Court Opinion

ID: 9557033
Source: CourtListenerOpinion
Date Created: 2023-08-21 16:02:58.273863+00
Date Added: 2024-06-11T09:04:22.265779
License: Public Domain

Slip Op. No. 23-120

          UNITED STATES COURT OF INTERNATIONAL TRADE

 BONNEY FORGE CORPORATION and
 UNITED STEEL, PAPER AND
 FORESTRY, RUBBER,
 MANUFACTURING, ENERGY,
 ALLIED INDUSRIAL AND SERVICE
 WORKERS INTERNATIONAL
 UNION,

                 Plaintiffs,
                                                Before: Stephen Alexander Vaden,
 v.                                                             Judge

 UNITED STATES,                                 Court No. 1:20-cv-03837

                Defendant,

       and

 SHAKTI FORGE INDUSTRIES PVT.
 LTD.,

                 Defendant-Intervenor.

                                    OPINION

[Remanding to Commerce to consider reliance interests and alternatives.]

                                                         Dated: August 21, 2023

William Fennell, Schagrin Associates, of Washington, DC, for Plaintiffs. With him
on the brief was Roger B. Schagrin.

Kara M. Westercamp, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of Washington, DC, for Defendant. With her on the brief
were Brian M. Boynton, Principal Deputy Assistant Attorney General, Jeanne E.
Davidson, Director, Commercial Litigation Branch, Claudia Burke, Assistant
Director, Commercial Litigation Branch, and JonZachary Forbes, Office of Chief
Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce.
Court No. l:20-cv-03837                                                         Page 2

Aqmar Rahman, Trade Pacific PLLC, of Washington, DC, for Defendant-Intervenor.
With him on the brief was Robert G. Gosselink.

       Vaden, Judge:       Following this Court's remand order, see Bonney Forge

Corporation v. United States, 560 F. Supp. 3d 1303 (CIT 2022) (Bonney Forge[), the

Department of Commerce (Commerce) reconsidered its actions in the underlying

proceeding. Commerce attempted to heed this Court's remand order and follow one

of the two paths offered by the Supreme Court in Department of Homeland Security

v. Regents of the University of California (Regents). 140 S. Ct. 1891, 1907-08 (2020).

Commerce chose the second path and sought to "'deal with the problem afresh' by

taking new agency action." Id. at 1908; Final Results of Redetermination Pursuant

to Court Remand (Remand Results) at 2, ECF No. 61.             The new agency action

Commerce took was determining "that the post-preliminary questionnaires issued by

Commerce satisfy Commerce's verification requirements under section 782(i) of the

Act." Remand Results at 2, ECF No. 61. Unfortunately, Commerce fell short of

fulfilling all of Regents' requirements. Specifically, the agency failed to consider (1)

the reliance interests implicated by its change of policy regarding verification and (2)

alternative options to further verify the information on the record under current

conditions. Therefore, the determination is REMANDED to Commerce for it to again

reconsider its decision. See Regents, 140 S. Ct. at 1912-15.
Court No. l:20-cv-03837                                                        Page 3

                                   BACKGROUND

      The Court presumes familiarity with Bonney Forge I but briefly summarizes

the relevant facts. See 560 F. Supp. 3d at 1305-09. Commerce chose not to perform

any kind of verification because of the constraints of the COVID-19 pandemic. Id. at

1307. Bonney Forge had suggested that Commerce perform a "virtual verification"

in place of a traditional on-site verification. Id. Commerce did not respond to this

suggestion.    Id. at 1312.    Instead, Commerce issued a series of supplemental

questionnaires to respondent Shakti Forge. Id. at 1308. Commerce then determined

that, although it could not verify Shakti's information, it would use the information

Shakti provided as "facts available." Id.; see 19 U.S.C. § 1677e. Commerce relied on

this unverified information in its determination. Bonney Forge I, 560 F. Supp. 3d at

1308. The Court remanded the decision to Commerce with instructions:

               On remand, Commerce may assess the current state of the
               COVID-19 pandemic, consider whether a virtual
               verification is possible, and act accordingly. Should
               Commerce determine that no verification method -
               virtual or otherwise - is possible, it must at a bare
               minimum explain on the record why it is not an abuse of
               discretion for the Government to determine that senior
               officials may galivant around the globe in-person but civil
               servants    cannot     even perform      their   statutory
               responsibilities virtually.

Id. at 1316.

      Commerce returned its Remand Results to the Court on June 30, 2022.

Remand Results, ECF No. 61. In the Remand Results, Commerce stated it took new

agency action: It found that the questionnaires it issued and the responses it received
Court No. 1:20-cv-03837                                                       Page 4

sufficiently verified Shakti's information. Id. at 2. Commerce additionally offered a

"fuller explanation as to the option of a remote, real-time verification, and why a

verification conducted in real time was not plausible during the investigation." Id.

       After recounting the situation in India and the United States in the summer

of 2020, Commerce responded to Bonney Forge's objections. First, Commerce argued

that Plaintiffs raised the option of a virtual verification on August 11, 2020, which

was too late for Commerce to acquiesce, id. at 13, and that Plaintiffs did not explain

what a virtual verification was. Id. at 14. Second, Commerce noted that "alternative

means of conducting verification under exceptional circumstances" have been

approved by prior opinions of the Court ofinternational Trade. Id. at 19. Commerce

concluded that "the Post-Preliminary Questionnaires and responses thereto were a

reasonable alternative to in-person, on-site verification or real-time, remote

verification given the unique conditions caused by the COVID-19 pandemic, as well

as other barriers specific to the case which impeded such means of virtual

verification."   Id. at 21.   The agency explained that India had internal and

international travel restrictions in 2020, making an on-site verification impossible.

Id. at 13.   With respect to virtual verification, Commerce noted that, during the

investigation, (1) many employees of Shakti were confined to their homes without

reliable internet access; (2) Shakti's accounting consultant could not travel to the

company's facilities because ofindian COVID restrictions; (3) most of Shakti's records
Court No. l:20-cv-03837                                                        Page 5

were only in paper form; and (4) the significant time difference between India and

the United States made scheduling a real-time teleconference difficult. Id. at 15.

      Plaintiffs filed comments on the Remand Results with the Court on August 5,

2022, arguing that (1) Commerce's refusal to conduct on-site or virtual verification is

contrary to law and the remand order; (2) Commerce's determination that it verified

Shakti's information is unsupported by substantial evidence; and (3) Commerce's

determination that Shakti's submitted cost information is accurate is unsupported by

substantial evidence. Pls.' Br. on Remaining Issues (Pls.' Br.) at 2-14, ECF No. 78.

Defendant Commerce and Defendant-Intervenor Shakti Forge responded to

Plaintiffs' comments on September 6, 2022. Def.'s Resp. to Pls.' Br. on Remaining

Issues, ECF No. 73; Def.-Int.'s Resp. to Pls.' Comments on Remand Results, ECF No.

72. In its response, Commerce argues that it complied with the remand order and

that its decision is supported by substantial evidence. Def.'s Resp. at 7-12, ECF No.

73. Shakti Forge argues that Commerce complied with the remand order and that

Commerce's actions in other investigations are not relevant to its actions here. Def.-

Int.'s Resp. at 2-10, ECF No. 72.

      The Court held oral argument on October 25, 2022, see ECF No. 80, and asked

the Government where Commerce considered Plaintiffs' reliance interests in its

decision. Oral Arg. Tr. (Tr.) at 43: 12-16, ECF No. 82. Counsel pointed to the agency's

discussion of why the record information was sufficient to constitute verification. Id.

at 43:17-48:8. The Court also inquired whether the agency considered alternatives
Court No. l:20-cv-03837                                                        Page 6

in the Remand Results, as required by Regents. Id. at 35: 17-36:5. The Government

explained that doing a virtual or on-site verification "would be superfluous or that

would be almost like a second verification because again what it had already done

and considered constituted verification." Id. at 37:18-20. Thus, Commerce's answer

to whether it had followed the necessary procedures on remand was to highlight its

determination on the merits.

                             STANDARD OF REVIEW

      Although the scope of issues Commerce may reconsider on remand is broad,

Supreme Court precedent limits the range of available actions it may take. 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.

Regents, 140 S. Ct. at 1907-08 (internal citations omitted); accord SKF USA Inc. u.

United States, 254 F.3d 1022, 1028 (Fed. Cir. 2001) ("In the second situation, in which

the agency seeks to defend its decision on grounds not previously articulated by the

agency .... we generally decline to consider the agency's new justification for the

agency action[.]"); Timken Co. u. United States, 894 F.2d 385, 389 (Fed. Cir. 1990)
Court No. 1:20-cv-03837                                                           Page 7

("[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." Nahornthai 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), af/'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 the Procedural Requirements of New
                           Agency Action

       Commerce acknowledges that it has a consistent past practice of performing

in-person, on-site verification whenever possible. See Remand Results at 20, ECF No.

61 (noting that "Commerce has a documented history of verifying information to the

fullest extent possible"); see also id. at 19 (detailing Commerce's actions in three other

cases with substantial verification hurdles where Commerce arranged in-person

verification at alternative locations); id. at 7 nn.35-36 (citing instances in which in-

person, on-site verification was impossible so that substitute procedures were used
Court No. 1:20-cv-03837                                                         Page 8

but none in which in-person, on-site verification was possible but was not done). In

the Remand Results, Commerce explained its view of why in-person, on-site

verification in India was not possible during the original investigation in 2020. Id. at

3-4. Commerce has also now explained its view of why a virtual verification was not

possible in 2020, filling the gap identified by this Court in its prior decision. Id. at

13-15; see Bonney Forge I, 560 F. Supp. 3d at 1316 ("Record review requires a record.

Because Commerce has failed to make one concerning its decision not to engage in

verification, virtual or otherwise, its decision may not stand.").    Commerce did a

thorough job explaining the conditions in the United States and India in 2020 and

how those conditions made on-site verification as well as an alternative virtual

verification impractical. See Remand Results at 3-11, 14-15, ECF No. 61. Unlike

the previous examples Plaintiffs cite -   where world events impacted only travel to

the foreign company and Commerce could designate an alternative in-person

verification site -   pandemic travel restrictions made travel difficult regardless of

location. Id. at 19-21. There was no clear alternative location where both parties

could meet.     Compare Polyethylene Terephthalate Resin from Pahistan:           Final

Determination of Sales at Less Than Fair Value, 83 Fed. Reg. 48,281, 48,282 (Sept.

24, 2018) (conducting a verification with representatives of a Pakistani company in

Washington, DC, when Commerce determined that travel in Pakistan was not

possible because of a State Department travel advisory), with Remand Results at 20,

ECF No. 61 (explaining that "in 2020, there were global travel bans in place, including
Court No. l:20-cv-03837                                                          Page 9

a ban on travel to India by U.S. citizens and travel to the United States by Indian

nationals").   Shakti faced many hardships from India's lockdown policies, which

prevented its employees from accessing its facilities and left them with irregular

online access, making virtual verification difficult. Id. at 15.

       Despite this explanation, two flaws mar Commerce's redetermination. First,

Commerce denied the legitimacy of Bonney Forge's reliance interests, which are

rooted in Commerce's consistent past practice of performing on-site or in-person

verifications. See id. at 26 (claiming that all that mattered was whether Commerce

was satisfied that the information was accurate). Second, the agency refused to

address whether any additional steps were warranted to verify the information on

the record given current conditions. See id. at 22 ("We disagree with the petitioners

that an analysis of verification possibilities under current conditions is required to

comply with the Remand Order."). 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 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 [policy]."' Id. at 1913 (quoting Motor Vehicle Mfrs.

Assn. of United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983))
Court No. 1:20-cv-03837                                                       Page 10

(alterations in original). And when deviating from a 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))).

      Given its admitted past practice of on-site or in-person verification and the

deviation from that practice in the Remand Results, Commerce was obligated to

acknowledge Bonney Forge's reliance interests and explain why this departure from

past practice would not unduly harm those interests. No such discussion can be

found. The agency never uses the term "reliance interests" once. When pressed at

oral argument to show where in the Remand Results the agency considered reliance

interests, the Government pointed to the Remand Results' discussion of why the

questionnaire was sufficient to fulfill Commerce's statutory mandate to gather

accurate and reliable information.     See Tr. at 43:17-48:8, ECF No. 82; Remand

Results at 26-28, ECF No. 61. However, Commerce's discussion effectively denied

the existence of Bonney Forge's reliance interests. According to Commerce, "the

purpose of verification is to corroborate information reported by the respondents

earlier in the proceeding, and establish, to Commerce's satisfaction, that such

information is accurate and reliable for purposes of making a final determination."

Remand Results at 26, ECF No. 61 (emphasis in original). Bonney Forge's reliance
Court No. 1:20-cv-03837                                                        Page 11

interests are irrelevant because the agency's satisfaction with the verification

procedure is all that matters.

       But Commerce may not ignore Bonney Forge's legitimate reliance interests

engendered by Commerce's consistent policy of conducting on-site or in-person

verifications. See Regents, 140 S. Ct. at 1913 (holding that reliance interests "must

be taken into account") (citations omitted).        The agency tries to dodge this

responsibility by explaining that its Remand Results are in line with a two-year policy

during the pandemic of using questionnaires in lieu of on-site verification. Remand

Results at 23-24, ECF No. 61. Citing an expired pandemic policy is insufficient to

avoid Commerce's obligation to acknowledge Bonney Forge's reliance interests in the

prior policy of on-site or in-person verification. Although agencies have flexibility to

change policy, they "must be cognizant that longstanding policies may have

'engendered serious reliance interests that must be taken into account."' Regents, 140

S. Ct. at 1913 (quoting Encino Motorcars, 136 S. Ct. at 2126) (quoting Fox Television,

556 U.S. at 515). Commerce's Remand Results claim that it is only Commerce's

interests that matter. See Remand Results at 26, ECF No. 61 (stating that "the

purpose of verification is to corroborate information reported by the respondents

earlier in the proceeding, and establish, to Commerce's satisfaction, that such

information is accurate and reliable"). Because ignoring Plaintiffs' reliance interests

ignores Supreme Court precedent, Commerce's determination must again return to

the agency.
Court No. l:20-cv-03837                                                        Page 12

       The Remand Results also fall short in their consideration of alternatives

during the remand period. The agency explained why it could not perform on-site

verification in 2020 and why virtual verification might not have been feasible during

the pandemic. Remand Results at 3-4, 13-21, ECF No. 61. This was helpful; but

there is no discussion of why the agency refused to take further steps to verify the

information during the remand period - when the agency took "new agency action."

Regents, 140 S. Ct. at 1908. The agency insisted that it need not consider doing

anything further at all during the remand period, stating "{a}n attempt by Commerce

to conduct additional verification of Shakti's responses via a virtual web conference

or other methodology the petitioners might have suggested would be unnecessary as

the information had already been verified under section 782(i)(l) of the Act." Remand

Results at 23, ECF No. 61 (alteration in original).        Commerce's explanation is

essentially that, because what the agency did in 2020 was sufficient, the agency need

not consider doing anything further. Id.; see also id. at 28 (explaining that using the

questionnaire fulfilled many of the same functions as on-site verification). But see id.

at 7 nn.35-36 (citing instances in which in-person, on-site verification was impossible

so that substitute procedures were used but none in which in-person, on-site

verification was possible but was not done). Again, the agency conflates the merits

question with a procedural question. Commerce must explain what other steps closer

to an on-site or in-person verification it has considered -   now and in 2020 -     and

why it rejected those alternatives in favor of questionnaires. See Regents, 140 S. Ct.
Court No. l:20-cv-03837                                                        Page 13

at 1913 (requiring that an agency analyze the alternatives within the scope of the

existing policy when changing longstanding practices).

       As the Regents Court noted, Commerce has two options on remand. 140 S. Ct.

at 1907-08. It may offer a fuller explanation of its reasoning at the time of the action

it defends, or it may take new agency action. Id. Commerce here correctly decided

to take new agency action but failed to acknowledge Bonney Forge's reliance

interests. See id. at 1913. The agency also refused to explain why no alternative

actions to verify Shakti's information were needed either in 2020 or during the

remand period. To rectify these deficiencies, the case is REMANDED to Commerce

for further explanation.

                                    CONCLUSION

      Past practice is not an inescapable straitjacket. Commerce may deviate from

it, provided that it places a reasoned explanation on the record in compliance with

Regents.    Because it has not done so, the Court must remand for further

reconsideration. Accordingly:

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

its decision on verification, consistent with this opinion, and place its reasons

supporting its decision on the record; and it is

      ORDERED that, at the conclusion of 150 days, Commerce should file its

Second Remand Redetermination with the Court. It is also
Court No. 1:20-cv-03837                                                  Page 14

     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.

                                            S~         AJ! ~  !in,    Judge

Dated:    0r:f:J.J1 l.-v , 3
         New York, New York