Coalition v. United States

• Decision Date: 23 October 2018
• Docket Number: Court No. 17-00167,Slip Op. 18 - 146
• Parties: THE DIAMOND SAWBLADES MANUFACTURERS' COALITION, Plaintiff, v. UNITED STATES, Defendant, and BOSUN TOOLS CO., LTD., Defendant-Intervenor.
• Court: U.S. Court of International Trade

THE DIAMOND SAWBLADES MANUFACTURERS' COALITION, Plaintiff, v. UNITED STATES, Defendant,and BOSUN TOOLS CO., LTD., Defendant-Intervenor.

Slip Op. 18 - 146 Court No. 17-00167

UNITED STATES COURT OF INTERNATIONAL TRADE

October 23, 2018

Before: R. Kenton Musgrave, Senior Judge

OPINION and ORDER

[Remanding 2014-15 administrative review of antidumping duty order on diamond sawblades and parts thereof from the People's Republic of China.]

Daniel B. Pickard, Maureen E. Thorson, and Stephanie M. Bell, Wiley, Rein & Fielding, LLP, of Washington, DC, for the plaintiff.

John J. Todor, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for the defendant. With him on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director. Of Counsel on the brief was Paul K. Keith, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.

Gregory S. Menegaz, J. Kevin Horgan, and Alexandra H. Salzman, deKeiffer & Horgan, PLLC, of Washington, DC, for the defendant-intervenor.

Musgrave, Senior Judge: The plaintiff Diamond Sawblades Manufacturers' Coalition ("DSMC") challenges three aspects of the 2014-15 administrative review of the antidumping ("AD") duty order on diamond sawblades ("DSBs") and parts thereof from the People's Republic of China ("PRC")¹, to wit: (1) Commerce's decision not to apply adverse facts available ("AFA") to an aspect of Bosun's record-keeping; (2) Commerce's selection for the copper powder and copper iron "clab"² factor of production of Thai import statistics as the "best available information" for Bosun; and (3), to the extent remand of either of the forgoing issues impacts the final determination on the margin for the separate respondents, DSMC also seeks recalculation thereof. The defendant-intervenor, Bosun Tools Co., Ltd. ("Bosun"), an exporter and/or producer of subject merchandise and one of the two mandatory respondents during the review, joins the defendant in support of the administrative record and determinations thereon by the International Trade Administration, U.S. Department of Commerce ("Commerce" or "Department"). For the following reasons, the plaintiff's motion for judgment on the agency record persuades that the case requires remand.

I. Jurisdiction and Standard of Review

Jurisdiction is pursuant to 28 U.S.C. § 1581(c). The standard of judicial review on an action invoking 19 U.S.C. §1516a(a)(2)(A) and (B)(iii) is to decide whether the administrativedetermination is "unsupported by substantial evidence on the record, or otherwise not in accordance with law". 19 U.S.C. §1516a(b)(1)(B)(i).

II. Discussion

A. Bosun's Record-Keeping

DSMC's first challenge is to Commerce's decision not to apply AFA to an aspect of Bosun's record-keeping. See 19 U.S.C. §1677e(b).

1. Background

In general, the AD statute expects that the margin for subject merchandise from a non-market economy ("NME") such as the PRC shall be determined by comparing its U.S. price with a "normal value" determined by reference to data covering the factors involved in production of subject merchandise ("FOPs") plus general and other expenses and profit obtained from one or more surrogate market economies at a level of economic development comparable to the NME country at issue that is/are also significant producer(s) of comparable merchandise. See 19 U.S.C. §1677b(c)(1)&(4).³

In order to reach its determinations, Commerce is required to rely on "facts otherwise available" on the record if "necessary" information is missing from the record. 19 U.S.C. §1677e(a) (i.e., "shall"). If such information is missing due to a party's failure to act to the "best of its ability," Commerce "may" use inferences adverse to the non-cooperating party in selecting from among the facts otherwise available, also known as "AFA." Id. §1677e(b). Resort to AFA is not mandatory,see, e.g., Nippon Steel Corp. v. United States, 337 F.3d 1373, 1382 (Fed. Cir. 2003), and the AFA statute has been held to confer administrative discretion in its application and to require judicial deference thereto. E.g., Shangdong Huarong Machinery Co., Ltd. v. United States, 30 CIT 1269, 1297, 435 F. Supp. 2d 1261, 1285-86 (2006); AK Steel Corp. v. United States, 28 CIT 1408, 1416, 346 F. Supp. 2d 1348, 1355 (2004). Further, in the exercise of that discretion AFA is intended to be remedial: "The purpose of the adverse facts statute is 'to provide respondents with an incentive to cooperate' with Commerce's investigation, not to impose punitive damages." Essar Steel Ltd. v. United States, 678 F.3d 1268, 1276 (Fed. Cir. 2012), quoting F.lli De Cecco Di Filippo Fara S. Martino S.p.A. v. United States, 216 F.3d 1027, 1032 (Fed. Cir. 2000).

During the administrative review Bosun maintained production facilities in both Thailand and the PRC. Letter from deKieffer & Horgan, PLLC to Sec'y Commerce, Sections C&D Questionnaire Response (July 1, 2016) ("QR") at C-1, CDocs 132-143, PDocs 207-210. In the United States, Bosun's sales affiliates were Bosun Tools, Inc. ("Bosun USA") and Pioneer Tools, Inc. ("Pioneer"). Id. Both U.S. sales affiliates sold to U.S. customers diamond sawblades produced by both Thai and PRC facilities during the POR. Id. at C-2.

These products, both subject and non-subject merchandise, were maintained in containers purportedly indicating their country of origin. Memorandum to File, re: Verification of the U.S. Sales Response of Bosun Tools Co., Ltd. (May 17, 2017) ("VR"), PDoc 383, CDoc 365, at 4. Bosun's U.S. sales affiliates did not, however, record this information when selling them to U.S. customers. Id. Lacking direct documentation during the review on which sales were of subject merchandise, Bosun reconstructed country of origin for those sales by: (1) identifying the models of sawblades that Pioneer and Bosun USA purchased through "unique product codes" assigned to each affiliate; (2) identifying the country of origin by matching those codes to unit purchase prices; and (3) applying a first-in, first-out ("FIFO") methodology to assign a country of origin to each sale. QR at C-2 to C-3.

In light of such reporting, DSMC argued that AFA should be applied to Bosun because Bosun could not demonstrate that it reported a complete and accurate universe of U.S. sales. Letter from Wiley Rein LLP to Sec'y Commerce (Jan. 17, 2017) ("DSMC Case Brief"), PDoc 373, CDoc 344, at 2-11. Specifically, DSMC argued that Bosun had conceded that it was unable to definitively identify its U.S. sales of subject merchandise made during the POR, see id., and that Bosun's reported methodology for identifying U.S. sales was insufficiently supported and not demonstrated to be accurate. Id. at 6-11. In rebuttal, Bosun asserted that it had fully complied with Commerce's information requests and had demonstrated the steps it undertook to identify sales of subject merchandise. See Letter from deKieffer & Horgan, PLLC to Sec'y Commerce (Jan. 24, 2017) ("Bosun Case Brief"), PDoc 367, at 6-8.

Due to this conflict, Commerce decided to verify Bosun's U.S. sales responses. See Memorandum from Deputy Assistant Sec'y for Antidumping and Countervailing Duty Operations to Acting Assistant Sec'y for Enf't and Compliance, re: Issues and Decision Memorandum for the Administrative Review of the Antidumping Duty Order on DSBs and Parts Thereof from the PRC (June 6, 2017); see also IDM at 22. Verification confirmed to Commerce that Bosun USA's and Pioneer's inventories of sawblades were maintained in boxes indicating the blades' origin and that this information was not recorded during the sales process. VR, CDoc 365, PDoc 383, at 4. According to Bosun, as stated during verification, its affiliates did not record country of origin because it "was not necessary information which needed to be recorded in its computer system for purposes of its business operations." Id. As to its reporting and methodology, Bosun contended

that the petitioner's argument omits the second stage and jumps from the first stage to the FIFO stage. Bosun argues that they were logical steps assigning the country of origin to the vast majority of products, not assumptions. Bosun explains that the Department extensively replicated and tested these stages in the database of all sales for Bosun USA and Pioneer USA and found no discrepancies.

IDM at 25.

Commerce reviewed Bosun's first-in-first-out ("FIFO") method, constructed after the fact for the review, for identifying merchandise of PRC or Thai origin. VR at 9-11. Commerce found that Bosun could not replicate the reported results of the FIFO step of its methodology for one of the three or four pre-selected sales for which this step was reviewed at verification. Id. at 10-11. Bosun "was unable to explain this discrepancy." Id. at 11 (citation omitted).

Commerce also learned of errors in Bosun's control number ("CONNUM") reporting of multiple physical characteristics for certain of the examined sales. These errors were manifest for three out of the sixteen transactions examined, or nearly 19% of those sales reviewed at verification. Id. at 2, 7; IDM at 31. Specifically, Commerce discovered that Bosun had reported the incorrect code for cutting edge, segment height, segment length, and core thickness for two of those sales, VR at 7, and in preparing for verification Bosun also discovered that it had reported the incorrect diamond grade for an additional sale. Id. at 2; IDM at 31.

Commerce then permitted the parties to submit additional case briefs based on its verification of Bosun. See IDM at 22. DSMC continued to argue to Commerce that AFA should be applied to Bosun, highlighting that Bosun had failed to maintain country of origin information that would allow it to accurately identify sales of merchandise made in the PRC despite having the ability to do so. Letter from Wiley Rein LLP to Sec'y...