Court Opinion

ID: 6498094
Source: CourtListenerOpinion
Date Created: 2022-07-06 15:00:56.456178+00
Date Added: 2024-06-11T08:50:42.134909
License: Public Domain

Case: 21-2067   Document: 84     Page: 1   Filed: 07/06/2022

   United States Court of Appeals
       for the Federal Circuit
                 ______________________

     SHANXI HAIRUI TRADE CO., LTD., SHANXI
   PIONEER HARDWARE INDUSTRIAL CO., LTD.,
    SHANXI YUCI BROAD WIRE PRODUCTS CO.,
       LTD., DEZHOU HUALUDE HARDWARE
      PRODUCTS CO., LTD., XI’AN METALS &
     MINERALS IMPORT & EXPORT CO., LTD.,
                Plaintiffs-Appellants

                            v.

    UNITED STATES, MID CONTINENT STEEL &
                  WIRE, INC.,
              Defendants-Appellees
             ______________________

            2021-2067, 2021-2068, 2021-2070
                ______________________

    Appeals from the United States Court of International
 Trade in No. 1:19-cv-00072-LMG, Senior Judge Leo M.
 Gordon.
                 ______________________

                  Decided: July 6, 2022
                 ______________________

     STEPHEN W. BROPHY, Husch Blackwell LLP, Washing-
 ton, DC, argued for plaintiffs-appellants Shanxi Hairui
 Trade Co., Ltd., Shanxi Pioneer Hardware Industrial Co.,
 Ltd., Shanxi Yuci Broad Wire Products Co., Ltd., Xi'An
 Metals & Minerals Import & Export Co., Ltd. Shanxi
 Hairui Trade Co., Ltd., Shanxi Pioneer Hardware
Case: 21-2067    Document: 84     Page: 2   Filed: 07/06/2022

 2                        SHANXI HAIRUI TRADE CO., LTD.   v. US

 Industrial Co., Ltd., Shanxi Yuci Broad Wire Products Co.,
 Ltd. also represented by JEFFREY S. NEELEY.

     BRITTNEY RENEE POWELL, Fox Rothschild LLP, Wash-
 ington, DC, argued for plaintiff-appellant Dezhou Hualude
 Hardware Products Co., Ltd. Also represented by LIZBETH
 ROBIN LEVINSON, RONALD MARK WISLA.

    GREGORY S. MENEGAZ, DeKieffer & Horgan, PLLC,
 Washington, DC, for plaintiff-appellant Xi'An Metals &
 Minerals Import & Export Co., Ltd. Also represented by
 JAMES KEVIN HORGAN, ALEXANDRA H. SALZMAN.

     SOSUN BAE, Commercial Litigation Branch, Civil Divi-
 sion, United States Department of Justice, Washington,
 DC, argued for defendant-appellee United States. Also
 represented by BRIAN M. BOYNTON, JEANNE DAVIDSON,
 PATRICIA M. MCCARTHY; AYAT MUJAIS, International Office
 of the Chief Counsel for Trade Enforcement & Compliance,
 United States Department of Commerce, Washington, DC.

     ADAM H. GORDON, The Bristol Group PLLC, Washing-
 ton, DC, argued for defendant-appellee Mid Continent
 Steel & Wire, Inc. Also represented by LAUREN FRAID,
 JENNIFER MICHELE SMITH.
                 ______________________

  Before MOORE, Chief Judge, NEWMAN and STOLL, Circuit
                        Judges.
 MOORE, Chief Judge.
     Appellants challenge two aspects of the Court of Inter-
 national Trade’s decision affirming the Department of
 Commerce’s ninth administrative review of its antidump-
 ing order regarding certain steel nails from China. Shanxi
 Hairui Trade Co. v. United States, 503 F. Supp. 3d 1307
 (Ct. Int’l Trade 2021). Shanxi Yuci Broad Wire Products
 Co., Shanxi Hairui Trade Co., Shanxi Pioneer Hardware
Case: 21-2067      Document: 84      Page: 3     Filed: 07/06/2022

 SHANXI HAIRUI TRADE CO., LTD.   v. US                          3

 Industrial Co., (collectively, Shanxi) and Xi’an Metals &
 Minerals Import & Export Co. (Xi’an) appeal Commerce’s
 calculation of the all-others rate applicable to separate-rate
 exporters.    Dezhou Hualude Hardware Products Co.
 (Dezhou) and Xi’an appeal Commerce’s application of par-
 tial adverse facts available (AFA) to Dezhou. For the fol-
 lowing reasons, we affirm.
                          BACKGROUND
     In its ninth administrative review of its antidumping
 order regarding certain steel nails from China, Commerce
 relied on AFA in calculating antidumping rates for two
 mandatory respondents. For Shandong Dinglong Import &
 Export Co. (Shandong Dinglong), Commerce relied on total
 AFA to compute a rate of 118.04% because Shandong Din-
 glong did not cooperate at all with Commerce’s investiga-
 tion. For Dezhou, Commerce relied on partial AFA to
 compute a rate of 69.99% because it found that Dezhou’s
 supplier engaged in a fraudulent transshipment scheme
 and that this misconduct was attributable to Dezhou.
     Commerce then used those AFA-based rates to com-
 pute its all-others rate (i.e., the rate applied to all exporters
 of the subject merchandise who requested a separate rate
 but whom Commerce did not select as mandatory respond-
 ents). The Trade Court affirmed. Appellants appeal. We
 have jurisdiction under 28 U.S.C. § 1295(a)(5).
                          DISCUSSION
     We apply the same standard of review as the Trade
 Court, upholding determinations by Commerce that are
 supported by substantial evidence and otherwise in accord-
 ance with law. Nan Ya Plastics Corp. v. United States, 810
 F.3d 1333, 1341 (Fed. Cir. 2016) (citing 19
 U.S.C. § 1516a(b)(1)(B)(i)).
      Appellants challenge Commerce’s determination of the
 all-others rate, arguing it was improper to base that rate
 in part on total AFA. Appellants further challenge
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 4                          SHANXI HAIRUI TRADE CO., LTD.   v. US

 Commerce’s determination of Dezhou’s individual rate.
 They argue Dezhou’s supplier did not engage in a fraudu-
 lent transshipment scheme, and, even if it did, such mis-
 conduct does not warrant the use of AFA against Dezhou.
 We affirm Commerce’s determinations.
                                I
     Ordinarily, Commerce determines an individual dump-
 ing margin for each known exporter of merchandise subject
 to antidumping duties. 19 U.S.C. § 1677f–1(c)(1). If, how-
 ever, that is impracticable because there is a large number
 of exporters, Commerce may instead limit its examination
 to a subset of exporters it refers to as mandatory respond-
 ents. 19 U.S.C. § 1677f–1(c)(2). For exporters who are not
 examined, Commerce assigns an all-others dumping mar-
 gin based on the margins Commerce determines for the
 mandatory respondents.
     During an initial investigation, Commerce must gener-
 ally set the all-others rate equal to the weighted average of
 the mandatory respondents’ individual dumping margins,
 “excluding any . . . margins determined entirely [on AFA].”
 19 U.S.C. § 1673d(c)(5)(A) (emphasis added). No such pro-
 vision exists in the statutes governing administrative re-
 views, however. See 19 U.S.C. §§ 1675–1675c.
      Here, Commerce interpreted the statutory scheme to
 permit the use of AFA-based margins to calculate the all-
 others rate in administrative reviews. We review Com-
 merce’s interpretation and application of statute under the
 two-step framework set forth in Chevron, U.S.A., Inc. v.
 National Resources Defense Council, Inc., 467 U.S. 837
 (1984). At Chevron step one, we determine “whether Con-
 gress has directly spoken to the precise question at issue.”
 Id. at 842. “If the intent of Congress is clear,” we give effect
 to that intent. Id. at 842–43. But if “the statute is silent
 or ambiguous with respect to the specific issue,” we proceed
 to step two of the Chevron framework, where we determine
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 SHANXI HAIRUI TRADE CO., LTD.   v. US                       5

 “whether the agency’s answer is based on a permissible
 construction of the statute.” Id. at 843.
                                 A

      At Chevron step one, we conclude that Congress has
 not directly spoken to whether Commerce may use AFA-
 based margins to compute all-others rates in administra-
 tive reviews. While § 1673d(c)(5)(A) expressly applies to
 investigations, the statute is silent with regard to admin-
 istrative reviews and non-market economy (NME) export-
 ers. See 19 U.S.C. § 1673d(c)(5)(A); Yangzhou Bestpak
 Gifts & Crafts Co. v. United States, 716 F.3d 1370, 1377–
 78 (Fed. Cir. 2013) (recognizing that § 1673d does not apply
 to NME proceedings). Moreover, § 1673d(c)(5)(A) states
 that its restriction on using AFA-based margins is “[f]or
 purposes of this subsection and section 1673b(d) of this ti-
 tle.” 19 U.S.C. § 1673d(c)(5)(A) (emphases added). Those
 sections concern determinations made during investiga-
 tions, not administrative reviews. And the statute govern-
 ing administrative reviews contains no such restriction.
 See 19 U.S.C. §§ 1675–1675c.              By not extend-
 ing § 1673d(c)(5)(A)’s restriction on using AFA-based mar-
 gins to administrative reviews, Congress “left a gap for
 [Commerce] to fill.” See Chevron, 467 U.S. at 843. Thus,
 under Chevron step one, we conclude that the statute is si-
 lent, 1 and we turn to Chevron step two to determine if the
 agency’s gap filling is reasonable.

     1   Appellants cite Albemarle Corp. & Subsidiaries v.
 United States in which we stated “the statutory framework
 contemplates that Commerce will employ the same meth-
 ods for calculating a separate rate in periodic administra-
 tive reviews as it does in initial investigations.” 821 F.3d
 1345, 1352 (Fed. Cir. 2016). But Albemarle recognized
 that “§ 1673d applies on its face only to investigations, not
 periodic administrative reviews” and only to investigations
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 6                         SHANXI HAIRUI TRADE CO., LTD.   v. US

                              B

     At Chevron step two, we ask whether Commerce rea-
 sonably filled the gap Congress left open as to the appro-
 priate methodology for calculating the all-others rate in an
 administrative review. In answering that question, we rec-
 ognize that Commerce is the “master of antidumping law”
 and has technical expertise in the “complex economic and
 accounting decisions” required in administering the statu-
 tory scheme. PSC VSMPO-Avisma Corp. v. United States,
 688 F.3d 751, 764 (Fed. Cir. 2012) (internal citation omit-
 ted). We therefore defer to its interpretation of the statute
 when implementing its antidumping duty methodology un-
 less it is “arbitrary, capricious, or manifestly contrary to
 statute.” Id. (quoting Chevron, 467 U.S. at 843–44). We
 also presume Commerce’s methodology used in its calcula-
 tions is correct. Id. (internal citation omitted). We con-
 clude that Commerce’s methodology for calculating the all-
 others rate was not contrary to statute and reasonable.
     In 2013, Commerce promulgated a new policy for cal-
 culating all-others rates in administrative reviews for
 NME entities. Antidumping Proceedings: Announcement
 of Change in Department Practice for Respondent Selec-
 tion in Antidumping Duty Proceedings and Conditional Re-
 view of the Nonmarket Economy Entity in NME
 Antidumping Duty Proceedings, 78 Fed. Reg. 65,963–64
 (Nov. 4, 2013). Under the new policy, Commerce calculates
 the all-others rate based on the individual dumping mar-
 gins not of the largest-volume exporters, as Commerce had
 historically done under § 1677f–1(c)(2)(B), but rather of a
 representative sample of exporters selected under § 1677f–
 1(c)(2)(A). Commerce explained that the largest-exporter

 of companies in market economies. Id. at 1352 & n.6 (em-
 phasis added). To the extent that our decision in Albemarle
 speaks at all to Chevron step one, it recognizes that the
 statute is silent.
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 SHANXI HAIRUI TRADE CO., LTD.   v. US                       7

 method “effectively . . . excluded from individual examina-
 tion” small-volume exporters, which “creates a potential
 enforcement concern . . . because, as exporters accounting
 for smaller volumes of subject merchandise become aware
 that they are effectively excluded from individual examina-
 tion . . . , they may decide to lower their prices.” Id. at
 65,964. Commerce further explained that “[s]ampling such
 companies under section [1677f–1(c)(2)(A)] . . . address[es]
 this enforcement concern.” Id.
     Commerce’s findings in the eight administrative re-
 views preceding the present one confirmed its enforcement
 concerns. Commerce consistently found that respondents
 other than Stanley, one of the largest exporters, “either ob-
 tained a much higher calculated margin, did not qualify for
 a separate rate, or were otherwise non-cooperative and re-
 ceived a margin based on total AFA.” J.A. 393. Indeed,
 during those reviews, it calculated an average margin of
 7.02% for Stanley and 105.71% for all other respondents.
 Id. That “large disparity,” in Commerce’s view, reinforced
 the need to follow the new policy and base the all-others
 rate on a representative sample of exporters, rather than
 the largest-volume exporters. Id. We cannot say that was
 unreasonable.
     Nor can we say it was unreasonable for Commerce to
 rely on AFA-based margins in implementing the new pol-
 icy. Commerce correctly noted that in other contexts the
 statutes it administers permit using AFA-based margins to
 calculate all-others rates.          J.A. 395 (citing 19
 U.S.C. § 1673d(c)(5)(B)). It also reasoned that “excluding
 AFA rates from the sample rate would give respondents the
 ability to manipulate the all[-]others rate,” as evidenced by
 the large disparity between Stanley’s 3.94% rate and the
 other mandatory respondents’ rates. Id.; see J.A. 436. As
 mentioned, Commerce found in previous reviews that
 Stanley is not a representative exporter of the subject mer-
 chandise. And it reiterated that concern here. J.A. 397
 (“Commerce finds that it is appropriate in this review to
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 8                          SHANXI HAIRUI TRADE CO., LTD.   v. US

 include all rates to address concerns that the average . . .
 dumping margins for the largest exporter (i.e., Stanley) dif-
 fers from the remaining exporters.”). Under these circum-
 stances, Commerce’s use of AFA-based margins to
 calculate the all-others rate was reasonable.
      Albemarle is also distinguishable at step two and does
 not control here. There, Commerce used data from a sec-
 ond review to impose an above de minimis margin to sepa-
 rate rate exporters in a third review despite Commerce’s
 determination of de minimis margins for the mandatory re-
 spondents in the third review. 821 F.3d at 1353–56. We
 concluded that it was unreasonable to deviate from Con-
 gress’ “preferred” method of calculating separate rates us-
 ing contemporaneous de minimis rates where Commerce
 had “no evidence . . . that averaging the de minimis mar-
 gins . . . in the third review . . . would not have been reflec-
 tive of” the separate rate exporters. Id at 1354–56. In this
 case, Commerce has demonstrated that averaging the larg-
 est exporters and excluding AFA-based rates instead of
 sampling and including AFA-based rates would not be re-
 flective of the economic realities of the export activity. In-
 deed, Commerce adopted a new sampling methodology
 because it found that smaller exporters were behaving dif-
 ferently than larger exporters and that AFA-based margins
 yield an all-others rate representative of the exporters as a
 whole. See, e.g., J.A. 397. Therefore, Commerce’s use of
 AFA here was reasonable based on the evidence that its
 method was reflective of the export behavior. See Albe-
 marle, 821 F.3d at 1359 (explaining that Commerce could
 have deviated from de minimis method if it had “some evi-
 dence” that data from previous reviews continued to be re-
 flective of current practices).
                                II
    We turn now to Commerce’s use of partial AFA against
 Dezhou. Commerce found that Dezhou’s supplier, Tianjin
 Lingyu (Lingyu), engaged in a fraudulent transshipment
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 SHANXI HAIRUI TRADE CO., LTD.   v. US                       9

 scheme by falsely labeling the country of origin on its prod-
 ucts. As a result, Commerce found that neither Lingyu nor
 Dezhou cooperated with the review and applied partial
 AFA in computing Dezhou’s individual dumping margin
 under 19 U.S.C. § 1677e(a), (b). Appellants argue that
 Lingyu did not commit fraud and, even if it did, that
 Lingyu’s conduct cannot be attributed to Dezhou for pur-
 poses of the dumping margin calculation. We conclude
 Commerce’s finding that Lingyu engaged in a fraudulent
 transshipment scheme while in a significant supplier-cus-
 tomer relationship with Dezhou is supported by substan-
 tial evidence, and Commerce’s calculation of Dezhou’s
 dumping margin based on partial AFA is reasonable.
     If Commerce finds that an exporter (1) provided infor-
 mation that cannot be verified or significantly impeded the
 examination, and (2) that exporter “failed to cooperate by
 not acting to the best of its ability to comply with a request
 for information,” Commerce may rely on AFA.                19
 U.S.C. § 1677e(a)(2)(C)–(D), (b)(1)(A); see Papierfabrik
 Aug. Koehler SE v. United States, 843 F.3d 1373, 1378–79
 (Fed. Cir. 2016). Failing to cooperate may be found if the
 respondent fails “to do the maximum it is able to do.” Nip-
 pon Steel Corp. v. United States, 337 F.3d 1373, 1382 (Fed.
 Cir. 2003) (emphasis added).
     Substantial evidence supports Commerce’s determina-
 tion that Lingyu impeded a proceeding and provided un-
 verifiable information, as well as failed to cooperate with
 the proceedings. During a verification tour of one of
 Lingyu’s facilities, Commerce photographed boxes of nails
 destined for the United States mislabeled “[m]ade in Thai-
 land.” J.A. 365–69, 405. This is evidence of a fraudulent
 transshipment scheme, which supports Commerce’s deter-
 mination that Lingyu impeded the proceeding. Papierf-
 abrik, 843 F.3d at 1379 (holding that evidence of
 transshipment scheme caused “omission that impeded in-
 vestigation”). Further, the transshipment scheme directly
 undermines the reliability of all information Lingyu
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 10                         SHANXI HAIRUI TRADE CO., LTD.   v. US

 provided to commerce regarding Dezhou so that it cannot
 be verified under 19 U.S.C. § 1677e(a)(2)(D). See Papierf-
 abrik, 843 F.3d at 1379 (“[F]raudulent responses as to part
 of submitted data may suffice to support a refusal by Com-
 merce to rely on any of that data in calculating the anti-
 dumping duty.” (emphases added)).
     It was reasonable for Commerce to attribute Lingyu’s
 transshipment fraud to Dezhou and determine that
 Dezhou failed to cooperate with Commerce because of their
 significant supplier-customer relationship. See Mueller
 Comercial de Mexico v. United States, 753 F.3d 1227, 1233
 (Fed. Cir. 2014) (holding that Commerce may attribute un-
 cooperative supplier’s conduct to cooperating respondent’s
 dumping margins). Based on sales data provided to Com-
 merce, there is substantial evidence that Dezhou’s pur-
 chases account “for a significant portion of . . . Lingyu’s
 total production quantity”; and Lingyu’s supply of nails ac-
 counts for a significant portion of Dezhou’s sales. J.A. 405.
 And Commerce’s conclusion that Dezhou did not cooperate
 to the best of its ability by failing to leverage its relation-
 ship with Lingyu to prevent transshipment fraud was not
 unreasonable. Mueller, 753 F.3d at 1233; see Ad Hoc
 Shrimp Trade Action Comm. v. United States, 802 F.3d
 1339, 1356 (Fed. Cir. 2015) (affirming a determination that
 misrepresentations call into question accuracy of remain-
 ing information).      Indeed, Commerce’s attribution of
 Lingyu’s transshipment fraud to Dezhou, who is the party
 best suited to influence compliance, promotes Commerce’s
 directive to remedy dumping harms and to protect the ad-
 ministrative process. See Mueller, 753 F.3d at 1235. In
 sum, substantial evidence supports Commerce’s findings
 regarding Lingyu’s conduct and its relationship to Dezhou.
 And Commerce’s partial-AFA determination for Dezhou’s
 dumping margin based on those findings is reasonable.
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 SHANXI HAIRUI TRADE CO., LTD.   v. US                     11

                        CONCLUSION
      Commerce did not err. Commerce’s use of AFA rates to
 determine the all-others rate was reasonable. And it rea-
 sonably applied partial-AFA rates to mandatory respond-
 ent Dezhou based on substantial evidence that Dezhou’s
 supplier had engaged in a fraudulent transshipment
 scheme. We affirm the Court of International Trade’s de-
 cision sustaining Commerce’s dumping order.
                        AFFIRMED
                           COSTS
 Appellants shall bear costs.