Court Opinion

ID: 819492
Source: CourtListenerOpinion
Date Created: 2013-02-05 02:39:13.153188+00
Date Added: 2024-06-11T15:12:12.364058
License: Public Domain

Slip Op. 00-78

        UNITED STATES COURT OF INTERNATIONAL TRADE

                                  :
GOURMET EQUIPMENT (TAIWAN) CORP., :
                                  :
          Plaintiff,              :     Court No. 99-05-00262
                                  :
               v.                 :
                                  :     Public Version
THE UNITED STATES,                :
                                  :
          Defendant,              :
                                  :
          and                     :
                                  :
CONSOLIDATED INTERNATIONAL        :
AUTOMOTIVE, INC.,                 :
                                  :
          Defendant-Intervenor.   :
________________________________ :

[Antidumping determination affirmed.]

                                        Dated: July 6, 2000

     Ablondi, Foster, Sobin & Davidow, P.C. (James Taylor,
Jr., Mitchell W. Dale, and Sarah M. Nappi) for plaintiff.

     David W. Ogden, Acting Assistant Attorney General, David
M. Cohen, Director, Commercial Litigation Branch, Civil
Division, United States Department of Justice (Michele D.
Lynch), Robert E. Nielsen, Office of the Chief Counsel for
Import Administration, United States Department of Commerce,
of counsel, for defendant.

     Nalls & Associates (Charles H. Nalls and Michael J.
Caridi) for defendant-intervenor.

                           OPINION

    RESTANI, Judge:   This matter is before the court on a

Motion for Judgment on the Agency Record, pursuant to USCIT
Court No. 99-05-00262                                Page 2

Rule 56.2, by Gourmet Equipment (Taiwan) Corp. (“Gourmet”).

The determination under review is Chrome-Plated Lug Nuts from

Taiwan, 64 Fed. Reg. 17,314 (Dep’t Commerce 1999) (final

results of antidumping duty admin. rev.) [hereinafter “Final

Results”].   Gourmet argues that the United States Department

of Commerce (“Commerce” or “the Department”) erred in refusing

to conduct a verification of Gourmet’s reported cost and sales

data, despite Gourmet’s alleged independent substantiation of

the information submitted to Commerce.   Gourmet also argues

that Commerce erred in applying total adverse facts available

to determine Gourmet’s dumping margin on the ground that the

information provided by Gourmet in its questionnaire responses

was unverifiable pursuant to both 19 U.S.C. §§ 1677e(a)(2)(D)

and 1677e(b) (1994).

              Jurisdiction and Standard of Review

    The court has jurisdiction pursuant to 28 U.S.C. §

1581(c) (1994).   The court must uphold Commerce’s final

determination unless it is “unsupported by substantial

evidence on the record or otherwise not in accordance with

law.”   19 U.S.C. § 1516a(b)(1)(B) (1994).

                           Background

    On October 30, 1997, Commerce published a notice of

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initiation of the sixth administrative review of an

antidumping duty order on chrome-plated lug nuts (“CPLN”) from

Taiwan.    See Initiation of Antidumping and Countervailing Duty

Administrative Reviews, 62 Fed. Reg. 58,705 (Dep’t Commerce

1997).    The period of review (“POR”) was September 1, 1996

through August 31, 1997.     Id.   Commerce sent questionnaires to

eighteen companies, including Gourmet.      Chrome-Plated Lug Nuts

from Taiwan, 63 Fed. Reg. 53,875, 53,875 (Dep’t Commerce 1998)

(preliminary results of antidumping duty admin. rev.)

[hereinafter “Preliminary Results”].      Questionnaires sent to

seven of the companies were returned as undeliverable.      Id.

These firms received the “all others” rate of 6.93 percent,

which was established in the less than fair value (“LTFV”)

investigation.    Id.   Those firms that did not respond to the

questionnaire, or whose submissions were substantially

deficient, were given an adverse margin of 10.67 percent, the

highest rate from the LTFV investigation.      Id. at 53,875-76.

    Gourmet provided a timely response to Commerce’s

questionnaire on December 23, 1997.      Questionnaire Response

(Dec. 23, 1997), P.R. Doc. 13, Pl.’s App., Tab 8.      Commerce

sent Gourmet a supplemental questionnaire requesting audited

financial statements and additional information in order to

                                   3
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reconcile the costs and sales reported in Gourmet’s

questionnaire response with its audited financial statements.

Supplemental Questionnaire (Feb. 11, 1998), at 1, P.R. Doc.

17, Pl.’s App., Tab 9, at 3.   Gourmet responded that its

financial statements for the POR had not been audited, and

that although the statements provided to the Taiwanese

government as tax returns were prepared with an outside

accountant, there was no independent auditor’s statement and

at that point Gourmet could not submit one.    Supplemental

Questionnaire Response (Mar. 9, 1998), at 1, P.R. Doc. 24,

Pl.’s App., Tab 10, at 8.   Commerce perceived a discrepancy in

Gourmet’s responses and asked Gourmet to explain why it had

audited accounting records in previous reviews and not in the

sixth review.   Supplemental Questionnaire (Mar. 31, 1998), at

1, P.R. Doc. 28, Pl.’s App., Tab 11, at 3.    The Department

also asked Gourmet to explain why a verification in this POR

would lead to a different result from previous reviews.       Id.

Gourmet explained that the confusion arose from an translation

error, confusing the distinction in English between an auditor

and an accountant.   Supplemental Questionnaire Response (Apr.

3, 1998), at 2, P.R. Doc. 29, Pl.’s App., Tab 12, at 2.

Although an accountant prepared Gourmet’s tax returns, Gourmet

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did not conduct an audit of its financial statements.         Id.

Gourmet stated that such an audit was not required of it under

Taiwanese law.   Id.    Because its tax returns were prepared

with the assistance of an outside accountant, Gourmet had

previously incorrectly stated that its financial statements

were audited on a yearly basis.      Id.   Gourmet asserted that a

verification in this review would differ from past reviews

because Gourmet had hired the accounting firm of Diwan, Ernst

& Young (“DE&Y”) to conduct a special audit of its accounting

records, and that DE&Y’s findings would constitute independent

substantiation of the data Gourmet had submitted.       Id. at 4;

see Letter from DE&Y to Gourmet (Mar. 17, 1998), at Ex. S-1,

C.R. Doc. 4, P.R. Doc 26, Pl.’s App., Tab 16, at 6-7; Letter

from DE&Y to Gourmet (May 18, 1998), at Ex. 1, C.R. Doc. 9,

P.R. Doc. 42, Pl.’s App., Tab 18, at 7.       Despite these

responses by Gourmet to Commerce’s questionnaires and the work

performed by DE&Y, Commerce determined that it could not

reconcile the data Gourmet submitted in its questionnaire

responses to its financial statements.1      Final Results, 64

    1     Gourmet has acknowledged that it [ ]. Gourmet
admits that [ ]. Gourmet admits that [ ]. Futtner Memo.
(Oct. 7, 1998), at 1, C.R. Doc. 12, Pl.’s App., Tab 20, at 1.

                                 5
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Fed. Reg. at 17,316.     Commerce determined that Gourmet’s

responses were unverifiable and applied the highest available

rate of 10.67 percent to Gourmet based on total adverse facts

available.    Id. at 17,316-17.

                             Discussion

I. Verification

    On the basis of information on the record, Commerce

determined that Gourmet’s accounting system and the

information submitted in its questionnaire responses were

unreliable.    Final Results, 64 Fed. Reg. at 17,316.    Commerce

further determined that because Gourmet’s submissions were not

reconcilable to its financial statements, the information

submitted was unverifiable and applied facts otherwise

available.    Id.   Gourmet now challenges this determination.

    Commerce’s statutory mandate is to calculate antidumping

duty margins as accurately as possible.     Rubberflex SDN. BHD.

v. United States, 59 F. Supp.2d 1338, 1346 (Ct. Int’l Trade

1999) (citation omitted).     In order to satisfy this

requirement, it is essential that a respondent provide

Commerce with accurate, credible, and verifiable information.

Where Commerce determines that information submitted in a

questionnaire response is unverifiable, 19 U.S.C.

                                  6
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§1677e(a)(2)(D)2 authorizes Commerce, subject to 19 U.S.C.

§1677m(d) (1994)3, to substitute facts otherwise available.

The use of facts available provides the “only incentive to

foreign exporters and producers to respond to Commerce

questionnaires” in antidumping and countervailing duty

proceedings.   Statement of Administrative Action, accompanying

H.R. Rep. No. 103-826(I), at 868, reprinted in 1994

U.S.C.C.A.N. 3773, 4198 (“SAA”).4

    2    Section 1677e(a)(2) provides in relevant part:

    If . . . an interested party or any other person . . .

    (D) provides such information but the information cannot
    be verified as provided in section 1677m(i) of this
    title, 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.
    3     Section 1677m(d) requires that Commerce provide
respondents with an opportunity to remedy any submissions
which Commerce determines to be deficient. See 19 U.S.C. §
1677m(d); Ta Chen Stainless Steel Pipe, Ltd. v. United States,
No. 97-08-01344, 1999 WL 1001194, at *12 (Ct. Int’l Trade Oct.
28, 1999). Commerce provided Gourmet with repeated
opportunities to establish that the information submitted was
verifiable.
    4     The Statement of Administrative Action represents
“an authoritative expression by the Administration concerning
its views regarding the interpretation and application of the
Uruguay Round Agreements...The Administration understands that
it is the expectation of the Congress that future
                                                 (continued...)

                               7
Court No. 99-05-00262                                  Page 8

    Gourmet argues that Commerce erred in determining that

its questionnaire responses were unverifiable, based solely on

the fact that Gourmet did not provide Commerce with audited

financial statements.   Gourmet insists that Commerce could

have conducted a verification of its bank statements and tax

returns, which it had allegedly independently substantiated,

in place of audited financial statements.5   Gourmet insists

that Commerce’s practice is to accept sources other than

audited financial statements.    In Collated Roofing Nails from

Taiwan, 62 Fed. Reg. 51,427 (Dep’t Commerce 1997) (notice of

final determination of sales at LTFV) [hereinafter “Collated

Roofing Nails”] Commerce stated that when a respondent does

not have audited financial statements, the Department “may use

the company’s tax return as an independent source to

substantiate the company’s questionnaire responses.”    62 Fed.

Reg. at 51,427.   The independent source, however, must be

proven reliable and useable.    In Collated Roofing Nails,

    4(...continued)
Administrations will observe and apply the interpretations and
commitments set out in this statement.” SAA at 656, 1994
U.S.C.C.A.N. at 4040.
    5     Apparently, if Gourmet had provided audited
financial statements, [ ]. See Gov’t Br. at 28; Pl.’s Reply
Br. at 12.

                                8
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Commerce was unable to reconcile one respondent’s unaudited

financial statement to its tax return, and therefore

determined that the unaudited financial statements were

unreliable and unusable, and therefore unverifiable.     Id. at

51,427.   For another respondent, the Department was able to

reconcile unaudited financial statements with a tax return and

determined that the information in the financial statements

was reliable.   Id. at 51,437.   The Department had also stated

in Fresh Cut Flowers from Mexico, 60 Fed. Reg. 49,569, 49,570

(Dep’t Commerce 1995) (final results of antidumping duty

admin. rev.) that respondents may be permitted to submit tax

returns as independent substantiation of their questionnaire

responses in the absence of audited financial statements.        In

that determination, Commerce found that without an explanation

reconciling the data in respondent’s tax returns with its

financial statements, the tax returns could not be used to

independently substantiate the reported sales and costs,

rendering the entire questionnaire responses unusable.     Id.

The Department explained its practice in this review, stating

that:

    The Department does not reject questionnaire responses
    simply because the respondent does not have an audited
    financial statement. In such situations, the Department

                                 9
Court No. 99-05-00262                                 Page 10

     looks to other financial records, prepared for purposes
     independent of the antidumping proceeding, such as tax
     statements, which attest to the veracity of a
     respondent’s accounting system and information submitted
     to the Department.

Final Results, 64 Fed. Reg. at 17,316 (emphasis added).

     Gourmet contends that it did independently substantiate

the information in its questionnaire responses by hiring the

outside accounting firm, DE&Y, to conduct a special audit of

its financial system.   Gourmet submits that DE&Y’s findings

constitute acceptable independent substantiation of the data

Gourmet submitted.   See Supplemental Questionnaire Resp.,

(Apr. 3, 1998), at 4, P.R. Doc. 29, Def.’s App., Tab 6, at 4.

DE&Y’s “special audit,” however, does not provide

substantiation independent of the antidumping proceedings,

which is what Commerce is seeking.   Under the facts of this

case, it was reasonable for Commerce to find that the audit

done solely for the purposes of the antidumping proceeding was

not sufficiently independent for the Department to be

confident that it would be reconciling the cost and sales

data.6   Here, DE&Y qualified its review of Gourmet’s records

by stating that, “We did not carry out an audit of Gourmet’s

     6     [   ].

                               10
Court No. 99-05-00262                                   Page 11

management accounts or general ledger in accordance with

generally accepted auditing standards.”      Letter from DE&Y to

Gourmet (Mar. 17, 1998), Pl.’s App., Tab 16, at 6.

Furthermore, DE&Y stated that “[i]n conducting our work we

have relied on the Corporation’s management accounts, general

ledger and supporting documentation obtained from Gourmet.         We

therefore make no representation regarding the accuracy or

completeness of such information.”     Id.    As Commerce

suggests, DE&Y simply took the information Gourmet provided it

at face value.7

    Commerce determined that Gourmet failed to demonstrate

that the information which it placed on the record accurately

reflected all of the relevant sales made by the company during

the period of review and its cost of production.      Final

Results, 64 Fed. Reg. at 17,316.     As DE&Y admitted, the work

it performed did not constitute an audit of Gourmet’s

accounting system.   Letter from DE&Y to Gourmet, at Ex. S-1,

Pl.’s App., Tab 16, at 6.   Its work was not itself

substantiation prepared for purposes other than antidumping

purposes nor was it an analysis of a reliable accounting

    7      Having already determined that Gourmet’s financial
system [   ].

                               11
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system or records prepared for such purposes.8    Commerce’s

determination that the alleged independent substantiation by

DE&Y fell short of rendering Gourmet’s questionnaire responses

verifiable is reasonable and is supported by substantial

evidence.9   Cf. Certain Preserved Mushrooms from Chile, 63

Fed. Reg. 56,613, 56,616-17 (Dep’t Commerce 1998) (notice of

final determination of sales at LTFV) (where vast majority of

respondents information was accurate and verifiable, and

discrepancies were “specific and quantifiable,” Department was

able to reconcile reported costs to financial statements).       In

this case, there was no substantiation of Gourmet’s data

independent from the antidumping investigation.    Therefore,

Commerce’s resort to facts otherwise available pursuant to 19

U.S.C. § 1677e(a)(2)(D) was in accordance with law.

     8    In two book situations, moreover, it seems that in
Commerce’s view at least one set must be prepared for an
independent purpose and be found reliable in order for the
information to be of any use to Commerce.
     9    Gourmet complains that all that would have satisfied
Commerce was a complete independent audit, and that this is
beyond the requirements of the statute. See, e.g., 19 U.S.C.
§ 1677b(f)(1)(A) (1994) (costs to be calculated on the basis
of records kept by exporter or producer if records are kept in
accordance with generally accepted accounting principles of
exporting country). In light of [ ].

                               12
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II. Application of Total Adverse Facts Available

    Gourmet also argues that Commerce’s resort to adverse

facts available is not supported by substantial evidence on

the record and is not otherwise in accordance with law because

Commerce failed to adhere to the statutory standard for

applying adverse facts available.   Following a determination

that the use of facts available is authorized pursuant to 19

U.S.C. §1677e(a), subsection (b)10 further permits Commerce to

apply an adverse inference if Commerce makes the additional

finding that “an interested party has failed to cooperate by

    10   Section 1677e(b) provides:

          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.   Such
adverse inference may include reliance on information derived
from-
          (1) the petition,
          (2) a final determination in the investigation under
this subtitle,
          (3) any previous review under section 1675 of this
title or determination under section 1675b of this title, or
          (4) any other information placed on the record.

19 U.S.C. §1677e(b).

                              13
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not acting to the best of its ability to comply with a request

for information.”    19 U.S.C. §1677e(b); see also Borden, Inc.

v. United States, 4 F. Supp.2d 1221, 1246 (Ct. Int’l Trade

1998).   In making its determination that a respondent has been

uncooperative, Commerce is to consider the extent to which a

party may benefit from its own lack of cooperation.      SAA at

870, 1994 U.S.C.C.A.N. at 4199.      Commerce is required to

articulate the reasons for its conclusion that a party failed

to act to the best of its ability prior to applying adverse

facts available.    Mannesmannrohren-Werke AG v. United States,

77 F. Supp.2d 1302, 1313-14 (Ct. Int’l Trade 1999).      Commerce

cannot simply repeat its facts available finding under 19

U.S.C. §1677e(a) to support its use of adverse facts available

under 19 U.S.C. §1677e(b).    Ferro Union, Inc. v. United

States, 44 F. Supp.2d 1310, 1329 (Ct. Int’l Trade 1999).

    In this case Commerce stated that the basis for the

adverse finding was Gourmet’s continued failure to provide

verifiable data.    Final Results, 64 Fed. Reg. at 17,316.

Commerce stated:

    We believe that Gourmet has had sufficient notice of the
    Department’s requirements for verifiable submissions and
    ample opportunity to provide information that is
    amendable to verification. Yet Gourmet has continued to
    provide unverifiable data. Therefore, we determine that

                                14
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      Gourmet has failed to cooperate by not acting to the best
      of its ability, and thus we are using an adverse
      inference in our application of facts available.

Id.   Unlike Borden, Commerce determined in this case that

Gourmet had the ability to produce verifiable information and

failed to do so.   Id. (“In this case, Gourmet possesses

relevant . . . financial statements.”)    That reasoning

supports the Department’s conclusion that Gourmet failed to

comply to the best of its ability.

      Gourmet insists that a finding that it failed to comply

to the best of its ability because of its continued failure to

provide verifiable information relies on an analysis of

Gourmet’s behavior in past reviews, which is not generally

permitted.   See E.I. DuPont de Nemours & Co. v. United States,

No. 96-11-02509, 1998 WL 42598, at *11 (Ct. Int’l Trade Jan.

29, 1998) (“Commerce’s longstanding practice, upheld by this

court, is to treat each segment of an antidumping proceeding,

including the antidumping investigation and the administrative

reviews that may follow, as independent proceedings with

separate records and which lead to independent

determinations.”) (citation omitted).    When Commerce is

judging a party’s ability to comply in the context of an

administrative review, as opposed to an initial investigation,

                               15
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it is not inappropriate for Commerce to consider that party’s

past behavior.11   Past participation may be relevant to notice,

knowledge and reliance issues.    This does not violate the

independent nature of the proceedings, rather in the context

of this case it acknowledges that Gourmet had participated in

the investigation and several reviews and was familiar with

Commerce’s requirements.12

     Normally Commerce may not require a party to change its

accounting system or provide information which it simply does

not have.   See Borden, 4 F. Supp.2d at 1246-47.   Commerce may,

however, require a party to provide financial statements which

are usable or suffer the consequences.    Under appropriate

factual circumstances, the failure to provide such statements

can justifiably lead to the conclusion that a party failed to

     11   The test of Gourmet’s ability to comply might have
rendered different results if Gourmet had made these efforts
in an original investigation. In that case, its ability to
comply would likely be measured against current capacity to
comply without judging the past behavior which rendered it
unable to comply. This is not the situation before the court.
     12   It was within Gourmet’s ability to provide relevant
financial information. Final Results, 64 Fed. Reg. at 17,316.
Apparently, the only reason it did not provide audited
statements was because [ ].

                                 16
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comply to the best of its ability.13    Gourmet argues, however,

that it did not have sufficient notice of what type of

information would satisfy Commerce, and that Commerce should

have told Gourmet from the outset that in this case only

audited financial statements would suffice, so that Gourmet

could avoid the expense of hiring DE&Y.     Commerce’s initial

questionnaire asked for audited and unaudited financial

statements.     See Questionnaire Response (Dec. 23, 1997), at A-

12, P.R. Doc. 13, Def.’s App., Tab 1, at 2.     The supplemental

questionnaire further stated: “Unless there are compelling

reasons not to do so, it is generally the Department’s

practice to reconcile questionnaire responses to audited

financial statements.”     Supplemental Questionnaire (Feb. 11,

1998) at 1, P.R. Doc. 17, Pl.’s App., Tab 9, at 3 (emphasis

added).     It was in response to this questionnaire that Gourmet

informed Commerce of the special audit being performed by

DE&Y.     Response to Supplemental Questionnaire (Mar. 9, 1998)

at 1, P.R. Doc. 24, Pl.’s App., Tab 10 at 8.     Gourmet thus

incurred the expense of hiring DE&Y prior to presenting

Commerce with this alternate form of attempted substantiation.

    13      [   ].

                                 17
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The Department alleges, however, that it could not know

whether the special audit would constitute independent

substantiation until it saw the results of DE&Y’s work.   For

its part, Gourmet should have known that Commerce’s preference

was to substantiate with audited financial statements, and

that “independent” meant information independent of the

antidumping investigation.   Because the DE&Y audit was not a

full scale audit, and was not sufficiently independent,

Commerce found the special audit insufficient.

    Although Gourmet responded to Commerce’s questionnaires,

it did not provide the kind of information Commerce required

to verify the questionnaire responses.   In light of the fact

that it was within Gourmet’s capacity to provide the right

kind of information, Commerce’s determination that Gourmet

failed to comply to the best of its ability is in accordance

with law and supported by substantial evidence.

                               18
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                          Conclusion

    For the foregoing reasons, the Court finds that Commerce

correctly applied 19 U.S.C. §§ 1677e(a)(2)(D) and 1677e(b).

Accordingly, the Final Results are affirmed in their entirety.

                                   ________________________
                                        Jane A. Restani
                                             Judge

Dated:   New York, New York

         This 6th day of July, 2000.

                              19