Court Opinion

ID: 817752
Source: CourtListenerOpinion
Date Created: 2013-02-01 01:57:42.722584+00
Date Added: 2024-06-11T15:26:37.876162
License: Public Domain

Slip Op. 10-88

            UNITED STATES COURT OF INTERNATIONAL TRADE

                                    :
SHANDONG MACHINERY                  :
IMPORT & EXPORT COMPANY             :
                                    :
                 Plaintiff,         :
                                    : Before: Richard K. Eaton, Judge
           v.                       :
                                    : Court No. 07–00355
UNITED STATES,                      :
                                    :
                 Defendant,         :
                                    :
     and                            :
                                    :
AMES TRUE TEMPER and                :
COUNCIL TOOL COMPANY, INC.,         :
                                    :
                 Def.-Ints.         :
                                    :

                          OPINION AND ORDER

[Department of Commerce’s remand results remanded]

                                               Dated: August 11, 2010

     Hume & Associates LLC (Robert T. Hume) for plaintiff.

     Tony West, Assistant Attorney General; Jeanne E. Davidson,
Director; Patricia M. McCarthy, Assistant Director, Civil
Division, Commercial Litigation Branch, United States Department
of Justice (Michael D. Panzera); Office of Chief Counsel for
Import Administration, United States Department of Commerce
(Shana Hofstetter), of counsel, for defendant.

     Wiley Rein LLP (Timothy C. Brightbill and Maureen E.
Thorson), for defendant-intervenor Ames True Temper.

     Kelley Drye & Warren (Eric McClafferty and John M. Herrman
II), for defendant-intervenor Council Tool Company, Inc.
Court No. 07-00355                                         Page 2

     Eaton, Judge:   This matter is before the court after remand

to the Department of Commerce (“Commerce” or the “Department”).

See Final Results of Redeterm. Pursuant to Court Remand (Dep’t of

Commerce Jan. 7, 2010)(“Remand Results”).   The Remand Results

address the antidumping duty rate applied to hammers/sledges

exported by plaintiff Shandong Machinery Import & Export Company

(“SMC”) in the fifteenth administrative review of antidumping

duty orders covering heavy forged hand tools (“HFHTs”) from the

People’s Republic of China (“PRC”) for the period of review

beginning on February 1, 2005, and ending on January 30, 2006

(“POR”).    See HFHTs, Finished or Unfinished, With or Without

Handles, From the PRC, 72 Fed. Reg. 51,787 (Dep’t of Commerce

Sept. 11, 2007) (final results) and the accompanying Issues and

Decision Memorandum (Dep’t of Commerce Sept. 4, 2007) (“Issues &

Dec. Mem.”) (collectively, “Final   Results”).1

     In the Final Results, Commerce found that plaintiff failed

to rebut the non-market economy (“NME”) presumption of government

control.2   As a result, Commerce applied a country-wide

     1
          United States imports of HFHTs are subject to
individual antidumping duty orders covering separate categories
of goods, including hammers/sledges. Final Results, 72 Fed.
Reg. at 51,787.
     2
          A non-market economy includes “any foreign country that
the administering authority [Commerce] determines does not
operate on market principles of cost or pricing structures, so
that sales of merchandise in such country do not reflect the fair
value of the merchandise.” 19 U.S.C. § 1677(18)(A) (2006);
Shandong Huarong Gen. Group Corp. v. United States, 28 CIT 1624,
Court No. 07-00355                                      Page 3

antidumping duty rate (“PRC-wide rate”) to SMC’s exports.     See

Issues & Dec. Mem. at Comment 1; HFHTs, Finished or Unfinished,

With or Without Handles, From the PRC, 72 Fed. Reg. 10,492 (Dep’t

of Commerce Mar. 8, 2007) (“Prelim. Results”).   Commerce

assigned, as the PRC-wide rate, using adverse facts available,

45.42 percent for hammers/sledges.   Final Results, 72 Fed. Reg.

at 51,787.   In selecting a PRC-wide rate for hammers/sledges,

Commerce used the 45.42 percent rate calculated as the best

information available (“BIA”)3 rate during a 1991 less than fair

value (“LTFV”) investigation of the China National Machinery

Import & Export Corporation.   See Issues & Dec. Mem. at Comment

1625 n.1, Slip Op. 04-117 (2004) (not reported in the Federal
Supplement).

     “Any determination that a foreign country is a nonmarket
economy country shall remain in effect until revoked by the
administering authority.” 19 U.S.C. § 1677(18)(C)(i) (2006).
The PRC has been determined to be an NME country. The Department
has treated the PRC as a non-market economy country in all past
antidumping investigations. Zhejiang Native Produce & Animal By-
Products Imp. and Exp. Corp. v. United States, 27 CIT 1827, 1834
n.14, Slip Op. 03-151 (2003) (not reported in the Federal
Supplement) (citations omitted).
     3
          BIA is the predecessor to the use of adverse facts
available. In the Statement of Administrative Action of the
Uruguay Round Agreements Act of 1994, Pub.L. No. 103-465, 108
Stat. 4809 (1994), Congress explained that the Uruguay Round
amended the prior law, which “mandate[d] use of the best
information available (commonly referred to as BIA) if a person
refuse[d] or [was] unable to produce information in a timely
manner or in the form required.” H.R. Doc. No. 103-316 (1994) at
868, reprinted in 1994 U.S.C.C.A.N. 4040, 4198. Shandong Huarong
Mach. Co. v. United States, 30 CIT 1269, 1282 n.9, 435 F. Supp.
2d 1261, 1274 n.9 (2006).
Court No. 07-00355                                         Page 4

3; HFHTs, Finished or Unfinished, With or Without Handles, From

the PRC, 56 Fed. Reg. 241 (Dep’t of Commerce Jan. 3, 1991) (final

results).

     Plaintiff SMC challenged the Final Results in this Court.

See Shandong Machinery Imp. & Exp. Co. v. United States, 33 CIT

__, Court No. 07-355, Slip Op. 09-64 (June 24, 2009) (not

reported in the Federal Supplement)(“Shandong I”).    In Shandong

I, the court sustained the Department’s findings that a) SMC was

not entitled to a separate rate because it failed to demonstrate

that it was not owned or controlled by the PRC; and b) adverse

facts available (“AFA”)4 should be applied to the PRC-wide entity,

including SMC.5   However, the court remanded the rate assigned to

hammers/sledges after finding that Commerce failed to corroborate

the 45.42 percent rate because it was based on information that

was not verified.    Shandong I, 33 CIT at __, Slip Op. 09-64 at

19-20;   see HFHTs, Finished or Unfinished, With or Without

Handles, From the PRC, 56 Fed. Reg. at 241.   The court found:

            Rather than using verified information, the
            Department used information submitted by the
            petitioner. Specifically, Commerce
            calculated an average of the margins
            contained in the petition for each class or

     4
          When periodically reviewing and reassessing antidumping
duties for an uncooperative party, Commerce “may use an inference
that is adverse to the interests of that party in selecting from
among the facts otherwise available.” 19 U.S.C. § 1677e(b).
     5
          The Shandong I court also sustained the margins
assigned to the other hand tools at issue.
Court No. 07-00355                                        Page 5

            kind of merchandise, as adjusted for
            calculation errors in the petition.
            Therefore, Commerce took no steps to
            corroborate the information during the LTFV
            investigation.

Shandong I, 33 CIT at __, Slip Op. 09-64 at 20 (citation

omitted).   Accordingly, the court found that the 45.42 percent

rate was not reliable.    Id. at ___, Slip Op. 09-64 at 20

(“Consequently, the 45.42 percent rate is not reliable, and the

court directs Commerce, on remand, to assign a different rate to

hammers/sledges that has been corroborated according to its

reliability and relevance to the country-wide entity as a

whole.”) (internal quotation omitted).

     On January 7, 2010, Commerce issued its Remand Results.       In

the Remand Results, Commerce applied a new PRC-wide rate of

109.16 percent based on a single transaction margin from SMC’s

2004-2005 administrative review, i.e., the fourteenth

administrative review.   See Remand Results at 11; Def.’s Resp.

Comments Remand Determ. (“Def.’s Resp.”) 3; see also Remand

Results at 8 (“The Department next examined the transaction-

specific rates of SMC from the most recent prior reviews, as SMC

is part of the PRC-wide entity.”).   Plaintiff now challenges the

Remand Results.    See Pl.’s Comments Final Results Redeterm.

Pursuant to Court Remand (“Pl.’s Comm.”).   Defendant-intervenors

Ames True Temper and the Council Tool Company, Inc. support the
Court No. 07-00355                                            Page 6

Remand Results.   See Ames True Temper’s Comments Supp. Final

Results Redeterm. Pursuant to Court Remand (“Ames’ Comm.”); Def.-

Int. Council Tool Co.’s Comments Final Results Redeterm. Pursuant

to Court Remand (“Council Tool’s Comm.”).

     The court has jurisdiction pursuant to 28 U.S.C. § 1581(c)

and 19 U.S.C. § 1516a(a)(2)(B)(iii) (2006).    For the following

reasons, the court remands the rate for hammers/sledges to

Commerce for further findings consistent with this opinion.

                        STANDARD OF REVIEW

     When reviewing Commerce’s final antidumping determinations,

the court “shall hold unlawful any determination, finding, or

conclusion found . . . to be unsupported by substantial evidence

on the record, or otherwise not in accordance with law . . . .”

19 U.S.C. § 1516a(b)(1)(B)(i).

                            DISCUSSION

I.   Legal Framework

     In seeking a PRC-wide rate based on AFA, the Department may

use information derived from the petition, a final determination

in the investigation, any prior administrative review, or any

other information placed on the record.     See 19 U.S.C.

§ 1677e(b); Statement of Admin. Action accompanying the Uruguay

Round Agreements Act, H.R. Rep. 103-316 at 870, reprinted in 1994
Court No. 07-00355                                              Page 7

U.S.C.C.A.N. 4040, 4199 (stating that secondary information is

“information derived from the petition that gave rise to the

investigation or review, the final determination concerning the

subject merchandise, or any previous review under [19 U.S.C.

§ 1675] concerning the subject merchandise”).

      Where, as here, Commerce relies on secondary information

such as calculated rates from previous reviews, rather than

information obtained in the course of a current investigation or

review, the Department must “to the extent practicable,

corroborate that information from independent sources that are

reasonably at [its] disposal.”    19 U.S.C. § 1677e(c); see 19

C.F.R. § 351.308(d).    To corroborate secondary information,

Commerce must “examine whether the secondary information to be

used has probative value.”     See 19 C.F.R. § 351.308(d).

Probative value means that the rate must be both a) reliable and

b) relevant.     See Ferro Union, Inc. v. United States, 23 CIT 178,

202, 44 F. Supp. 2d 1310, 1333 (1999) (“Ferro Union”).

II.   Remand Results

      On remand, Commerce first examined the weighted average

rates calculated for hammers/sledges in preceding segments of

this proceeding and found that the highest calculated rate was

34.56 percent.    Def.’s Resp. 8 (citing Remand Results at 8).

Commerce determined that this rate, which was a partial AFA rate
Court No. 07-00355                                           Page 8

for SMC, would be inappropriate as an AFA margin for the PRC-wide

entity because assigning the 34.56 AFA rate “to the PRC-entity

would also lead to the PRC-wide entity exporters, including SMC,

obtaining a more favorable result by failing to cooperate than if

they had cooperated fully.”   Remand Results at 7-8.   Commerce

thus turned to an examination of the transaction-specific

antidumping margins of SMC’s sales calculated from the fourteenth

administrative review.    Def.’s Resp. 8 (citing Remand Results at

8).

      These transaction-specific margins ranged from zero to 348

percent.   Def.’s Resp. 8 (citation omitted).   Commerce first

stated that these transaction-specific margins could be used to

corroborate the 45.42 AFA rate applied in the Final Results,6 but

that, because the court had instructed it to select a “different”

rate, Commerce selected 109.16 percent, SMC’s “single

transaction-specific margin calculated in the prior review that

is closest to and exceeds the original 45.42 percent AFA rate.”

Remand Results at 9-10.

      Commerce states that in choosing the 109.16 percent rate it

      6
          Specifically, Commerce states: “Since more than 98
percent of the positive individual transaction margins from the
2004-2005 Final Results are higher than 45.42 percent, using
individual transaction margins from the 2004-2005 Final Results
provides a sufficient basis to find the 45.42 percent rate has
probative value and, thus, is corroborated within the meaning of
the statute.” Remand Results at 9 (citation omitted).
Court No. 07-00355                                             Page 9

has: (1) demonstrated that it was a calculated rate reflecting

SMC’s commercial activities from the prior year’s administrative

review; (2) explained that the rate is based on verified

information from the same company; (3) determined that “the rate

has not been found either unsupported by substantial evidence nor

contrary to law by any court”; and (4) noted the data have not

been challenged by any record evidence.    Def.’s Resp. 9 (citing

Remand Results at 10-11).    While Commerce’s efforts seemed

designed to corroborate the rate as to SMC itself, the Department

nonetheless found that the 109.16 percent rate was an appropriate

AFA PRC-wide rate.

     In response, plaintiff argues, inter alia, that the margin

is not supported by substantial evidence or otherwise in

accordance with law, and that the rate is punitive.    See Pl.’s

Comm. 9-14.

III. The Hammers/Sledges Rate Selected on Remand is Aberrational
     and Punitive

     The court finds that the selected rate is aberrational and

punitive.7    The Federal Circuit teaches that an AFA rate must be

“a reasonably accurate estimate of the respondent’s actual rate,

     7
          Because the court finds the rate to be aberrational and
punitive, and thus must be remanded, it need not address
plaintiff’s other arguments as to the inadequacies of the
selected rate.
Court No. 07-00355                                              Page 10

albeit with some built-in increase intended as a deterrent to

non-compliance.”     F.LLI De Cecco Di Fillippo Fara S. Martino

S.p.A. v. United States,     216 F.3d 1027, 1032 (Fed. Cir. 2000)

(“De Cecco”).   That the Department’s new rate of 109.16 percent

goes beyond the Federal Circuit’s guidance can be seen from the

Department’s previous findings in this case.    Specifically,

Commerce determined in the Final Results that the 45.42 percent

rate it chose was sufficient to ensure future compliance:

          The Department’s practice when selecting an
          adverse rate from among the possible sources
          of information is to ensure that the margin
          is sufficiently adverse so "as to effectuate
          the purpose of the facts available role to
          induce respondents to provide the Department
          with complete and accurate information in a
          timely manner."

See Issues & Dec. Mem. at Comment 3 (citation omitted).     If a

rate of 45.42 percent has been found by Commerce to fulfill the

goal of ensuring compliance, then a rate of over twice as much

must necessarily be punitive.    “[T]he purpose of [the statute

governing adverse inferences] is to provide respondents with an

incentive to cooperate, not to impose punitive, aberrational, or

uncorroborated margins.” De Cecco, 216 F.3d at 1032; see Timken

Co. v. United States, 26 CIT 1072, 1076, 240 F. Supp. 2d 1228,

1234 (2002), aff’d, 354 F.3d 1334 (Fed. Cir. 2004)(in choosing a

margin, Commerce must “appropriately balanc[e] th[e] goal of

accuracy against the risk of creating a punitive margin”);
Court No. 07-00355                                            Page 11

Gallant Ocean (Thailand) Co., Ltd. v. United States, 602 F. 3d

1319, 1324 (Fed. Cir. 2010).

                            CONCLUSION

     The court therefore remands this matter to Commerce to

determine a non-punitive PRC-wide rate for hammers/sledges.    In

its Remand Results, Commerce states that it is able to

corroborate the 45.42 percent rate:

          the Department believes that had the Court
          permitted the Department another opportunity
          to corroborate the 45.42 percent [rate] we
          would have concluded that these individual
          transaction margins from the administrative
          review of SMC, covering the period February
          1, 2004, through January 31, 2005,
          corroborate the 45.42 percent rate applied to
          the country-wide entity as a whole.

Remand Results at 8-9 (citation omitted).   If Commerce is capable

of corroborating the 45.42 percent rate, then it may endeavor to

do so on remand.   The Department shall be mindful, however, that

whatever rate it finds must be in accord with its previous

finding that the rate of 45.42 percent is sufficient to ensure

compliance.   Should the Department wish, it may reopen the record

and calculate an AFA rate to be applied to the PRC-wide entity

for sales of hammers/sledges, with an additional amount to deter

future non-compliance.

     The remand results shall be due on December 10, 2010;
Court No. 07-00355                                         Page 12

comments to the remand results shall be due on January 31, 2011;

and replies to such comments shall be due on February 22, 2011.

                                           /s/ Richard K.Eaton
                                           Richard K. Eaton

Dated:    August 11, 2010
          New York, New York