Court Opinion

ID: 9555352
Source: CourtListenerOpinion
Date Created: 2023-08-11 19:01:14.807528+00
Date Added: 2024-06-11T15:42:29.176569
License: Public Domain

Slip Op. No. 23-113

          UNITED STATES COURT OF INTERNATIONAL TRADE

ELLWOOD CITY FORGE CO.,
ELLWOOD NATIONAL STEEL CO.,
ELLWOOD QUALITY STEELS CO.,
and A. FINKL & SONS,

                Plaintiffs,

v.                                             Before: Stephen Alexander Vaden,
                                                               Judge
UNITED STATES,
                                               Court No. 21-00007
                Defendant,

       and

BHARAT FORGE LTD.,

                Defendant-Intervenor.

                                    OPINION

[Granting Plaintiffs’ Motion for Judgment on the Agency Record and remanding to
Commerce with instructions to comply with Regents]

                                                         Dated: August 11, 2023

Jack A. Levy, Cassidy Levy Kent (USA) LLP, of Washington, DC, for Plaintiffs
Ellwood City Forge Co., Ellwood National Steel Co., Ellwood Quality Steels Co., and
A. Finkl & Sons. With him on the brief were Thomas M. Beline, Myles S. Getlan,
James E. Ransdell, IV, and Nicole Brunda.

Sarah E. Kramer, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, for Defendant United States. With her on
the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General,
Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, W. Mitch
Purdy, Of Counsel, Office of the Chief Counsel for Trade Enforcement and
Compliance, U.S. Department of Commerce.
Court No. 21-00007                                                                Page 2

Lizbeth R. Levinson, Fox Rothschild LLP, of Washington, DC, for Defendant-
Intervenor Bharat Forge Limited. With her on the brief was Brittany Renee Powell
and Ronald M. Wisla.

      Vaden, Judge: Plaintiffs Ellwood City Forge Co., Ellwood National Steel Co.,

Ellwood Quality Steels Co., and A. Finkl & Sons (collectively, Ellwood City) challenge

Defendant Department of Commerce’s (Commerce) Final Determination as modified

by the results following the requested voluntary remand in its antidumping

investigation of forged steel fluid end blocks from India. Pls.’ Revised Mot. for J. on

the Agency R. at 1 (Pls.’ Revised Mot.), ECF No. 33; see Forged Steel Fluid End Blocks

from India: Final Negative Determination of Sales at Less Than Fair Value (Negative

Determination),   85   Fed.     Reg.   80,003   (Dec.   11,   2020);   Final   Results   of

Redetermination Pursuant to Court Remand (Remand Results), ECF No. 29. Ellwood

City argues that substantial evidence fails to support Commerce’s determination that

Defendant-Intervenor Bharat Forge Ltd. (Bharat) did not dump forged steel fluid end

blocks at less than fair value and that Commerce did not comply with its statutory

obligation to conduct on-site verification. Pls.’ Revised Mot. at 1–3, ECF No. 42. For

the reasons set forth below, the Court GRANTS Plaintiffs’ Motion for Judgment on

the Agency Record and REMANDS the case to Commerce for further proceedings

consistent with this opinion.
Court No. 21-00007                                                            Page 3

                                     BACKGROUND

      The products at issue in this case are forged steel fluid end blocks produced in

India for import into the United States.          Commerce described the covered

merchandise in its announcement of the investigation’s initiation:

             The products covered by this investigation are forged steel
             fluid end blocks (fluid end blocks), whether in finished or
             unfinished form, and which are typically used in the
             manufacture or service of hydraulic pumps.

             The term ‘‘forged’’ is an industry term used to describe the
             grain texture of steel resulting from the application of
             localized compressive force. Illustrative forging standards
             include, but are not limited to, American Society for
             Testing and Materials (ASTM) specifications A668 and
             A788. . . .

             The products covered by this investigation are: (1) Cut-to
             length fluid end blocks with an actual height (measured
             from its highest point) of 8 inches (203.2 mm) to 40 inches
             (1,016.0 mm), an actual width (measured from its widest
             point) of 8 inches (203.2 mm) to 40 inches (1,016.0 mm),
             and an actual length (measured from its longest point) of
             11 inches (279.4 mm) to 75 inches (1,905.0 mm); and (2)
             strings of fluid end blocks with an actual height (measured
             from its highest point) of 8 inches (203.2 mm) to 40 inches
             (1,016.0 mm), an actual width (measured from its widest
             point) of 8 inches (203.2 mm) to 40 inches (1,016.0 mm),
             and an actual length (measured from its longest point) up
             to 360 inches (9,144.0 mm). . . .

             A fluid end block may be imported in finished condition
             (i.e., ready for incorporation into a pump fluid end
             assembly without further finishing operations) or
             unfinished condition (i.e., forged but still requiring one or
             more finishing operations before it is ready for
             incorporation into a pump fluid end assembly). Such
             finishing operations may include: (1) Heat treating; (2)
             milling one or more flat surfaces; (3) contour machining to
Court No. 21-00007                                                              Page 4

             custom shapes or dimensions; (4) drilling or boring holes;
             (5) threading holes; and/or (6) painting, varnishing, or
             coating.

Forged Steel Fluid End Blocks from the Federal Republic of Germany, India, and

Italy: Initiation of Less-Than-Fair-Value Investigations (Initiation of Investigations),

85 Fed. Reg. 2,394, 2,399 (Jan. 15, 2020).

               I.     The Disputed Final Determination

      On December 19, 2019, Ellwood City petitioned Commerce to initiate an

antidumping investigation into the importation of forged steel fluid end blocks from

Germany, India, and Italy. Initiation of Investigations, 85 Fed. Reg. 2,394. Bharat,

an Indian producer and exporter of fluid end blocks, was selected as a respondent in

the petition that initiated the investigation. Id. at 2,397–98. Commerce sent Bharat

a standard antidumping questionnaire on January 22, 2020. Decision Memorandum

for the Preliminary Negative Determination at 3 (PDM), J.A. at 4,179, ECF No. 43.

The agency issued further supplemental questionnaires to Bharat from March to July

2020; and Bharat, with the grant of some extensions, submitted timely responses. Id.

      Bharat’s responses were vital to Commerce’s determination of the

antidumping margin because there is no domestic Indian market for fluid end blocks.

Consequently, Commerce calculated the dumping margin using the constructed value

of the goods in question, encompassing Bharat’s costs of production, sales figures,

general and administrative expenses, and profits. See 19 U.S.C. § 1677b(e); PDM at

4, J.A. at 4,180, ECF No. 43; Commerce Antidumping Questionnaire at Section D
Court No. 21-00007                                                            Page 5

(Jan. 22, 2020), J.A. 80,098–117, ECF. No. 44. In response to Bharat’s answers to

Commerce’s initial questionnaire, Ellwood City filed comments challenging Bharat’s

submissions and alleging that Bharat had failed to cooperate. Deficiency Comments

Concerning Section D Questionnaire Response of Bharat Forge (Section D Deficiency

Comments) at 1–43, J.A. 83,140–83 (Apr. 7, 2020), ECF No. 44; Petitioners’

Comments in Advance of the Preliminary Determination at 11–38 (Jan. 24, 2020),

J.A. at 83,228–66, ECF No. 44.

      During the period in which Bharat submitted its questionnaire responses, the

World Health Organization classified COVID-19 as a pandemic. WHO Director-

General’s opening remarks at the media briefing on COVID-19 - 11 March 2020,

WORLD HEALTH ORGANIZATION (Mar. 11, 2020), https://bit.ly/3Ed8Fdj. On March 15,

2020, the Department of Commerce issued an agency-wide memo prohibiting all

travel not “mission-critical and pre-approved by senior bureau leadership.” DEP’T OF

COMMERCE,         All       Hands:        Coronavirus         Update        (3-16-20),

https://bit.ly/commercecoronavirus. The Centers for Disease Control issued a Level

4 travel advisory, urging all U.S. citizens to avoid international travel on March 31,

2020. CENTERS FOR DISEASE CONTROL AND PREVENTION, Global Level 4 Health

Advisory: Do Not Travel (Mar. 31, 2020). During this period, Petitioners repeatedly

noted that there was uncertainty surrounding Commerce’s ability to conduct an

effective on-site verification. See, e.g., Section D Deficiency Comments at 2, J.A. at
Court No. 21-00007                                                             Page 6

83,141, ECF No. 44; Deficiency Comments on Bharat Forge Limited’s Supplemental

Section A Questionnaire Response at 2 (Apr. 27, 2020), J.A. at 87,573, ECF No. 44.

      On March 26, 2020, Commerce postponed issuance of the results of the

preliminary investigation until July 16, 2020. See Forged Steel Fluid End Blocks

from the Federal Republic of Germany, India and Italy: Postponement of Preliminary

Determinations in the Less-Than-Fair-Value Investigations, 85 Fed. Reg. 17,042

(Mar. 26, 2020). Based on the initial information gathered from Bharat, Commerce

issued a Preliminary Negative Determination of Sales at Less Than Fair Value with

the preliminary dumping margin for Bharat set at zero. Forged Steel Fluid End

Blocks from India: Preliminary Negative Determination of Sales at Less Than Fair

Value, Postponement of Final Determination (Preliminary Determination), 85 Fed.

Reg. 44,517–18 (July 23, 2020). Commerce also stated that it “intends to verify the

information relied upon in making its final determination concerning the estimated

weighted-average dumping margin calculated for Bharat.” Id. at 44,518.

      In response to Commerce’s preliminary determination, Ellwood City filed

comments proposing two alternatives:        Either (1) Commerce should disregard

Bharat’s inaccurate cost allocations, cancel verification, and apply adverse inferences

drawn from facts otherwise available to the entirety of Bharat’s submissions, or (2)

Commerce should ask questions Ellwood City suggested “in the event that Commerce

conducts verification or issues a verification outline.”      Petitioners’ Comments

Following Preliminary Determination at 19–25, J.A. at 83,321–27, ECF No. 44.
Court No. 21-00007                                                                  Page 7

Instead of performing on-site verification, Commerce issued what it called a

“Questionnaire in Lieu of Verification” to Bharat on September 2, 2020.

Questionnaire in Lieu of Verification, J.A. at 83,332–38, ECF. No. 44. Ellwood City

expressed misgivings about Commerce’s decision, noting that Commerce’s

questionnaire “contains significantly fewer topics than complete sales and cost

verification agendas.” Petitioners’ Opposition to Second Extension at 3 (Sept. 11,

2020), J.A. at 87,606, ECF No. 44. Even Bharat expressed some concerns about the

process by reaching out to Commerce and suggesting the possibility of conducting a

“virtual verification” via teleconference. Bharat Possibility of Virtual Verification to

Respond to Questions at 1– 2 (Oct. 7, 2020), J.A. at 87,616–17, ECF No. 44.

       Bharat submitted its responses to the questionnaire on September 15, 2020.

Bharat Response to Questionnaire in Lieu of On-Site Verification, J.A. at 87,367, ECF

No. 44.     Bharat sought to answer Commerce’s request for more specificity

surrounding its cost centers 1 by providing Exhibit D-71. Id. at 6–8, Ex. D-71. The

exhibit provided a detailed breakdown of location-specific costs with subcategories

including general and administrative expenses and manufacturing costs such as

1 The Oxford English Dictionary defines cost centers as follows:

       (a) Chiefly Accounting a part of an organization to which costs may be charged
       for accounting purposes; (b) Business a section of an organization that adds to
       costs and does not generate revenue directly; frequently in contrast to profit
       centre.

OXFORD ENGLISH DICTIONARY (Aug. 2023), https://tinyurl.com/33jh6mx9.
Court No. 21-00007                                                            Page 8

forging and machining. Id. at Ex. D-71. Commerce asked Bharat about these cost

centers because properly allocating costs to the production of the subject merchandise

is essential to the accurate calculation of the constructed value of the goods. See 19

U.S.C. § 1677b(e).

      On October 16, 2020, Ellwood City filed its administrative case brief and again

charged that Bharat had falsified evidence and had “failed verification.”

Administrative Case Brief at 12, J.A. at 83,444, ECF No. 44 (emphasis in original).

It argued that Bharat’s new submissions revealed that the company had intentionally

misreported the costs allocated to fluid end block production in its original

submissions. Id. at 12–13. Ellwood City also argued that Bharat had underreported

its general and administrative expenses. Id. at 18–26. To illustrate its argument,

Ellwood City compared the revised Exhibit D-71 with Bharat’s previous submissions

and claimed that Bharat had left general and administrative expenses from two cost

centers out of its allocation ratio. Id. This omission, according to Ellwood City,

artificially lowered Bharat’s general and administrative expenses attributable to

fluid end block production. Id. at 25. Lower production costs make a finding of

dumping less likely by lowering the value against which Commerce compares U.S.

sales prices.

      Bharat filed its rebuttal brief on October 29, 2020. Rebuttal Brief of Bharat

Forge Limited, J.A. at 90,018, ECF No. 44. Bharat contended that it had submitted

no new information but rather had simply provided a further breakdown of cost
Court No. 21-00007                                                              Page 9

allocations of the previously reported cost centers. Id. at 3–4. Because Ellwood City

misunderstood Bharat’s calculation method, Bharat asserted that Ellwood City had

also mistakenly concluded that Bharat had underreported its costs. Id. at 5–7.

Bharat claimed that it did nothing more than calculate its general and administrative

expenses by following the Department’s standard methodology and instructions. Id.

at 7–10.

      On November 23, 2020, Ellwood City requested that Commerce strike the

allegedly new information that Bharat had submitted in its rebuttal brief.          See

Petitioners’ Request to Strike Portions of Bharat Forge’s Rebuttal Brief at 1–9, J.A.

at 90,050–58, ECF No. 44. Commerce held a hearing via video teleconference to allow

both parties to present their cases to the Department on November 16, 2020. In re

Forged Steel Fluid End Blocks from India (Hearing) at 1, J.A. at 83,537, ECF No. 44.

In that hearing, counsel for Ellwood City complimented Commerce’s use of a

questionnaire in lieu of verification, stating “thankfully, you have issued verification

questionnaires to Bharat Forge, and conducted what is in effect a virtual

verification.” Id. at 12. Throughout the hearing, Ellwood City’s counsel referred to

the questionnaire as a “verification questionnaire” and argued that Bharat had

“failed to satisfy the objectives set out in Commerce’s verification questionnaire.” Id.

at 16, 18–22, 25.

      Nonetheless, in its final Issues & Decision Memorandum (IDM), Commerce

stated that it “was unable to conduct on-site verification of the information relied
Court No. 21-00007                                                            Page 10

upon in making its final determination in this investigation, as provided for in section

782(i) of the Act.” IDM at 2, J.A. at 83,613, ECF No. 44. Commerce then relied on

the unverified information as facts otherwise available under 19 U.S.C. § 1677e(a)(2)

to calculate Bharat’s dumping margin. Id. It refused Ellwood City’s invitation to

apply adverse inferences to the entire record. Instead, Commerce only drew adverse

inferences to fill selected gaps in Bharat’s submissions — net weight reporting,

certain component costs, and sales of two particular products — because in these

instances Bharat failed to provide the information Commerce requested. Id. at 3-4,

8–10. The agency, however, relied on the remainder of Bharat’s submitted data

because “in general, Bharat complied with our requests for information, acted to the

best of its ability to be transparent in its response, and supplied supporting

information that was in greater detail than that contained in prior submissions.” Id.

at 5. Commerce thus rejected Ellwood City’s claims that Bharat underreported its

production costs and its general and administrative expenses. Id. at 5–7. Because of

the limited application of adverse inferences, Bharat retained its zero percent

dumping margin from the preliminary determination.               See Final Negative

Determination, 85 Fed. Reg. at 80,004.

                              II.    The Present Dispute

      Ellwood City filed suit on January 8, 2021. See Summons, ECF No. 1. It

challenged the legality of Commerce’s failure to perform verification, alleged that

Commerce unlawfully accepted new information in Bharat’s rebuttal brief, and
Court No. 21-00007                                                             Page 11

asserted that substantial evidence does not support Commerce’s acceptance of

Bharat’s cost allocations and expense calculations. See Compl. ¶¶ 23–39, ECF No. 8;

Pls.’ Mot. for J. on Agency Record (Pls.’ Mot.) at 17–18, 32–44, ECF No. 22.

      Commerce moved for a voluntary remand “to reconsider its position on the

questionnaire in lieu of on-site verification and subsequent application of facts

available in this investigation.” Def.’s Resp. and Mot. for Voluntary Remand (Mot.

for Remand) at 5–6, ECF No. 24. The Court granted Commerce’s Motion on October

29, 2021. Order Granting Voluntary Remand (Remand Order), ECF No. 28. The

Court gave Commerce 150 days to reconsider its decision and permitted Commerce

“at its discretion to perform on-site verification, which would moot all procedural

issues created by the agency’s decision to short-circuit verification.” Id. at 5. The

Court also noted that travel restrictions to India were now significantly relaxed so

that on-site verification was once again possible. Id. Commerce had two options on

remand under Supreme Court precedent: It could either give a fuller explanation of

its reasoning at the time it made its decision, or it could take new agency action. Id.

      Commerce — after taking the full 150 days — published its Remand Results.

Final Results of Redetermination Pursuant to Court Remand (Remand Results), ECF

No. 29. The agency did not perform on-site verification, nor did it take new action to

verify the information on the record. Instead, Commerce “reconsidered our use of a

questionnaire in lieu of on-site verification and no longer find that we were unable to

verify Bharat’s information.” Id. at 4. Because of this new determination, the agency
Court No. 21-00007                                                              Page 12

no longer needed to rely on facts otherwise available for its final determination

because it could rely on the now “verified” information. Id. Commerce also rejected

Ellwood City’s comments arguing that it did not comply with the remand by failing

to conduct on-site verification. Id. at 7. It asserted that the verification statute gives

it discretion in its procedures and that Ellwood City was pleased with the

questionnaire during the investigation. Id. at 7–8. Because the agency could not

have conducted an on-site verification in this investigation during the pandemic, it

did not do so now and did not issue a verification report. Id. at 8–9.

      On March 11, 2022, Ellwood City filed a Revised Motion for Judgment on the

Agency Record, arguing that the Remand Results constitute a new agency action

because they provide a new rationale. Pls.’ Revised Mot. at 22, ECF No. 34 (noting

that the agency’s current position is “the direct opposite of Commerce’s prior

position”). It also asserts that substantial evidence does not support Commerce’s

finding of a de minimis dumping margin for Bharat because Bharat underreported

its costs and general and administrative expenses. Id. at 2–3.

      Commerce filed its response brief on May 10, 2022. Def.’s Resp., ECF. No. 38.

The agency argues that it complied with the Remand Order and denies that it took

new agency action. Id. at 24. Instead, it states that the “change in characterization

regarding the verification questionnaire through the remand determination did not

change the action taken by the agency” but simply “reconsidered and clarified [the]

determination.” Id. Defendant-Intervenor Bharat filed its corrected response brief
Court No. 21-00007                                                            Page 13

on May 23, 2022, contending that administrative exhaustion bars Ellwood City’s

argument that Commerce failed to comply with the verification statute. Def-Int.’s

Resp. at 2–5, ECF No. 40. Ellwood City responded in its reply brief that exhaustion

does not apply because Commerce’s voluntary remand reopened the issue of

verification. Pls.’ Reply at 12–16, ECF No. 41.

      The Court held oral argument on October 20, 2022. ECF No. 47. Counsel for

the Government maintained the position that Commerce had not taken new agency

action on remand; instead, “it considered itself expounding on its previous reasoning.”

Transcript (Tr.) at 6:6–7, ECF No. 49. Government counsel also affirmed that there

was no reason that the Supreme Court’s holding in Regents would not apply in the

context of a voluntary remand. Id. at 24:14–16 (Ms. Kramer: “Your Honor, I don’t

necessarily see a distinction in applying it to an involuntary versus a voluntary

remand.”).

      Counsel was unable to explain another oddity. Commerce’s position here is

the exact opposite of its position in another case currently before the Court presenting

the same legal issue. See Bonney Forge Corp. v. United States, Case No. 20-03837.

In that case — argued five days after this case — Commerce took the position that it

had taken new agency action when it found on remand that it had properly complied

with the verification requirement. See Remand Results, ECF No. 61, Case No. 20-

03837. Agency counsel offices and the requirement that the Department of Justice

manage all litigation for cabinet departments exist so that the Government does not
Court No. 21-00007                                                            Page 14

take contradictory positions on similar legal questions. That consultation process

completely failed in these cases. In the future, Commerce should settle on one legal

position before arriving in court rather than trying to literally have it both ways. Cf.

Acquisition 362 LLC v. United States, 59 F.4th 1247, 1251–52 (Fed. Cir. 2023) (“In

the future, we expect Commerce will be both more specific and complete than it was

initially about the sequence of government and party actions leading to the challenges

presented to the CIT and on appeal.”).

                             STANDARD OF REVIEW

      Federal Circuit precedent allows for an agency to request a voluntary remand

— without confessing error — to reconsider its position. SKF USA Inc. v. United

States, 254 F.3d 1022, 1029 (Fed. Cir. 2001). Although the scope of issues Commerce

may reconsider in its remand can be broad, Supreme Court precedent limits the

procedural avenues available to the agency. An agency has two options on remand:

             First, the agency can offer a “fuller explanation of the
             agency’s reasoning at the time of the agency action” . . . .
             This route has important limitations. When an agency’s
             initial explanation “indicate[s] the determinative reason
             for the final action taken,” the agency may elaborate later
             on that reason (or reasons) but may not provide new ones.
             Alternatively, the agency can “deal with the problem
             afresh” by taking new agency action. An agency taking this
             route is not limited to its prior reasons but must comply
             with the procedural requirements for new agency action.

Dep’t of Homeland Sec. v. Regents of the Univ. of California, 140 S. Ct. 1891, 1907-08

(2020) (Regents) (internal citations omitted); accord SKF, 254 F.3d at 1028 (“In the

second situation, in which the agency seeks to defend its decision on grounds not
Court No. 21-00007                                                              Page 15

previously articulated by the agency . . . . we generally decline to consider the agency’s

new justification for the agency action[.]”); Timken Co. v. United States, 894 F.2d 385,

389 (Fed. Cir. 1990) (“[A]gency action cannot be sustained on post hoc rationalizations

supplied during judicial review.”) (citations omitted).

      “The court reviews remand determinations for compliance with the court’s

order.” Nakornthai Strip Mill Public Co. Ltd. v. United States, 32 CIT 1272, 1274

(2008) (citations omitted); accord Ad Hoc Shrimp Trade Action Comm. v. United

States, 992 F. Supp. 2d 1285, 1290 (CIT 2014), aff’d, 802 F.3d 1339 (Fed. Cir. 2015).

“Deviation from the court’s remand order in the subsequent administrative

proceedings is itself legal error, subject to reversal on further judicial review.”

Sullivan v. Hudson, 490 U.S. 877, 886 (1989). The Court may also issue a further

remand order when the remand results are not supported by substantial evidence or

otherwise in accord with the law. See Nippon Steel Corp. v. ITC, 494 F.3d 1371, 1379

(Fed. Cir. 2007).

                                        DISCUSSION

                       Commerce Failed to Comply with Regents

      The primary issue facing the Court is whether Commerce complied with

Regents. The agency could comply by either taking new agency action or giving

further explanation of its original decision. However, Commerce in its Remand

Results and briefing does not even cite Regents. Instead, it contradictorily asserts

the following: (1) Commerce determines that it had verified Bharat’s submissions
Court No. 21-00007                                                            Page 16

when it sent the original questionnaire in lieu of verification; (2) it rescinds its

application of facts otherwise available, relying on the newly verified information in

making its Final Determination; and (3) it maintains that these reversals of its prior

positions “did not change the action taken by the agency.” Def.’s Resp. at 24, ECF

No. 38. Ellwood City counters that Commerce took new agency action because the

Remand Results “reversed Commerce’s ‘prior reasons’ with respect to verification.”

Pls.’ Reply at 9, ECF No. 41 (citation omitted). Commerce thus had to comply with

the requirements of new agency action and verify the information on which it relied

in making its final determination. Id. at 10. The Court finds that the case must be

REMANDED back to the agency to comply with Regents because Commerce failed

to do so here.

      Regents gives an agency two paths on remand: (1) The agency can offer a fuller

explanation of its reasoning at the time it made the decision in question; or (2) the

agency can take new agency action and provide new reasoning for that action. 140 S.

Ct. at 1907–08. When offering a fuller explanation on remand, an agency may only

refer to the agency’s reasoning “at the time of the agency action” and “may not provide

new [reasons] to prevent ‘post hoc rationalization.’”       Id.   (citations omitted).

Alternatively, when taking new agency action, an agency “is not limited to its prior

reasons but must comply with the procedural requirements for new agency action.”

Id. at 1908. For example, “when an agency rescinds a prior policy its reasoned

analysis must consider the ‘alternative[s]’ that are ‘within the ambit of the existing
Court No. 21-00007                                                              Page 17

[policy].’” Id. at 1913 (quoting Motor Vehicle Mfrs. Assn. of United States, Inc. v. State

Farm Mut. Automobile Ins. Co., 463 U.S. 29, 43 (1983)). And, when deviating from

consistent past practice or policy, an agency “must be cognizant that longstanding

policies may have ‘engendered serious reliance interests that must be taken into

account.’” Id. (quoting Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2126

(2016) (quoting FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515, (2009))).

      These two paths offered by Regents map onto the Federal Circuit’s opinion in

SKF, which explains the five different approaches an agency may adopt when agency

action is subject to judicial review. 254 F.3d at 1027–1030. First, an agency may

defend its decision on “the grounds articulated by the agency,” and a remand does not

normally come into play. Id. at 1028. Second, an agency seeks to defend its decision

“on grounds not previously articulated by the agency,” and here, the court’s obligation

is to “decline to consider the agency’s new justification.” Id. at 1028. This second

situation accords with Regents, which extended the bar on post hoc rationalizations

from the famed Chenery case to include agency justifications on remand. See Sec. &

Exch. Comm’n v. Chenery Corp., 332 U.S. 194, 196 (1947); Regents, 140 S. Ct. at 1907–

08. Third, an agency may “seek a remand because of intervening events outside of

the agency’s control, for example, a new legal decision or the passage of new

legislation.” SKF, 254 F.3d at 1028. In this case, Regents requires that the agency

take new agency action if it is to change its position in light of the intervening event.

Regents, 140 S. Ct. at 1907–08. Fourth, “even if there are no intervening events, the
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agency may request a remand (without confessing error) in order to reconsider its

previous position.” SKF, 254 F.3d at 1029. Regents also requires that the agency

take new agency action if it wishes to change its previous position in this situation.

Regents, 140 S. Ct. at 1907–08. Fifth, when an agency admits that it has erred and

wishes for a remand to change its previous decision, here too an agency must comply

with all the procedural requirements of new agency action under Regents. See SKF,

254 F.3d at 1029.

      Commerce has failed to comply with either pathway offered by Regents. In its

briefs and at oral argument, the Government claimed that the agency had simply

given a fuller explanation of its original decision in its Remand Results. See Def.’s

Resp. at 24, ECF No. 38; Tr. at 6:6–7, ECF No. 49. If this were an accurate description

of what occurred, the agency is guilty of an “impermissible post hoc rationalization.”

Regents, 140 S. Ct at 1908 (internal quotation marks omitted). Its Remand Results

purporting to clarify the original action taken instead contradict and reverse

Commerce’s original position.    Compare IDM at 2, J.A. at 83,613, ECF No. 44

(explaining that Commerce “was unable to conduct on-site verification of the

information relied on in making its final determination in this investigation, as

provided for in section 782(i) of the Act”), with Remand Results at 4, ECF No. 29

(stating that the agency “reconsidered our use of a questionnaire in lieu of on-site

verification and no longer find that we were unable to verify Bharat’s information”).

Commerce did not further explain the rationale of its original decision; it switched to
Court No. 21-00007                                                              Page 19

a new rationale for an entirely different position. Cf. Regents, 140 S. Ct. at 1907-08.

In short, Commerce took new agency action without complying with the procedural

requirements for that action. Cf. Tr. at 6:6–7, ECF No. 49 (“Yes, Your Honor, it [the

agency] considered itself expounding on its previous reasoning.”). Regents requires

Commerce to make that decision “afresh” and to explain why the prior questionnaire

it sent was sufficient and no additional verification was needed in the post-pandemic

world of 2022, i.e., during the remand period. Commerce also failed to discuss why

its departure from its past practice of on-site verification did not harm Plaintiffs’

reliance interests or why it rejected other alternatives, as Regents demands. Compare

Regents, 140 S. Ct. at 1913 (explaining that an agency “must consider the

‘alternative[s]’ that are ‘within the ambit of the existing [policy],’” explain why it did

not choose those alternatives, and that “serious reliance interests . . . must be taken

into account”) (alternations in original, citations omitted), with Remand Results at 9,

ECF No. 29 (considering only the possibility of an on-site verification, ignoring other

alternatives such as a virtual verification, and failing to discuss reliance interests).

      Commerce’s own decisions have greatly complicated its legal position. When

first brought to court, Commerce declined to defend its original decision on the merits.

It instead asked for a voluntary remand to reconsider its verification decision. That

allowed Plaintiffs to assert an argument they may well have otherwise waived — that

the verification process was insufficient. Compare Remand Results at 7–8 (quoting

Plaintiffs thanking the agency for issuing a verification questionnaire), with Ellwood
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City Forge Co. v. United States, No. 1:21-00077, 2023 CIT LEXIS 113, at *12 (CIT

July 24, 2023) (holding that, when an agency asks for a voluntary remand, it typically

“obviate[es] any concern that failure to exhaust” by the plaintiff prohibits the agency

from considering the question on which it seeks remand). Commerce then chose to

reverse its prior position, but it ignored this Court’s admonition to follow the Supreme

Court’s Regents opinion and disclaimed that it was making a new decision. See, e.g.,

Remand Order at 5, ECF No. 28 (“As the Regents Court noted, Commerce has two

options on remand.”). An agency is free to reverse its prior position, but it may only

do so by taking new agency action. Having chosen to reverse itself and now assert

that it did verify Bharat’s information, Commerce cannot short circuit the procedural

requirements for new agency action: (1) an explanation for why it now chooses not to

do on-site verification, (2) an explanation for the range of other alternatives the

agency considered within the ambit of on-site verification and why it rejected them,

and (3) an explanation for why its decision to use only questionnaires did not violate

any legitimate reliance interests on Plaintiffs’ part. Regents, 130 S. Ct. at 1907-08,

1913.    Because Commerce ignored Regents, its Remand Redetermination is not

supported by substantial evidence, fails to comply with the law, and therefore must

be returned to the agency.

                                   CONCLUSION

        Commerce has changed its mind regarding whether it verified the information

it received from Bahrat during its investigation of imports of fluid end blocks from
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India. Unfortunately, it did not follow the necessary procedural prerequisites that

must follow a decision to reverse course. Consequently, it is:

     ORDERED that Plaintiffs’ Motion for Judgment on the Agency Record is

GRANTED;

     The Court REMANDS the case for up to 150 days for Commerce to comply

with the requirements of the Regents decision; and it is

     ORDERED that Defendant shall supplement the administrative record with

all documents considered by Commerce in reaching its decision in the Second Remand

Redetermination; and it is further

     ORDERED that Plaintiffs shall have 30 days from the filing of the Second

Remand Redetermination to submit comments to the Court;

     ORDERED that Defendant shall have 15 days from the date of Plaintiffs’ filing

of comments to submit a response; and

     ORDERED that Defendant-Intervenor shall have 15 days from the date of

Defendant’s filing of comments to submit a response.

     SO ORDERED.

                                              /s/ Stephen Alexander Vaden
                                                           Judge

Dated: August 11, 2023
       New York, New York