Fujian Machinery and Equipment v. U.S.

• Decision Date: 28 September 2001
• Docket Number: No. 99-08-00532.,SLIP OP. 01-120.,99-08-00532.
• Citation: 178 F.Supp.2d 1305
• Parties: FUJIAN MACHINERY AND EQUIPMENT IMPORT & EXPORT CORPORATION, and Shandong Machinery Import & Export Corporation, Plaintiffs, v. UNITED STATES, and the United States Department of Commerce, Defendants, and O. Ames Company, Defendant-Intervenor.
• Court: U.S. Court of International Trade

178 F.Supp.2d 1305

FUJIAN MACHINERY AND EQUIPMENT IMPORT & EXPORT CORPORATION, and Shandong Machinery Import & Export Corporation, Plaintiffs, v. UNITED STATES, and the United States Department of Commerce, Defendants, and O. Ames Company, Defendant-Intervenor.

SLIP OP. 01-120.

No. 99-08-00532.

United States Court of International Trade.

September 28, 2001.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Powell, Goldstein, Frazier & Murphy LLP, Washington, DC (Lawrence R. Walders) for plaintiffs Fujian Machinery and Equipment Import & Export Corporation and Shandong Machinery Import & Export Corporation.

Stuart E. Schiffer, Acting Assistant Attorney General, David M. Cohen, Director, Kenneth S. Kessler, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice; Office of the Chief Counsel for Import Administration, United States Department of Commerce (John F. Koeppen), for defendant, of counsel.

Wiley, Rein & Fielding, Washington, DC (Charles O. Verrill, Jr. and Eileen P. Bradner) for defendant-intervenor O. Ames Company.

OPINION

GOLDBERG, Judge.

In this action, the Court considers plaintiffs' challenges to the final results of the Department of Commerce ("Commerce") for the seventh administrative review of the antidumping duty order on heavy forged hand tools ("HFHTs"). See Heavy Forged Hand Tools, Finished or Unfinished, With or Without Handles, From the People's Republic of China; Final Results and Partial Recission of Antidumping Duty Admin. Reviews, 64 Fed.Reg. 43,659 (August 11, 1999) ("Final Results"). Plaintiffs Fujian Machinery and Equipment Import & Export Corporation ("FMEC") and Shandong Machinery Import & Export Corporation ("SMC") argue that: (1) Commerce erred in determining that there was a total failure of verification at FMEC, SMC, and two of the supplier factories; (2) Commerce erred by denying plaintiffs' claims for separate company-specific dumping margin rates; and (3) Commerce acted unlawfully by using facts available and in particular by applying adverse inferences, on the basis of alleged verification failures and subsequently discovered unreported sales.

The Court exercises jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c) (1994).

BACKGROUND

On March 23, 1998, Commerce initiated the seventh administrative review of HFHTs. Initiation of Antidumping and Countervailing Duty Admin. Reviews, 63 Fed.Reg. 13,837 (March 23, 1998). With respect to the People's Republic of China ("PRC"), the review covered axes/adzes, bars/wedges, hammers/sledges, and picks/mattocks. Id. Commerce issued an initial set of questionnaires to plaintiffs on April 23, 1998. Supplemental questionnaires followed for SMC on August 7, 1998, for FMEC on August 10, 1998, and for both companies on September 15, 1998. SMC and FMEC timely responded to all questionnaires.

On September 24, 1998, Commerce faxed the verification outlines for SMC and FMEC to the Washington office of plaintiffs' counsel. Verification began at FMEC the morning of October 5, 1998, and lasted two days. Subsequently, Commerce conducted verification at SMC October 8-9, 1998, and at two of the plaintiffs' suppliers' factories the following week: [], termed "Factory A" by Commerce, on October 12-13, 1998; and [], termed "Factory B" by Commerce, on October 14-15, 1998 (collectively, the "Factories").

On January 29, 1999, Commerce issued an internal memorandum determining that FMEC, SMC,¹ Factory A, and Factory B had each failed verification. See App. ("Pls.' App.") to Pls.' Mot. for J. upon the Agency R. ("Pls.' Memo") 8, Determination of Adverse Facts Available Based on Verification Failure in the Admin. Review of HFHTs from the PRC ("AFA Memo"). On February 9, 1999, FMEC's counsel wrote to Commerce requesting an opportunity to provide information that the memorandum had identified as unavailable during FMEC's verification. See Pls.' App. 9, Heavy Forged Hand Tools From the PRC — Clarification of Verification ("FMEC's Add'l Submissions Letter"). On February 26, 1999, Commerce denied this request as untimely. See Pls.' App. 10, Antidumping Duty Admin. Review of HFHTs from the PRC (1997-1998) ("Commerce's Add'l Submissions Letter").

On February 5, 1999, Commerce published the preliminary results of the antidumping review. Heavy Forged Hand Tools, Finished or Unfinished, With or Without Handles, From the PRC; Preliminary Results and Partial Recission of Antidumping Duty Admin. Reviews, 64 Fed.Reg. 5,770 (February 5, 1999) ("Preliminary Results"). In the Preliminary Results, Commerce determined that sales of HFHTs from the PRC were made at less than fair value during the period of review, February 1, 1997, through January 31, 1998. Id. With respect to both FMEC and SMC, Commerce stated that "serious problems" at verification made it impossible to confirm that U.S. sales for either company were properly reported. Id. at 5,771. Commerce further determined that "the nature of the verification failures of both companies and the inadequacy of their cooperation" was such that neither FMEC nor SMC had established that it was entitled to a separate, company-specific rate, rather than the government-entity rate otherwise applicable to exporters in non-market economies that fail to demonstrate an absence of government control over their export activities. Id. at 5,772. Finally, Commerce concluded that the non-responsiveness of the PRC's Ministry of Foreign Trade and Economic Cooperation ("MOFTEC"), as well as the verification failures of FMEC and SMC, demonstrated that the "PRC entity" (including FMEC and SMC) had failed to cooperate to the best of its ability, and that application of adverse facts available ("AFA") under 19 U.S.C. § 1677e(b) (1994) was therefore appropriate. Id.

On April 22, 1999, Commerce informed FMEC and SMC that a review by the U.S. Customs Service had disclosed several unreported sales of bars/wedges by both companies. FMEC and SMC filed comments explaining these unreported sales on May 10, 1999. See Pls.' App. 11, Heavy Forged Hand Tools From China ("Pls.' Unreported Sales Letter"). On August 3, 1999, Commerce issued a memorandum rejecting plaintiffs' explanations. See Pls.' App. 12, Antidumping Duty Admin. Review of HFHTs from the PRC (1997-1998) — Unreported Sales ("Commerce's Unreported Sales Letter").

On August 11, 1999, Commerce published the Final Results, in which it again determined that FMEC, SMC, and their suppliers' factories failed verification; that neither FMEC nor SMC warranted a separate rate; and that the application of AFA was appropriate. See 64 Fed.Reg. at 43,661-69. Commerce assigned FMEC and SMC the following PRC-wide dumping margins: for axes/adzes, 18.72%; for bars/wedges, 47.88%; for hammers/sledges, 27.71%; and for picks/mattocks, 98.77%. Id. at 43,672.

STANDARD OF REVIEW

The Court will sustain Commerce's Final Results unless they are "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B)(i) (1994). Substantial evidence is "more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938); accord Matsushita Elec. Indus. Co., Ltd. v. United States, 3 Fed. Cir. (T) 44, 51, 750 F.2d 927, 933 (1984). "[T]he possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence." Consolo v. Federal Maritime Comm'n, 383 U.S. 607, 620, 86 S.Ct. 1018, 16 L.Ed.2d 131 (1966) (citations omitted).

While Congress has thus directed the Court to test whether Commerce's Final Results are supported by substantial evidence, the Court of Appeals for the Federal Circuit has determined that a nominally different standard of review applies to one aspect of the methodology from which the Final Results are derived. In Micron Tech., Inc. v. United States, 15 Fed. Cir. (T) ___, 117 F.3d 1386 (1997), the Federal Circuit observed that although Congress has directed Commerce to "verify all information relied upon in making ... a final determination in an investigation ... [or] a final determination in a[n antidumping] review," 19 U.S.C. § 1677m(i)(3) (1994),² Congress never defined what successful verification entails, 15 Fed. Cir. (T) at ___, 117 F.3d at 1394, and neither Congress nor Commerce has either specified a particular verification methodology. Id. at 1395. Accordingly, the Micron Tech. court looked to the Supreme Court's decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), to derive the appropriate level of deference due Commerce's verification methodology. See 15 Fed. Cir. (T) at ___, 117 F.3d at 1394.

In Chevron, the Supreme Court observed:

If Congress has explicitly left a gap for the agency the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.

Sometimes the legislative delegation to an agency is implicit rather than explicit. In such a case, the court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency.

Id. at 843-44, 104 S.Ct. 2778 (footnotes omitted). Apparently in reliance on that language, the Micron Tech. court held, among other things, that "Congress has implicitly delegated to Commerce the latitude to derive verification procedures ad hoc.... Therefore, we review verification procedures employed by Commerce in an investigation for abuse of discretion,³ rather than against previously-set standards." 15 Fed. Cir. (T) at ___, 117 F.3d at 1396 (footnote added).

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