Slip Op. 18-32
UNITED STATES COURT OF INTERNATIONAL TRADE

OPINION AND ORDER [The court sustains the determinations of the U.S. Department of Commerce.] Dated: April 2, 2018 Chunlian Yang , Kenneth G. Weigel , Alston & Bird LLP, of Washington, D.C., for plaintiffs. Kelly A. Krystyniak , Trial Attorney, Commercial Litig ation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C ., for defendant. With her on the brief were Chad A. Readler , Acting Assistant A ttorney General, Jeanne E. Davidson , Director, and L. Misha Preheim , Assistant Director. Of counsel on the brief was Brandon J. Custard , Office of the Chief Counsel for Trade Enforcement and Complian ce, U.S. Department of Commerce, of Washington, D.C. Matthew L. Kanna , Arent Fox LLP, of Washington, D. C., for defendant-intervenor. Goldberg, Senior Judge: Plaintiffs Deosen Biochemical Ltd. (“Deosen Zibo”), Deosen Biochemical (Ordos) Ltd. (“Deos en Ordos”), Deosen USA Inc. (“Deosen USA”), and A.H.A.

DEOSEN BIOCHEMICAL LTD., DEOSEN BIOCHEMCIAL (ORDOS) LTD., DEOSEN USA, INC., AND A.H.A. INTERNATIONAL CO., LTD., Plaintiffs ,

v. UNITED STATES, Defendant , and CP KELCO US, INC., Defendant-Intervenor

. Before: Richard W. Goldberg, Senior Judge Court No. 17-00044Court No. 17-00044 Page 2 International Co., Ltd. (“AHA”) challenge the fina l results issued by the U.S. Department of Commerce (“Commerce” or “the Depa rtment”) in its administrativ e review of the antidumping duty on xanthan gum from the People’s Republic of China. Plaintiffs filed two separate complaints ch allenging Commerce’s findi ngs as they relate to two separate periods of review: July 19, 2013 through June 30, 2014 (“AR1”), Complaint, No. 17-00044 (“AR1”) ECF No. 5 (Mar. 9, 2017), and July 1, 2014 through June 30, 2015 (“AR2”), Complaint, No. 17-00045 (“AR2”) ECF No. 2 (Mar. 10, 2017). The two complaints assert that Commerce cannot lawfully apply to Plaintiffs the China-wide ra te of 154.07%, the imposition of which was based primarily on a business arrangeme nt that spanned both periods of review. See Resp. to Suppl. Questionnaire, AR2 P.R. 45 (Oct. 9, 2015), ECF No. 43. As a result, both complaints and Commerce’s ultimate decision will be analyzed collectively by the court. 1 Specifically, Plaintiffs dispute the applicati on of facts otherwise available (“FA”) and adverse facts available (“AFA”) under 19 U.S.C. §§ 1677e(a) and (b), see Post-Prelim. Results Mem., AR1 P.R. 333 (Aug. 5, 2016), ECF No. 47, as well as the resultant rate imposed by
Commerce. See Xanthan Gum from the People’s Republic of China , 82 Fed. Reg. 11,428, 11,429–30 (Dep’t Commerce Feb. 23, 2017) (final resu lts) (“Final Result s”) and accompanying Issues & Decision Mem. (“I&D Mem.”). 2 On review of Plaintiffs’ motions for summary judgment, Mot. for J. on Agency R., AR1 & AR2 ECF Nos. 32 (Aug. 23, 31, 2017), the court sustains Commerce’s application of FA and AFA as well as the resultant separate rate of 154.07%.

1 The court has entered a substantially identical opinion in Deosen Biochemical Ltd. v. United States , Court No. 17-00045. 2 The Final Results covered only AR1; however, in AR2 Commerce imposed the same rate for the same reasons. See Xanthan Gum from the People’s Republic of China , 82 Fed. Reg. 11,434, 11,435 (Dep’t Commerce Feb. 23, 2017) (final results) and accompanying Issues & Decision Mem.Court No. 17-00044 Page 3

BACKGROUND Commerce initiated an antidumping duty investigation in July 2012, Xanthan Gum from Austria and the People’ s Republic of China , 77 Fed. Reg. 39,210 (Dep’t Commerce July 2, 2012) (initiation), and published the results roughly a year later. Xanthan Gum from the People’s Republic of China , 78 Fed. Reg. 43,143 (Dep’t Commerce July 19, 2013) (am. final determination). After receiving re quests for review of that orde r, Commerce initiated the first administrative review. Initiation of Antidumping and Countervailing Duty Administrative
Reviews , 79 Fed. Reg. 51,548 (Dep’t Commer ce Aug. 29, 2014) (initiation). AHA was chosen as a mandatory respondent, Se lection of Resp’ts Mem., AR1 P.R. 24 at 5 (Sept. 23, 2014), and was issued a questionnaire . AHA Questionnaire, AR1 P.R. 27 (Sept. 25, 2014). Based on AHA’s responses, Commerce then sent questionnaires to Deosen Zibo and Deosen Ordos in order to gather more information on sales reported by AHA. Deosen Questionnaire, AR1 P.R. 133 (Feb. 26, 2015). The questionnaires requested that the entities describe, and provide documenta tion relating to, “agreement(s) for sales in the United States ( e.g. , long-term purchase contract, short-term purchase contra ct, purchase order, order confirmation).” AHA Questionnaire, AR1 P.R. 27 at A-7; AHA Questionnaire, AR2 P.R. 30 at A-7 (Sept. 29, 2015); Deosen Questionnaire, AR2 P.R. 96 at A-7 (Nov. 13, 2015). Plaintiffs submitted several responses to Commerce’s questionnaires. See Deosen’s Sec. A Resp., AR1 P.R. 165 at 16–18 (Mar. 24, 2014); AHA’s Sec. A Resp., AR1 P.R. 57 at 15–16 (Oct. 27, 2014); AHA’s Sec. A Resp., AR2 P.R. 113 at 16–18 (Nov. 23, 2015); s ee also Deosen’s Sec. A Resp., AR2 P.R. 121 (Dec. 9, 2015) . Each response indica ted that sales were made pursuant to purchase orders made by custom ers of the Deosen entities. Commerce thenCourt No. 17-00044 Page 4 sent a supplemental questionnair e, to which Plaintiffs respon ded on May 7, 2015. Deosen’s Sec. A. Suppl. Resp., AR1 P.R. 192 (May 7, 2015). In th at response, Plaintiffs further explained the relationship between Deosen Zibo and AHA, providing that “the vast majority of Deosen Zibo’s US sales were made through AHA International C o., Ltd. to Deosen’s US customers” and that “AHA purchased the subject merchandise from Deos en and resold it to Deosen USA . . . .” Id. at 6. None of these responses included informa tion on any formal agreements made between Plaintiffs. Thereafter, the Department delayed announcing its final determinations so that it could “further examine[] the relationship between Deosenand AHA with respect to the sales at issue,” Deferral of the Final Results, AR1 P.R. 310 at 4 (Feb. 9, 2016), and sent Plaintiffs a supplemental questionnaire. Suppl. Qu estionnaire, AR1 P.R. 312 (Mar. 4, 2016). On March 21, 2016, Plaintiffs disclosed, for th e first time, two documents detailing an arrangement between Deosen Zibo and AHA cove ring the period of March 13, 2013 to February 28, 2015, under which AHA agreed to export xanthan gum on behalf of Deosen Zibo. Resp. to Suppl. Questionnaire, AR1 P.R. 317, Ex. 7 (M ar. 21, 2016) (“Export Service Agreements”). 3 On August 5, 2016, Commerce made preliminar y findings on the significance of the Export Service Agreements. See Post-Prelim. Results Mem., AR1 P.R. 333 (Aug. 5, 2016). Commerce determined that the documents showed “that Deosen contro lled the sales through AHA, that Deosen assumed all responsibilities for th e sales, and that Deosen bore the risk of any losses associated w ith those sales.” Id. at 6. Thus, the Department found that “Deosen’s sales to AHA and AHA’s sales to Deosen’s U.S. customer s were not a legitimate sales process, as claimed by Deosen and AHA, but instead were sales made and controlled by Deosen.” Id. at 7.

3 The Export Service Agreements were later disclosed in AR2 as well. See Resp. to Req. for Submissions, AR2 P.R. 287, Ex. 7 (July 19, 2016).Court No. 17-00044 Page 5
As a result, Commerce decided that not only had Pl aintiffs withheld the Export Service Agreements, they had also impeded the investig ation both by providing inc onsistent statements contradicted by the Export Service Agreements and by structuring their business arrangement in such a way as to omit necessary information from the record. See id. at 7–9 (citing 19 U.S.C. § 1677e(a)(2)). In its final decision, Commerce determin ed that not only was FA appropriate, see id. , but also that AFA was warranted because Plaintiffs ha d “failed to cooperate bynot acting to the best of [their] ability to comply with a request for information” in violation of 19 U.S.C. § 1677e(b)(1). I&D Mem. cmt. 1. Three specific reasons gave rise to the FA conclusion: Plaintiffs 1) withheld the Expor t Service Agreements, 2) organized their business arrangement in such a manner so as to impede the investigatio n, and 3) provided inconsistent information. Id. Withholding the Export Service Agreements and not revealing the business arrangement were particularly relevant because, in Commerce’s view, those details “could have an effect on U.S. prices” and the information that was provided was “artificially constructe d and [did] not provide a reliable basis upon which to calculate a dumping rate.” Id. Additionally, Commerce determined that, at a minimum, “submit[ting] misl eading information” and continuing to be “not forthcoming with key aspects” of the business re lationship both were indi cators that Plaintiffs had not acted to the best of their abilities, thus justif ying the imposition of AFA. Id. Ultimately, even though Plaintiffs were otherwise entitled to a separate rate, see id. cmt. 3, Commerce imposed the China-wide rate of 154.07% to Plaintiffs, “the highest dumping margin alleged in the petition,” id. , as a result of the Department’s AFA determination. See Final Results at 11,429–30.Court No. 17-00044 Page 6

JURISDICTION AND STANDARD OF REVIEW The court has jurisdiction over this action pursuant to 28 U.S.C. § 1581(c) and will sustain Commerce’s determinations unless theyare “unsupported by substantial evidence on the record, or otherwise not in accordance w ith law.” 19 U.S.C. § 1516a(b)(1)(B)(i).
DISCUSSION In enacting 19 U.S.C. § 1677e, Congress se t out a two-step process with which Commerce must comply if it is to invoke AFA. First, the Department must identify a justification for the application of FA and, only then, if there is a determination that a party has not acted to “the best of its ability,” may Commerce apply AFA. 19 U.S.C. § 1677e(b)(1). Here, Commerce permissibly imposed an AFA rate of 154.07% and, as such, the Department’s Final Results are sustained.

a. Adverse Facts Available Commerce has the ability to “use [] facts otherwise available” when a party to a proceeding: A) withholds information requested by the Department, B) fails to provide requested information by a specified deadline or in a sp ecified form, C) “significantly impedes a proceeding,” or D) provides information that cannot be verified. See 19 U.S.C. § 1677e(a)(2). This statute provides Commerce with the ability to fill in “informational gaps” with FA when those gaps arise out of one of the four circ umstances described in 19 U.S.C. § 1677e(a)(2). See Özdemir Boru San. ve Tic. Ltd. Sti. v. United States , 41 CIT __, __, 273 F. Supp. 3d 1225, 1231 (2017) (citing Nippon Steel Corp. v. United States , 337 F.3d 1373, 1381 (Fed. Cir. 2003)). Only once one of these conditions ha s been met and the Department has deemed FA appropriate may Commence evaluate whether or not to impose AFA. If the Department determines that “anCourt No. 17-00044 Page 7 interested party has failed to cooperate by not acti ng to the best of its ab ility to comply with a request for information,” Commerce may: [U]se an inference that is adverse to the interests of that party in selecting from among the facts otherwise available; and [] is not required to determine, or make any adjustments to, a countervailable subsidy rate or weighted average dumping margin based on any assumptions about in formation the interested party would have provided if the interested party had complied with the request for information. 19 U.S.C. § 1677e(b)(1). In ot her words, if the party with held requested information and did not “put forth its maximum effort” to comply with that request, see Nippon Steel Corp. , 337 F.3d at 1382, the Department can apply AFA. The court’s review probes whether the Department’s finding that requested information was withheld is supported by substantial evidence , and its imposition of AFA was in accordance with law. See Changzhou Wujin Fine Chem. Factory Co. v. United States , 701 F.3d 1367, 1377 (Fed Cir. 2012) (applying the substantial evidence standard to agency findings of fact and the “arbitrary and capricious (or c ontrary to law) standard” to agency reasoning). Here, Commerce asked for “agreement(s) for sales in the United States,” see, e.g. , AHA Questionnaire, AR1 P.R. 27 at A-7, and when it became apparent that the Export Service Agreements had been withheld, Commerce dete rmined that the application of FA was appropriate under 19 U.S.C. § 1677e(a)(2). I&D Mem. cmt. 1. Then, because Commerce also determined that Plaintiffs had failed to act to the best of their abil ity to produce the Export Service Agreements, Commerce imposed an AF A rate of 154.07%. Final Results at 11,429. Substantial evidence supports Commerce’s conclu sion that Plaintiffs withheld requested information under 19 U.S.C. § 1677e(a)(2)(A). “The mere failure of a respondent to furnish requested information—for any reason—requires Commerce to resort to other sources of information to complete the factual record . . . .” Nippon Steel Corp. , 337 F.3d at 1381.Court No. 17-00044 Page 8
As an initial matter, the E xport Service Agreements were clearly requested. As the Export Service Agreements laid out an “agreement for sales in the United States,” the documents should have been produced in response to Commerce’s original questionnaire. 4 Next, the information contained within the Export Service Agreements was withheld. Although Plaintiffs generally described their arrangement, Co mmerce requested—but was not furnished with— documentation regarding that arrangement. Co mmerce found that, “[c]ontrary to Deosen’s claims, the [Export Service Agreements] [did] no t merely confirm the explanations of the relationship given in the questi onnaire response but provide[d] the Department with specific details regarding the arrangement between AHA and Deosen which clearly show just how limited AHA’s role was in the sales that Deosenreported as AHA’s.” I& D Mem. cmt. 1. As there were discrepancies between the previous representations and the details found within the Export Service Agreements, Commerce’s finding that Plaintiffs withheld requested information under 19 U.S.C. § 1677e(a)(2)(A) is supported by substantial evidence. Once it became clear that those sales agreements had been withheld, Commerce was entitled to apply FA. Commerce’s second justifica tion for applying FA, impeding an investigation under 19 U.S.C. § 1677e(a)(2)(C), is likewise supported by substantial evidence. Commerce’s application of FA under 19 U.S.C. § 1677e(a)(2)(A) serves as a distinct ground for applying FA so as to make this separate finding, to an extent, moot. In any event, as this court has previously stated, the parties’ arranging a principa l-agent relationship for the pur poses of obtaining a lower rate may act as an impediment to a proceeding. See Tianjin Machinery Im port & Export Corp. v. United States , 31 CIT 1416, 1422–24, 2007 WL 2701368, at *5–6 (2007). As in Tianjin ,

4 Indeed, Plaintiffs appear to concede that the Expo rt Service Agreements were requested by Commerce in the original questionnaire. See Mot. for J. on Agency R., AR1 & AR2 ECF Nos. 32 at 21 (Aug. 23, 31, 2017) (suggesting that the withholding of the document was the result of an “accidental omission.”).Court No. 17-00044 Page 9 Plaintiffs only fully revealed their agency sche me designed to obtain the lower cash deposit rate after the fact. Whereas Plaintiffs at one poi nt described “Deosen’s U.S. sales of subject merchandise [as] AHA’s sales,” the Export Serv ice Agreements revealed “that these were actually sales made and controlled by Deosen.” I&D Mem. cmt. 1. As a result, substantial evidence supports Commerce’s determination th at Plaintiffs impeded the Department’s investigation by concealing the tr ue nature of Plaintiffs’ relationship with one another. Plaintiffs’ arguments to th e contrary are unavailing. 5 The court now turns to Commerce’s impositi on of AFA and whether the Department’s determination that Plaintiffs had “failed to coopera te by not acting to the best of [their] ability to comply with a request for information,” 19 U.S. C. § 1677e(b)(1), was in accordance with law. “Compliance with the ‘best of its ability’ standard is determined by assessing whether respondent has put forth its ma ximum effort to provide Commerce with full and complete answers to all inquiries in an investigation.” Nippon Steel Corp. , 337 F.3d at 1382. Commerce asked for sales agreements four times across tw o administrative reviews; each time, Plaintiffs withheld key responsive documents. Instead, the Export Service Agreements were produced as “new factual information” in response to the Department’s supplemental questionnaire. See Resp. to Suppl. Questionnaire, AR1 P.R. 317 at 1 (Mar. 21, 2016).

5 Plaintiffs maintain that Commerce impermissibly relied on “Deosen’s and AHA’s actions to structure sales of Deosen’s subject merchandise in such a way to avoid payment of the proper antidumping duty cash deposits at the appropriate rate.” See I&D Mem. cmt. 1. However, not only do es this assertion misstate the Department’s view but it also overlooks Commerce’s primary reason fo r applying FA. Plaintiffs inaccurately characterize Commerce’s FA decisi on as an attempt by Commerce to “punish Plaintiffs for arranging their sales to use a lower cash deposit rate[, which] was not in accordance with law.” See Mot. for J. on AgencyR. 17, AR1 ECF No. 32 (Aug. 23, 2017); see also Mot. for J. on Agency R. 17, AR2 ECF No. 32 (Aug. 31, 2017) (“In an effort to distract from its use of AFA to punish Plaintiffs for using the lower cash deposit rate, Commerce attempts to justify its actions by reciting the statute.”). In actuality, Commerce determined that Plaintiffs’ business arrangement—and the concealment thereof—impeded the investig ation by leaving the record devoid of certain material information. See I&D Mem. cmt. 1 (“The record demonstrates that De osen and AHA significantly impeded the proceeding by engaging in a scheme to avoid the applicable cash deposit rate, resulting in necessary information not being available on the record to calculate an accurate dumping margin.” (emphasis added)). Contrary to Plaintiffs’ assertions, Commerce did not conclude that the arrangement itself impeded the investigation.Court No. 17-00044 Page 10 While Plaintiffs argue that their “unintentional omission due to a good faith misunderstanding of a question cannot be the basis for applying AFA,” Mot. for J. on Agency R. 23, AR1 ECF No. 32 (Aug. 23, 2017), they mistakenlyconstrue the statute as both requiring Commerce to 1) excuse such “uni ntentional omissions” and 2) make a showing of bad faith. It does neither. See Nippon Steel Corp. , 337 F.3d at 1382–83 (holding that the statute does not “condone inattentiveness, carelessness, or inad equate record keeping” and “does not contain an intent element.”). Rather, Commerce must only show that a reasonable importer would have known to preserve the requested documentation and that Plaintiffs failed to produce the requested information because they did not put forth their maximum effort. See id. Certainly, as here, repeated requests for and avoiding production of certain documents can constitute failure to cooperate to the best of Plaintiffs’ ability. See id. at 1383 (sustaining Commerce’s AFA decision when it requested data that re spondent repeatedly fa iled to—but ultimately did—produce). By withholding a requested document despite multiple re quests for its production, Plaintiffs failed to act to the best of their abilitie s. Therefore, we sustain Commerce’s imposition of AFA as it was in accordance with law. Accordingly, Commerce’s determinations that FA and AFA were available are supported by substantial evidence and in accordance with law. As such, those determinations are sustained and the court must next consider whether Commerce’s chosen AFA rate was appropriate. b. Commerce’s Selected AFA Rate Plaintiffs also argue that Commerce’s selected AFA rate, the China-wide rate, was not in accordance with law because Commerce had already de termined that Plaintiffs were entitled to a separate rate. So long as Commerce’s reasoning is not arbitrary and cap ricious, the court willCourt No. 17-00044 Page 11 sustain the Department’s chosen AFA rate. See Changzhou Wujin Fine Chem. Factory Co. , 701 F.3d at 1377. “In antidumping duty proceedings involving merchandise from a nonmarket economy country, [] Commerce presumes al l respondents are government-cont rolled and ther efore subject to a single country-wide rate.” Ad Hoc Shrimp Trade Action Comm. v. United States , 802 F.3d 1339, 1353 (Fed. Cir. 2015). If a respondent is able to rebut this presumption, it may be entitled to a separate rate. See id. Regardless of any separate rate analysis, th e imposition of AFA may rely on information derived from the petition, final determinations in the investigation, prev ious reviews, or any other information placed on the record. 19 U.S. C. § 1677e(b)(2). Further, Commerce has the discretion to select the highest rate on the record, 19 U.S.C. § 1677e(d)(2), and the resultant rate need not “reflect[] an alleged commercial re ality of the interested party,” 19 U.S.C. § 1677e(d)(3)(B). Commerce “may employ [such] in ferences . . . to ensure that the party does not obtain a more favorable result by failing to cooperate than if it ha d cooperated fully.” See Viet I-Mei Frozen Foods Co. v. United States , 839 F.3d 1099, 1110 (Fed Cir. 2016). Plaintiffs contend that because they were initially found to be entitled to a separate rate by Commerce, the Department is pr ecluded from using the China-wi de rate as part of AFA. Plaintiffs’ position ignores the plain language of the statut e, which gives Commerce the discretion to impose the highe st rate on the record. See 19 U.S.C. § 1677e(d)(2); see also Viet IMei Frozen Foods Co. , 839 F.3d at 1109–10 (upholding Commerce’s AFA selection of the Vietnam-wide rate despite the finding of respondent’s eligibility for a separate rate). Plaintiffs claim to find support in this court’s ruling in Shenzhen Xinboda Industria l Co. v. United States , 40 CIT __, __, 180 F. Supp. 3d 1305, 1317 (2016). Yet, that case is inapposite as itCourt No. 17-00044 Page 12 contemplated Commerce’s rejection of separate rate information. See id. at 1316. That is not at issue here. The question of sepa rate rates is entirely detached from the imposition of AFA such that a party’s entitlement to a separate rate does not eliminate the power of Commerce to choose from available numbers on the recor d, including the country-wide rate. See 19 U.S.C. §§ 1677e(b)(2), (d)(2). Tellingly, Plaintiffs cite to cases decided before Congress’s amendments to the Trade Preferences Extension Act of 2015, Pub. L. No. 114-27, § 502, 129 Stat. 362, 383–84 (2015). See Yantai Xinke Steel Structure Co. v. United States , Slip Op. 12-95, 2012 WL 2930182, at *14 (CIT July 18, 2012); Gerber Food (Yunnan) Co. v. United States , 29 CIT 753, 771–72, 387 F. Supp. 2d 1270, 1287 (2005). It was these amendments that granted Commerce the discretion to apply the highest rate on the re cord and in which Congress also made clear that the Department was not required to impose an AFA rate th at reflected alleged commercial realities. See 19 U.S.C. § 1677e(d)(2), (3); see also generally Özdemir Boru San. ve Tic. Ltd. Sti. , 41 CIT __, 273 F. Supp. 3d 1225 (discussing the import of the amen dments). Plaintiffs conveniently disregard the broad discretion Congress granted to Commerce. Ultimately, Commerce acted in accordance withlaw in imposing the China-wide rate despite its contemporaneous determ ination that Plaintiffs had established their entitlement to a separate rate. AFA permits Commerce to choose from among the options available on the record; that Plaintiffs had established their entitl ement to a separate rate as an initial matter did not eliminate the China-wide rate as an option when the Department deemed AFA appropriate. As a result, this court sustains Commerce’s chosen AFA rate.Court No. 17-00044 Page 13

CONCLUSION AND ORDER For the foregoing reasons, upon considerati on of the parties’ motions for summary judgment and all papers and proceedings herein, it is hereby:
ORDERED that Commerce properly applied FA under 19 U.S.C. § 1677e(a)(2)(A) and (c), AFA under 19 U.S.C. § 1677e(b)(1), a nd a rate of 154.07%; it is further
ORDERED that Plaintiffs’ Rule 56.2 Motion for Judgment on the Agency Record is
DENIED.

/s/ Richard W. Goldberg Dated: April 2, 2018 New York, New York Ri chard W. Goldberg Senior Judge