GUANGD ONG CHEMI CALS IMPORT & EXPORT CORPORATI ON,

Plaintiff,

v. UNITED STATES, Defend ant. Slip Op. 06-13 UNITED STATES COURT OF INTERNATIONAL TRADE

Before: Rest ani, C hief J udge Court No. 05-00023

OPINION [Results of Depa

rtment of Co mme rce Per

iodic Revi ew on Anti dumping D uty Order o n Sebacic

Acid from the People’s Republic of China Remanded.] Dated: January 25, 2006 Garvey Schubert Barer

( Ronald M. Wis la

and William E. Perry ) for the plaintiff. Peter D. Kei sler , Assistant Attorney Gene ral, David M. Cohen , Director, Jeann e E. Davidson , Deputy Direct or, Co mmerc ial Lit iga tion Branch, Civil Divi sion, United States Department of Justice ( David S. Silverbrand ), Arthur D. Sidney , Office of the Chief Counsel for I mport Administration, United Sta

tes Depa rtment of Commerce , of coun sel, for the defendant. Restani, Chief Judg e: Guang dong Che micals Impo rt and Export Corporation (“ Guangdong”) appeals from a ruling by the Department of Commerce (“Commerce” or “th e Department”) conducti

ng an a dministra tive review of an

antidumpin

g duty order e ntered a gainst sebacic acid from the People’s Republic of China (“China”). See Sebacic Acid from the People’s Republic of China , 69 Fed. Reg. 75, 303 (Dep ’t C ommerce Dec. 16, 2004) (final results of antidumping admin. re

view). G uangdong alle ges tha

t the revie w should be dismissed for lack ofC OURT N O . 05-00023 P AGE 2

service or remanded for lack of substantial eviden ce supp orting Commerce’s calculation of the surrogate value of the input factor se bacic acid and failure to properly credit by-pr

oduct offsets. Commerce’s fa il ur e t o p ro pe rl y serve Guangdong was harmless er ror, but the determination is remanded as to the surrogate va lue for sebacic acid and by -product credit. BACKGROUND The facts of

this case may neatly be divided into two parts. The first set of relevant facts relate to the circumstances surrounding Ge nesis Chemical Corp.’s (“Genesis”) failure to serve Guangd ong. On July 2, 2003, C ommerce published notice of an opportunity to request review of an antidu mping dut

y or der ente red ag ainst

exporter s of seba

cic acid from China. Antidumping or Countervailing Duty Order , Finding, or Suspended Inve stigation , 6 8 Fed. Reg. 39,511 (Dep’t Commerce July

2, 2003) (opportunity to reque st administrative review). On July 21, 2003, G enesis submitted a request that Commerce perform an admini st rative review of sebacic ac id from two specific companies, Tianjin Chemical Import and Export Co. and Guangdong

. See Letter from Greg E. Mitchell, Frost Brown LL C, to the Assistant Sec’y for I mp. Admin, Int’ l Trade Admin. (Jul. 21, 2003), P.R. Doc. 2, Pl.’s App. Tab 2. I n mid-July , counse l for Genesis contacted an employ ee of the Department

of Commerce to inquire whether the firm was required to serve its client’s request for administrative review on parties on the public service list. See Memorandum from Michael Strollo, Senior Analyst, Dep’t of Commerce to Louis Apple, Of fice Director, Dep’t of Commerce (Aug. 22, 2003), P.R. Doc. 6, Pl.’s App. Tab 4, at 1 [hereinafter Service Mem. ]. A Commerce employe e stated that no service was necessary

because no public servicelist had yet been g enerated. Id. Counsel for Guangdong

receiv ed an an

tidumping

review q uestionna ire on Au gust 14, 2003, whic

h was its f

irstC OURT N O . 05-00023 P AGE 3

notice of the review. See Lette r from Ron

ald M. Wisla , Garve

y Sc hubert B arer, t

o Donald E

vans, Sec’y of Dep’t of Commerce (Aug. 20, 2003), P.R. Doc. 4, Pl.’s App. Tab 3, at 1–2. On August 20, Guangdong

sent Commerce a letter requesting that Commerce declin e review because it had not been properly

served. Id. Commerce published a not ic e of initiation on August 22, 2003. Initiation of Antidumping and

Countervailing Duty Revie ws and Request for Revocation in Part , 68 Fed. Reg. 50,750 (Dep’t Commerce Aug. 22 , 2 003). That day, it also enter ed a memorandum into its files recognizing

th at Ge ne si s h ad fa il ed to se rv e G ua ng do ng wi th in th e r eg ul at or y time-fr ame established by 19 C.F.R. § 351.303(f)(3)(ii) (2005). See Service Mem. , Pl.’s App. Tab 4. The memorandum stated that Genesis would be allowed to cure its deficient service by serving

the request on or before August 29, 2003. Id. , Pl.’s App . Tab 4, a t 1–2. Gen esis served Guangdong on Aug ust 26. Letter fr om Greg E. Mitchell, Frost Brown Todd LL C, to Assistant Sec’y for I mp. Admin, Int’l Trade Admin. (Aug. 26, 2003), P.R. Doc. 9, Def.’s App. Tab 1.

The second se

t of fac ts relate

to Commerce’s method of calculating a surrog ate value for sebacic acid. Guangdong purchases its sebacic acid from a produc er named Hengshui Dongfe ng Chemical Co. Ltd. (“Hengshui”)

. See Sections C and D Respo ns e of Guangdong Chems. I mp. & Exp. Corp. Group (Nov. 4, 2003), P.R. Doc. 21, Pl.’s App. Tab 13, at D-1. Sebacic acid production results in the creation of a co-product, capry l alcohol. Prelim. Valuation of Factors of Prod. , Memorandum

from Greg Kalbaugh, D ep’t of Commerce, to File (Jul. 30, 2004), P.R. Doc. 47, Pl.’s App. Tab 6, at 4 [hereinafter Prelim. Valuation of Factors of Prod. Mem. ]. In order to calcula te Hengshu i’ s production costs for sebacic acid, Commerce alloca ted production costs between the two products based on their relative sales values in I ndia. Id. , Pl.’s App . Tab 6, a t 4. Bec ause I

ndia doesC OURT N O . 05-00023 P AGE 4

notproduce sebacic acid, Commerce re lied on import statistics to estimat

e the val ue of seb acic ac id inIndia. Id. , Pl. ’s App. Tab 6, at 1–2. Commerce used statistics from the Indian De partment of Commerce’s Import/Export Data Bank (the “I ndian government statistics”), which lumped sebacic with azelaic a cid (a c ommon der

ivative o f sebac ic acid) un der I ndian Ha rmonized T ariff Sc

hedule (“HTS”) subheading 291713. Id. , Pl.’s App. Tab 6, at Attach. 4. Guangdong propose d using surrog ate value data for sebacic acid maintained by the Indian publication Chemical Weekly (the “Chemical Weekly data”) , which was based on a selection of the Indian gove

rnment data, but was further subdivided and included a specific subheading for sebacic acid (291713.02)

. Guangdong Chems. I mp. & Exp. Co. Case Br. (Sept. 20, 2004), P.R. Doc. 65, Pl.’s App. Tab 8, at 2– 3 [hereinafter Guangdong Case Br. ]. Based on this data, Guangdong arg ued that the value of sebac ic acid in India during the Period of Revie w (“POR”) was $3,551.73 per metric ton. Id. , Pl.’s App. Tab 8, at 7. Guangdong corrobora ted its proposed value with data from U.S. import statistics for seba cic acid, published Indian

prices for oxalic acid (asserted to be similar to sebacic acid), a nd benchmark price data from the publication Chemical Market Reporter. Id. , Pl.’s App. Tab 8, at 6–7.

Commerce refuse d to use the Chemical

Weekly data, sta ting tha t its authe

nticity could not be verified, and that the data, which relied on two shipments totaling 1,400 kilogra

ms, did not“repre sent a

sufficiently broa

d range of import values on which to base the surrogate value for sebacic acid.” See Issues & Dec ision Mem. for the Antidumping Duty Admin. Review of Sebac ic Acid from the People’s Republic of China (Dec. 1 0, 2004), P.R. Doc. 8 0, Pl.’s A pp. Tab 10, at 7 [hereinafter Issue s & Dec ision Mem. ]. Reco gniz i ng that HTS 291713 was a basket categ ory including both seba

cic and a zelaic ac id, Commer

ce cond ucted ad ditional r esearc h to deter mi n eC OURT N O . 05-00023 P AGE 5

whether prices f or azela ic acid a nd sebac ic acid

were similar. See Comparison of U.S. Int’l Trade Comm’n Dataweb Values for Seba cic Acid & Azelai c Acid I

mps. to the

U. S. , Memorandum from Jennifer Moats, De

p’t of Comm erce, t

o File (D ec. 10, 2 004), P.R. Doc. 79, Pl.’s App. Tab 11, at 1 [hereinafter Price Comp arison Me m. ]. It concluded tha

t the two products were similarly priced, varying only by $0.3 0 per k ilogr am ove r a twenty- three month period during which the price for sebacic acid ra nged be tween $2 and $3 pe

r kilo gram. Id. , Pl. ’s App. Tab 11, at 1. Commerce therefore used the basket category Indian gover

nment statistics to determine the surrogate value of sebacic acid, ca lculating the surr ogate v alue of s ebacic

acid in I ndia to be $15,826.30 per

metric ton. See Issue s & Dec ision Mem. , Pl.’s App . Tab 10, a t 9 (electing to use I

ndian government

statistics);

see also Prelim. Va

luation of Factor s of Prod. M em. , Pl.’s App. Tab 6, at 4 (usingIndian gover nment statistics to arrive at $15,826.30 per-metric-ton value for seba cic acid). JURISDIC TION AND STA NDARD OF

REVIEW The Court has jurisdiction to review Commerce’s administration of anantidumping review under 28 U.S.C. § 158 1(c) (2 000). The Court will u

phold an a

dministra tive dec ision unle ss it is “unsupp orted by

substantia

l evidenc e on the r

ecord, o r otherw ise notin accordance with law.” 19 U.S.C. § 1516a(b)(1)(B) (2000). DISCUSSION I. Failure To Serve Notice

A. G enesis Did Not Ma ke A Reas onable Att empt t o Serve G uang don g Under 19 C.F.R. § 351.303(f)(3)(ii). A pet itioner requesting an administrative review of an a ntidumping order “must serv eC OURT N O . 05-00023 P AGE 6

a copy of the re quest by

persona l service or first c lass mail

on each exporter or producer specified inthe requ

est . . . by the end of

the anniv ersary

month or wi thin ten days of filing the request for review, w hi ch ev er is la te r. ” 1 9 C .F .R . § 35 1. 30 3( f) (3 )( ii ). A p et it io ne r h as th e r es po ns ib il it y t o

serve a specified exporter whether or not that exporter appea rs onCommerce’s service list; however, if the interested pa

rty is “unabl e to locate a particular exporter or produce r . . . the Secretary

may accept the request for

review i f the Secretary

is satisfie d that the

party made a r easonab le attemp t to serve a copy

of the request on such person.” Id. A Commerce employe e advised Genesis t hat no ser vice wa s necess ary

at the time

it filed its petition for review because no public service list had y et been gener ated. Ge

nesis understood

this advic e to mean

that it did not have to serve Guangdong with notice of its request for review despite it s obliga

tions unde

r 19 C.F.R . § 351.303 (f)(3) (ii). Although th e peti tioners “misconstrued” Commerce ’s instruc tio n, Com merce g

ranted G enesis a

dditional t

ime in whic

h to “remedy the procedural deficiency .” Service Mem. , Pl.’s App. Tab 4, at 1. This was done by letter thirty-six day s after Genesis’s initial request and four day s after the initiation of review. Genesis’s call to Commerce cannot be considered a “reasonable attempt.” Relianc e

on faulty ag ency

advice, or a misint

erpret ation of a gency advice, does not excuse a pa rty from failing to comply with the law. See Fed. Cro p Ins . Corp. v. M errill , 33 2 U.S. 380, 384–85 (1947) (“[E]veryone

is charged with knowledge of the United States Statutes at

Lar ge, [and ] Congre ss has provided that the appearance of r

ules and reg ulations in the Federal Register gives le gal notice of their contents .”); Cathedra

l C andl e Co. v. U.S. Int’l Trade Comm’n. , 285 F. Supp. 2d 1371, 1378 n.10 (CIT 2003) (“I

t is well established by both statutes and cases th at the pub lication o f an item i nC OURT N O . 05-00023 P AGE 7

the Federal Register constitutes constructive notice of an ything wi thin that item.”). To say that Genesis’s inquiry with Commerce by itself constituted a

reasona ble attem pt at serv ice would imply that Genesis i s not char

ged wit h knowled

ge of Co mmerce’ s regul ations. I t is undisputed that Genesis was aware of, and provided Commerc e with, Guangdong’s location and that Genesis was notprevent

ed in any way from ser ving Gua ngdong . Failur

e to serve cannot be excused by Genesis’s failure to read the relevant reg ulation. This court has suggested that a party may make a “ reasona ble attempt” at service by “curin g” faulty service

after discovering the defec t. See PAM, S.P.A. v. United States , 395 F. Supp. 2d 1337, 1342–43 (CIT 2005). I n that case, the court voided anadministr

ative re view for failure to comply with the service requirements of 19 C.F.R. § 351.303(f)(3)(ii). Id. at 1344. It distinguished another opinion, NSK, Ltd. v. United States , 346 F. Supp. 2d 1312, 1325 (CIT 2004), that refused to void an administrative review for failure to comply

with the same regulatory

provision. PAM , 395 F. Supp. 2d at 1343 n.2. In NSK , the petitioner failed to serve notice on a respondent und er § 351.303(f)(3)(ii) until after the notice of initiation was published in the Federal Register. 346 F. Supp. 2d at 1323–24. Upon discovering its mistake, the petitioner faxed noti ce to the

responde nt. Id. at 1324. The court in PAM argued that a reasonable a ttempt at service had been madein NSK because “upon disc overy

of lack o f servic e, petitioner atte mpted to cur e its defective service by facsimil e service.” PAM , 395 F. Supp. 2d at 1343 n.2. Assuming that a party may attempt service by “curing” their d

efault after the

time for s ervice

has passe d, Genes is’s serv ice would sti ll not constitute a “r eas ona bl e at tem pt .” In NSK , the petitioner, apparently of its own accord , realize d its

ownmistake the day af

ter initiation and immediately sought to ser ve the respondent. See DecisionC OURT N O . 05-00023 P AGE 8

1 The court also notes that the terms of the regulation re quire a reasonable attempt at service to take place before the Secretary accepts a petition for administrative review. See 19 C.F.R. § 35 1.303(f) (3)(ii) (allowin g Secr etary to acce pt revie w “if . . . satisfie d that the party made a reasonable attempt to serve a copy of the request on such person”) (emphasis adde d). The regulation nowhere provides for the Secretary

to accept a petition conditioned on a future attempt to serve. Mem., A-100-001 at 94 (Aug. 3, 200 2) (ball bearings and parts thereof ), availab le at http://ia. ita.doc. gov/fr

n/summary

/2002aug .htm. In thi s case, C ommerce publi shed it s notice of initiati o n while instructing Genesis to cure its mistake. 1 Only after Co mmerce’ s prompting did Genesis attempt to “cure” this error.

B. Comm erce’ s Obligation to Abide By It s Own Regulat ions Commer ce as serts that it was within its discretion to relax its procedural rules regarding service in the interests of justice. No statute requires a petitioner to ser ve a respondent when it requests an administrative review. Nevertheless, i n enforc ing the a ntidumping

laws, Commerce has creat ed a regulat ion obligating a party requesting a review to serve a proposed respondent

with notice. Having exercise d its discr etion to c reate s

uch a re quireme

nt, Commerce

is gener ally required to play

by its own rules. United Sta tes ex rel. Accar

di v. Shaug

hnessy , 347 U.S. 260, 268 (1954 ); Vitarelli v. Seaton , 359 U.S. 535, 547 (1959) ( Fr ankfurter, J., concurring in part and disse nting in p art) (r

ecogn izing a “ judiciall y evolved rule of administrative law” that “he who takes the procedural sword shall perish with that sword”).

The Supreme Court has not held, however, that the courts are r equired to reverse subsequent

agenc y a ction on th e basis of

any procedu ral misste

p, no matter how minute or inconseq uential. Thus, judicial review of agency action is conducted with “due account . . . of theC OURT N O . 05-00023 P AGE 9

2 19 U.S.C. § 1 677c(b)(2000) pr ovides tha

t administr

ative he arings

in antidump ing duty reviews are “not subject to the provisions of subchapter I I of chapter 5 of

title 5, or to section 702 of such title” of the Administrative Procedures Act (“APA”) . These provisions do not apply to 5 U.S.C. § 706, which is located in chapter 7 of the APA. rule of prejudicial error. ” 5 U.S.C. § 706 ( 2000). 2 If, as is often the case , no law or regulation specifies the conseque nce of n on-compliance with a regulation, the court must determine w hat

re me dy, if any, should be imposed. I n this endeavor, the court is guided by the S upreme Co urt’ s opinion in American Farm L ines v. Black Ball Freight Ser vice , 397 U.S. 53 2 (1970). First, it must be determined wheth er the r egulat ion in ques tion was “ intended primaril y to confer imp orta nt procedural benefits upon individuals in the face of otherwise unfettered discretion” or if the “agency [was] required by

rule to exercise independent discretion [but] has failed to do so.” Id. at 538–39;

see also Lopez

v. Fed. Aviation Admin. , 318 F.3d 242, 247 (D.C. Cir. 2003). If the reg ulation was notso intended, but, for

example, was intended to ease the agency ’s administrative burden, the court considers whether

the party cha

llenging agency

actionhas shown that it was substantially prejudice d by the agency ’s failure to comply w ith its rules. See Lopez , 318 F.3d at 247. If substantial prejudice is shown, the administrative action is reversed, if not, it is affirmed. See Dixon Ticonderoga Co. v. U.S. Customs

& Bord er Prot. , 366 F. Supp. 2d 1352, 1357 (CIT 2005). If the violated regulation was intended to confer important procedural benefits, the result is less cle ar. Some

courts applying

the American Farm

Lines test have automatically r eversed agency action. See Port of Jacksonville Maritime A d Hoc Comm ., Inc. v. U.S. Coast Guard , 788 F.2d 705, 708 ( 11th

Cir. 1986) ; Alamo Express, Inc. v. United States , 613 F.2d 96, 97–98 (5th Cir. 1980).C OURT N O . 05-00023 P AGE 10

Incontrast, the District of Columbia Cir

cuit has found that harmless error should be considered

in the context of a regulation providing important procedu ral safe guard s to an employee facing termin atio n by the Fe deral Aviation Administration (“FAA”). Lopez , 31 8 F. 3d a t 2 48. In Lopez , the cour

t specifi cally

found tha

t the FAA’s procedures challeng ed by Lopez are not primarily intende d to prov ide information to the agency , but are instead aimed at protecting the [employee] from the Administrator’s otherwise un limited discretion. It is uncontested that FAA Orde rs 8 110.37C an

d 8130.24 p

rovide pr ocedura l safeg uards tha t are the only availab le protection for [employee s] whose designation can otherwise be terminated by the FAA

for “any reason considered appropriate by the Administrator.” Id. at 247–48 (quoting 49 U.S.C. § 44702(d)(2)). Despite finding that the rules provided procedural benefit s for employee s, the court nonetheless refused to reverse the FAA’s employment decision bec aus e Lope z did not show he was “ pressed for time i

n respond

ing to the FAA’s view of his performance or that other defenses would have been presented with additional time.” Id. at 248. He therefore “fail[ed] to show that the FAA’s initial oversight was othe r than harmless.” Id. Other courts have dispensed with the i nqu iry of whethe r a regulation provides importantprocedu

ral bene fits and have gone straight to the question of pre judice. For example, the court of Appea

ls for the Ninth Circ

uit held in t

he context of a deportation pr oceedin g that a “[v]iolation of a reg

ulation re nders a d eportat ion unlaw ful only

if the viol ation pre

judiced i nterests of the alien which were protected by the reg

ulation.” United States v. Calderon-Medina , 591 F.2d 529, 531 ( 9th

Cir. 1979). More recent

ly, the Secon

d Circuit refused to requir e proof o f prejud

ice in all cases, but found tha

t agenc y a ction will b e voided a

utomatica lly for failure to follow i

ts regu lations on ly if it affects “fundamental rights derived from the Constitution or a federal statute.” Waldron v. INS ,C OURT N O . 05-00023 P AGE 11

3 The Fourth Circuit has reserved the question of when pr ejudice is presumed after an agency fails to comply with its own reg ulations in the context of a regulation governing representation of prisoners during a he aring to determine whether medication should be involuntarily administered. United States v. Morgan , 193 F.3d 252, 267 (4th Cir. 1999). 17 F.3d 511, 518 (2d Cir. 1994). In Waldron , the court considered two I NS regulations, 8 C.F.R

. § 242.2(g) (1994), which required a n alien to be notifi ed of his right to contact a consular official when ta ke n i nt o c us to dy, and 8 C.F.R. § 3.7, which provided that an Immigr ation Judge’s decision must includ e a cert ificate of notice if its opinion must be certified to the Board of I mmigration Appeals, if known at the time the opinion was filed. Id. at 515–16 . The cou rt held tha

t

we believe that, when there is a r eg ul at io n w hi ch re la te s t o l es s f un da me nt al , a ge nc ycreated rightsand

privileges, the wholesale remand of ca ses, where no prejudice has been shown to result fromthe I NS’s fail ure to str ictly adhere to its reg ulations, would place an unwar

ranted a nd potenti all y unwo rkable burden on the agency ’s adjudication of immigration cases. Id. at 518; see also Chong v. INS , 264 F .3d 37 8, 390 (3d Ci r. 200 1) (fol lowi ng Waldron ). 3

No case from

the Federal Circuit applies the American Farm L ines test i n the cont ext of a regulation intended to confer important procedural benefits, and it is not clear which approa ch the appellate court would adopt. Kemira Fibres Oy v. United States , 61 F.3d 866 (Fed. Cir. 1995), applied t he American Farm L ines substantia l prejudic e test to a

Commerce

regula tion requ irin g publica tion of any

“notice of intent t

o revoke [an antidu

mping dut

y] or der” no l ater tha

n fiv e anniversary-months after receiving its last request for a dministrative review. Id. at 869 (citing 19 C.F.R. § 353.25(d) (1995)). The court was care ful to note that the regulation in q uestion was a “merely procedu

ral aid[]” to accomplishing the goal of the antidumping laws to provide “ notification of domestic parties so that their interest in revocation of an outstanding order may

be ascertained and addressed.” Id. at 875. B ecause the reg ulation wa s “mere ly procedur al” the c ourt r equired t heC OURT N O . 05-00023 P AGE 12

plaintiff to “establish that

it was pre judiced by Co mmerce’ s non-com pliance with this requirement.” Id. Other

cases from the Federal Circuit have dispensed with the inquiry into whether a regulation

is “merely proc edural” and held that “[i]t is well settled that principles of harmle ss error apply to the review of agency

proceedings.” Intercargo Ins. Co. v. United States , 83 F.3d 391, 394 (Fed. Cir. 1996). In that case, the Customs Service (“ Customs”) published regulat ions requi ring a districtdirector , prior to extending the liquidation period for entered goods, promptly to notify an importer and its surety “on Customs Form 4333–A . . . that the time has been extended and the

reasons for doing so.” Id. at 393 (quoting 19 C.F.R. § 159.12(b) (1996)). I n Intercargo , Customs sent a notice to sureties that did not state which of the statutorily a uthorized reasons for

the extension

was relied on, and thus “did no t s at is fy t he requirement of the regulation.” Id. at 394. Applying principles of

ha rmless error, the court first found that neither the reg ulation, nor the governing statute, provided a consequence for the fa ilure to send pro per notice under § 159.12(b). Id. at 394–96. The court then determined that the regula tion was “amenable to harmless error analy sis,” noting that “a p laintiff

‘should no t become

immune fromthe antidumping laws because Commerce missed the deadline.’” Id. at

396 (q uoti ng Kemira Fibres Oy , 61 F.3d at 873). The court concluded that “[t]he publi c intere st in the ad ministrati on of the i

mportation laws sho

uld not ‘f all victim’ to the failure by t

he Customs Se

rvice to use the r equisite l angua

ge in its extension n

otices, if the oversight has not had any

prejudicial impact on the plaintiff.” Id. at 396 (q uoti ng Kemira Fibres Oy , 61 F.3d at 873). Likewise, in Belton I ndustrie s, Inc. v. United States , 6 F.3d 756, 761 (Fed. Cir. 1993),C OURT N O . 05-00023 P AGE 13

the court of appeals found that Commerce “violated 19 C.F.R. § 355.25(d)( 4)(ii)” by f

ailing to “send writtennotice to the appellees . . . despite its prior recognition of them as intere sted parties.” Commerce had instead sent written notice of initiation of a sunset review to the appellees’ counsel and a trade association of which the appellees were members. The court declined to void the subsequent

agency action, noting that “appellees suffered no prejudice” and that appellees’ counsel received actual notice of the proposed action. Id. The court ruled that the failure to abide b y Commerce’s own regulations was “har mless error.” Id. Alth ough Ke mi ra Fi br es Oy, Intercargo and Belton all upheld agency action, t he three

ca ses can be read as standing for dif ferent propositions. On one hand, Kemira implies (b ut is no t premised on) the stricter

approach of the Fifth and Eleventh Circuits, presuming prejudice when an agency fails to f ollow its re gulatio ns that ar e intende d to confe

r a proc edural b enefit. On the other hand, Intercargo and Belton can be seen as similar to the approach of the Nin

th and Sec ond Circu

its, whichdo not pre sume pre judice in all case s where

an age ncy fails to a bide by its regulations that

are intended to confer procedural benefits. See Atteberry v. United States , Slip Op. 03-93, 20 03 W L 21748 674, at *11 n.40 (CIT Jul. 28, 2003) (“ Intercargo – and cases that have followed it, such a s [ Cummins Engine Co. v. United States , 23 CI T 1019 , 1032 , 83 F . Supp . 2d 13 66, 13 78 (1 999) ] –

can be read to extend Accardi and its progeny by requiring

‘harmless error’ analysis in every case involving an agency ’s violation of its statute or regulations, without regard to the nature and extent of the remedy

sought by the c omplainant.”) (citation omitted). Ad di ti on al ly, this court has grappled with Commerce’s failure to abide by this very regulation

in two recent opinions. In NSK , the court stated that a nine-day

delay in notice re sultingC OURT N O . 05-00023 P AGE 14

4 As noted above, the PAM court distinguished NSK on the grounds that Commerce “cured” the defect once

it was discovered, leading to a “rea sonable attempt” at service within the terms of the regulation. PAM , 395 F. Supp. 2d at 1343 n.2. NSK ’s discussion of American Farm Lineswas therefore treated as dicta

. froma petitione r’s failure to properly serve respondent did not invalidate review because “the regulation

here wa s ‘not inte

nded to confer important procedural benefit s’” and t

he plaint iff could notdemonstr

ate substantial prejudice. 346 F. Supp . 2d at 1325 ( quot ing Taiyuan He avy Mach. I mp. & Exp. Corp. v. United

States , 23 CIT 701, 703 (1999). The court found tha t “nine fewer days of preparation

time, prior even to receipt of Commerce’s questionna ire, does not constitute such substantial prejudice that a remand is required on this issue.” Id. at 1326.

Inanother case, this court found that 19 C.F.R. § 3 51.303(f)(3)(ii) “does indeed confer im portant procedural benefits upon the individual companies involved in nor mal antidumpin

g administrative reviews.” PAM , 395 F. Supp. 2d at 1343. 4 In that case, Commerce allowed a review to proceed although no service occurred before or after the regulatory

deadline had passed, unlike NSK , where the respondent was eventually se

rved. Id. The court in PAM voided the administrative review for failure to comply with the regulation’s requirements. Id. at 1344. The court believes that the best way to re concile cases such as Kemira with Belton and Intercargo is to apply

the follow

ing proc ess. First, the court will consider whether the regulation (or statute it implement s) spells out a remedy for failure to comply . Second, if no remedy is stated, the court will cons ider whethe r the regulation in question was intended to provide important procedural benefits. Third, if the regulation is not inten

ded to pro vide impor

tant proc edural b enefits, Commerce’s ac ti on wi ll be vo id ed on ly if the plaintiff can show it in fact suffered substantialC OURT N O . 05-00023 P AGE 15

5 See , e.g. , Dixo n Tico ndero ga , 366 F. Supp. 2d at 1357 (CIT 2005) (voiding agency action for failure to comply with 19 C.F.R. § 159.62(a) (2003), which requires a notice of intent to distribute funds obtained pursuant to antidumping duty orde rs under the “By

rd Amendment,” 19 U.S.C. § 1675c (2000), despite finding that the regulation in question was “me rely [a] procedural aid[],” because plaintiffs failed to show substantial prejudice)

.

6 The cour

t needs no t decide

here how “substan tial prej udice” d

iffers f rom “har mless error.” In the

circumstances of this case, it is enough to note that, at oral a rgument , Guangdong in essenc e conce ded that Commerce’ s failure to comply

with § 351. 303(f)( 3)(ii) di d not caus e even a de minimus injury related to the rig hts and int

erests th at the re gulatio n protec ts. prejudice. 5 If the reg

ulation is intended to provide important procedural benefits, the court will void the agency

action unless the agency

demonstrates that

the violation was harmless error. Cf. Wilson

v. Comm’r Soc. Sec. , 378 F.3d 541, 547 (6th Cir. 2004) (stating in dicta that an agency ’s failure to follow a regulation “creating animportant

procedu ral safe guard

for cla imants for disability benefit s” might nonetheless “constitute harmless error”).

This approac

h has the v

irtue of r ecogn izing Co mmerce’ s responsi bility to comply with its reg ulations, especia

lly r egulat ions intended to benefit par ticipants in the a dministrative process , whil e avoi ding a rigid rule that would mandate reversal base d on a court’s construction of regulatory

intent alone, with little or no reference to the facts of a particular case. 6 This rule also allows the court

to follow the American Farm L ines test, as applied in cases such as Kemira , while h eeding the language of the APA, which r equires that “due account shall be taken of the r ule of prejudicial error.” 5 U.S.C. § 706. Apply ing this test, the court finds that even if it is assumed that § 351.3 03(f)(3)(ii) was intended to provide an important proce dural benefit, failure to provi d e service until afte

r commencement o f the re view pro cess in th

is case constituted

only harmless err

or. The regulation in que stion here, 19 C.F.R. § 35 1.303(f) (3)(ii) , does not s tate consequences fo r f

ai lu re to co mp ly. See NSK , 346 F. Supp. 2d at 1325. The regulation is intendedC OURT N O . 05-00023 P AGE 16

7 The regulatory

history for 351.303(f) (3)(ii) is very limited. The federal register notice proposing the provision states only tha t “[p]aragraph (f)(3)(ii) is new, and c larifies the requirements for service of reque sts of review.” Notice of Proposed Rulemaking & Request for Pub. Commen

ts , 61 Fed. Reg. 7308, 7326 (Dep’t Commerce F eb. 27, 1996). to confer a procedural benef it – service of

notice provisions generally provide predictability in the administrative review

process , and time

for res pondents t

o prepare a response. 7 PAM , 395 F. Supp. 2d at 1343. The notification provision at issue in Intercargo , for exam ple, was designe d “to incr

ease certain ty in the cus toms process by a pprising the importer

and its sur

ety of the pr ecise pe riod withi n

w hich f inal action would be taken on the liquidation . . . .” 83 F.3d a t 396. Simila

rly , the D.C. Circuit has found that the FAA’s failure to comply with a regulation

requiring thirty day

s notice prior to termination of an employment c ontract was a procedure “a imed at protectingthe [employee] from the Administrator’s otherwise unlimited discretion.” Lopez , 318 F.3d at 248. Respondents such as Guan gdon g rely on servic e of notice provisions, such as § 351.303(f)(3)(ii), to provide g reater regula rity in the administrative process and an opportunity to prepare for participation in an investigation

before it begins. Thus, Guan gdong will not be required to show that it suffered substantial prejudice in order to void the administrative review.

The mere fact that Guangdong is not required

to show substantial prejudice does not

mean that the court must void agency action that

is conce ded to hav e cause d no harm a t all. While Guangdong

need not show“substantial prejudice,” Commerce may show that

the agency

oversight

was harmless error. At oral a rgumen t, counse l for Gua

ngdong stated tha t it was not prevented in any way from preparing for, or par t icipa ting i n, the adm

inistrativ e revie

w. Guang dong af

firmativ ely stated that it suffered no prejudice, other than the fac t that the administrative review took place. The plaintiff in Intercargo made a similar argument that “the prejudice flowing from this circumstanceC OURT N O . 05-00023 P AGE 17

[failure to fully comply

with a notice regulation] is the ultimate prejudice – the wrongful imposition of customs duty.” 83 F.3d at 396. The Feder al Circui t disagr eed, sta ting tha t the loss of

a case “ is notwhat is meant by pre

judice as used in this context.” Id. There must instead be some indication that failure to comply with the re g ulation i n some wa y in hibited Gu

angdon g’s pre sentation

of its

case. See id. at 396 (“Preju dice, as used in thi s setting, means injury to a n interest that the statute, regulation, or rule in question was designed to protect.”). Bec ause Guangdong in essence conceded that the failure to serve was harmless error , Commerce has met its burden to show its error was harmles s. Guangd ong’s request that Commerce’s administrative review be voided ab initio is denied. II. Commerce ’s Choice of Data Source Is Not Supported by Substantial Evidence

Commerce is given wide discretion in the selection of data sourc es for us e in administrative review. See Nation Ford Chem. Co. v. United States , 166 F.3d 1373, 1377 (Fed. Cir. 1999). The role of the court is to determine whether Commerce ’s choice of data was reasonable

. When ch oosing a data s ource to estimate the surrogate value of an input, Commerce looks to a number of fact ors, i nclud ing: 1) wheth er the da ta reflects non-export average va lues; 2) whether the data is contemporaneous with the period of investigation (“POI ”); 3) whether the da ta is produc t specific; and 4) whether the data excludes taxes in its price. Taiyuan , 23 CIT at 706 (1999) (citing H eavy For ged Hand Tools, Finished or Unfinished, With or Without Handles, from the People’s Republic of China , 63 Fed. Reg. 16,758, 16,759 (Dep ’t Comm erce Apr. 6, 1998) (final results of antidumping duty administrative reviews) ). Guangdong concedes that the data it proposed and the data used by Commerce a

re identical with respect to all of these factors except for productC OURT N O . 05-00023 P AGE 18

specificity. Becau se India does not pr

oduce se bacic a cid domes tically, both Comm er ce and Guangdong

relied on statistics of imports of

sebacic acid into India to e stablish its surrogate value. As discusse d, Commerc e used imp ort statis tics base d on the six- digit I ndian HTS s

ubheadin g 291713, a basket tariff category that includes both sebacic acid and azelaic ac id. See Issues & Decision Mem. , Pl.’s App. Tab 10, at 8–9. Guangdong submitted comments requesting that Commerc e adopt data taken from the Ind ia n p ub li ca ti on Ch em ic al We ek ly based on 1,400 kilogra ms of seba

cic aci d imported

intwo transactions from Ger

many to India. See Lette

r from Ronald

M. Wisla, Ga

rvey Schuber t Barer , to Donald Evans, Sec ’y De

p’t of Comm erce ( Sept. 8, 20 04) (subm ission of p

ublically availab le informationfor use as surrogate value) , P.R. Doc. 62, Pl.’s App. Tab 7 , at Attach. 1 [hereinafter Guangdong Surroga

te Value Submission ]. Commerce expresse d two reas ons for r ejecting the Chemic al Weekly

data. F irst, Commerce found that the Chemical Weekly data contained

insufficient

data points and “therefore [did not] repre sent a

sufficiently broa

d range of import values on which to base the surrogate value for sebacic acid where alterna tive data are available.” Issue s & Dec ision Mem. , Pl.’s App. Tab 10, at 7. Second, Commerce could not determine the accura cy of the Chemica

l Weekly data bec ause it could not tell how the data was culled from the I ndian government import statistics. Id. Insupport of

its own data, Commerce only conducted research into the relative pric es of azelaic and sebacic acid in the United States to assure that the two produ

cts were similarly pr

iced

over a twenty-thre e-month p eriod, d etermining that “[b]ecause the record does not include a nyC OURT N O . 05-00023 P AGE 19

technical information on the more specialized production requirements for azelaic ac id and because the attache d datawe

b query shows tha

t the pric es are n

ot consiste

ntly higher than those

for seba cic acid, we are

unable to determine that aze laic acid is a specialty product.” Price ComparisonMem. , Pl.’s App. Tab 11, at 1. Commerce therefore found that “ [t]he prices for azelaic aci d and sebacic acid fluctua te with sebacic acid sometimes having the highe r price, and, therefore, we do not se e a clear pattern that azela

ic acid is a higher priced product.” Issue s & Dec ision Mem. , Pl.’s App. Tab 10, at 8. Even

if the court were to conclude that Commerce produce d substantial evidence demonstrating that azelaic and sebacic acid are pr iced similarly, that would not justify Commerce’s decisionto abandon a more product- specific da ta sourc e. Commer ce faile d to addre ss the dat a Guangdong used to corrobora te its Chemical Weekly submission. Guangd ong adm itted the s mall size of its sample but submitted evidence designed to prove that the data were not abe rra ti ona l. It corroborated

its data using an average unit value of $3,061.54 per metr

ic ton for sebacic acid in the United States (excluding data from non-market economies and subsidizing nations), data published inthe Septe

mber 6, 20 04 edition

of Chemic al Ma

rket Reporter (listing sebacic acid in drums as $4,187.60 per metric ton), and data from Chemical Weekly for the POI reflec

ting the price of

oxalic acid (asserted to be simila

r to sebacic acid) in I

ndia as $469.66 per metric ton. Guangd ong Surr ogate Value Submission , Pl.’s App. Tab 7, at 2–3

.

Neither the Final Determination

and the attached Issues and Decision Memorandum

nor Commerce’s brief specifically discusses the corroborating evidence Guan gdong

submitted t

o support the use of

its product-specif

ic import data, nor does either provide evidence demonstratingC OURT N O . 05-00023 P AGE 20

that the values were in fact aberra tional. Commerce’s only objec tion, besides the small size of the sample, is that it “cann ot deter min e how this categorization was derived from the off icial Indian government statistics.” Issue s & Dec ision Mem. , Pl.’s App. Tab 10, at 8–9.

The Supreme Court has “frequently reiterated that an

agenc y mu st coge

ntly explain why it has exercised its discretion in a given manner . . . .” Motor Vehicle Mfrs. Ass’n of U.S., Inc

. v. State Fa

rm Mut. Auto. Ins. Co. , 463 U.S. 29, 48 (1983). “The agency must explain the evidence whichis available, and must offer a ‘rational connec tion between the f

a cts found and the choice made.’” Id. at 52 ( quot ing Burlington Truck L ines, Inc. v. United States , 317 U.S. 156, 168 (1962)). Alth ough an ag en cy i s not required to comment on every submission it receives, a pertinent submission, such as Guangdong’s corr oborating evidence, should not be ignored. See Nat’l Ass’n of Mirror Mfrs. v. United States , 12 CI T 771, 780, 696 F. Sup p. 642, 649 (1988) (

the age ncy must discuss “material issues of law or fact”). This is particular ly true in a case such a s this, where Com merce departs from its generally expressed preference for produc t-specific data. See Sav e Domestic Oil, Inc. v. United States , 357 F.3d 1278, 1283–84 (Fed. Cir. 2004).

Ad di ti on al ly, Commerce

failed to consider or explain why

its own sample of 10,100 kilogra ms of sebac ic and aze laic ac id was not a berrat ional com pared with the sam e basket category in other year

s. “[I]f . . . import statistics are based on a small quantity of imports for the per iod of investigation, the Commerce practice is to determine if the price f or those imports is aberrational.” Shanghai Foreign Trade

Enters. Co., Ltd. v. United States , 318 F. Supp. 2d 1339, 1350 (CIT 2004) (citing Shakeproof Assembly Components Div. of Ill. Tool Works, Inc . v. United States , 23 CIT 479, 485, 59 F. Supp. 2d 1354, 1360 (1999)).C OURT N O . 05-00023 P AGE 21

8 The Court also notes that Commerce recently abandoned a surrogate value of $15,826.30 for sebacic acid in the context of another administrative review. Decision Mem., A570-825 (Mar. 23, 2005), available at http://ia.ita.doc.gov/frn/summary/2005mar .htm. Commerce found that “information on the record of this chang ed circumstances review indicates that the PO R avera

ge seb acic ac id surrog ate value in the I ndian six-d

igit ca tegory that we us ed in the preliminary re sults of this changed circumstances review is sig nificantly highe

r than the import value of the previous period.” Id. at 17. Commerce therefore eliminated the highe st and lowest value countries (imports from the United States and Germany , respectively

) and arrived at a value of $5,459.72 per metric ton, “which was in line with other seba cic acid prices on the record.” Id. Guangdong identified for Commerce a number of logic al incons istencie s in its surrog ate value for sebac ic aci d that should have prompted Commerce to examine its own data. Guangdong

argued that

Commerce’s value of $15,826.30 was over six times the commercial value of the product. Guangdong Surroga te Value Submission , Pl.’s App . Tab 7, a t 1–2. Addi

tionally , in the 2000-2001 administrative review, Sebacic Acid from the People’s Republic of China , 67 Fed. Reg. 69,719 (Nov. 19, 2002) (f inal resu lts of antidumping duty administrative r eview), Commerce found the same basket category established a surrogate value of $5,388.66 pe r metric ton. See Decision Me m., A-570-825 at 17 (Mar. 23, 20 05), availab l e a t http://ia. ita.doc. gov/fr

n/summary

/2005mar .htm

(discuss ing surr

ogate v alue of s ebacic

acid used in 2002). 8 Commerce noted Guangdong’s objection that the surrogate value was “ove r six times the commercial value of the subject mer chandi se,” but did not cite evidence explaining the inconsistency

. Issue s & Dec ision Mem. , Pl.’s App. Tab 10, at 3, 8–9. Nor did Commerce determine the total size o f the I

ndian seb acic ac id market to determine if it was commercially and statistica lly signific ant. Having failed to consider whether t he $15,826. 30 figure derived from the basket category was abe rrationa l despite e

vidence of its wide variation from the value of the same basket category inanother

ye ar, Comme

rce fa iled to pre sent subst

antial ev idence s upporting its surrog ateC OURT N O . 05-00023 P AGE 22

value for sebaci c acid. See Timken U.S. Corp. v. United States , 421 F.3d 1350, 1355 (Fed. Cir. 2005) (agency

decision not supported by substantial evidenc e i f the age ncy “‘entir ely failed to consider an importa

nt aspec t of the pr

oblem [ or] off

ered an explanation for its decision that runs counter to th e evid ence be fore t he agenc y’”) (quot ing State Farm , 463 U.S. a t 43) (emp hasis removed). Accordingly

, the court will remand this issue to Commerce for reconsideration. III. By-Pro duct Cre dit

Commerce requests that

the court remand Commerce’s application of the by-produc

t credit. The issue is remanded. CONCLUSION

Commerce’s calculation of the surrogat e value of sebacic acid is not supported by substantial evidenc e and is th erefor e REMAND ED for f

urther c onsidera

tion consi stent w ith this opinion. Commerce’s application of the by- product credit is likewise remanded. Commerce shall reconsider

these matters and issue a determination within 45 days afte r the issuance of this opinion. Guangdong

will have 15 days to file

objections to Commerce’s remand determination. Commerce will have 11 days to file its response

. /s/ Jane A. Re stani Jane A. Restani Chief Judge Dated: This 25th day of January , 2006. New York, New York