Slip O p. 08-75 UNITED STA TES COURT OF INTERNATIONAL TRADE

Be for e: Gr egory W. Ca rma n,Ju dge Court No. 04-00082

[ Commerce ’s remand re sults su stained. ] La wOffi c es of

D avi d L . Si mo n ( D avi d L . Si mo n) fo r P la inti ff P AM, S.p .A. Rodr i guez O’Donnell Ro ss Fuerst Gonzales & Wi lli ams, P C (Thomas J. O’Donnell, Michael A. Johnson, and L ara A. A ustri ns) for Plai nti ff J CM, Ltd. Gre gory G . Ka ts as, Ac ting A s s i s tan t Attorn ey G en era l; Je anne E. D avi ds on, D i rec tor, Commerci al Li tigati on Branch, Ci vil D i vis i on, Uni ted S tate s Department of Justi ce (J ane C. D em ps ey) ; of

c ou ns el, Mykh ayl o A. Gry zl ov, Offi c e of the Ch i ef

Cou ns el fo r Im port Ad mini s trati on, U.S. D ep artm en t of Com me rc e, fo r D efen da nt. Kel le y, D rye & W arre n, LL P (D avi d C . Sm i th, Jr. , a nd P au l C . Ro s en tha l) fo r D efen da ntInter venor s. PAM, S.P.A and JCM, LTD.,

Plainti ffs, v. UN IT ED STA TE S, D efen da nt,

and A. Z ARE GA ’S AN D SONS, AME RIC AN ITALIAN PASTA CO MPANY, NEW WORLD PASTA COM PANY, and DAKOTA GR OWE RS P AST A COM P AN Y,

Defendan t-Inter venor s.Ct. No. 04-00082 Page 2

PAM i s an Itali an pasta manu facturer, and JCM im port s pas ta fro m PAM. As a 1 res ul t, J CM i s s ubjec t to th e s am e a nti du mp ing d uty as i s as s es s ed aga ins t P AM. July 9, 2008 O P I NI ON C AR M AN , J U D GE : Th i s c as e return s to th e Co urtfo ll ow ing arem an d to the Un i ted State s D ep artm en t of

Com me rc e p urs ua nt t o th e Co urt ’s orde r i n P AM, S.p .A. v. Un i ted St ates, 31 CIT __, __, 495 F. S upp. 2d 1360, 1373 ( 2007) (“P AM I I”). In that o rder , the Court remanded i n part t he final results of the si xth admi ni strat i ve r eview of the anti dumping duty o rder on certain pas ta fro m Italy, in whi ch Commerce appli ed a 45 .4 9% du mp i ng m argin to P AM, S.p .A. an d J CM, Ltd . a s an“a dve rs e f ac ts ava i labl e” rat e. See No tic e of Final Res ults of the Sixth Admini strat i ve Re viewof the 1 An ti du mp i ng D uty Orde r on C erta in P as ta from Ital y an d D ete rmina ti on N ot to Re voke i n Part, 69 Fed. R eg. 6,255 (Dep’t Co mmerce Feb. 10, 2004) and as soci ated Issues & D ec i s i on M em oran du m ( togeth er, “Fina l R es ul ts ”) . The Cou rt he ld tha t, a lth ou gh Commerce’s deci si on to apply adver se fac ts availab le to PAM was s upporte d by
s ub s tan ti alevi de nc e onthe rec ord, the ad vers e f ac ts ava i labl e ra te C om me rc e s el ec ted fo r P la i nti ff s ha d n ot b eenprop erl y “c orrob orate [d ], ” a s w as requi red bys tatu te. See PAM II, 31 C IT at __, 495 F. S upp. 2d at 1371; 19 U.S.C. §1677e(c) (2000) . To c orrob orate the ad vers e f ac ts ava i labl e ra te, on re ma nd , C om me rc e c om pa red the 45 .4 9% ad vers e f ac ts ava i labl e ra te to tra ns ac ti on- s pe c i fi cdu mp ing m argins of P AMCt. No. 04-00082 Page 3

A tr ansac tion-s peci fi c dum ping margin c ompares a single U.S . sale to a si ngle 2 hom e- ma rket s al e ( or, i f n one , a thi rd- c ou ntryma rket s al e) . The w ei ght ed ave rage of the tr ansac tion-s peci fi c dum ping margins i s a respondent’s ove rall dumping margin. fro m p revi ou s ad mini s trati ve revi ew s . Com me rc e f ou nd mu lti pl e tra ns ac ti ons w i th 2 du mp i ng m argins at or abo ve 4 5. 49 % a nd the ref ore c onc lu de d th at th e a dve rs e f ac ts availab le rat e of 45.49% appli ed to PAM was ad equately cor ro borat ed. Gi ven that precedent fro m the Uni ted S tate s Court o f Appeals f or the Feder al Ci rcui t holds that Commerce may corr obor ate an adver se fac ts availab le rat e wi th a respondent’ s own tran s ac ti on- s pe c i fi cdu mp i ng m argins, T a C he n Sta inl es s Stee l P i pe , In c . v. Un i ted St ates, 298 F.3d 1330, 1339 (Fed. Cir. 2002), the Court mus t conclude that Commerce has adequately cor ro borat ed the 45.49% dumping margin s elected for PAM . As a result, the Court sus tain s the remand results as s upporte d by sub stanti al evidenc e and other wi se i n acc or dance w i th law.

B A C KG R OU ND Th i s c as e a ri s es ou t of

the s i xthad mini s trati ve revi ewof the an ti du mp ing d uty
or der o n certainpasta from It aly. Duri ng an admini strat i ve r eview of ananti dumping duty or der, Co mmerce i s ch arg ed wi th deter mining the dumping margins of i ndi vidu al
res pon de nts fo r the pri or yea r. Se e 1 9 U. S.C . § 16 75 (a ) ( 20 00 ). To ac c om pl i s h th at, Com me rc e c oll ec ts an d p ut s on the rec ord d atafro m re s pon de nts an d oth er inte res tedCt. No. 04-00082 Page 4

The un repo rt ed sales w ere t he result of two mis take s, one inadvert ent and one 3 s trate gi c . On e p orti on o f the s al es w as notrep orted to Com me rc e b ec au s e th e c om pu ter prog ram PAM used to ex tr act the data fro m i ts accoun tin g system was inadvert ently not coded t o pic k up sales m ade from warehouses not owned by PAM. The second porti on o f s al es w as exc lu de d onad vi c e of P AM’spri or c ou ns el, who b el i eved the s al es (continued...) pa rti es c onc ern i ng the pri c es at whi c h s ubjec t m ercha nd i s e w as s old du ri ng the pe ri od of rev i ew and the cost of producing such merchandi se. 19 U.S.C. §§ 1677a, 1677b (2000). In some instances, necess ary i nformation wi ll not be availabl e on the r ecord, as when a party wi thholds or fails to submi t in formation in a ti mely manner, or when the sub mi tte d information cannot be v erifi ed. In those in stances, Commerce deter mines the du mp i ng m argins us i ng “ the fa c ts oth erw i s e a vai labl e” on the rec ord. 19 U.S. C. § 1 67 7e (a ). Fu rthe r, i f C om me rc e d ete rmine s tha t a re s pon de nt h as “f ai le d to c oope rate bynotac ting t o th e b es t of i ts ab i li ty to c om pl y w i th areque s t f or inf orm ati on from [Commerce],” the agency “may use an inference that is adver se to t he intere sts of that party i n selec tin g fro m among the facts otherwis e availab le.” 19 U.S.C. § 1677e (b) . The Court refer s to this as applying “adver se fac ts availab le.” That i s wh at occurred her e. In the F inal Results to the admini strat i ve r eview, Com me rc e a pp li ed a d um ping m argin of 45 .4 9% as anad vers e f ac ts ava i labl e ra te to PAM. Commerce did so becau se PAM fai led to r epor t to Commerce about two-t hi rds of i ts hom e- ma rket s al es, a nd Com me rc e c ou ld not , th erefore, veri fythe hom e- ma rket da tab as e. Com me rc e d ete rmine d th at b y f ai ling t o rep ort m os t of i ts hom e- ma rket 3Ct. No. 04-00082 Page 5

(...continued) 3 to hav e been made outsi de the or dinary cour se of trade, and ther efore no t r epor table. For a m ore d eta i le d a c c ou nt o f the rep orting m i s take s , s ee P AM II, 31 CITat _ _, 49 5 F. Supp. 2d at 1363-64. PA M a l so a r g ue d tha tthe F ina l R e su l t s w e r e v o id b e ca us e the d o me st ic 4 company peti tioners fai led to g i ve not i ce to PAM o f thei r r equests to in i tiate an admini strat i ve r eview. The Courtini tiall y agr eed wi th PAM, but was rever sed by the Court of Appeals for the F ederal Circui t, whi ch held that PAM was not pr ejudic ed by the lack of not i ce. See PAM, S .p.A. v. United Stat es, 29 CIT __, __, 395 F. Supp. 2d 1337, 1345 (2005) ( “PAM I”) rev ’d, 463 F.3d 1345 (Fed. Cir. 2006). sales, P AM “fail ed to coo perat e by not acting to t he best of i ts abi li ty t o comply wi th a request for i nformation from [Commerce],” 19 U.S.C. § 1677e(b), and ap pli ed adver se fa c ts ava i labl e to P AM. On appeal, Plainti ffs challen ged bot h Commerce’s authority to apply adver se fa c ts ava i labl e to th e c om pa ny, as w el l a s the pa rti c ul ar d um ping m argin s el ec ted (4 5. 49 %) . Wh i le the Cou rt s us taine d C om me rc e’s de c i s i on t o ap pl y ad vers e f ac ts

4
a v a ila bl e t o PA M , a s s up p o r t e d by su bs t a nt ia l e v ide nc e o n t he r e co r d a nd o the r wis e in accordance w i th law, the Court held that the ag ency had not pro perly cor ro borat ed the 45.49% adver se fac ts availab le rat e, as was required by statute. PAM I I, 31 CIT at __, 495 F. S upp. 2d at 1362-63. The adverse facts avai lable rate Co mmerce selec ted for PAM was a du mping margin as si gned to another unc ooper ative respondent, Barilla, as adver se fac ts availab leCt. No. 04-00082 Page 6

To c al c ul ate the rate , C om me rc e u s ed a d om es ti cpri c e l i s t of Ba ri ll a’s as a p roxy 5 for t he home-market pr i ce and U.S. i mportstatis tic s as a p ro xy fo r t he U.S. pr i ce. World Fin er F oods, Inc. v. United Stat es, 24 CIT 1235, 1235, 120 F. Supp. 2d 1131, 1132 (2000). Com pa ri ng the proxi es, C om me rc e c al c ul ate d ind i vi du aldu mp ing m argins fo r thre e catego ries of pasta. The indi vidu al dump ing margins were 39.63%, 60.09%, and 63.36%. Wor ld Fi ner Fo ods, 24 CITat 1 23 6, 12 0 F. Sup p. 2d at 1 13 2. Wh i le Com me rc e s el ec ted the hi ghest of the t hree calculati ons, 63.36%, as Bari lla’s adverse facts avai lable rate, t he court r educed Bari lla’s adverse facts avai lable dum ping margin to 45.49%, a si mple aver age o f the three i ndi vidu al dump ing margins . Wor ld Fi ner Fo ods, 24 CIT at 1238, 120 F. S upp. 2d at 1134. in t he fir sta d min ist r a t iv e r e v ie w. Th e o r ig in o f t he d um p ing ma r g in is sig nif ica nt in 5 tha t th e m argin w as notrel ate d to P AM: i t w as notc al c ul ate d f or P AM, or b as ed on data subm i tte d by PAM. Commerce purpor ted to corr obor ate t he dump ing margin by
c om pa ri ng i t to tra ns ac ti on- s pe c i fi cma rgins of oth er res pon de nts du ri ng the pe ri od of revi ew . The Cou rt f ou nd Com me rc e’s ac ti ons de fi c i en t to c orrob orate the ad vers e f ac ts
ava i labl e ra te b ec au s e “ Com me rc e d i d n ot exp la in h owoth er res pon de nts ’ tra ns ac ti on speci fi c margi ns w ere r elated to PAM’s dumping acti vity durin g the per i od of r eview.” PAM II, 31 C IT at __, 495 F. S upp. 2d at 1372. The Court ex plained that “Co mmerce
mu s t s el ec t anad vers e f ac ts ava i labl e m argin th at i s a ‘re as onabl y ac c ura te e s ti ma te of the re spondent’s actual rate, albei t wi th some bui lt-i n increase as a deterre nt to nonc om pl i an c e. ” Id . ( qu oting F .L LI d e Ce c c o diFi li pp os FaraS. Ma rtino S. p. A. v. Un i ted St ates, 216 F.3d 1027, 1032 (Fed. Cir. 2000)). As a resu lt, the Co urt r emanded the Fi nal Res ul t to Com me rc e to s el ec t a p rope rly c orrob orate d a dve rs e f ac ts ava i labl e ra te f or P AM.Ct. No. 04-00082 Page 7

On remand, Commerce selected the same 45.49% adverse facts avail able rate, but
corr obor ated the r ate using data fro m PAM i tself. Commerce compared the 45.49% du mp i ng m argin to tran s ac ti on- s pe c i fi cma rgins of P AM from the fo urth a dm ini s trati ve
rev i ew (the most recent re viewi n whi ch P AM par tic i pated, prior t o the r eview at i ssu e). Com me rc e s tate d th at i t f ou nd “d oze ns ” of tran s ac ti on- s pe c i fi cma rgins at or abo ve 45 .4 9% , “ w i th the hi ghe s t m argin b eing s evera l ti me s hi ghe r tha n th e [ ad vers e f ac ts availab le] rate” applied to PAM. (Fin al Remand Determinati on 5.) Th ou gh P la i nti ff s do n ot di s pu te C om me rc e’s find ing tha t doz en s of P AM’s tran s ac ti on- s pe c i fi cdu mp i ng m argins fro m the fo urth a dm ini s trati ve revi eww ere a t or above 45.49%, t hey arg ue that Co mmerce’s c or ro borat i on i s nonetheless invali d. Plainti ffs contend that t he sales used to calcu late the t ransacti on-spec i fi c dum ping margins are “stat i sti cal outli ers” that do not r epresent PAM’ s actual l evel o f dum ping du ri ng the pe ri od of

revi ewof

the fo urth a dm ini s trati ve revi ew . ( Con fi d. Com me nts of Pl. P AM S .p.A. Concernin g Co mmerce Dep’t Fin al Remand Determ’n (“PAM Remand Br.”) 3; accord Comments of Pl. JCM, Ltd. on FinalRemand (“J CM Remand Br.”) 3 (arguin g thatCommerce “cherry -pi cked” sales) .) Plainti ff P AM ar gues that tr ansac tions pe c i fi cma rgins at or abo ve 4 5. 49 % w ere the exc ep ti on ra the r tha n th e ru le in th e f ou rth ad mini s trati ve revi ew, a s s hown b y th e f ac t th at P AM’s w ei ght ed du mp ing m argin f orCourt No. 04-00082 Page 8

Plainti ff J CM adds that PAM’ s dum ping margins for t he year s su rr ounding the 6 si xth admi ni strat i ve r eview w ere all ar ound 5% (1998-1999: 5.04%; 1999- 2000: 4.10%; 20 00 -2 00 1: no re vi ew ; 2 00 1- 20 02 : 4 5. 49 % ( prop os ed ); an d 2 00 2- 20 03 : 4 .7 8% ). (J CM Remand Br. 2.) that per i od was 4.10%. (PAM Remand Br. 8.) Plainti ffs thus argue that t he adver se 6 facts avai lable rate selected by Co mmerce has not been pro perly cor ro borat ed, and ask the Cour t to remand the re mand results to Commerce to do it agai n.
J UR I SD I CT I ON AND S TANDA RD O F R EVI EW The Court has jur i sdi cti on to rev i ew final results of admini strat i ve r eviews pursuant to 28 U.S .C. § 1581(c) (2000). Whenrev i ewing the fi nal results of an admini strat i ve r eview, an d any associ ated r emand determi nati ons, the Court mus t
s us tain C om me rc e’s de term i na ti ons, find ings, or c onc lu s i ons un le s s the y are “uns upporte d by sub stanti al evidenc e on the r ecord, o r o therwis e not in ac cordance wi th law.” 19 U.S.C. § 1516a(b)(1) (B)( i ) (2000) . “Mor e speci fi cally, whenrev i ewing
w he the r Com me rc e’s ac ti ons are un s up porte d b y s ub s tan ti alevi de nc e, the Cou rt
asses ses whether t he agency acti on i s ‘unreasonable’ gi ven the r ecord as a whole.” Mittal St eel GalatiS.A. v . Uni ted S tate s, 31 CIT __, Sli p Op. 07-73 at 2-3 (May 14, 2007) (ci tin g Nip pon St eel Cor p. v. United Stat es, 458 F.3d 1345, 1350-51 (Fed. Ci r. 2006)).Court No. 04-00082 Page 9

On re ma nd , C om me rc e m ainta ine d i ts di s agre em en t w i th the Cou rt’s 7 deter minati on that C ommerce had not adequately corr obor ated the 45.49% dumping ma r g in inthe F ina l R e su l t s. (F ina l R e ma nd De t e r min a t io n 3 . ) H o we v e r, C o mm e r ce d id (continued...) D I S C U S S I ON Th e on ly que s ti on b ef ore th e Co urti s w he the r Com me rc e p rope rly c orrob orate d the 45 .4 9% du mp i ng m argin i t ap pl i ed to P AM a s ad vers e f ac ts ava i labl e. Inthe c as e of
an unc ooper ative respondent, Co mmerce has “di screti on to choose whi ch s ources and facts i t wi ll rely o n to supportan adverse inference.” F.LLI de Ce cco, 216 F.3d at 1032. How ever, w he n C om me rc e “ rel i es on s ec ond ary inf orm ati on ra the r tha n on i nf orm ati on o bt aine d in th e c ou rs e of the inve s ti gati on o r revi ew, [ Com me rc e] s ha ll, to the exte nt p rac ti c ab le, c orrob orate tha t inf orm ati on from ind ep en de nt s ou rc es tha t are
r e a so na bl y a t[it s] d isp o sa l . ” 1 9 U . S . C . § 1 6 7 7 e (c ). Th e co r r o bo r a t io n r e quir e me nt is i nclu ded in the statute t o ensure that an adv erse facts avai lable rate is “a reasonably
accu rat e esti mate of the r espondents actual rate, albei t wi th some bui lt-i n increase as a d e t e r r e nt t o no n- co mp l ia nc e . ” F . L L I d e C e cc o , 2 1 6 F . 3 d a t1 0 3 2 . I tis n o twit hin Commerce’s di screti on “to select unreasonably hi gh rat es wi th no r elations hi p to t he respondent’s actual dump i ng margin.” Id. On re ma nd , C om me rc e c om pa red the ad vers e f ac ts ava i labl e ra te s el ec ted w i th P AM’s ow n tra ns ac ti on- s pe c i fi cdu mp ing m argins fro m the fo urth a dm ini s trati ve
rev i ew, wh i ch w as the most recent r eview in whi ch P AM par tic i pated. Commerce 7Court No. 04-00082 Page 10

(...continued) 7 not speci fy (1) i f i t beli eved t he Court ’s concl usi on to be incorre ct that Co mmerce mu st ti e th e a dve rs e f ac ts ava i labl e d um ping m argin to the pa rti c ul ar re s pon de nt t o corr obor ate t he margin, or (2) i f Commerce beli eved t hat, as a fac tual matter , i t had suffi ci ently do ne so in the FinalResults. Bec ause Commerce di d not pr esent any reasonin g for i ts posi tion, the Courtcannot evaluate t he valid i ty o f the objection, except to refer Co mm erc e to th e p ri or opini on, w hi c h d i s c us s es thi s i s s ue in d ep th. See P AM I I , 3 1 C I T a t__

, 4 9 5 F . S up p . 2 d a t1 3 7 1 -7 3 . I n a ny e v e nt, o n r e ma nd C o mm e r ce d id fo ll owthe Cou rt’s orde r to c orrob orate any ad vers e f ac ts ava i labl e ra te s el ec ted w i th evi de nc e of

P AM’s ow n d um ping a c ti vi ty. fo un d d oze ns of

tran s ac ti on- s pe c i fi cma rgins at or abo ve th e a dve rs e f ac ts ava i labl e ra te of 45.49%. (See F i nal Remand D eter minati on 5.) Thi s method of corr obor ation w as su stained by the Cour t of Appeals for t he Feder al Ci rcui t inTa Chen, 298 F.3d 1330. In that case, Commerce compared the adver se fac ts availab le dumping margin to a tr ansac tion-s peci fi c margi n of the respondent fro m a previous adm i ni strat i ve r eview. The Ta Chen c ourtfound that the adver se fac ts availab le rat e was c or ro borat ed “by actual sales data, and Ta Chen [the
res pon de nt] ad mi ts tha t i t i s refle c ti ve of s om e, albe i t a s ma llporti on, of TaCh en ’s
a ct ua l sa l e s. ” I d . a t1 3 3 9 . Th e co ur tsa id t ha t“ C o mm e r ce a ct s w ithinit s d isc r e t io n [ in
s el ec ting a n a dve rs e f ac ts ava i labl e ra te] s o lon g as the rate c hos enha s a re la ti ons hi p to the actual sales i nformation avai lable.” Id. at 1340. Plainti ffs cannot prev ai l on their argument thatCommerce di d not adequately
corr obor ate t he adver se fac ts availab le margin b ecaus e the tr ansac tion-s peci fi c margi ns rel i ed up on b y Com me rc e refle c t on ly as ma llporti on o f P AM’s s al es fro m the fo urthCourt No. 04-00082 Page 11

ad mini s trati ve revi ew . Whe n f ac ed w i th as i mi la r argu me nt, the TaCh enc ou rt rejec ted the co nt e nt io n t ha tC o mm e r ce co ul d no tr e l y o n a sm a l l nu mb e r o f t r a ns a ct io n- sp e cif ic du mp i ng m argins to c orrob orate anad vers e f ac ts ava i labl e m argin. Th e c ou rt s tate d that “it i s un di sputed that Ta Chen made a s ale wi th a 30.95% dumping margin [the ad vers e f ac ts ava i labl e ra te a pp li ed to T a C he n] .” TaCh en , 2 98 F.3 d a t 13 39 . The c ou rt
w en t onto s tate tha t th e a dve rs e f ac ts ava i labl e m argin w as ad equa tel y c orrob orate d wi th Ta Chen’s s ales data becau se “i t is reflective of some, albei t a small portion, of Ta Ch en ’s ac tu als al es .” Id. Be c au s e th e T a C he n c ou rt affi rme d C om me rc e’s s el ec ti on o f
anad vers e f ac ts ava i labl e ra te in th e f ac e of the s am e a rgu me nt m ad e b y P la inti ff s he re, the Cou rt i s bo un d b y th at p rec ed en t. A c c ordingl y, th e Co urtmu s t s us tain C om me rc e’s
s el ec ti on o f a45 .4 9% ad vers e f ac ts ava i labl e d um ping m argin f or P AM. Thi s opini on should not be read as an endorsement of Commerce’s action. The Court i s tro ubled b y Co mmerce’s dec i si on to apply an adver se fac ts availab le dumping
ma rgin th at i s nine ti me s hi ghe r tha n P AM’s c al c ul ate d d um ping m argins fo r the yea rs surroundi ng this admini strat i ve r eview. H owever , the Cour t beli eves itself to be
co ns t r a ine d by the Ta C he n d e cis io n. Abs e nt tha td e cis io n, the 4 5 . 4 9 % d um p ing ma r g in assi gned to PAM mi ght be construed as the sort of “puni tive” adver se fac ts availab le dumping margin that i s prohibi ted. S ee F.LLI de Ce cco, 216 F.3d at 1032 (“[T] heCourt No. 04-00082 Page 12

pu rpos e of

s ec ti on 1 67 7e (b ) i s to pro vi de res pon de nts w i th a n inc en ti ve to c oope rate , not t o im pose puni tive, aberrat i onal, or unc or ro borat ed margins ”).

C ON C L U S I ON Inthe rem an d re s ul ts , C om me rc e a de qu ate ly c orrob orate d th e a dve rs e f ac ts
ava i labl e ra te a pp li ed to P AM w i th t ran s ac ti on- s pe c i fi cdu mp ing m argins fo r P AM from a prev i ous admini strat i ve r eview. As a result, the Co urt sustains the Fi nal Remand Determi nati on as being supported by substanti al evidenc e on the r ecord and other wi se in acc or dance w i th law. The Court wi ll i ssu e judgment for Commerce
s ep ara tel y.
___/s/_Gregor y_W._Car man__ Grego ry W. Carman Dated: July 9, 2008 Ne wYork, Ne wYork