Zhejiang Zhaofeng Mech. & Elec. Co. v. United States

• Decision Date: 27 December 2018
• Docket Number: Slip Op. 18-182,Court No. 18-00004
• Citation: 355 F.Supp.3d 1329
• Parties: ZHEJIANG ZHAOFENG MECHANICAL AND ELECTRONIC CO., LTD., Plaintiff, v. UNITED STATES, Defendant, and The Timken Company, Defendant-Intervenor.
• Court: U.S. Court of International Trade

355 F.Supp.3d 1329

ZHEJIANG ZHAOFENG MECHANICAL AND ELECTRONIC CO., LTD., Plaintiff,

v. UNITED STATES, Defendant,andThe Timken Company, Defendant-Intervenor.

Court No. 18-00004

Slip Op. 18-182

United States Court of International Trade.

Dated: December 27, 2018

Adams C. Lee, Harris Bricken McVay, LLP, of Seattle, WA, argued for Plaintiff Zhejiang Zhaofeng Mechanical and Electronic Co., Ltd.

Kelly A. Krystyniak, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., argued for Defendant United States. With her on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and L. Misha Preheim, Assistant Director. Of counsel was James H. Ahrens II, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, D.C.

William A. Fennell, Stewart and Stewart, of Washington, D.C., argued for Defendant-Intervenor The Timken Company. With him on the brief was Terence P. Stewart. Geert M. De Prest, Jennifer M. Smith, Lane S. Hurewitz, Nicholas J. Birch, and Patrick J. McDonough also appeared.

OPINION AND ORDER

Choe-Groves, Judge:

This action arises out of an administrative review of the antidumping duty order on tapered roller bearings from the People's Republic of China ("China"). See Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China, 83 Fed. Reg. 1,238 (Dep't Commerce Jan. 10, 2018) (final results of antidumping duty administrative review, and rescission of new shipper review; 2015–2016) ("Final Results"). Before the court is a Rule 56.2 motion for judgment on the agency record filed by Plaintiff Zhejiang Zhaofeng Mechanical and Electronic Co., Ltd. ("Plaintiff" or "Zhaofeng") contesting the decision of the U.S. Department of Commerce ("Commerce" or "DOC") to revoke Plaintiff's separate rate status. See Pl.'s Rule 56.2 Mot. J. Agency R., June 29, 2018, ECF No. 30 ("Pl.'s Mot."); see also Mem. P. & A. Supp. Pl. Zhejiang Zhaofeng's Rule 56.2 Mot. J. Agency R., June 29, 2018, ECF No. 32 ("Pl.'s Mem."). For the following reasons, the court concludes that Commerce's determination is unsupported by substantial evidence and not in accordance with the law. Plaintiff's Rule 56.2 motion is granted.

PROCEDURAL HISTORY

Defendant-Intervenor the Timken Company ("Timken") petitioned Commerce for an administrative review of the antidumping duty order on tapered roller bearings from China. See Petitioner's (Timken's) Pre-Preliminary Comments, PD 181, bar code 3576832-01 (May 31, 2017); see also Tapered Roller Bearings and Parts Theoreof, Finished or Unfinished, From the People's Republic of China, 52 Fed. Reg. 22,667 (Dep't Commerce June 15, 1987) (antidumping duty order). Commerce initiated an administrative review covering June 1, 2015 through May 31, 2016 for sales of subject merchandise by Chinese producers and exporters. See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 81 Fed. Reg. 53,121 (Dep't Commerce Aug. 11, 2016) (initiation notice). Commerce selected Zhaofeng as a replacement mandatory respondent in the administrative review. See Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China, 82 Fed. Reg. 31,301 (Dep't Commerce July 6, 2017) (prelim. results and prelim. rescission of new shipper review; 2015–2016) ("Preliminary Results").

Prior to its selection as a mandatory respondent, Zhaofeng submitted a timely separate rate certification to Commerce from a previous administrative review for tapered roller bearings from China. See Zhaofeng Section A Response, PD 65–67, bar code 3523271-01 (Nov. 17, 2016). Between November 2016 and April 2017, Zhaofeng submitted timely responses to questionnaires issued by Commerce. See Preliminary Results Decision Memo at 3–4, PD 185, bar code 3587281-01 (June 29, 2017) ("Prelim. IDM").

Commerce conducted on-site verification of Zhaofeng's submissions in May 2017, including information on separate rates and sales. See DOC Zhaofeng Verification Report, PD 187, bar code 3588002-01 (June 29, 2017). Commerce noted that Zhaofeng's responses contained no significant omissions, errors, or other issues of concern. See id. After verification, Commerce became aware of irregularities in Zhaofeng's submissions when Timken submitted comments identifying discrepancies in a certain verification exhibit. See Petitioner's (Timken's) Pre-Preliminary Comments at 1–3, PD 181, bar code 3576832-01 (May 31, 2017).

Commerce published its Preliminary Results on July 6, 2017. See Preliminary Results, 82 Fed. Reg. at 31,301. Commerce concluded that Zhaofeng failed to provide a complete and accurate U.S. sales database despite having possessed the records necessary, and it determined that the application of partial AFA was appropriate and warranted. See Prelim. IDM at 14–15. Separately, Commerce found no evidence of Chinese government ownership of Zhaofeng and that it was otherwise entitled to a separate rate in the review. See id. at 10.

Zhaofeng submitted an administrative case brief pursuant to Commerce's Preliminary Results. See Zhaofeng DOC Case Brief, PD 194, bar code 3604752-01 (Aug. 7, 2017). In its administrative brief, Zhaofeng noted that the sales listing worksheet provided in the verification exhibit in question incorrectly identified certain model numbers, but stated that the worksheet was not part of its official financial record. See id. at 3–4. Zhaofeng argued that the irregularities in its submissions were the result of clerical error, and even so, it did not misreport sales of subject merchandise during the period of review because the verification exhibit involved unreported sales of non-subject merchandise. See id. at 2–4. In response to Zhaofeng's assertion that the examination of the invoice would resolve the matter, Commerce requested the entry package pertaining to the disputed sales from U.S. Customs and Border Protection ("CBP") and received the requested documents, including the associated invoice. See DOC Memo to File: Entry Documents - CBP, PD 202, bar code 3617066-01 (Sept. 7, 2017). Upon reviewing the CBP entry documents, Commerce found further discrepancies in Zhaofeng's submissions. See Final Results Issues & Decisions Memorandum at 7, PD 219, bar code 3657729-01 (Jan. 2, 2018) ("Final IDM").

Commerce issued its Final Results on January 10, 2018. See Final Results, 83 Fed. Reg. at 1,238. In light of the extent and nature of the discrepancies between Zhaofeng's verification materials, U.S. sales listings, and CBP entry documents, Commerce determined that Zhaofeng's submissions were "unreliable in its entirety" and that it could not rely on Zhaofeng's separate rate certification. See id. at 1,239 ; Final IDM at 6–10. Commerce found that Zhaofeng had failed to rebut the presumption that it is subject to government control and concluded that Zhaofeng should be assessed at the single, China-wide entity rate of 92.84 percent. See Final Results, 83 Fed. Reg. at 1,239 ; Final IDM at 10.

Zhaofeng brought this action on January 25, 2018. See Summons, Jan. 25, 2018, ECF No. 1; Complaint, Jan. 25, 2018, ECF No. 2. Zhaofeng filed a Rule 56.2 motion for judgment on the agency record, contesting Commerce's rejection of Zhaofeng's separate rate status. See Pl.'s Mot. Defendant filed a response to Zhaofeng's Rule 56.2 motion. See Def.'s Resp. Opp'n Pl.'s Rule 56.2 Mot. J. Agency R., Sept. 14, 2018, ECF No. 35 ("Def.'s Resp."). Defendant-Intervenor Timken submitted a response in opposition to Plaintiff's Rule 56.2 motion. See Def.-Intervenor Timken's Opp'n Rule 56.2 Mot. J. Agency R., Sept. 17, 2018, ECF No. 40. Zhaofeng submitted a reply brief. See Pl. Zhejiang Zhaofeng's Reply Resp. United States & Timken Zhejiang Zhaofeng's Rule 56.2 Mot. J. Agency R., Oct. 19, 2018, ECF No. 43 ("Pl.'s Reply"). The court held oral argument on December 4, 2018. See Oral Argument, Dec. 4, 2018, ECF No. 54.

JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction pursuant to Section 516A(a)(2)(B)(i) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(i) (2012), and 28 U.S.C. § 1581(c). 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 the law. 19 U.S.C. § 1516a(b)(1)(B)(i).

ANALYSIS

The single issue before the court is whether Commerce's determination that Zhaofeng was not eligible for a separate rate and subsequent assignment of the China-wide entity rate to Zhaofeng was supported by substantial evidence and in accordance with the law. Plaintiff contests Commerce's denial of its separate rate status as opposed to applying adverse facts available ("AFA") for Commerce's perceived deficiencies in Zhaofeng's sales information. See Pl.'s Mem. 12–14.

Pursuant to the Tariff Act, Commerce has the authority to determine if a country is a nonmarket economy. See 19 U.S.C. § 1677(18) ; see also Sigma Corp. v. United States, 117 F.3d 1401, 1404–06 (Fed. Cir. 1997). In proceedings involving a nonmarket economy, such as China, there is a rebuttable presumption that all companies within the country are subject to government control and should be assigned a single, country-wide antidumping duty rate. See Sigma Corp, 117 F.3d at 1405. An exporter will receive the country-wide rate by default unless it affirmatively demonstrates that it enjoys both de jure and de facto independence from the government and receives a separate rate status. See id. The burden of rebutting the presumption of government control rests with the exporter. See id. at 1406. The de jure criteria are: (1) an absence of restrictive stipulations associated with an individual exporter's business and export licenses; (2) any legislative enactments decentralizing control of companies; and (3) any other formal measures by the government decentralizing control of companies. See Ad...