Hubbell Power Systems, Inc. v. United States, Slip Op. 19-25
| Decision Date | 27 February 2019 |
| Docket Number | Slip Op. 19-25,Court No. 15-00312 |
| Citation | 365 F.Supp.3d 1302 |
| Parties | HUBBELL POWER SYSTEMS, INC., Plaintiffs, v. UNITED STATES, Defendant, and Vulcan Threaded Products Inc., Defendant-Intervenor |
| Court | U.S. Court of International Trade |
Kevin M. O'Brien, and Christine M. Streatfeild, Baker & McKenzie LLP, of Washington, DC, for the plaintiff Hubbell Power Systems, Inc.
Elizabeth A. Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for the defendant. With her on the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of Counsel on the brief was Khalil N. Gharbieh, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.
Roger B. Schagrin, Christopher T. Cloutier, and Paul W. Jameson, Schagrin Associates Washington, DC, for the defendant-intervenor Vulcan Threaded Products Inc.
This matter concerns the Department of Commerce's ("Commerce") final results of the fifth administrative review of the antidumping ("AD") duty order on certain steel threaded rod from the People's Republic of China ("PRC"). Certain Steel Threaded Rod from the People's Republic of China; Final Results of 2013–2014 Antidumping Duty Administrative Review, 80 Fed. Reg. 69,938 (Dep't Commerce Nov. 12, 2015) ("Final Results"). Hubbell Power Systems, Inc ("Hubbell"), a U.S. importer of Chinese exporter Gem-Year Industrial Co. Ltd. ("Gem-Year") products, challenges Commerce's rejection of Gem-Year's application for separate rate status and assignment of the 206% PRC-wide rate to Gem-Year. Pl.'s Brief in Supp. of Mot. for J. on the Agency R. Pursuant to Rule 56.2, Doc. No. 33 ("Hubbell Br."). For the reasons stated below, the matter is remanded for Commerce to reconsider Gem-Year's separate rate application and, if it determines that Gem-Year is entitled to a separate rate, to determine that rate.
In 2009, Commerce issued an AD duty order on certain steel threaded rod from the PRC. Certain Steel Threaded Rod from the People's Republic of China: Notice of Antidumping Duty Order, 74 Fed. Reg. 17,154 (Dep't Commerce Apr. 14, 2009). In response to requests by interested parties, Commerce initiated its fifth administrative review of the order for the period of review ("POR") April 1, 2013 to March 31, 2014. See Initiation of Antidumping and Countervailing Duty Administrative Review, 79 Fed. Reg. 30,809 (Dep't Commerce May 29, 2014) ("Initiation Notice"). Commerce selected exporter Gem-Year as one of two mandatory respondents for the review. See Issues & Decision Mem. for the Final Results of the Fifth Administrative Review of the Antidumping Duty Order on Certain Steel Threaded Rod from the People's Republic of China, 2013-2014, at 1, A-570-932, POR: 4/1/2013–3/31/2014 (Dep't Commerce Nov. 3, 2015) ("I&D Memo"). During the review, however, Commerce found that Gem-Year had "failed to cooperate by not acting to the best of its ability," because it did not provide Commerce with "full and complete answers" to its inquiries. Id. at 27. Commerce highlighted Gem-Year's inadequate information regarding various factors of production ("FOPs") and late disclosure that its affiliate, Jinn-Well Auto Parts (Zhejiang) Co. Ltd. ("Jinn-Well"), had likely produced in-scope merchandise.1 Id. at 9–28. Commerce claimed that to properly conduct a separate rate analysis it needed to examine not only Gem-Year's corporate structure, but also the operations of its affiliated manufacturers of in-scope merchandise–Jinn-Well and Gem-Duo. Id. at 27. Although Commerce apparently knew that both Gem-Duo and Jinn-Well existed, it was not made aware that Jinn-Well likely had produced in-scope merchandise until verification. Id. at 21–22, 26–27. Accordingly, Commerce stated that Gem-Year's separate rate information was "unreliable and incomplete" and had "deficiencies in Gem-Year's corporate structure and affiliation information," such that a separate rate was not merited. Id. at 27–28. Thus, Commerce applied "total" adverse facts available ("AFA") and "placed [Gem-Year] in the PRC-wide entity." Id. at 28.
Hubbell challenges this result and claims that Commerce improperly conflated Gem-Year's separate rate inquiry with the issue of whether Gem-Year supplied the necessary data needed to set such a rate. See Hubbell Br. at 13–16. It argues that any purported deficiencies must go "to the heart of ... corporate ownership and control" for Commerce to deny a separate rate. Id. at 14. At base, Hubbell argues that "the record does not support a finding of state ownership or control." Id. at 16. Further, Hubbell argues that, although Commerce was not made aware that Jinn-Well produced potentially-subject merchandise, its status as Gem-Year's affiliate was clear from a timely-submitted organizational chart. Id. at 17–18.
According to the chart, Jinn-Well is a fully-owned subsidiary of Gem-Year and Chin-Champ Enterprise Co., Ltd., which in turn can both be traced back to the same four Taiwanese-national owners (members of the Tsai Family) and public shareholders. Id. at 18–20; Gem-Year Section A. Questionnaire Response, Ex. 10 "Investment Relation Chart of Gem-Year," C.R. 11 (Aug. 22, 2014) ("Gem-Year Org. Chart"). Because Commerce assessed government control of Gem-Year and the Tsai Family, and had received at least some of Jinn-Well's financial records, Hubbell argues that Commerce ignored significant evidence showing a lack of government control that entitled it to a separate rate. Hubbell Br. at 18–20. Hubbell also stresses that the Jinn-Well merchandise constituted a very small fraction of Gem-Year's exports and that there was no indication that this merchandise was exported to the United States. Id. at 17. Finally, Hubbell challenges Commerce's imposition of the PRC-wide rate resulting from an adverse inference, arguing that it is untethered to the record and punitive given Gem-Year's active participation in the review. Id. at 22–26.
Defendant United States ("the government") and Defendant-Intervenor Vulcan Threaded Products Inc. ("Vulcan") argue that applying the PRC-wide rate to Gem-Year based on an adverse inference is supported by substantial evidence and otherwise in accordance with law. Def.'s Resp. to Pl.'s Mot. for J. Upon the Agency R., Doc. No. 46 ("Def. Br."); Def.-Intervenor's Resp. to Pl.'s USCIT Rule 56.2 Mot. for J. on the Agency R., Doc. No. 45 ("Vulcan Br."). The government states that "this case presents unusual circumstances in which Commerce received some separate rate information and sought to verify that information, but discovered at verification that the separate rate information was incomplete." Def. Br. at 13. Because Gem-Year omitted the information about Jinn-Well's production, Commerce determined that Gem-Year "failed to cooperate to the best of its ability," which in turn led Commerce to disregard all of Gem-Year's proffered information as unreliable. Id. at 14. The government disagrees with claims that the information necessary to evaluate government control of Jinn-Well was on the record, pointing out in its briefing before the Court missing information, such as business licenses and plans, and Commerce's inability to verify such information given the late notice.2 Id. at 16–18. Accordingly, the government argues that Commerce was unable to assess "the Chinese government's involvement in Jinn-Well's business decisions, its purchases and price-setting, or the appointment of its management." Id. at 17.
The government claims that absent verification, it cannot validate Hubbell's assertions that the Jinn-Well merchandise was only a small fraction of relevant exports and may not have been shipped to the United States. Id. at 22–23. The government emphasizes that "Commerce did not assign Gem-Year an adverse facts available margin" (emphasis in original), but rather "as adverse facts available, Commerce rejected all of Gem-Year's separate rate information and included Gem-Year in the China-wide entity." Id. at 25. Vulcan largely agrees with the government. See Vulcan Br. at 11–32. It also stresses the validity of Commerce's rebuttable presumption of state control in non-market economies ("NME") and that those seeking a separate rate must prove lack of de jure and de facto control rather than Commerce proving control. See id. at 11–14.
In its reply, Hubbell essentially contends that if Commerce needed additional information to verify a lack of government control of Jinn-Well, then it should have requested it. See Pl.'s Reply Br. in Supp. of Mot. for J. on the Agency R. Pursuant to Rule 56.2, Doc. No. 50 ("Hubbell Reply Br."). Hubbell also claims that as all subject merchandise for this review was produced in 2009 and because Commerce previously found a lack of government control during the first administrative review covering 2008–2010, Commerce should have explained why the previous finding of independence fails to alter the outcome here. Hubbell Reply Br. at 8.
The court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (2012). The court upholds Commerce's final results of an administrative review of an AD duty order 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).
Although the parties largely agree on the underlying facts, they deviate in their understanding of precisely why Commerce denied Gem-Year's separate rate application. Hubbell understands Commerce to have denied the separate rate application because of an arguably small amount of undisclosed Jinn-Well merchandise, which it claims is not enough to undermine Gem-Year's application. See Hubbell Reply Br. at 6. In...
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