Opinion ID: 782931
Heading Depth: 2
Heading Rank: 2

Heading: Imposition of Adverse Inference

Text: 12 The first issue before us is whether Commerce's initial decision to apply an adverse inference in selecting facts available was supported by substantial evidence. Appellants argue that Commerce acted within its discretion because NSC had the ability to provide the conversion factor data requested in a timely manner and simply failed to comply. Appellants contend that under the circumstances of this case, 19 U.S.C. § 1677e allows Commerce to apply an adverse inference against respondents who fail to act to the best of their ability in complying with department requests. To the extent that the Court of International Trade required Commerce to show that the failure to provide information was not inadvertence or a simple mistake, appellants complain that the court injected an element of intent not found in the statute. 13 NSC argues that the Court of International Trade properly rejected Commerce's interpretation of section 1677e. Specifically, NSC supports the court's conclusion and contends that the inquiry into whether a respondent has acted to the best of its ability requires a determination whether the respondent showed a lack of due regard for its responsibilities in the investigation. See Nippon I, 188 F.Supp.2d at 1379. NSC argues that Commerce's interpretation of the statute amounts to a requirement that responses to inquiries be perfectly compliant and that punishing respondents for inadvertent errors serves no legitimate purpose under the antidumping laws. 14 The parties frame the issue in this case as a dispute over the scope of the best of its ability standard in section 1677e. When evaluating an interpretation of a statutory scheme that an agency is charged to administer, we apply the familiar two-part inquiry to determine whether to sustain an agency's interpretation of that statute. See Chevron, 467 U.S. at 842-44, 104 S.Ct. 2778. First, the court must determine whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. Id. at 842-43, 104 S.Ct. 2778. However, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute. Id. at 843, 104 S.Ct. 2778. 15 Turning to the words themselves, section 1677e provides: 16 If — 17 (a) In general 18    19 (2) an interested party or any other person — 20 (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, 21    22 the administering authority and the Commission shall, subject to section 1677m(d) of this title, use the facts otherwise available in reaching the applicable determination under this subtitle. 23 (b) Adverse inferences 24 If the administering authority or the Commission (as the case may be) finds that an interested party has failed to cooperate by not acting to the best of its ability to comply with a request for information from the administering authority or the Commission, the administering authority or the Commission (as the case may be), in reaching the applicable determination under this subtitle, may use an inference that is adverse to the interests of that party in selecting from among the facts otherwise available. 25 19 U.S.C. § 1677e (2000). The statute has two distinct parts respectively addressing two distinct circumstances under which Commerce has received less than the full and complete facts needed to make a determination. Under subsection (a), if a respondent fails to provide [requested] information by the deadlines for submission, Commerce shall fill in the gaps with facts otherwise available. The focus of subsection (a) is respondent's failure to provide information. The reason for the failure is of no moment. 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 on which it makes its determination. As a separate matter, subsection (b) permits Commerce to use an inference that is adverse to the interests of [a respondent] in selecting from among the facts otherwise available, only if Commerce makes the separate determination that the respondent has failed to cooperate by not acting to the best of its ability to comply. The focus of subsection (b) is respondent's failure to cooperate to the best of its ability, not its failure to provide requested information. 26 The legislative history found in the Statement of Administrative Action (SAA) accompanying the Uruguay Round Agreements Act, Pub.L. No. 103-465, 108 Stat. 4809 (1994) (URAA), confirms the distinction between the two sections. Prior to the adoption of the URAA, the Tariff Act mandated the use of the best information available if a respondent refused or was unable to produce information in a timely manner or in the form requested by Commerce. In adopting the URAA, Congress changed the terminology and noted: 27 New section [1677e(a)] requires Commerce and the Commission to make determinations on the basis of facts available where the requested information is missing from the record or cannot be used because, for example, it has not been provided, it was provided late, or Commerce could not verify the information. 28    29 [N]ew section [1677e(b)] permits Commerce and the Commission to draw an adverse inference where a party has not cooperated in a proceeding. A party is uncooperative if it has not acted to the best of its ability to comply with requests for necessary information. Where a party has not cooperated, Commerce and the Commission may employ adverse inferences about the information to ensure that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully. 30 SAA at 869-70, reprinted in 1994 U.S.C.C.A.N. 4040, 4198-99. Thus, the legislative history mirrors the language in the statute by recognizing that: (1) Commerce must use facts otherwise available when requested information is missing and (2) Commerce may impose an adverse inference after determining that a respondent has not been fully cooperative or has failed to act to the best of its ability in gathering information. 31 The statute does not provide an express definition of the best of its ability. None of the parties argue that the language is ambiguous. Rather, they each dispute the plain meaning of the phrase. Appellants argue that the statute requires Commerce to determine (1) the best of [the respondent's] ability and (2) whether the respondent has met that standard. NSC criticizes that test, claiming that it amounts to a perfection standard. We disagree. The ordinary meaning of best means one's maximum effort, as in do your best. Webster's New Collegiate Dictionary 104 (1981). Ability refers to the quality or state of being able, especially physical, mental, or legal power to perform. Id. at 2. Thus, the statutory mandate that a respondent act to the best of its ability requires the respondent to do the maximum it is able to do. 32 Before making an adverse inference, Commerce must examine respondent's actions and assess the extent of respondent's abilities, efforts, and cooperation in responding to Commerce's requests for information. Compliance with the best of its ability standard is determined by assessing whether respondent has put forth its maximum effort to provide Commerce with full and complete answers to all inquiries in an investigation. While the standard does not require perfection and recognizes that mistakes sometimes occur, it does not condone inattentiveness, carelessness, or inadequate record keeping. It assumes that importers are familiar with the rules and regulations that apply to the import activities undertaken and requires that importers, to avoid a risk of an adverse inference determination in responding to Commerce's inquiries: (a) take reasonable steps to keep and maintain full and complete records documenting the information that a reasonable importer should anticipate being called upon to produce; (b) have familiarity with all of the records it maintains in its possession, custody, or control; and (c) conduct prompt, careful, and comprehensive investigations of all relevant records that refer or relate to the imports in question to the full extent of the importers' ability to do so. 33 The Court of International Trade concluded that [t]he fact that NSC did not make appropriately timely submissions as a result of inadequate inquiries ... only provides sufficient basis for the use of facts available pursuant to 19 U.S.C. § 1677e(a)(2)(B). Nippon II, 146 F.Supp.2d at 839. We disagree with that interpretation because it is predicated on an unduly stringent interpretation of 1677e(b) and, thus, fails to appreciate the proofs needed to trigger an adverse inference. To conclude that an importer has not cooperated to the best of its ability and to draw an adverse inference under section 1677e(b), Commerce need only make two showings. First, it must make an objective showing that a reasonable and responsible importer would have known that the requested information was required to be kept and maintained under the applicable statutes, rules, and regulations. See Ta Chen, 298 F.3d at 1336 (holding that Commerce reasonably expected importer to preserve records of accused antidumping activity). Second, Commerce must then make a subjective showing that the respondent under investigation not only has failed to promptly produce the requested information, but further that the failure to fully respond is the result of the respondent's lack of cooperation in either: (a) failing to keep and maintain all required records, or (b) failing to put forth its maximum efforts to investigate and obtain the requested information from its records. An adverse inference may not be drawn merely from a failure to respond, but only under circumstances in which it is reasonable for Commerce to expect that more forthcoming responses should have been made; i.e., under circumstances in which it is reasonable to conclude that less than full cooperation has been shown. While intentional conduct, such as deliberate concealment or inaccurate reporting, surely evinces a failure to cooperate, the statute does not contain an intent element. Inadequate inquiries may suffice. The statutory trigger for Commerce's consideration of an adverse inference is simply a failure to cooperate to the best of respondent's ability, regardless of motivation or intent. 34 The Court of International Trade's requirement that Commerce show that NSC made more than a simple mistake or exercised a lack of due regard for its responsibilities in the investigation is likewise not supported by the statute. NSC suggests that under the facts of this case, Commerce should have evaluated NSC's overall pattern of behavior, examined the reasons for the initial mistake and subsequent correction, considered the inordinate pressures placed on NSC by Commerce's accelerated investigation schedule, and permitted NSC to explain the extenuating circumstances related to its initial response. Commerce certainly could have done that; however, section 1677e(b) does not by its terms set a willfulness or reasonable respondent standard, nor does it require findings of motivation or intent. Simply put, there is no mens rea component to the section 1677e(b) inquiry. Rather, the statute requires a factual assessment of the extent to which a respondent keeps and maintains reasonable records and the degree to which the respondent cooperates in investigating those records and in providing Commerce with the requested information. In preparing a response to an inquiry from Commerce, it is presumed that respondents are familiar with their own records. It is not an excuse that the employee assigned to prepare a response does not know what files exist, or where they are kept, or did not think—through inadvertence, neglect, or otherwise to look beyond the files immediately available. 35 In this case, it is undisputed that NSC triggered section 1677e(a) by failing to timely provide the conversion factor data to Commerce. The issue is whether NSC triggered section 1677e(b). Under the proper standard, substantial evidence supports Commerce's conclusion that NSC failed to act to the best of its ability in acquiring the conversion factor data. Commerce asked NSC for the data, and NSC responded that the information was not necessary for the investigation. Commerce asked again, and NSC responded that the information did not exist. Commerce concluded that NSC failed to act to the best of its ability and assigned an adverse margin to sales made by NSC upon a theoretical weight. Three days after assigning the adverse margin, NSC produced the information Commerce requested. NSC later explained that it never asked the actual factories for the information, and once it did, it was able to provide that information to Commerce. 36 Following the first remand in this case, Commerce set forth its opinion as to what efforts NSC could have put forth to comply with the best of its ability standard and concluded that NSC did not meet that standard in this case. 37 A reasonable respondent, acting to the best of its ability to comply with the Department's request for such [conversion factor data], would minimally have contacted the factory, where the steel coils were produced and where weighing was most likely to take place, to determine whether they were weighed and the weight data maintained. A reasonable respondent would have attempted to obtain the data when it was first requested, or at least when it was requested for the second time, rather than telling the Department, without any factual basis to support such a claim, that the respondent did not believe the Department needed the information. With respect to this issue, NSC was not acting as a reasonable respondent nor was it acting to the best of its ability, as required by the statute. 38 Final Results of Redetermination Pursuant to Court Remand at 5 (Dec. 8, 2000). The second step of the test we set forth is subjective. While Commerce framed its response as an objective inquiry, Commerce's opinion of the level of cooperation this reasonable respondent provided was clearly a subjective assessment of NSC's abilities. The response refers to NSC's failure to look for the information at the factories and its initial insistence that Commerce did not actually need the requested information. Using different language, Commerce made the two showings required by the statute. First, Commerce showed, and NSC has not disputed, that the requested conversion factor data is the type of information required to be kept. Second, Commerce determined that NSC was able, but failed to fully investigate and obtain the requested information from the records kept by NSC at the factories where the steel was made. 39 Because Commerce properly concluded that NSC failed to act to the best of its ability, Commerce's decision to apply an adverse inference was in accordance with law. 19 U.S.C. § 1677e(b). Commerce properly returned the untimely conversion factor data to NSC. See 19 C.F.R. § 351.302(d)(1) (1999) ([T]he Secretary will not consider or retain in the official record of the proceeding ... [u]ntimely filed factual information....). We need not reach the issue of whether, on remand, Commerce was precluded from evaluating the effects of the missing data because of the prohibition of using factual information returned to the respondent under 19 C.F.R. § 351.104. Thus, we vacate as moot the Court of International Trade's holding that 19 C.F.R. § 351.104(a) is not in accordance with law. 40 C. Use of Yen as the Starting Price for U.S. Sales 41 The next issue is whether Commerce's calculation of the starting price of NSC's U.S. sales is supported by substantial evidence and otherwise in accordance with law. Unlike the adverse inference issue, Commerce is aligned with NSC rather than Bethlehem on this issue. Bethlehem argues that the correct starting price is the gross price stated in U.S. dollars on NSC's sales invoices. Commerce argues, and NSC agrees, that the starting price should be calculated by taking the net yen price actually received by NSC and converting it to dollars at the exchange rate effective on the shipment date. We hold that Commerce's methodology was not in accordance with law. 42 The starting price is a component of the export price, which is explicitly defined in 19 U.S.C. § 1677a(a): 43 The term export price means the price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to the United States, as adjusted under subsection (c) of this section. 44 If the starting price is not in U.S. dollars, then Commerce is required to convert the starting price to dollars using the exchange rate in effect on the date of sale of the subject merchandise.... 19 U.S.C. § 1677b-1(a) (2000). Under the facts of this case, Commerce's methodology conflicts with the plain language of the statute. 45 NSC and its customers agreed to a sales price in U.S. dollars. On the date of sale (the day the merchandise was shipped), the only price agreed to by the buyer and seller was the U.S. dollar price. The U.S. customer then paid NSC an amount of yen equal to the agreed upon U.S. net price based on the exchange rate in effect on the ninth day following shipment. Depending on the direction of exchange rate fluctuations between the shipping date and nine days following that, either the buyer or seller would benefit from the change, but the sales price in U.S. dollars remained constant. 46 The methodology employed by Commerce requires that the agreed U.S. dollar sales price be converted twice. The first conversion used by Commerce is the conversion from the U.S. dollar sales price to yen at the exchange rate effective on the ninth day following shipping. The second conversion is the conversion from yen back to U.S. dollars at the exchange rate effective on the day of shipment. Commerce argues that its methodology is a better reflection of what NSC actually charges for steel. The net yen amount found on the invoices is the amount of money actually received from the customer. We are sympathetic to Commerce's position. As a policy matter, Commerce's interpretation is appealing. However, because the language of the statute is unambiguous, this is not an area where the agency is afforded deference for its interpretation of the statute. The only price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation is the U.S. dollar price found on the invoice. Commerce's methodology uses a price determined nine days after the merchandise is first sold. The unambiguous language of the statute does not allow that, and the Court of International Trade erred by affirming Commerce's methodology.