Shandong Huarong General Group Corp. v. United States

SLIP OP. 05-129

UNITED STATES COURT OF INTERNATIONAL TRADE

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:
SHANDONG HUARONG GENERAL :
GROUP CORPORATION and :
LIAONING MACHINERY IMPORT :
& EXPORT CORPORATION, :
: Before: Richard K. Eaton, Judge
Plaintiffs, :
: Court No. 01-00858
v. :
:
UNITED STATES, :
:
Defendant. :
:
:
:
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OPINION AND ORDER

[United States Department of Commerce’s Final Determination on
heavy forged hand tools remanded to Commerce]

Dated: September 27, 2005

Hume & Associates, PC (Robert T. Hume), for plaintiffs.

Peter D. Keisler, Assistant Attorney General, Civil
Division, United States Department of Justice; David M. Cohen,
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice, Jeanne E. Davidson, Deputy
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice (Stephen C. Tosini).
Court No. 01-00858 Page 2

Eaton, Judge: This matter is before the court following a

second remand to the United States Department of Commerce

(“Commerce”). In Shandong Huarong General Group Corporation v.

United States, 28 CIT __, slip op. 04-117 (Sept. 13, 2004)

(“Huarong II”), this court remanded Commerce’s determination in

the ninth administrative review of heavy forged hand tools from

the People’s Republic of China (“P.R.C.”), covering the period of

review February 1, 1999, through January 31, 2000. See Heavy

Forged Hand Tools From the P.R.C., 66 Fed. Reg. 48,026 (ITA Sept.

17, 2001) (final determination) (“Final Results”). Plaintiffs

Shandong Huarong General Group Corporation (“Huarong”) and

Liaoning Machinery Import and Export Corporation (“LMC”)

(collectively the “Companies”) challenged that determination with

respect to Commerce’s decision to apply the P.R.C.-wide

antidumping duty margin to their subject merchandise. The court

has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c)

(2000) and 19 U.S.C. § 1516a(a)(2)(B)(iii) (2000). For the

reasons set forth below, this matter is again remanded to

Commerce with instructions to conduct further proceedings in

conformity with this opinion.

BACKGROUND

The relevant facts and procedural history in this case are

set forth in Huarong II. A brief summary of these is included
Court No. 01-00858 Page 3

here. On February 14, 2000, Commerce published a notice of

opportunity to request administrative reviews of the Final

Results. See Antidumping or Countervailing Duty Order, Finding,

or Suspended Investigation, 65 Fed. Reg. 7348 (ITA Feb. 14, 2000)

(opportunity to request admin. rev.). In response, several

P.R.C. entities, including the Companies, requested

administrative reviews. See Heavy Forged Hand Tools, Finished or

Unfinished, With or Without Handles, From the P.R.C., 65 Fed.

Reg. 66,691, 66,692 (ITA Nov. 7, 2000) (prelim. results and

prelim. partial rescission of antidumping duty admin. revs.)

(“Prelim. Results”). Commerce then commenced its investigation

and distributed standard nonmarket economy (“NME”) country1

antidumping questionnaires.

Based on information provided by the Companies in their

original and supplemental questionnaire responses, Commerce

determined that they were each preliminarily entitled to company-

specific antidumping duty margins separate from the P.R.C.-wide

antidumping duty margin. See Prelim. Results, 65 Fed. Reg. at

1
A “nonmarket economy” country is defined as “any
foreign country that the administering authority 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). “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).
Court No. 01-00858 Page 4

66,693. Commerce then calculated Huarong’s preliminary company-

specific antidumping duty rate for bars/wedges to be 0.44%, and

calculated LMC’s preliminary company-specific antidumping duty

rate for bars/wedges to be 0.01%. See id. at 66,696. The

P.R.C.-wide antidumping duty rate for bars/wedges was calculated

to be 47.88%. Id.

Commerce then notified the Companies that it would conduct

verification of their submitted sales and factors of production

information. After review and analysis of the questionnaire

responses and the information gathered at verification, Commerce

determined that it was proper to use facts available2 and adverse

2
Use of facts available is warranted where Commerce
finds that a respondent has, inter alia, withheld or failed to
provide requested information. See 19 U.S.C. § 1677e(a). The
statute provides:

If—
(1) necessary information is not available on the
record, or

(2) an interested party or any other person—

(A) withholds information that has
been requested by the administering
authority or the Commission under
this subtitle,

(B) fails to provide such
information by the deadlines for
submission of the information or in
the form and manner requested,
subject to subsections (c)(1) and
(e) of section 1677m of this title,
(continued...)
Court No. 01-00858 Page 5

facts available,3 as the Companies had withheld information and

2
(...continued)
(C) significantly impedes a
proceeding under this subtitle, or

(D) provides such information but
the information cannot be verified
as provided in section 1677m(I) of
this title,

the administering authority and the Commission shall,
subject to section 1677m(d) of this title, use the facts
otherwise available in reaching the applicable determination
under this subtitle.

Id.
3
The use of adverse facts available is warranted if
Commerce

finds that an interested party has failed to
cooperate by not acting to the best of its
ability to comply with a request for
information from [Commerce] . . . .
[Commerce], in reaching the applicable
determination under this subtitle, may use an
inference that is adverse to the interests of
that party in selecting from among the facts
otherwise available. Such adverse inference
may include reliance on information derived
from—

(1) the petition,

(2) a final determination in the
investigation under this subtitle,

(3) any previous review under
section 1675 of this title or
determination under section 1675b
of this title, or

(4) any other information placed on
the record.

(continued...)
Court No. 01-00858 Page 6

failed to cooperate by not acting to the best of their ability to

comply with Commerce’s requests for information.4 See Final

Results, 66 Fed. Reg. at 48,028. As a result of these findings,

the Companies were, among other things, found not to have

demonstrated their independence from the P.R.C. government, and

their subject merchandise was therefore assigned the final

P.R.C.-wide antidumping duty rate of 47.88%. See id. at 48,030

n.1. The Companies then commenced this action for judgment upon

the agency record pursuant to USCIT Rule 56.2, arguing that

Commerce’s decision to apply the P.R.C.-wide antidumping duty

margin to their subject merchandise was not supported by

substantial evidence or otherwise in accordance with law. The

court ordered a remand, instructing Commerce to reevaluate the

evidence submitted by the Companies with respect to their

entitlement to separate rates, and to “revisit . . . its

determination that the Companies were to receive the PRC-wide

3
(...continued)
19 U.S.C. § 1677e(b).

4
Specifically, Commerce found that Huarong failed to
report the great majority of its U.S. market sales and had
prepared almost none of the documents requested of it in
Commerce’s verification outline. See Final Results, 66 Fed. Reg.
at 48,028. Similarly, Commerce found that LMC had supplied none
of the documents requested in the verification outline and could
not provide the information necessary to verify its own
submissions to Commerce. See id; see also Shandong Huarong
General Group Corp. v. United States, 27 CIT __, slip op. 03-135
(Oct. 22, 2003) (affirming Commerce’s application of facts
available and adverse facts available to both Huarong and LMC).
Court No. 01-00858 Page 7

antidumping duty margin.” Shandong Huarong General Group Corp.

v. United States, 27 CIT __, __, slip op. 03-135 at 45 (Oct. 22,

2003) (“Huarong I”). In the Final Results of Redetermination

Pursuant to Court Remand (Jan. 20, 2004), Commerce found that the

Companies were entitled to separate rates, and assigned each

company an antidumping duty rate of 139.31% based on adverse

facts available. The court affirmed Commerce’s determination to

apply separate rates, but remanded Commerce’s decision to apply a

rate of 139.31%, on the grounds that the rate was aberrational

and not supported by substantial evidence. See Huarong II, 28

CIT at __, slip op. 04-117 at 17.

STANDARD OF REVIEW

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 . . . .” Huaiyin Foreign Trade Corp. (30) v. United States,

322 F.3d 1369, 1374 (Fed. Cir. 2003) (quoting 19 U.S.C. §

1516a(b)(1)(B)(I) (2000)). “Substantial evidence is ‘such

relevant evidence as a reasonable mind might accept as adequate

to support a conclusion.’” Id. at 1374 (quoting Consol. Edison

Co. v. NLRB, 305 U.S. 197, 229 (1938)). The existence of

substantial evidence is determined “by considering the record as

a whole, including evidence that supports as well as evidence
Court No. 01-00858 Page 8

that ‘fairly detracts from the substantiality of the evidence.’”

Id. (quoting Atl. Sugar, Ltd. v. United States, 744 F.2d 1556,

1562 (Fed. Cir. 1984)).

DISCUSSION

Title 19 U.S.C. 1677e(a) permits Commerce to use the facts

otherwise available in making its determination when an

interested party withholds or fails to provide requested

information, significantly impedes Commerce’s investigation, or

provides information that cannot be verified. If Commerce

further determines that a party has failed to cooperate by not

acting to the best of its ability to comply with a request for

information, 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). In drawing the

adverse inference, Commerce may rely on information drawn from

the petition, a final determination in the investigation, any

previous review, or any other information placed on the record.

Id.

I. The 139.31% Antidumping Duty Rate

In Huarong II, the court found that the rate Commerce

selected was aberrational and not indicative of what the

Companies’ actual rate would likely have been had they cooperated
Court No. 01-00858 Page 9

with Commerce’s investigation, “with some built-in increase

intended as a deterrent to non-compliance.” Huarong II, 28 CIT

at __, slip op. 04-117 at 17. The court based its finding on two

factors: (1) Commerce failed to demonstrate that assigning to the

Companies the rate of another producer5 in the eighth

administrative review satisfied the requirement that Congress

“intended for an adverse facts available rate to be a reasonably

accurate estimate of the [Companies’] actual rate, albeit with

some built-in increase intended as a deterrent to non-

compliance”; and (2) even if the rate assigned to the Companies

in the ninth administrative review could reasonably have been

higher than the rate they received in the preceding review,

Commerce gave no explanation as to why the rate would have

increased so dramatically, i.e., by over 100 percentage points.

See id. at __, slip op. 04-117 at 16–17. The court therefore

instructed Commerce to “revisit the evidence cited for its

decision to apply the 139.31% rate and, shall it continue to

employ such rate, provide adequate explanations for this decision

based on the evidence.” Id. at __, slip op. 04-117 at 17.

In the Remand Results, Commerce continues to apply the

139.31% rate, claiming that it “is representative of the margins

5
The other producer, Tianjin Machinery Import & Export
Corp. (“TMC”), produced the same bars/wedges covered by the
antidumping duty order at issue here.
Court No. 01-00858 Page 10

that we would have calculated for Huarong and LMC in the ninth

review had they not received total [adverse facts available],

with an increase to encourage cooperation.” Remand Results at 1.

First, Commerce maintains that the rate chosen bears a rational

relationship to commercial practices in the Companies’ particular

industry, despite representing a five-fold increase in their

margins from the eighth to the ninth review and being 91.43

percentage points greater than the P.R.C.-wide rate:

The Court has upheld [Commerce’s] chosen AFA [adverse
facts available] rates when the rates sought to be
imposed are “relevant, and not outdated, or lacking a
rational relationship.” See Ferro Union, Inc. v.
United States, 23 CIT 178, 205, 44 F. Supp. 2d 1310,
1335 (1999) . . . . Further, the rate chosen must
have some relationship to commercial practices in the
particular industry. See Ta Chen Stainless Steel Pipe,
Inc. v. United States, 298 F.3d 1330, 1340 (Fed. Cir.
2002) . . . . [Commerce] selected as AFA a rate
calculated for another PRC company, TMC, in the
immediately preceding review. This rate therefore
reflects recent commercial activity by Chinese
exporters. These facts alone establish that this rate
has some relationship to commercial practices in the
industry – indeed recent commercial practices – and are
a strong indication of the relevance of this
information.

Id. at 4 (internal citation omitted). Thus, although Commerce

claims that the 139.31% rate represents the rate it would have

calculated for the Companies plus an additional percentage to

encourage cooperation, it seeks to justify the rate as having

some relationship to the Companies’ industry — rather than the

Companies themselves.
Court No. 01-00858 Page 11

As an initial matter, the cases relied upon by Commerce do

not support its findings. For instance, Ferro Union is

incompletely quoted. Commerce states that “[t]he Court has

upheld [Commerce’s] chosen AFA rates when the rates sought to be

imposed are ‘relevant, and not outdated, or lacking a rational

relationship.’” Remand Results at 4 (quoting Ferro Union, 23 CIT

at 205, 44 F. Supp. 2d at 1335). In fact, the passage from Ferro

Union reads, “In order to comply with the statute and the

[Statement of Administrative Action’s] statement that

corroborated information is probative information, Commerce must

assure itself that the margin it applies is relevant, and not

outdated, or lacking a rational relationship to Saha Thai [the

Plaintiff].” Ferro Union, 23 CIT at 205, 44 F. Supp. 2d at 1335.

By not quoting the case fully, Commerce apparently wishes to

leave the impression that Ferro Union stands for the proposition

that it need only justify its chosen rate as bearing a rational

relationship to the particular industry under investigation. A

reading of the relevant sentence in its entirety, however, makes

clear that each assigned adverse facts available rate must bear a

rational relationship to the individual company itself. In like

manner, the holding in Ta Chen requires that an assigned rate

relate to the company to which it is assigned. “Because Commerce

selected a dumping margin within the range of Ta Chen’s actual

sales data, we cannot conclude that Commerce ‘overreached
Court No. 01-00858 Page 12

reality.’” Ta Chen, 298 F. 3d at 1340. Thus, while Ta Chen does

note that sales practices within an industry may provide support

for concluding that a rate is accurate, Commerce’s goal is to

assign a rate that accurately reflects what a company’s rate

would have been had it cooperated. It is to that rate that

Commerce is then permitted to add an amount to deter non-

compliance. Here, there is no indication that Commerce has

sought to select a rate that bears a rational relationship to the

Companies themselves.

Second, in Huarong II the court expressed its concern that

“even if the rate calculated for the Companies in the ninth

administrative review may have been higher than the rate they

received in the preceding review, Commerce has given no

explanation as to why the rates would likely have increased so

dramatically, i.e., by over 100 percentage points.” Huarong II,

28 CIT at __, slip op. 04-117 at 16. In the Remand Results,

Commerce

notes that margins in the bars/wedges order have varied
widely from year to year and company to company. For
example, Fujian Machinery & Equipment Import & Export
Corporation (“FMEC”) jumped from 1.05 percent in the
1994-1995 review to 36.76 percent in the 1995-1996
review, Huarong increased from 1.27 percent in the
1997-1998 review to 27.28 percent in the 1998-1999
review, LMC grew from zero percent in the 1997-1998
review to 27.18 percent in the 1998-1999 review, and
TMC dropped from 139.31 percent in the 1998-1999 review
to 0.56 percent in the 1999-2000 review. When looking
at the rates for different companies within a
Court No. 01-00858 Page 13

particular review period, we found that rates ranged
from 2.94 percent to 38.30 percent in the 1996-1997
review and from zero percent to 47.88 percent in the
1997-1998 review. As these examples clearly
illustrate, margins in the bars/wedges order have
experienced greater than 25-fold increases from review
to review, and more than 19-fold differences between
companies in a particular review period.

Remand Results at 4–5 (footnote omitted). In other words,

Commerce maintains that the five-fold increase in the Companies’

margins is consistent with the volatile nature of calculated

rates for bars and wedges. Id. at 5. While changes in

antidumping duty rates from one review to the next may be

consistent with the “volatile nature” of the rates for

bars/wedges, Commerce has still failed to demonstrate the

validity of such a large absolute increase. For example,

Huarong’s rate in the eighth review was calculated to be 28.96%.

Following remand in the ninth review, Huarong’s rate jumped over

110 percentage points, to 139.31%. It is worth noting that in

the tenth review, Huarong’s rate was calculated to be 16.22%.

Similarly, LMC’s rate in the eighth review was 29.10%. Following

remand in the ninth review, LMC’s rate jumped by nearly the same

amount as Huarong’s, over 110 percentage points, also to 139.31%.

In the tenth review, LMC’s rate was 0.00%. By contrast, in the

examples Commerce provided, it found that “rates ranged from 2.94

percent to 38.30 percent in the 1996-1997 review and from zero

percent to 47.88 percent in the 1997-1998 review.” Remand

Results at 4. In no case do the increases from one review to the
Court No. 01-00858 Page 14

next approach the 110 percentage point increase experienced by

Huarong and LMC from the eighth to the ninth review.

Significantly, Commerce’s sole justification for a five-fold

percentage increase — volatility — is never tied to the Companies

themselves. That is, Commerce provides no explanation as to why

the Companies’ rates should increase so dramatically in this

case.

Third, Commerce states that, because there was no

corroborating data available in the ninth review for purposes of

calculating the Companies’ antidumping duty margins, it was

entitled to justify its chosen rate by referencing calculated

transaction-specific margins from the eighth review for Huarong

and LMC. Commerce explains:

Given that Huarong, LMC, and SMC [Shandong Machinery
Import & Export Corp., another respondent in the ninth
review] failed to cooperate and thus received total AFA
[adverse facts available], and FMEC [Fujian Machinery
Import & Export Corp., another respondent in the ninth
review] remained within the PRC-wide entity (which also
received total AFA), the only respondent left from the
ninth review that could possibly serve as a basis of
corroborating the rate selected as AFA is TMC. In the
ninth review, TMC received a calculated, weighted-
average margin of 0.56 percent for bars/wedges, which
is nearly a de minimis margin under 19 C.F.R. §
351.106(c)(1). TMC’s information does not provide a
suitable basis6 for corroborating the selected rate,
nor do we consider this one cooperative respondent to

6
Commerce gives no explanation as to why TMC’s ninth
review rate was not suitable; apparently, while reliable, the
rate was simply too low for Commerce’s purposes.
Court No. 01-00858 Page 15

represent the behavior of uncooperative respondents.

Remand Results at 5.

With respect to the transaction-specific margins it

calculated for the Companies from the eighth review, Commerce

gives the following explanation: “Several of these transaction-

specific margins for both Huarong and LMC are well above 47.88

percent, which is the second highest margin ever calculated for

bars/wedges. In fact, a significant number of the transaction-

specific margins are nearly as high as the 139.31 percent rate

selected as AFA [adverse facts available].” Id. This

explanation overstates the case. Of eighty-seven transaction-

specific margins, the highest was calculated at 120.53%, and

thirteen others ranged from 97.84% to 117.20%. The remaining

seventy-three margins were all calculated at 0.00%. Nonetheless,

Commerce insists that because several of Huarong’s and LMC’s

transaction-specific margins are nearly as high as the adverse

facts available rate selected,

[t]he U.S. transactions corroborating the AFA [adverse
facts available] rate do not appear to be aberrant or
unusual in any way. . . . Because we are making an
adverse inference with regard to Huarong and LMC, we
regard these transactions as representative of the
margins we would have calculated for these companies in
the ninth review (with a built-in incentive to
encourage cooperation) had they not received total AFA
. . . . Because these transaction-specific margins for
Huarong and LMC in the eighth review are nearly as high as
the rate selected as AFA, and these margins were calculated
for transactions involving the same class of merchandise
sold in the same market, under similar demand and supply
Court No. 01-00858 Page 16

conditions, as the AFA rate, we find that they support the
relevance of the rate selected as AFA.

Id. at 6.

In their joint brief, the Companies first argue that

“Commerce’s reliance on certain of Plaintiffs’ sales from the

eighth review is misplaced. Commerce highlights only selected

sales made by Plaintiffs in the eighth review. These selected

sales, by themselves, do no corroborate the 139.31 [percent] rate

as applied to all Huarong and LMC sales in the ninth review.”

Pls.’ Comments on Final Results of Redetermination Pursuant to

Court Remand (“Pls.’ Comments”) at 11 (emphasis in original).

The Companies explain:

By using selected sales to corroborate the 139.31[%]
rate, Commerce failed to note that they also calculated
total weighted dumping margins for Plaintiffs in the
[eighth] review. Since the 139[.31%] rate [of TMC]
represents a total weighted dumping margin, it would
follow that the weighted dumping margins in the eighth
review are the best values for comparison, not the
transaction-specific margins cited by Commerce.

Id. at 11–12. Put another way, the Companies urge an apples-to-

apples comparison: Since TMC’s 139.31% rate is a weighted-average

margin from the eighth review, for corroboration purposes it

should be compared to the weighted-average margins for the

Companies from that same review, i.e., 28.96% for Huarong and

29.10% for LMC, not selected transaction-specific margins from

the eighth review.
Court No. 01-00858 Page 17

The court finds that Commerce’s reliance on the Companies’

high-margin transactions as corroboration for the 139.31% rate

does not satisfy its mandate to determine antidumping duty

margins as accurately as possible. Of the eighty-seven

transaction-specific margins, only one was calculated at 120.53%,

the closest percentage to the Companies’ rate of 139.31%. Just

thirteen transactions, or 14.9%, ranged from 97.84% to 117.20%.

The vast majority of all transactions, i.e., over 83% of the

transactions, were calculated at 0.00%. Moreover, at no point

does Commerce provide an adequate explanation as to why these

transaction-specific margins are probative of the validity of the

use of a weighted-average margin from an unrelated company. In

order for Commerce to carry out its mandate to determine

antidumping duty margins as accurately as possible, where the

information is available a “like-kind” comparison is preferred.

In other words, if Commerce wished to use the Companies’ sales to

corroborate the use of the 139.31% weighted-average margin for

TMC in the eighth review to the Companies, then the preferred

method would be to use the Companies’ own weighted-average

margins for that same review. Here, the court finds that the

chosen transaction-specific rates do not provide a sufficiently

probative like-kind comparison to TMC’s weighted-average margin

to satisfy the substantial evidence requirement, nor do these

aberrational sales reasonably corroborate the 139.31% weighted-
Court No. 01-00858 Page 18

average rate.7 See World Finer Foods, Inc. v. United States, 24

CIT 541, 547–48 (2000) (not reported in the Federal Supplement)

(refusing to uphold Commerce’s use of “apparently aberrant

transactions” from unrelated respondents to corroborate

petitioners’ margin, where Commerce did not explain whether the

transactions represented a significant portion of the

transactions at issue or how the transactions related to a

rational dumping margin for petitioners).

Next, Commerce insists that if either Huarong or LMC could

have demonstrated that its dumping margin was lower than “the

highest cash deposit rates for bars/wedges,” they would have

provided evidence showing their margins to be less. Remand

Results at 6. Relying on Rhone Poulenc, Inc. v. United States,

899 F.2d 1185, 1190–91 (Fed. Cir. 1990), Commerce explains:

Since the highest cash deposit rates[8] for bars/wedges

7
The court finds the facts of this case to be
distinguishable from those in Branco Peres Citrus, S.A. v. United
States, 25 CIT 1179, 173 F. Supp. 2d 1363 (2001). In that case,
Commerce used Plaintiff’s single highest transaction-specific
margin because the application of a weighted-average dumping
margin would have allowed Plaintiff to benefit from its non-
cooperation. The court acknowledged, however, that “the
selection of a party’s highest transaction-specific rate may not
in every case be reasonable . . . .” Id. at 1191, 173 F. Supp.
2d at 1377.
8
Importers who enter merchandise that is within the
scope of an antidumping duty order must make a deposit of
estimated antidumping duties. 19 U.S.C. § 1673d(c)(1)(B)(ii)
(continued...)
Court No. 01-00858 Page 19

being collected by U.S. Customs and Border
Protection(“CBP”) during the period of the ninth review
. . . were . . . 47.88 percent, and [Commerce] assumes
that a respondent will cooperate if its actual margin
is less than such rate, it is reasonable to conclude
that the actual margins for Huarong and LMC in the
ninth review were greater than 47.88 percent.

Remand Results at 6 (footnotes omitted). Commerce cites to no

source demonstrating that this assumption follows its past

practice or that it has been found to be in accordance with law

by any Court. Nor does this court find justification for this

assumption in Commerce’s reliance on Rhone Poulenc. The Court in

Rhone Poulenc found that, in cases where use of adverse facts

available9 is justified, it is reasonable to assume that “the

[company’s] highest prior margin is the most probative evidence

of current margins because, if it were not so, the importer,

knowing of the rule, would have produced current information

showing the margin to be less.” Rhone Poulenc, 899 F.2d at 1190

(emphasis omitted). Here, the highest prior margins for reviews

in which the Companies cooperated are Huarong’s rate of 34.00% in

the sixth review and LMC’s rate of 29.10% in the eighth review.

8
(...continued)
(requiring the posting of a cash deposit, bond, or other security
in the final antidumping determination Commerce makes in the
investigation).
9
It should be noted that the analysis in Rhone Poulenc,
a 1990 case, was governed by the application of the best
information available (“BIA”) rule, which was used prior to
enactment of the Uruguay Round Agreement Act (“URAA”) in 1995.
The URAA replaced Commerce’s application of BIA in antidumping
duty cases with the use of facts available.
Court No. 01-00858 Page 20

The most that can be assumed from the Companies’ failure to

cooperate is that they believed their rates in the ninth review

would exceed their rates in these prior reviews.

Finally, nowhere does Commerce explain why it failed to

follow the court’s instruction in Huarong II to “explain its

reasons for not choosing a previous antidumping duty rate for the

Companies themselves.” Huarong II, 28 CIT at __, slip op. 04-117

at 17.

Based on the foregoing, it is apparent that Commerce has

failed to justify the 139.31% rate with substantial evidence.

Indeed, Commerce’s strained efforts to demonstrate the validity

of this elevated rate lead the court to find that the application

of the rate is punitive in nature. See F.LLI De Cecco Di Filippo

Fara S. Martino S.p.A. v. United States, 216 F.3d 1027, 1032

(Fed. Cir. 2000) (“[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.”). In choosing a margin, Commerce must

“appropriately balanc[e] th[e] goal of accuracy against the risk

of creating a punitive margin.” Timken Co. v. United States, 26

CIT 1072, 1076, 240 F. Supp. 2d 1228, 1234 (2002). “Punitive

rates are the result of rejection of low-margin information in
Court No. 01-00858 Page 21

favor of high-margin information that is demonstrably less

probative of current conditions.” Usinas Siderurgicas de Minas

Gerais, S.A. v. United States, 22 CIT 743, 765 n.41 (1998)(not

reported in the Federal Supplement)(citing Rhone Poulenc, 899

F.2d at 1190); see also Peer Bearing Co. v. United States, 25 CIT

1199, 1206, 182 F. Supp. 2d 1285, 1296 (2001) (citing Allied-

Signal Aerospace Co. v. United States, 996 F. 2d 1185, 1191 (Fed.

Cir. 1993)). Here, the record shows that Commerce had several

other sources from which to choose the Companies’ rates, which

would have been more probative of the Companies’ actual rates,

and to which a further percentage could be applied to ensure

compliance. For example, Commerce could have chosen from among

the Companies’ rates for previous reviews. In addition, other

sources available to Commerce are the petition rate, the rate

from a final determination or previous review, and any other

information on the record that would indicate what the Companies’

rate might have been had they cooperated. See 19 U.S.C. §

1677e(b).

CONCLUSION

Because the court finds that Commerce has failed to justify

the 139.31% rate assigned to the Companies, and further finds

that the rate is punitive, Commerce is directed upon remand to no

longer employ this rate. Also upon remand, Commerce is directed
Court No. 01-00858 Page 22

to choose and justify its choice of one of the following rates:

(1) the Companies’ rates from a previous review, with
a built-in increase as a deterrent to non-
compliance; or

(2) a calculated rate that accurately reflects what
the Companies’ rates would have been had they
cooperated, with a built-in increase as a
deterrent to non-compliance.

Remand results are due on December 27, 2005, comments are

due on January 26, 2006, and replies to such comments are due on

February 6, 2006.

/s/Richard K. Eaton
Richard K. Eaton
Dated: September 27, 2005
New York, New York