and Commerce had verified, during the administrative review. Instead, Commerce assig

ned Gerber and Green Fresh an antidumping duty assessment rate of 198.63 percent, which was the highest rate assigned to any

producer or exporter in the challen ged re view and the prev ious admin

istrative review. In a

ddition, th

is rate w as the ra

te assigned to producers and exporters who could not establish fre edom from control of the gover nment of the PRC. Commer ce appli ed this ra

te to Ger ber and G reen F resh eve

n though it previous ly had found

as a fac t that both p laintiff

s were f ree of governme

nt contro l. In the Final Resu lts , Commerc e gave as a justif

ication f or invokin

g “tota l advers e facts availab le” its fi

nding tha t Gerber and Gre en Fre sh had mad e misrepr esentat ions to Comme

rce in claiming that Green Fresh, for some of the mushroom shipments to the United States occurring during the period of review, had ac ted as Gerber’s agent a

nd exporter in return for pay ment of a commission. Commerce concluded that Green Fresh’s r ole was largely

limited to providing blank sales invoices to Gerber and, accor dingly, that Gre en Fresh did not have sufficient involvement in the international sales transactions to justify a claim that it had acted as exporter of Gerber’s merchandise. Commerce further concluded that Green Fr esh’s participation as an agent i n Gerbe r’s tran sactions

was a mea

ns to allow

Gerber to circu mvent the cash dep osit require ments Comme

rce had applied t o Gerbe r. Citing to the alle ged misr

eprese ntations, Commerce

claimed i t was justif

ied in re jecting all the re sponses of

both resp ondents to

its inqu iries durin g the en tire r eview procee ding. The court exercises jurisdiction pursuant to 19 U.S.C. § 1516a(a)(2)(A) (2000) and 28 U.S.C. § 1581(c) (2000). Gerber and Gree n Fresh participated as respondents in theCourt No. 03-00544 Page 4

administrative review proceeding that re sulted in the decision being challenged. Ther efore, plaintiffs are “interested parties” within the meaning of 19 U.S.C. § 1677(9)(A) (2000) and, pursuant to 28 U.S.C. § 2631(c) (2000), have standing to challeng e the Commerce determination. The cour t conclud es, for t he reas ons discus sed here in, that Com merce e xceeded i ts statutory authority

by rejecting all the data relevant to antidumping duty assessment rates submitted by Gerber a

nd Green Fresh and refusing to calculate specific assessment rates for the two plaintiffs. The court also concludes that certain fac tual determinations relied upon by Commerce in its invoking of “total adverse facts ava ilable” are not supported by substantial evidence. The court remands this matter to Commerce with instructions to conduct fur ther proceedings in conformity with this opinion.

I. B ACKGROUND A. Commerce’s Initiation of the Third Administrative Review Commerce

issued its a

ntidumping

duty order on preser ved mushr

ooms from t

he PRC in early 1999. See Notice of Amendment of Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order for Certain Preserved Mushrooms From the People’s Republic of China , 64 Fed. Reg. 8,308 (Feb. 19, 1999). Appr oximately three y

ears later, the Department announced the opportunity to r equest the administrative review at issue in this case, which was the third such administrative review of the antidumping duty order. See Oppo rtunity To R equest Administrative Review for Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation , 67 Fed. Reg. 4,945 (Feb. 1, 2002). Ge rber and Green Fresh r

equested this review on February

28, 2002. On that same day, the petitioner in the antidumping investigation, theCourt No. 03-00544 Page 5

Coalition for Fair Preserved Mushroom Trade, also re quested an administrative review, asking that Commerce review the mushroom import transactions of seven companies, inc luding those of Gerber and Gre en Fre sh. The Coa lition for Fair Pre served M

ushroom Tr

ade has d efendantinterve nor statu s in this pro ceeding , having satisfie d the req

uiremen ts for inte rvention set forth by 2 8 U.S.C. § 26 31(j) an d USCI T Rule 24( a). Comme rce initi ated the

administr

ative re view in response to the requests. See Initiation of Antidumping and Countervailing Duty Administrative Reviews and Reque

sts for Rev

ocations i n Part , 67 Fed. Reg. 14,696, 14,696-97 (Mar. 27, 2002). B. Cash Deposit Rates for Gerber and Gre en Fresh During the Period of Review Under th e antidum

ping sta tute and r egulat ions, impor

ters who e

nter mer chandise that is within the scope of an antidumping duty order must make a cash deposit of estimated antidumping duties. See 19 U.S.C. § 1 673d(c) (1)(B) (ii) (re quiring the postin

g of a c ash depo sit, bond, or other security , as Commerce deems appropriate, in the final antidumping de termination Commerce makes in the investigation); 19 C.F.R. § 351.211(b)(2) (re quiring cash deposits of estimated antidumping duties at rates Commerce determined in the final a ntidumping determination, onc e an anti dumping order is in effect); see also19 C.F.R. § 351.221(b)(7) (establishing new cash deposit requirement during an administrative review). Commerce issues instructions to the Bureau of Customs and Border Protection (“Customs”) direc ting the collection of the cash deposits. Actual antidumping duties are dete rmined later, upon liquidation of the entry, w

hich also is performed according to instructions from Commerce to Customs. Entries of Green Fresh’s and Ge rber’s mushrooms made during the period of re view each were subject to changing c ash deposit rates. From the beginning of the period of review on February 1, 2001 through July 5, 2001, the cash deposit ra te in effect for importations ofCourt No. 03-00544 Page 6

Gerber ’s mushro oms was 14 2.11 per cent, the antidumpin

g duty margin established for G erber i

n the antidumping investigation concluded in 1999. Gerber’ s cash deposit rate subsequently was adjusted downwar d, to 121.3 3 perce

nt, which was the a ntidumping

duty assessme nt rate Commerce determined to apply to Gerber’s mushrooms that were entered dur ing the period covered by

the first administrative review. See Amended Final Results of First New Shipper Review and First Antidumping Duty Administrative Review for Certain Preserved Mushrooms From the People’s Republic of China , 66 Fed. Reg. 35,595, 35,596 (July 6, 2001) . On July 6, 2001, the 121.33 percent rate became the ne w cash deposit rate for future entries of G erber’s mushrooms, which cash deposit rate remained in effec t for the remainder of the period of revie w, which en ded on January

31, 2002. G

reen F resh obta

ined a ca sh deposit

rate of 29.87 per

cent as a result o f its requ

esting a nd obtaini

ng a ne w shipper review. That cash deposit r ate wen t into effect on August 27, 2001. See Final Results of New Shipper Review for Certain Preserved Mushrooms From the People’s Republic of China , 66 Fed. Reg. 45,006, 45,007 (Aug. 27, 2001). Gerber’s and Green Fr

esh’s cash deposit rates were set forth in instructions that Commerce issued to Customs. The instructions included individual cash deposit rates to be applied based on the identity of specific exporters and producers. I n the instructions, Commerce also addressed the situation arising where an e ntry cover

ed merchandise for which the producer and export

er were differe nt partie s, each o f which w as the sub ject of a n individua

l cash de posit rate. In that case , Commerce instructed Customs to apply the exporter’s c ash deposit rate. As of August 27, 2001, Gerber’s cash deposit rate for the subject merchandise was 121.33 perce nt, and Green Fresh’s cash deposit rate was 29.87 percent. Thus, as a result of the way that Commerce structured its cash deposit instructions, any mushrooms produc ed by Ger ber but exported byCourt No. 03-00544 Page 7

Green Fresh we

re subje ct to a ca sh deposit rate tha t was con siderab ly lo

wer than the rate applying if G erber were both producer a nd exporter. C. Agreement between Gerbe r and Green Fresh on Exports of Mushrooms Produced by Gerber Approximately midway

in the period of review, Gerber and Gr een Fresh entered into an agreement under which Gre en Fresh would perform services in the role of exporter for mushrooms produced by Ge rber. Under the agre ement, which was the subject of a written contract executed in September 2001, Green Fr esh agreed to prepare

export documents for shipments o f mushrooms Gerbe r produc ed and to “ [a]ct as an agent f or [Gerbe r] to export”

its shipments of merchandise to the United States. See Second Supplemental Resp. of Gerber Food (Yunnan) Co., Ltd. for

Certain Pre

served M ushrooms f

rom China, T

hird Revi ew (Sept. 12, 2002) (Pub. App. to Pls.’ Rule

56.2 Mot. f

or J. Upon th e Agen

cy R. Ex. 7). I

n return , Gerbe

r agre ed to pay Gre en Fresh a commission. Gerber was the producer for a total of 34 shipments of mushrooms exported to the United States during the period of review. For 24 of those 34 shipments, the entry documenta tion filed in the Unit

ed States listed Gr een Fr esh as the exporter , and as a

result the cash dep osits on tho se 24 shipments were made at the cash deposit rate apply ing to Green Fresh, i.e. , 29.87 pe rcent, rather than the 121.33 percent rate a pplying to shipments exported by Gerber. Of the 24 shipments of Gerber-produced mushrooms for which Gre en Fresh was listed as the exporter, eleven were made pursuant to the Ger ber-Green Fresh ag

reement discussed above, under which Gr ee n F re sh ag re ed to se rv e a s e xp or te r i n a n a ge nc y re la ti on sh ip . G re en Fr es h a ct ua ll y prepared the export documentation on only the first two of the eleven shipments; on the remaining nine shipments Gerber prepar ed the export-related commercial documentation,Court No. 03-00544 Page 8

1 Gerber and Green Fr

esh disputed the effect of Green Fresh’s notice of termination of the export

agenc y a greement. Gre en Fre sh took the position tha

t the cont ract en ded upon i

ts giving notice to Gerber of ter mination, which occurred in December 2001. Ger ber took the position that the effect of the notice of termination was that the contrac t would not be renewed after its expiration at the end of May 2002. Verification of the Resp. of Gerber Foods (Yunnan) Co., Ltd. (“Gerber”) in the Third Antidumping Duty Administrative Review of Certain Preserved Mushroom

s from the P

eople’s Republic of China ( “PRC”) at 6-7 (F eb. 12, 20 03) (Pub. App. to Pls.’ Rule 5 6.2 Mot. for J. Upon the Agenc y R. Ex. 14); Verifica tion of the R esp. of Gr een Fre sh Foods (Zhangzhou) Co., Ltd. (“Green Fresh”) and Zhangzhou Longhai Lu Bao Food Co., Ltd. (“Lu Bao”) the Third Antidumping Duty Administrative Review of Certain Preserved Mushroom

s from the P

eople’s Republic of China ( “PRC”) at 7 (Fe b. 12, 2003 ) (Pub. Ap

p. to Pls.’ Rule 56.2 Mot. for J. Upon the Agency R. Ex. 13). including invoices that it prepared using Gree n Fresh’s blank invoice forms, with Green Fr esh’s authorization. On the remaining 13 of the 24 shipments of Gerber mushrooms, Gre en Fresh was listed as the exporter on the entry doc umentation, including invoices, without Green Fresh’s authorization. By that time, Gree n Fresh had terminated the export agenc y ag reement it had entered into with Gerber. 1 Commerce applied the 198.63 percent assessment rate, in the Final Results , to all 34 shipments of Gerber-produced mushrooms made during the period of review. During the period of review, Gre en Fresh exported more than 100 shipments of mushrooms produced by a n entity other than Ger

ber, with no participation by Gerber. In the Final Resu lts , Commerc e applie d the 198. 63 perce nt assess ment rate

to these shipments a s well, even though these shipments were not involved in the export agenc y ag reement with which Commerce took issue in its decision.

D. Commerce’s Preliminary Results in the Third Administrative Review Commerce issued the preliminary results of the administrative review in March 2003. See Pre liminary R esults and Partial Re

scission o f Fourth Ne

w Shipper R eview an d Prelimin ary Results of Third Antidumping Duty Administrative Review for Certain Preserved MushroomsCourt No. 03-00544 Page 9

from the People’s Republic of China , 68 Fed. Reg. 10,694 (Mar. 6, 2003) (“ Prelimina ry Results ”). In the Prelimina ry Result s , Commerce reported its calculated preliminary antidumpin

g duty assessme nt rates f or both re spondents . The pre liminary antidumpin

g duty assessment rate for Gerber was c alculated to be 1.17 percent; for Gree n Fresh the rate was calculated to be 46.61 percent. See id. at 10,702. In the Preliminary Results, Commerce indicated its disapproval of the agreement betwe en Gerber and Green Fresh under which Green Fresh was to act as exporter of recor d for Gerber’s merchandise. Commerc e proposed to act on its disapproval by depar

ting from its normal practice, under which the ca sh deposit rate for future entries would have been set at the individual assessment rate for each individual respondent. Inste ad, Commer

ce propo sed to ass ign both c ompanies the rate of 46.61 p ercent

as a cash deposit rate for future entries. See id. Thus, the action would not have changed the ca sh deposit rate for Green Fresh but would have had as its eff ect the setting of Gerber’s ca sh deposit rate at 46.61 percent instead of the 1.17 percent ca sh deposit rate that Commerce ordinarily would have established. The Coalition for Preserved Mushroom Trade, the petitioner in the original antidumping investigation, criticized as too lenient the way Commerce, in the Prelimina ry Result s , had proposed to addre ss the expor

t agenc y a rrang ement between Ge

rber an d Green Fresh. In its

case brief, filed with Commerce on May 1, 2003, the petitioner argued that Commerce should invoke “total ad verse f acts ava ilable” a gainst b oth Gerb er and G reen F resh by

apply ing to bot h respondents the highest possible antidumping duty assessment rate for the period of review. Petitioner s argue d that Comme

rce’s in voking “ total adv erse fa

cts avai lable” to

this deg ree wou ldCourt No. 03-00544 Page 10

2 Petitioner also proposed several less stringent measures to be a pplied to the two responde nts for us e in the e

vent Comme

rce re jected p etitioner ’s propos al for “total adv erse fa cts availab le.” Amon

g them w as a prop osal that b oth respondents be subjecte d to an ass essment r ate equal to the cash deposit rate of 121.33 percent assig ned to Gerber in the first administrative review. Issues and Decision Memorandum for the Final Results of the Antidumping Duty New Shipper and Administrative Reviews on Certain Preserved Mushrooms from the People’s Republic of China - February 1, 2001, through January 31, 2002 at 5-6 (Pub. App. to Def.’s Mem. in Opp’n to Pls.’ Rule 56.2 Mot. for J. Upon the Agency R. Ex. B). be the appropriate response to what petitioners viewed a s serious wrongdoing by the two responde nts. 2 The following July

, Commerc e issued t

he final decision that plain

tiffs cha llenge in this litigation. See Fina l Results , 68 Fed. Reg. at 41,304. I n the Final Resu lts , Commerce, after holding an ex parte

meeting with petitioner and a subsequent, separate ex parte meeting with respondents, took the harshest course of action urg ed by the petitioner, a ssessing antidumping duties of 198.63 percent upon all entries of the subject mercha ndise of both respondents made during the period of review. See id. at 41,309.

E. Commerc e’s Final Resu lts in the Third Administrative Review In the Final Resu lts , Commerce made several findings of fa ct, disputed by plaintiffs, the common thread of which is that Commerce disbelieved that Green Fresh actually acted as the exporter for shipments of Gerber’s mushrooms to the United States. Commerce based its sever e action against Gerber and Gr een Fresh on its finding that “both companies withheld cruc ial informat ion prior to verifi cation a

nd active ly c olluded to

circumv ent the c ash depo sit rates in effec t during

the [perio d of revi ew] . . . [suc h that] the u se of tota

l advers e facts

availab le is warranted in this case with respect to determining Gerber’s and Green Fr

esh’s cash deposit and assessment rates. . . .” Id . at 41,30 6. Commerc e found a s a fact that “Ge rber continuallyCourt No. 03-00544 Page 11

misrepre sented in

its questionnaire r

esponses the true nature o f its rela

tionship wi

th Green Fresh during the [period of review].” Id . Commerc e conclu ded that “ Gerber ’s misrepresenta tions were highly

material to the Department’s analy sis and call into question the veracity of other responses provided by

Gerber.” Id . “Bec ause the Department relie s on orig inal sale s invoice s to verify the a

ccuracy of the sales listing, the information Gerber mis-chara cterized and withh eld was fundamental and material to the Department’s a nalysis. Gerber ’s actions now lead [Commerce] to question [its] verification findings which were predicated on the reliability of Gerber’s own information and records.” Id. at 41,307. Commerce drew similar conclusions about Green Fre sh. “With respect to Green Fresh, its representations on the record significantly impeded this proceeding as well.” Id . According to Commerc e, Gree

n Fresh had bee n a willing

particip ant in the

“misrepr esentat ion” in tha

t it had claimed to have been Gerber’ s agent. Commerce concluded that “Gr een Fresh never acted as Gerber’s agent for

most of the Gerber/Green Fresh r eported transactions.” Id. at 41,306. Commerce reasoned that “the willingness of Gr een Fresh to assist another company to evade the payment of legally require d cash deposits, as well as its consistent mis-characterization of the facts on the rec ord (des

pite its re present atives’ c ertific ation of the facts containe d in multiple submissions

to the Dep artment a s truthful when the y w ere not) , leads [Com

merce] to again question the validity of the books and re cords examined by the De partment at verification.” Id. at 41,307. F. Principal Contentions of the Parties Plaintiffs argue that Commerce’s decision to apply the 198.63 percent rate to Gerber a nd Green Fresh wa s unsuppor ted by substantia

l evidenc e on the r

ecord a nd otherw

ise not inCourt No. 03-00544 Page 12

accordance with law. They assert that substantial evidence did not support Commerce’s invoking of the “facts otherwise available” procedure of 19 U.S.C. § 1677e(a) and that there fore, by definition, Commerce did not have the authority to invoke the “adve rse inferences” procedur

e of 19 U.S.C . § 1677e(

b). Acc ording t

o their a rgumen t, Gerbe r and Gr een Fr esh resp onded to a

ll questionnaires, ti

mely produce d all req

uired doc umentation, and re

plied to the

best of th eir ability to Commerce’s questions about their business re lationship as it pertained to the export agency agreement. Plaintiffs characte rize the administrative record as containing verifie d information on U.S. sale prices, moving expenses, proof of pay ment, factors of production, and all other subjects that is sufficient to allow the Department to calculate individual antidumping margins for both respondents. Rather than a leg itimate resort to the “facts otherwise available” and “adverse inference s” procedures in the statute, the Commerce action was, in their vie w, an unlawfu l attempt to

punish Ge

rber an d Green Fresh f or the wa y in which the

two respondents structured their business relationship. Defendant and defendant-interve nor maintain that Commerce was justified in imposing the 198.63 percent rate because Commerc e found, based on substantial evidence, that Gerber and Green Fresh misr

eprese nted the f acts con cerning the export

agenc y a greement, par

ticularl y in stating that Green Fresh acte d as an export agent for Gerber’ s shipments of mushrooms to the United Sta

tes. They contend t hat Gerb er’s an

d Green Fresh’ s respons es to Comme rce’s r equests for information concerning that ag reement reveal that both plaintiffs withheld information and significantly impede d the antidumping proceeding. Those re sponses justified, in their view, Commerce’s determination that none of the information that the two respondents submitted during the entire investigation could be verifie d. Based on these findings, defenda nt andCourt No. 03-00544 Page 13

defendant-intervenor arg

ue that the criteria for invoking the “fa cts otherwise available” procedu re of 19 U .S.C. § 1677 e(a) we re met an d furthe r argu e that Ge rber an d Green Fresh d id not cooperate to the best of their ability in responding to Commerce’s requests for information, thus justif yin g the invoking of

“adverse infer

ences” pursuant to 19 U.S.C. § 1677e(

b). They also argue that Commerce’s construction of § 1677e (a) and (b) is entitled to deference unde r the Supreme Court’s decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. 837 (1984). Defendant and defendant-inter venor submit, additionally, that the imposition of the 198.63 percent rate was appropriate as a n exercise of Commerce’s inherent authority to respon d to circ umvention

of the an tidumping

duty laws. II. S TAND ARD O F R EVIEW This court must evaluate whether the challenge d findings by the D epartment are supported by substantial evidenc e on the record or are otherwise in accordance with law. See 19 U.S.C. § 1 516a(b) (1)(B) (i). Subst antial ev idence i s “such r

elevant evidenc e as a re asonable mind might accept as adequate to support a conclusion.” Consol. Edison Co. v. NLRB , 305 U.S. 197, 229 (1938). III. D ISCU SSI ON This case present s the issue

of wheth er Commer

ce acte d in accordance

with law in applying the

198.63 percent rate to the shipments of Gerber and G reen Fresh for antidumping duty assessme nt purpose s. The co

urt conc ludes tha

t Commerc e failed

to support , with substantia l evidenc e on the r

ecord, c ertain f

indings o f fact in

the chal lenged

decision . Beca

use these fin dings we re requ ired for the appli cation of

the “fa cts other wise ava ilable” a nd “adve rse inferences” provisions set forth in 19 U.S.C. § 1677e, the challeng ed decision exceeded theCourt No. 03-00544 Page 14

authority gr

anted by Cong

ress in those provisions . The court further concludes that the Final Results , in assig

ning the 198.63 pe

rcent a ntidumping

duty assessme nt rate to the plain tiffs, cannot be justified by de ference to an age ncy construction of § 1677e, nor can it be justified by deference to a construction of the antidumping laws in general under which Commerce may exercise its “inherent” authority to prevent circumvention of those laws. In the Final Resu lts , Commerce rejected the applicable data pe rtaining to the calculation of individ ual asse ssment ra

tes that G erber a

nd Gree n Fresh submitted i

n respons e to its questionnaires, and declined to calculate individual antidumping duty assessment rates for Gerber and Gre en Fre sh, even

though Commerce had verif ied those data pri or to using

them to calculate preliminary

antidumping duty assessment ra tes in the Prelimina ry Result s . Instead, Commerce

applied b oth “facts otherw ise avai lable” u

nder subs ection ( a) of § 16 77e and “ adverse inferences” under subsection (b) of § 1677e , an application that Commerce characterized as “total adverse facts available.” Rely ing on these provisions, Commerce applied an antidumping duty assessment rate of

198.63 percent to both plaintiffs for all entries of mushrooms produced by Gerbe r or exported by Gre en Fresh during the period of re view. It also established this rate as the new cash deposit rate for future entr ies, which action plaintiffs also challenge. Had Commerce adopted in the Final Resu lts the antidumping duty asse ssment rates it had calculated in the Prelimina ry Result s , Gerber’s assessment rate would have be en 1.17 percent and Green Fresh’s rate would have been 46.61 percent. The assessment ra tes in the Prelimina ry Results were intended by Commerce to reflect the amount by which “normal value,” as determined for goods of a non-marke t economy country

, exceeded the U.S. prices associated with the sales of Gerber’s and Gree n Fresh’s subject merchandise during the period of review.Court No. 03-00544 Page 15

As discussed below, Commerce in the Final Resu lts did not adopt the 198.63 percent assessment rate with that intent, adopting it instead in response to its disapproval of the export agenc y agreement entered into by Gerber and Green Fr

esh and the way

the parties reported that agree ment in the

response s to the De

partmen t’s questi onnaire s. Commerc e, howev er, fai led to support with substantial evidence on the record the findings of f act on which it relied in invoking § 1677e. T

he court reache s this conc lusion for two reas ons. The first reason for the court’s conclusion is the lack of substantial evidence on the record to support Commerce’s apparent finding that the information submitted by both plaintiffs did not qua

lify for use i n calcul ating a

ctual as sessment r

ates. Commerce a

pparent ly r ejecte d all of that information based on findings of fact under 19 U.S.C. § 1677e(a )(2) and § 1677m(e) that neither the information submitted by Ge rber, nor the information submitted by Green Fresh, containe d in questi onnaire response s and nec essary

to deter mining a ctual as sessment r

ates, co uld be “verified.” However, a f inding that the information is not verifiable is unsupported by substantial evidence. In fa ct, the record reveals that Commerce itself ha d verified both sets of information and used them in calculating the separate assessment rates for Gerber and Gr een Fresh that it reported in the Prelimina ry Result s . The second reason for the court’s conc lusion is that Commerce erred in apply ing 19 U.S.C. § 1677e(b) by deter mining that the PRC-wide assessment rate should apply as “adverse facts available” a nd by failing to support that de termination with substantial evidence on the record. There is a complete abse nce of evidentiary

support for the specific choice of the 198.63 percent rate, which is the rate Commerce applied in the subject review, and the previous review, to respondents who failed to demonstrate independenc e from control of the governmentCourt No. 03-00544 Page 16

of the PRC. T

he record lacks

any evidenc e that eit

her Ger ber or G reen F resh is su

bject to PRC control; moreover, Commerce made findings of fa ct in the Prelimina ry Result s , which it did not subsequently reve

rse or modify, that both plaintiffs we re not subject to PRC control. Absent the substantial evidence necessary to support the findings that Commerce made pursuant to 19 U.S.C. § 1677e, Commerce’ s determi nation of the 198.6 3 perce

nt assess ment rate on the bas is of “tota

l advers e facts

availab le” exce eded the

authority Congre ss provide d in 19 U.S.C. § 1677e. To explain its conclusion that Commerce erred in determining that the PRC-wide rate of 198.63 percent was the appropriate assessment rate for Gerber and Gr een Fresh, the court, in the discussion below, (A) examines how Commerce incorr ectly applied subsection (a) of § 1677e in conjunction with subsection (e) of § 1677m by disregarding verified infor mati on rel evant to cal culat ing in divi dual a ssess ment r ates an d by faili ng to b ase it s find ings on substantial evidence on the record, (B) a nalyzes how Commerce e rred in applying

subsection (b) of § 1 677e by

determin ing that the PRC-wid

e assessment rate

should app ly a s “adver

se fact s available” and by

failing to support its determination with substantial evidence on the record, and (C) explains why Commerce’ s determination is not justified by defere nce to Commerce’s construction of either 19 U.S.C. § 1677e or the antidumping laws in gene ral, which Commerce insists per

mit it to exer

cise its “ inheren

t authorit y” to preve nt circu mvention o f those la

ws. A. Co mm er ce Er re d i n A pp lyi ng 19 U. S. C. § 1 67 7e (a ) b y Di sr eg ar di ng Ve ri fi ed , C om pa nySpecific Information for G erber and Green Fre sh Without Basing its Decision on Substantial Evidence on the Record Commerce

erred i n apply ing 19 U. S.C. § 1677e (a) by invoking the “fa cts other wise available” procedure when Commerc e possessed verified, company -specific information from which to determine the assessment rates for Gerbe r and Green Fresh. Subsection (a) of § 1677eCourt No. 03-00544 Page 17

allows Commerce to invoke “facts otherwise available” when “necessary

information is not available on the record” or when a ny of four c onditions specified in subparagraph (a)(2) is met. The four condition s apply

to situations where

a party : (A) withholds information that has been requested by the administering authority . . . under this subtitle, . . . (B) fails to provide such information by the deadlines for submission of the information or in the form and manner requested, subject to subsections (c )(1) and (e) of section 1677m of this title, (C) significantly

impedes a proceeding under this subtitle, or (D) provides such information but the information cannot be verified a s provided in section 1677m(i) of this title. 19 U.S.C. § 1677e(a)(2). Where a party meets any of the se four conditions, the statute provides that Commerce shall, subject to § 1677m(d), “use the facts otherwise ava ilable in reaching the applicable determination.” 19 U.S.C. § 1677e(a). I n the Final Resu lts , Commerce concluded that the plaintiffs’ reporting of the export agenc y ag reement satisfied conditions (A), regar ding the withholding of information, (C), concerning sig nificantly impeding a

proceeding, and (D), with respect to information that was provided but cannot be verified. See Fina l Results , 68 Fed. Reg. at 41,307. In su bjecting the use of

“facts otherwis e availa

ble” to 19U.S.C. § 167 7m(d), th e statute applies a procedure when Commerce de termines that a response to a request for information does not comply with the reque st. In sum, subsection (d) of § 1677m requires that Commerce promptly inform the submitter of the nature of the deficiency

and, “to the extent practicable, provide t hat pers on with an

opportuni

ty to remedy or explain

the defi ciency

in light o f the time limits esta

blished f or the completion of

investig ations or

reviews under thi s subtitle. ” 19 U.S.C. § 1677m(d) . If C ommerce determines that the

response of the submitter is not satisfa ctory, or ifCourt No. 03-00544 Page 18

such resp onse is not timel y, Comme

rce t hen “ may , subj ect t

o subs ecti on (e ) of [§ 1677m], disregard all or part of the original and subsequent responses.” Id. When applying subsec

tion (a) of § 1677e, Commerce, pursuant to subsection (d) of § 1677m, must comply

with the r

equirements of § 1 677m(e) . Accor dingly , Commerc e must determine whether information is “necessary to the determination” and whether that particular information must be considered even if Commerce concludes that suc h information does not meet all of its requirements. See 19 U.S.C. § 1677m(e) (providing that in reaching administrative review determinations under § 1675, among other de terminations, Commerce “shall no t decline

to conside

r informa tion that is

submitted by a

n intere sted par

ty a nd is necessary to the determination but does not meet all the applicable requirements established by [Commerce]”). The statute provides five criteria, which, if met, prec lude Commerce from declining to consider submitted information: (1) the information must be submitted by the deadline ; (2) the i

nformati on must be v erifiab le; (3) the informa tion must not

be “so inc omplete that it cannot serve as a reliable basis for rea ching the applicable determination”; (4) “the interested party

[must] demonstrate[] that it acted to the best of its ability in providing the information and meeting the requirements established by [Commerce] with respect to the information”; and (5) the information must be such that it “can be used without undue difficulties.” 19 U.S.C. § 1677m(e). In the Final Resu lts , Commerc e does no t explain ad equatel y w hy t he five c riteria in 19 U.S.C. § 1677m(e) are not satisfied by Gerber’s and Green Fr

esh’s submission of the subsequently-ver

ified information that was necessary to the calculation of individual assessmentCourt No. 03-00544 Page 19

rates. Nor does Commerce explain which of its specific “applica ble requirements,” as referenc ed in § 1677m(e), were not satisfied by this information. Commerce regarded as not ver ifiable the information that Gerber and Gree n Fresh had submitted during the review and that was necessa ry to the calc

ulation of individual assessment rates. Commerce concluded that the export agenc y ag reement and the misleading responses or misrepresentations it alleges to have been made by both plaintiffs concer ning that agreement caused it to question the veracity of all other information submitted by the par ties in the review procee ding: For purposes of the [Final Resu lts ], [the Department] now find[s] that Gerber and Green Fresh’s joint efforts during the [period of review] to illegally evade antidumping duty ca sh deposits and subsequent misleading responses to the Department’s que stionnair es, illustr ate a pa ttern of b ehavior

intended to undermine the antidumping duty law and the ability of the D epartment to enforce it. Such behavior calls into question the validity of all of the infor mation provided to the Department in the questionnaire responses and lea ds the Department to question both parties’ business practices and the vera city and commercial validity of G erber[’s] and Green Fresh’s repor ted information. Issues and Decision Memorandum for the Final Results of the Antidumping Duty New Shipper and Administrative Reviews on Certain Preserved Mushrooms from the People’s Republic of China - February 1, 2001, through January 31, 2002 at 9 (“ Decision Memorandum ”) (Pub. App. to Def.’s Mem. in Opp’n to Pls.’ Rule 56.2 Mot. for J. Upon the Agency R. Ex. B). The rationale that Commerce put forth does not justify Commerce’s dispensing with the requirements of 19 U.S.C. § 1677m(e). The record evide nce concerning the “misrepr esentat ions” alle ged to h ave bee

n made by

Gerber and Gre en Fre sh is not suf ficient t o support a conclusion that none of the submitted information pertaining to the calculation of actual assessment rates – information that was separate from the information the two partiesCourt No. 03-00544 Page 20

reporte d conce

rning the export a

gency agree ment – was

“verif iable” f or purpos es of 19 U .S.C. § 1677m(e)(2) and § 1677e(a)(2)(D ). Based on the record evidenc e, Commerce indicated that Gerber and Green Fr

esh misrepresented the nature of their export ag ency a greement in several way s: (1) the

use of ce rtain ter ms in the expo

rt age ncy agree ment that C ommerce

consider ed to imply a more active r

ole for Green Fresh than Commerce believes Green Fresh to have a ssumed; (2) the alleged misrepresentation by Gerber and Green Fr

esh regarding their motive for entering into the export agency

agreement; (3) the alleg ed failure of both parties to disclose initially the fact that they did not adhe re to the original terms of the export agenc y ag reement; and (4) the alleged failure of Gree

n Fresh to provide supporting documentation for shipments that Gerbe r made using Green Fresh’s invoice s. Decision Memorandum at 10-13. This record evidence of “material misrepresentations” uniquely concerns the terms and execution of the export agenc y agreement between Ge

rber and Green Fresh. See id. at 10, 12. Althoug h Commerc e could demonstrate, with record evidence, that one or both of the parties were less than forthcoming regar ding ce rtain asp ects of the export a gency agree ment, this r

ecord e vidence is not suff

icient to impugn the veracity

of all other record evidence, i.e. , recor d evidenc e that Commerce us ed to calculate the assessment rates in the Prelimina ry Result s . Commerce never explained adequately why the other r

ecord evidence was not “verifiable.” I

nstead, Commerce offered vag ue assertions, insisting that it “must have confidence that transactions reviewed a t verification are legitimate with no mis-charac terization or mislabeling of the information being verified” and added the general notion that “[t]he verification process is highly dependent upon the accurate and compr ehensive characterization by respondents of the

facts supporting their books and records, and the inf ormation containedCourt No. 03-00544 Page 21

therein.” Decision Memorandum at 9. With respect to Gerber, Commerce then concluded that Gerber is untrustworthy

and hence that Commerce cannot treat its findings a t verification as

accurate. See id. at 11. Commerce drew a similar conclusion with respect to Gree n Fresh; Commerce concluded that it could not rely on any of the infor

mation that Green Fresh provided because the misrepresentations it alleged r egarding the export age

ncy ag reement led Commerce to question the validity of all the information reviewed at verification. See id. at 13-14. At verification, however, other than the rec ord evidence regarding the export agency agreement, Commerce found fe w discrepancies with the information that Gerber and G reen Fresh provided, and Commerce resolved any inaccuracies found during ver ification. See Verifica tion of the R esp. of Ge rber Food

s (Yunnan) Co., Ltd. ( “Gerber”) in the Third Antidumping Duty Administrative Review of Certain Preserved Mushrooms from the People’s Republic of China ( “PRC”) (Feb. 12, 2003) ( “Gerber V erificati on Report ” ) (Pub. App. to Pls.’ Rule 56.2 M ot. for J. Up on the Ag ency R. Ex. 14); Verifica tion of the R esp. of Gr een Fre sh Foods (Zhangzhou) Co., Ltd. (“Green Fresh”) and Zhangzhou Longhai Lu Bao Food Co., Ltd. (“Lu Bao”) the Third Antidumping Duty Administrative Review of Certain Preserved Mushroom

s from the P

eople’s Republic of China ( “PRC”) (Feb. 12, 2003) ( “Green Fr esh Verifica tion Repor

t ”) (Pub. App. to Pls.’ Rule 56.2 Mot. for J. Upon the Agency R. Ex. 13). Even after noting the allege d misrepresentations concerning the export ag ency a greement that were discovered at verification, Commerce declined to use “facts otherwise available” and “adverse inferences” w

hen calculating preliminary individual assessment rates and acknowl edged

that “for assess ment purp oses, [the Department] verif

ied that the sales d

ata reporte d by

each re spondent was accu rate an d, for pur poses of t his revie w, can c alculateCourt No. 03-00544 Page 22

importer-specific assessment rates using this data.” Memoran dum from Lo uis Apple, Director , Office of AD/CVD Enforcement 2, to Susan Kuhbach, Acting Deputy Assistant Secretary for Import Administration at 6 (Feb. 28, 2003) (discussing the appropria te cash deposit rates and the calcul ation of ind ivid ual as sessm ent rat es for G erber a nd Gree n Fresh given t he fin dings regarding the export ag ency a greement) (“ Cash Deposit Memorandum ”) (Pub. App. to Def.- Inte rvenor’ s Mem. in Re sp. to Pls.’ Rule 56.2 M ot. for J. Up on the Ag ency R. Ex. 24); see Prelimina ry Result

s , 68 Fed. Reg. at 10,697. Having made such favorable findings concer ning the acc uracy and suita bility of the submitted inf

ormation needed to

calcula te asses sment rat

es,

an d h av in g f

ai le d t o s up po rt wi th su bs ta nt ia l e vi de nc e a ny l at er fi nd in gs to th e c on tr ar y, Commerce

may not refu se to cons ider tha t informa tion. Comme

rce ca nnot mainta

in plausib ly that, for purposes of § 1677m(e)(2), the information cannot be verified or that, for purposes of § 1677m(e )(4), Ge

rber an d Green Fresh f ailed to d emonstra te that the y a cted to th e best of

their ability in providi

ng the information and mee ting Comme

rce’s r equirements. As the Cour

t of Appe als for the Fede

ral Circ uit has obs erved, t

he use of facts otherwise availab le is to “f

ill in the g aps” whe

n “Commer

ce has r eceive d less tha

n the full a

nd comple

te facts needed to make a determination.” Nippon Steel Corp. v. United States , 337 F.3d 1373, 1381 (Fed. Cir. 2003). Leg islative history illustrates that Commerce’s ac tion in the Final Resu lts is based on an impermissible use of the authority under 19 U.S.C. § 1677e. The language of § 1677e was included in the Uruguay Round Agreements Act of 1994, Pub. L . No. 103-465, 108 Stat. 4809 (1994). The Statement of Administrative Action explains that subsection (a) of § 1677e pertains to situations “where requested information is missing from the re cord or cannot be used b ecause , for exam ple, it ha s not been

provided , it was pr

ovided la te, or Commerce c ouldCourt No. 03-00544 Page 23

not verify the infor

mation.” Uruguay Round Agreements Act, Statement of Administrative Action , H.R. Doc. No. 103-316, at 869 (1994), as reprinted in 1994 U.S.C.C.A.N. 4040, 4198 (“ SAA ”). As Commerce demonstrated in the Prelimina ry Result s , it had sufficiently full and complete facts, which Commerce itself had verified, to find that Ge rber and Green Fresh we

re free from PRC-control and to determine the preliminary antidumping assessment rates to be 1.17 percent for Gerber and 46.41 pe rcent for Green Fresh. See Pre liminary R esults , 68 Fed. Reg. at 10,702. The subsequent refusal by Commerce to use the verified sales data was base d solely on its disapproval of the export agency relationship and the way in which the two plaintiffs reported that relationship. See Fina l Results , 68 Fed. Reg. at 41,306-07. However, the facts on record pertaining to the export agency relationship do not support a conclusion that the verified information provided by both re spondents could not be used to calculate separate assessment rates. Commerce never ide ntified a ny gaps or de ficienc ies in that informat ion such a s would preclude Commerce from rely ing on that information for the purpose of calculating assessment rates. Nor did Commerce identify any inacc

uracy, mis-c

haracterization, or discrepancy in the information to support a conclusion that the information is no longer “verifiable.” Viewed against the “substantial evidence” requirement as defined in Consolidated Edison Co. , 305 U.S. at 229, the record evidence in this case is not such as “a reasonable mind might accept as adequate to support a conclusion” tha t none of the information submitted by either Gerber or Green Fre sh in the third administrative review could be verified for use in ca lculating individual assessment rates. Because Commerce fa iled to justify its rejection of that informationCourt No. 03-00544 Page 24

under the require ments of 1 9 U.S.C. § 16 77m(e), Commerce ’s rationale for invoking the “fa cts otherwise available” procedure of 19 U.S.C. § 1677e(a) is insufficient. In a ddition to the criter

ion for in voking “ facts otherwise a vailable ” that is se

t forth in § 1677e(a)(2)(D), which is satisfied only if an interested party

provides necessary

information that “cannot be verified,” Commerce also invoked c riteria (A) and (C) of § 1677e(a)(2), which

are sat isfied if the part y “ withholds i

nformati on” that Commerce r equeste d, or “sig

nifican tly impedes a proceeding,” respe ctively. Neither c riterion (A) nor criterion (C), however, justifies Commerce’s actions in the Final Resu lts . Commerc e made f indings t hat Gerb er and G

reen F resh initially withheld information by misrepresenting the nature of the export ag ency a greement and that these misrepresentations impeded a proper review of the transactions affected by the export agency agreement. See Decision Memorandum at 11, 13. Even assuming, arguendo , that the two parties initially withheld some information about the export ag ency a greement, none of the informat ion alleg edly

withheld was nece ssary

to the ca lculation of individ

ual antid umping du

ty assessment rates. Because Commerce did not satisfy the requireme nts of 19 U.S.C. § 1677m(e) as to the information that actually was nec essary

to the ca lculation of individ

ual asse ssment rates, Commerce’s invoking of criterion (A) of § 1677e(a)(2) is insufficient to justify the actions taken in the Final Resu lts . With respect to criterion (C) of § 1677e(a)(2), Commerce did not reveal its reasoning and failed to cite to evide nce on the record that could support a finding that the administrative review proceeding wa s “significantly impeded” as a result of actions taken by either Gerber or Green Fresh.Court No. 03-00544 Page 25

B. Commerce Erred in I

ts Applying 19 U.S.C. § 1677e(b) by Determining that the PRC-Wide Assessme nt Rate Sho

uld Apply as “Adve rse Fac ts Availa ble” and by F ailing to

Support its Determination with Substantial Evidence on the Record Commerce erred further in its apply ing subsection (b) of § 1677e. I f Commerce makes the findings, based on substantial record evidence , that are required for invoking subsection (b) of 19 U.S.C . § 167 7e, it may “use an in fere nce t hat is adve rse t o the inter ests o f tha

t par ty [( i.e. , the part y that faile d to coope

rate by not actin g to the b est of its a

bility to comply

with a re quest by Comme rce f or inf orma tion) ] in selec ting from am ong the fac ts otherwis e availab le .” 19 U.S.C. § 1677e(b) (emphasis added). I n selecting from among “fa cts otherwise available,” Commerce can rely

on information derived from “the petition,” “a final determination in the investigation under this subtitle,” “any previous review under 19 U.S.C. § 1675 or determination under 19 U.S.C. § 167 5b,” or “ any other inf ormation p laced on

the rec ord.” 19 U.S.C. § 1677e(b). Subsection (b) of § 1677e cannot properly be read in isolation. In limiting the proce dure thereunder to the agency ’s “selecting from among the f acts otherwise available,” subsection (b) refers back to subsection (a). Ther efore, if it is assumed, arguendo , that subs ection ( b) is available to be invoked against Gerber and Green Fresh based on ea ch party’ s failure to respond to the best of its ability to Commerce’s reque sts for information concerning the nature of the export agency

agreement, Commerce, in determining assessment rates, nevertheless is confined by s ubsection (b) to “ selectin g from a mong the facts otherwise a

vailable .” Commer

ce did not so confine its action. In the Prelimina ry Result s , Commerce made findings of fact based on substantial evidence that both Gerber and Gree n Fresh were independent of control of the government of the PRC. See Pre liminary R esults , 68 Fed . Reg. at 10,698-99. Gerber was deemed to beCourt No. 03-00544 Page 26

3 Neither the statute nor Commerce’s reg ulations refer to the procedure Commerce identifies as “total adverse facts available.” The statute sets forth two individual, but related, procedures in subsections (a) and (b) of 19 U.S.C. § 1677e. independent of government control beca use it “is wholly owned by persons located outside the PRC.” Id . at 10,698. As to Green Fresh, Commerce determined in the Prelimina ry Result s that Green Fresh has demonstrated abse nce of both de jure

and de factogovernment control. See id. at 10,698-99. Commerce reported no findings of fa ct in the Final Resu lts that contradicted or cast doubt on its earlier findings related to the matter of government control of either plaintiff. On the basis of those findings, and consistent with its past practice, Commerce proc eeded to calculate separate preliminary antidumping duty assessment ra tes: 1.17 percent for Gerber and 46.61 percent for Green Fre sh. While Commerce, in the Prelimina ry Result s , took exce

ption to the way the export

agenc y a greement was r

eported , Commerc e did not in voke its “ total adv erse facts available” procedure, w hich encompasses both subsection (a) (“facts other wise available”) and subsection (b) (“adverse infere nces”), on the calculation of the assessment rate s, instead invoking that procedure to set a higher -than-normal cash deposit rate for future e ntries of Gerber’s merchandise. 3 See Pre liminary R esults , 68 Fed. Reg. at 10,702. Commerce explained that “for assessment purposes, [the Department] verified that the sales data r eported by e ach responde nt was ac curate

and, for purposes of this re view, ca n calcul ate impor

ter-spe cific assessment rates using this data . . . . Therefore , [the Department] do[es] not believe the use of adverse facts ava ilable

. . . for e ach of these res

pondents is warranted .” Cash Depo sit Memorandum at 6 (emphasis added). In the Final Resu lts , however, Commerce invoked the “total adverse f acts available” procedu re to disr egard all data r elevant to calcu lation of a

ctual as sessment r

ates tha t either p artyCourt No. 03-00544 Page 27

had submitted. Pursuant to its application of its “total adverse facts available” proce dure, Commerce

offere d the unsup

ported a nd conclu sory

statemen t that “as adverse facts a vailable , in light of record evidence of mate rial misrepresentations by Gerber as noted above and the potential for future misconduct, the assignment of a ca sh deposit and assessment rate equal to the PRC-wide rate of 198.63 percent is appropriate.” Decision Memorandum at 11. Commerce reached the same conclusion for Gre en Fresh. See Decision Memorandum at 13-14. Instead of selectin g, and i dentify

ing in its d

ecision, facts tha

t were “ otherwis e availa

ble” for use in determining assessment rates, Commerce saddled Ge rber and Green Fresh with a punishing assessment rate that was hugely disproportionate to the individual assessment rates it had calculated in the Prelimina ry Result s . But an a ssessmen

t rate, st anding alone, is not a “fa ct” or a set of “f acts othe rwise available,” and under no reasonable c onstruction of the provision could it be so interpreted. The statute do es not per

mit Commerc e to choos e an anti dumping d uty assessme nt rate a s an “adverse infer ence” w itho ut mak ing fact ual fi ndin gs, su pport ed by subs tanti al evi dence, just ifying a conclusion that the body of re cord information necessary to the calculation of that assessment rate is to be rejected for reasons c onsistent with the statutory scheme, including in particular § 1677e(b) when read in conjunction with § 1677e(a) a nd § 1677m(e). As the Court of Appeals for the Federal Circuit obser ved, Commerce does not have the discretion under 19 U.S.C. § 1677e(b) to impose an “unjustifiably high, punitive rate” that ignores the facts discovered in the course of its own investigation. F.lli De Cecco di Filippo Fara S. Martino S.p.A. v. United States , 216 F.3d 1027, 1033 (Fed. Cir. 2000) (“ De Cecco ”). Althoug h Commerc e has con siderab le discre tion in maki

ng antid umping de

terminat ions and in apply ing 19 U. S.C. § 1677e (b), tha t discret ion is not bo

undless. See De Cecco , 216 F.3d at 1034Court No. 03-00544 Page 28

4 Subsection (c) of § 1677e requires that Commerce, “to the e xtent practicable,” corroborate fr

om indepe

ndent sour

ces rea sonably

at its dispo sal “sec ondary informat ion” that it relied u pon and that was no t obtaine d in the co urse of a n investig ation or r

eview. 1 9 U.S.C. § 1677e(c). (“By requiring corroboration of adver se inference rates, Congre ss clearly intende d that such rates should be reasonable and have some basis in reality .”). 4 Commerce exceeds i ts discre tion if it imposes an “unjustifiably high, punitive ra te” that is contrary

to its own findings of fact. See id. at 1033. The Court of Appeals for the Federa l Circuit reiterated these principles in a decision issued in 2002: Congress could not have intended for Commerce’s discr etion to include the ability to select unrea sonably high r ates with no relationship to the responde nt’s actu al dumping

margin . Obviousl

y a higher adverse margin creates a strong deterr

ent, but Congress tempered deterrent value with the corroboration requirement. I t could only have done so to pre vent the petition rate (or other adverse infer ence rate), when unreasona ble, from prevailing and to block a ny t emptation by C ommerce

to overr each re ality

in seekin g to maximize deterrence. Ta Chen Stainless Steel Pipe, Inc. v. United States , 298 F.3d 1330, 1340 (Fed. Cir. 2002) (quot ing De Cecco , 216 F.3d at 1032). Instead of calcula

ting an assessment rate for Gerbe r based on record information, Commerce instead took an action that was intended, at least in part, as a punishment of G erber, stating in the Decision Memorandum that “[t]he Department cannot tolerate the existence of schemes to evade the antidumping law, such as the one applied by Ger

ber in this case” and that “[t]he Dep artment c onsiders the assig nment of th

is rate to Gerber sufficie nt to enco urage it to cooperate with the Department in further re views, and to ensure that Gerber cannot under mine the efficacy

of the antidumping law by posting insufficient and improper deposits.” Decision Memorandum at 11.Court No. 03-00544 Page 29

Commerce’s statements concerning Gre en Fresh also reveal the intent to inflict punishmen

t on a res pondent. Commerce

stated tha

t “[it] consid

ers the a ssignme

nt of this r

ate to Green Fresh as sufficient to encour age it to cooperate with the Depar tment in future reviews, and

to ensure that Gre en Fre sh does no t partici pate in ot her sche mes to eva

de the an tidumping

duty law and pay

ment of appropriate cash deposit rates in the future.” Id. at 14. The punitive intent of Commerce’s action is also apparent because , as noted previously, Commerce in the subject third administrative review applied the 198.63 percent PRC-wide rate to more tha n 100 shipments of mushrooms exported by Green Fresh and produced by an entity other than Ge

rber, even though Gerber had no involvement in these shipments. Commerce failed to provide a rational explanation of how Green Fresh’s participa tion in the export agency

agreement, and the circumstances surrounding its reporting of that agreement, affected the unrelated information needed to calculate an antidumping duty rate for application to all shipments by Green Fresh of mushrooms subject to the administrative review. Consistent with the Federal Circuit’s instruction that an assessment rate calculated using adverse infere nces hav e some ba sis in rea lity , this Court

has held t

hat Commer

ce acts unlawfu lly in imposing

a rate that presu

mes gove rnment c ontrol, su

ch as the PRC-wide r

ate appl ied in this case, when a respondent has been f ound to be independent of government control. See Shandong Huarong Gen. Group Corp. v. United States , No. 01-00858, 2003 Ct. Intl. Trade L EXIS 153, at *61-*66 (Oct. 22, 2003), subsequently remanded by Shandong Huarong Gen. Group Corp. v. United States , 2004 Ct. Intl. Trade L EXIS 121 (Sept. 13, 2004). The Court in Shandong Huarong found tha

t “the fin dings tha t justified the use of

facts a vailable and a re sort to ad

verse facts available with respect to the [respondents’] sales data and fa ctors of production, cannot be used to accord similar treatment to issues relating to the [respondents’] evidence ofCourt No. 03-00544 Page 30

independence from state control.” Id. at *62. As the Court in Shandong Huarong explained with reg ard to the

responde nts’ inde pendenc e from g overnme nt contro l, “[t]he [re spondents ] supplied the requested information and Commerce has not adequate ly demonstrated a suf ficient

reason t o disreg ard the [r

esponde nts’] submis sions of e

vidence of their e ntitlemen t to separ ate antidumping duty marg

ins and resort to adverse facts available.” Id. at *66. The reasoning in Shandong Huarong is pertinent to the issue presented in this case by Commerce’s choice of the 198.63 percent PRC-wide assessment r ate. Commerce took issue with the w ay

in which the plaintif

fs disclos ed their

agree ment unde

r which G reen Fresh wa s to act as e xpor ter of

record for Ger ber’s m erchan dise, and wi th th e agreem ent it self. The fi ndin gs of fact the age ncy relied u pon to supp ort its invoking “total adve rse facts availa

ble” per tained to the disclosures of the terms of the agree ment in questionnaire responses by the two plaintiffs. These findings were factua lly unrelated to the issue of government control. Commerce neither cited re cord evi dence sh

owing that, nor ma

de a find ing of f act that, either p laintiff

was subje ct to the control of the PRC government. As noted previously , Commerce made, and maintained through the review, an actual finding of fact that both Green Fresh and Ge rber were not

subject to gove rnment c ontrol. Con sistent wit h the dec ision of the

Court of A

ppeals in De Cecco and this Court’s decision in Shandong Huarong , the cour t conclud es that the

determination set f

orth in the Final Resu lts to apply the 198.63 perc ent assessment rate to the shipments of Gerber and Green Fresh was not supported by substantial evidence and, accordingly , was contrary

to law. The legislative history

of 19 U.S.C. § 1677e(b) further illustrates that Commerce’s action in the Final Resu lts is based on an impermissible use of the authority thereunder. Subsection (b) of § 1677e

“permits Commerce

and the Co mmission to d raw an a dverse i nferen ce wher e a part y has not co operate d in a proc eeding ,” by “not act [ing] to the

best of its

ability to comply

withCourt No. 03-00544 Page 31

requests for necessary

information.” SAA at 870, as reprint ed in 1994 U.S.C.C.A.N. at 4199. The State ment of Ad

ministrati ve Action makes cl ear tha

t Commerc e may

not be indi scrimina

te in drawing an adverse infere nce. “Where a party

has not cooperated, Commerce and the Commission may employ adverse inferencesabout the missing information to ensure that the party does not obtain a more favorable result by

failing to cooperate than if it had coopera ted fully.” Id. (emphas is added) . Beca use Commer

ce is emp owered

to use adv erse inf

erence s only in “s el ec ti ng fr om am on g t he fa ct s o th er wi se av ai la bl e, ” i t m ay not do so in disregard of information of record that is not missing or otherwise deficient under subsection (a). See 19 U.S.C. § 1677e(b). In summary, Commerce erred in apply ing § 1677e(b) by

determining that the PRC-wide rate should apply to Ge

rber and Green Fresh a s “adverse inferences.” The choice of the PRC-wide rate, which Commerce based solely on the existence of the export agency agreement and the way

Gerber and Green Fr

esh had reported that agree ment, bore no relationship to record evidenc e neede d to calc

ulate actual antid

umping ma

rgins pe rtaining to shipmen

ts of mushr

ooms associated with Gerber or Green Fresh during the period of review. Commerc e does not attempt to establi sh such a r

elationsh ip. In stead, c ontrary

to § 1677e (b), Comme

rce ass igned the PRCwide rate to Gerber and Gree n Fresh to punish them for the existence of the export agency agreement and the manner in whic h the parties reported it. In this respe ct as well as the inconsistency with Commerce’ s findings of fact on the absence of g overnment control, the determination to a

pply the 198.6 3 perce

nt assess ment rate

to the mer

chandise produce d by

both plaintiffs was not supported by substantial evide nce.Court No. 03-00544 Page 32

C. Commerc e’s Choic e of the PR C-Wide Asse ssment Rat

e Cannot B e Justified

by D efere

nce to Commerce ’s Constru

ction of E ither 19 U .S.C. § 1677 e or the A ntidumping

Law s Gener

ally This court cannot agree with defe ndant’s argument that the principle of defe rence

es ta bl is he d b y Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. at 837, require s the cour

t to uphold Commerce’ s decision to assig n a 198.63 percen

t antidumpi

ng duty assessment rate to the two plaintiffs. According to defe ndant, that decision must be upheld as an exercise of Commerce’s authority to interpret 19 U.S.C. § 1677e or the antidumping laws ge ne ra ll y. Commerce’s interpretations of the statute it is charged w ith administering, whether adopted pursuant to a rulemaking or adjudicative proc eeding, are accor ded deference consistent with the Supreme Court’s decision in Chevron

. See Chevron , 467 U.S. a t 842-43; see also Pesquera Mares Australes Ltda. v. United States , 266 F.3d 1372, 1379-82 (Fed. Cir. 2001). As directed by the

Supreme Court in Chevron , the court first must consider “whether Congress ha s directly spoken to the pre cise question at issue. If the intent of Cong ress is clear, that is the end of the ma tter; for the cour t, as well as the ag ency , must giv e effe ct to the u nambigu ously expressed intent of Congress.” Chevron , 467 U.S. a t 842-43. I

f, howev er, “the

statute is silent or ambiguous with respect to the specific issue, the question for the c ourt is whether the agency ’s answer is based on a permissible construction of the statute.” Id . at 843. In the absence of specific findings of fact require d under § 1677e and the related provisions under § 1677m, no permissib le constr

uction of § 1677e a

nd provisi ons rela

ted ther eto could allow Comme

rce to impose the 198.63 percent assessment rate on the mushroom shipments associated with Gerbe r and Gre en Fre sh. Althou gh Cong ress pro vided Comme

rce con siderab le discre

tion in 19 U. S.C. § 1677e, Congress, in that and related statutory provisions, has spoken directly to the issue ofCourt No. 03-00544 Page 33

what findings of fact are nec essary to invoke the pr ocedure thereunder. I

n this case, Commerce did not make all the necessary findings of fact, and significant finding s of fact that Commerce did make must be set aside because Commerce failed to support them with substantial evidenc e on the record. Defendant and defendant-interve nor make an additional argument that, aside from 19 U.S.C. § 1677e, Commerce’s adoption of the PRC-wide assessment rate was justified by Commerce’s “inherent authority ” to address circumvention of the antidumping laws. Defe ndant and defendant-intervenor fail to cite a spe cific statutory provision that conc eivably could be construed (reasonably

or otherwise) to support this claim of inherent authority . Nor is the court aware of any

such provision. Defendant cites to a number of cases be fore this Court and the Court of Appeals for the Federal Circuit in support of its claim of “inherent authority ,” but none of those cases holds, or even suggests, that action of the kind resor ted to in this case is a proper exercise of Commerce’s discreti on. For e

xample, Commerce c ites Tung Mung Development Co. v. United States , 26 CIT 969, 979-81, 219 F. Supp. 2d 1333, 1343-44 (2002), where the Court deferr ed to Commerce’s interpretation of the relevant antidumping provisions, thereby permitting Commerce to choose an appropriate methodology

for computing dumping for transactions involving middlemen. Commerce

also cite s Mitsubishi Electric Corp. v. United States , 12 CIT 1025, 1046, 700 F. Supp. 538, 555 (1988), where the Court deferre d to Commerce’s discretion to define the scope of an investigation to capture all forms of the subject merc handise. Although Commerce has certain discretion to interpret ambiguous statutory provisions with the purpose of preventing evasion of antidumping duties, in this case, Commerce is invoking inherent authority in anCourt No. 03-00544 Page 34

attem pt to poli ce the c ash de posi t requ ireme nt th rough t he imp osit ion o f an ex traor dinar ily high antidumping duty assessment ra te. Commerce also relies on a recent decision of this Court to arg ue that Commerce’s inherent authority pe

rmits it to apply adverse infer ences as it has done in the Final Resu lts

. Commerce

cites Elkem Metals Co. v. United States , 27 CIT

OO , OO , 276 F. Supp. 2d 1296, 1303 (2003), w here the Court uphe ld the I

nternat ional Tra de Commissio

n’s appli cation of

best infor mati on ava ilabl e to do mesti c prod ucers w ho con cealed a price -fix ing arr angemen t duri ng a material injury investig ation. While both Elkem M etals and this case involve a contractual agreement, the agr

eement in Elkem M

etals involved price-fixing by dome stic producers. In a material injury investig ation, price-fixing directly affects the Inte

rnational Trade Commission’s det erm in ati on o f wh eth er m ate ria l i nj ury e xi st s or whe th er a th rea t o f ma ter ial in ju ry ex is ts . In this case, however, Commerce has not established how its findings re garding the terms of the export ag ency

agree ment aff ect the information necess ary to calcu late anti dumping d

uty assessment rates. To the contrary, Commerce found that the information subsequently revealed regar ding the export ag ency

agree ment did no t compromi se Commer ce’s ab ility

to calcu late individual antidumping duty assessment rate s. Cash Deposit Memorandum at 6. Apply ing the PR

C-wide r ate as “total adv erse fa

cts avai lable” b ased on the applic able record of this administrative review required Commerce to ignore evidence on the recor d unfavorable to its desired outcome and to act in the absence of required findings of fact. As the Court of A

ppeals explained, Commerce may consider deterr ence when invokin

g adve rse infere nces to choose a d

umping ma

rgin, bu t it may do so only

“so long as the ra te chose n has a relationship to the actual sales information available.” Ta Chen Stainless Steel Pipe, Inc. , 298 F.3d at 1340. Commerce’s invoking its “inherent authority ” does not justify the exercise of aCourt No. 03-00544 Page 35

5 Commerce, in the Final Resu lts , also app lied the 1 98.63 per cent ra te as the new cash deposit rate for both plaintiffs. Because assessment r ates have not been determined pursuant to a final judgment, the court will not direct any action to be taken with regard to cash de posits. See Inland Steel Bar Co. v. United States , 18 CI T 14, 843 F . Supp. 1477(1994) ( holding t hat part y was not entitled to a revised cash deposit rate or refund of previous deposits where final judgment had not been entered with respec t to the cash deposit rate). In this litigation, moreove r, the dete rmination of the as sessment r

ates on r emand lik ely will moot an

y is sues invol

ving ca sh deposits. statutory power in a ma

nner contrary

to Congress’s clearly

expressed intent. As the Court of Appeals stated, “Congress could not have intended for Commerce’s discretion to include the ability to select unrea sonably high r ates with no relationship to the respondent’s actual dumping margin.” Id. (quot ing De Cecco , 216 F.3d at 1032). Neither the “adverse infe rences” provision of 19 U.S.C. § 1677e(b) nor the general authority granted by

the antidumping laws empowers Commerce to assign punitive antidumping duty assessment rates that are unsupported by record evide nce and contr ary to fact s Com merce f ound i n its own rev iew pr oceedi ng. IV. C ONCLUSI ON The court concludes that Commerce’s determination in the Final Resu lts to select and apply the 198.63 perc ent assessment rate to both plaintiffs as “facts otherwise ava ilable” and “adverse inferences” is not supported by substantial evidence on the record and is otherwise not in accordance with law. Theref ore, plaintiff’s motion for judgment on the agenc y recor d must be granted. On remand, Commerce must calculate individual antidumping duty assessment rates for Gerber and Gre en Fre sh in acc ordance with appli cable st

atutory require ments. 5 These individual assessment rates must be consistent with the findings of fact made by Commerce that each of the two plaintiffs is free of government control.Court No. 03-00544 Page 36

If Commerce relies on its authority under 19 U.S.C. § 1677e in calculating individual assessment rates, then it must identify wha t information needed to calculate those assessment rates is unavailable or is deficient according to the statutory require

ments for submitted information, including in particular the requirements of 19 U.S.C. § 1677m(e), so a s to require the use of the “facts otherwise available” procedure of 19 U.S.C. § 1677e(a). I f Commerce determines that any

information that was submitted by either plaintiff a nd is necessary

to the calcula tion of the

individua

l assessme

nt rates i s unverif

iable, th en it must id

entify that spec ific informat ion and pr

ovide a r easoned and supported ana

lys is of any

decision to deem that speci fic information unverifiable. If Commerce relies on its authority under 19 U.S.C. § 1677e(a) in calculating an individual assessment rate for either plaintiff, and also, pursuant to 19 U.S.C. § 1677e(b), uses any infer ences adverse to either plaintiff in selecting from among the facts otherwise ava ilable, Commerce must explain its conclusion, based on substantial evidence on the record, that the party in question failed to coope rate to the best of its ability in providing inf ormation that was needed to calculate the individual assessment rate. I n that event, Commerce must include in the remand d etermina tion its findings of

fact an d a reas oned ana

lys is support

ing its c onclusion s. If Commerce does not identify substantial evidence to support the rejection of any of plaintiffs’ data that was used to calculate the rates in the Prelimina ry Result s , then Commerce must assign Gerber and Green Fresh the assessment rates stated in the Prelimina ry Result s or explain with reasoned and supported analysis in the remand determination why assessment rates differe nt from tho se rate s are ap propria te for a doption as

final ass essment r

ates.Court No. 03-00544 Page 37 O RDER For the reasons stated in this Opinion and Order, plaintiff’s motion for judg ment on the ag en cy r ec or d i s g ra nt ed , a nd it is he re by ORDERED that this ma

tter is re manded f or further admin

istrative procee dings consistent with this Opinion and Order; and it is further ORDERED that the D epartme nt of Comme

rce may reopen t he admini strative

record if it deems it necessary

to do so to allow plaintiffs to submit information required for the calculation, pursuant to 19 U.S.C. § 1675(a), of individual antidumping duty a ssessment rates for each of the plaintiffs; and it is further ORDERED that the D epartme nt of Comme

rce sha ll have ni nety (90) day s from the

date of th is or de r t o c om pl et e a nd fi le it s r em an d d et er mi na ti on ; p la in ti ff s s ha ll ha ve th ir ty ( 30 ) d ays from that filing to file comments; and

Commerce

and defe ndant-in tervenor shall ha

ve twenty (2 0) da ys a ft er pl ai nt if

fs ’ c om me nt s a re fi le d t o f il e a ny r ep ly.

/s/ Timothy C. Stanceu Timothy C. Stanceu Judge Dated: July 18, 2005 New York, New York