Slip Op. 00-89
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Judge Judith M. Barzilay
-------------------------------------------------------------- x
KRUPP THYSSEN NIROSTA GMBH and :
KRUPP HOESCH STEEL PRODUCTS, INC.
Plaintiffs, :
Court No. 99-08-00550
v. : Public Version
UNITED STATES, :
Defendant
:
and
:
ALLEGHENY LUDLUM CORP., ET AL.,
Defendant-Intervenors. :
-------------------------------------------------------------- x
[Plaintiff’s Motion for Judgment Upon an Agency Record denied in part, remanded in part.]
Decided: July 31, 2000.
Hogan & Hartson, L.L.P. (Lewis E. Leibowitz, T. Clark Weymouth, Craig A. Lewis, Daniel J.
Cannistra), for Plaintiffs.
David W. Ogden, Acting Assistant Attorney General; David M. Cohen, Director, Commercial
Litigation Branch, Civil Division, Department of Justice (Velta A. Melnbrencis); Mildred E. Steward,
Attorney, Office of the Chief Counsel for Import Administration, Department of Commerce, of counsel,
for Defendant.
Collier Shannon Scott, P.L.L.C. (David A. Hartquist, Jeffrey S. Beckington, Adam H. Gordon),
for Defendant-Intervenor.
Court No. 99-08-00550 Page 2
OPINION
BARZILAY, JUDGE:
This case is before the court pursuant to Plaintiffs’ USCIT R. 56.2 Motion for Judgment Upon an
Agency Record. Krupp Thyssen Nirosta GmbH (“KTN”) is a German producer of stainless steel and
Krupp Hoesch Steel Products, Inc. (“KHSP”) is KTN’s United States sales affiliate. Plaintiffs challenge
certain aspects of the final determination of the Department of Commerce’s International Trade
Administration (“Commerce” or “Department”) in the antidumping investigation of stainless steel sheet and
strip from Germany. See Final Determination of Sales at Less Than Fair Value; Stainless Steel Sheet and
Strip in Coils from Germany, 64 Fed. Reg. 30,710 (1999) (“Final Determination”), as amended, 64 Fed.
Reg. 40,557 (1999). The court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (1994).
I. BACKGROUND
On June 30, 1998, Commerce initiated antidumping duty investigations covering stainless steel sheet
and strip in coils from several countries. See Initiation of Antidumping Duty Investigations: Stainless Steel
Sheet and Strip in Coils From France, Germany, Italy, Japan, Mexico, South Korea, Taiwan, and the
United Kingdom, 63 Fed. Reg. 37521 (1998). Commerce determined the period of investigation to be
from April 1, 1997 through March 31, 1998. See Final Determination, 64 Fed. Reg. at 30,712.
During the period of investigation, KTN was a subsidiary of Krupp Thyssen Stainless (“KTS”).
KTS was a joint venture holding company owned by two German steel manufacturers, Krupp AG Hoesch-
Krupp (“Krupp”) and Thyssen Stahl AG (“Thyssen”). Krupp owned sixty percent of KTS and Thyssen
owned forty percent. Thyssen also owned resellers in Germany (“German Resellers”) and in the United
States (“USR”). KTN sold the subject merchandise in Germany direct from its factory and inventory,
Court No. 99-08-00550 Page 3
through a KTN affiliated service center specializing in resale of second quality stainless products and
through the German Resellers. KTN sold the subject merchandise in the United States through KHSP,
USR and two other Thyssen owned importers. Commerce determined that KTN was affiliated with
Thyssen and, through Thyssen, with Thyssen’s affiliated resellers and service centers in Germany and the
United States. See Final Determination, 64 Fed. Reg. at 30,713. Because KTN failed to supply the
German Resellers’ downstream sales data, Commerce found KTN failed to act to the best of its ability,
and applied partial adverse facts available in the margin calculation. See id. at 30,726.
Following the preliminary dumping finding, Commerce conducted a number of verifications. Only
the verification of USR’s data and the accompanying results are in contention in the case before the court.
Commerce conducted its verification of USR’s sales data at the end of February, 1999, and its verification
of USR’s cost data at the beginning of March, 1999. In the Final Determination, Commerce rejected
USR’s data entirely, applying total adverse facts available. Commerce determined that KTN failed to
cooperate to the best of its ability because it failed to ensure the accuracy of its data prior to verification.
See id. at 30,739.
II. STANDARD OF REVIEW
In reviewing a challenge to Commerce’s determination in an antidumping investigation, the court
is to hold unlawful a determination, finding or conclusion by Commerce that is unsupported by substantial
evidence or otherwise not in accordance with law. See 19 U.S.C. § 1516a(b)(1)(B)(i) (1994). Substantial
evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.” Consolidated Edison v. NLRB, 305 U.S. 197, 229 (1938); accord Matsushita Elec.
Indus. v. United States, 750 F.2d 927, 933 (Fed. Cir. 1984).
Court No. 99-08-00550 Page 4
III. DISCUSSION
A. German Resellers
Plaintiffs challenge Commerce’s Final Determination with respect to the German Resellers on two
grounds. First, they argue that Commerce’s decision to use adverse facts available was not supported by
substantial evidence. Second, Plaintiffs argue that even if the use of adverse facts available was supported
by substantial evidence, the particular adverse facts chosen by Commerce were not.
1. Commerce’s decision to use adverse facts available is supported by substantial
evidence.
Commerce is required in antidumping investigations to compare “the U.S. prices of the subject
merchandise to the prices (‘normal value’) for the same or similar merchandise in the home market.”
Mannesmannrohren-Werke A.G. v. United States, 77 F. Supp.2d 1302, 1304 (CIT 1999) (citing 19
U.S.C. §§ 1677a, 1677b (1994)). In order to calculate and verify the difference between these prices,
Commerce requests various data from parties to the investigation. If parties fail to supply the data or when
the data cannot be verified, Commerce is required by statute to “use the facts otherwise available in
reaching the applicable determination. . . .” 19 U.S.C. § 1677e(a). Further, 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 . . .[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).
Plaintiffs do not dispute that the use of facts available is necessary. Rather, Plaintiffs argue that the
decision by Commerce to apply adverse facts available for KTN’s alleged refusal to cooperate to the best
of its ability is not supported by substantial evidence. The court does not agree.
Court No. 99-08-00550 Page 5
In the Final Determination, Commerce found that KTN, the wholly owned subsidiary of KTS, a
joint venture between Krupp and Thyssen, was affiliated with the German Resellers, who were wholly
owned by Thyssen. See Final Determination, 64 Fed. Reg. at 30,713. KTN asserts that while the two
companies may be affiliated through their common parent company, Thyssen, KTN has no operational
control over the German Resellers and therefore, could not be expected to compel them to produce their
sales data. In other words, KTN claims that it was unable to comply with Commerce’s data requests
regarding the German Resellers, and that its failure to provide the information does not evince a failure to
act to the best of its ability.
The affiliation issue and its attendant issues of potential or actual operational control were
thoroughly addressed by petitioners, respondents and Commerce during the investigative process. See id.
at 30,713, 30,721-24; CR 34, Memorandum from Analyst/IA to File (Nov. 13, 1998); Notice of
Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination;
Stainless Steel Sheet and Strip in Coils from Germany, 64 Fed. Reg. 92, 95 (1999). Although the issue
of control and a party’s ability to cooperate are linked, the facts of this case, as revealed by the record,
make an analysis of the issue of whether KTN had the ability to control the German Resellers unnecessary.
Therefore, the court declines to address the issue of whether actual control must be shown, and instead
bases its decision on whether the application of adverse facts available was appropriate on other grounds.
In World Finer Foods v. United States, 2000 WL 897752 (CIT June 26, 2000), this court found
Commerce’s decision to apply adverse facts available to an interested party improper, inter alia, because
such party had written to Commerce explaining its inability to supply the data. In this case, however, KTN
failed to notify Commerce Department officials in writing of its claimed inability to supply data from the
Court No. 99-08-00550 Page 6
German Resellers despite the questionnaire’s request that it do so. See Confidential Record Doc. (“CR”)
15, Letter from Hogan & Hartson to Dep’t Commerce (Sept. 8, 1998); see also Final Determination, 64
Fed. Reg. at 30,726-27. KTN not only failed to explain its claimed inability to retrieve data from the
German Resellers; it also indicated by letter that it did “not intend to report sales by [the German Resellers]”
[
]. See
CR 30, Letter from Hogan & Hartson to Dep’t Commerce (Oct. 29, 1998); see also Final Determination,
64 Fed. Reg. at 30,726-27. Thus, in this case the burden never shifted to Commerce to consider KTN’s
ability to supply the German Reseller’s downstream sales data. See World Finer Foods, 2000 WL
897752, at * 3. Based on this record evidence, and absent any evidence in the record that KTN requested
data from the German Resellers, the court finds that Commerce’s decision to apply adverse facts available
with respect to the German Resellers pursuant to 19 U.S.C. § 1677e(b) was supported by substantial
evidence.
2. Commerce must explain its selection of adverse facts available.
Plaintiffs argue that even if Commerce may properly draw an adverse inference, it still must adhere
to certain standards in selecting the adverse facts.1 The court agrees. Even under the former best
1
The Defendant argues that KTN should be precluded from raising this argument because it
was not raised at the administrative level. Plaintiffs argue that they did not have an opportunity to raise
this argument administratively because the decision was made after the administrative briefing period
had closed. The court finds that Plaintiffs are not precluded from raising this argument. Because
Commerce chose to use adverse facts, Commerce must have considered the issue and Plaintiffs may
challenge the decision. See Ferro Union, Inc. v. United States, 44 F. Supp. 2d 1310, 1333 n. 48
(CIT 1999) (citing Natural Resources Defense Council, Inc. v. EPA, 824 F.2d 1146, 1151 (D.C.
Cir. 1987)) (exhaustion not required when agency has in fact considered an issue)). Additionally, in its
Court No. 99-08-00550 Page 7
information available statute, which provided Commerce wider latitude, Commerce had to select facts from
the record that met the basic goals of the statute: “to encourage compliance while determining current
margins as accurately as possible.” National Steel Corp. v. United States, 20 CIT 100, 103, 913 F.
Supp. 593, 596 (1996) (citing Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed. Cir.
1990)); see also National Steel Corp. v. United States, 18 CIT 1126, 1132-33, 870 F. Supp 1130,
1136-37 (1994) (discussing limits on Commerce’s use of best information available).2 The adverse facts
selected, therefore, must be non-aberrant, rationally related to sales, and indicative of KTN’s customary
selling practices. National Steel, 20 CIT at 103, 913 F. Supp. at 596.
In the current case, Commerce selected the “highest NV [normal value] reported by control
number” for “KTN’s and NSC’s sales to its affiliates for which KTN did not report home market
downstream sales,” Final Determination, 64 Fed. Reg. at 30,728, but it failed to explain why such number
was non-aberrant, rationally related to sales, and indicative of customary selling practices. As Plaintiffs
have argued, the result of Commerce’s choice of adverse facts available is to increase the average price
of KTN’s sales to the German Resellers by a substantial amount.3 In arriving at the adverse inference
average price, for 97 control numbers, Commerce used a price more than double the weighted average
case brief, KTN challenged the methodology Commerce used in the Preliminary Determination, arguing
that the methodology produced aberrant results. See CR 98 at 24-27, Brief from Hogan & Hartson to
Dep’t Commerce (Mar. 23, 1999).
2
The Court of Appeals for the Federal Circuit recently held that Commerce’s discretion under
the new statutory regime is similarly bound. In F.LLI De Cecco Di Filippo Fara S. Martino S.p.A. v.
United States, the court noted that the corroboration requirement evinced Congressional intent to
prohibit Commerce from selecting unreasonably high rates. __ F.3d __ , 2000 WL 777170, at *5
(Fed. Cir. June 16, 2000).
3
[]%.
Court No. 99-08-00550 Page 8
price, and of the 97, 21 were more than 250% of the weighted average price and 5 were more than 500%
of the weighted average price.
On remand, Commerce must explain why the numbers it selected were not aberrant and unduly
punitive. In the explanation, Commerce must bear in mind the goal of the new facts available statute, which
is to deter non-compliance while being “a reasonably accurate estimate of the respondent’s actual
rate. . . .” F.LLI De Cecco di Filippo Fara S. Martino S.p.A. v. United States, __ F.3d __ , 2000 WL
777170, at *5 (Fed. Cir. June 16, 2000). The court therefore remands to the Department of Commerce
with instructions to explain its selection of adverse facts in light of this standard.
B. USR
1. Commerce’s decision to reject USR’s entire database is not supported by substantial
evidence.
Plaintiffs argue that Commerce’s decision to reject USR’s entire database and apply total adverse
facts available because of errors in the further manufacturing data field is not supported by substantial
evidence on the record. Although Commerce disputes that the decision is so limited, the Final
Determination could not be more clear.4 Accordingly, the court declines to consider Commerce’s post
hoc rationale as support for the Final Determination. See U.H.F.C. Co. v. United States, 916 F.2d 689,
700 (Fed. Cir. 1990).
The main reason Commerce provided for rejecting USR’s entire database was that the errors in
4
Commerce expressly noted that the issues surrounding the sales verification were moot and
were not addressed in light of the decision to apply total adverse facts available. See Final
Determination, 64 Fed. Reg. at 30,744. Although not expressed as such, the errors cited by
Commerce in the Final Determination as grounds for rejecting USR’s entire database all stem from the
further manufacturing field.
Court No. 99-08-00550 Page 9
the further manufacturing response were pervasive and served to undermine the reliability of the entire
response. See Final Determination, 64 Fed. Reg. at 30,739. Commerce, however, fails to support its
assertion with any record evidence. Indeed, the calculations made by Plaintiffs based on record evidence
suggest that a large portion of USR’s cost database, let alone the sales database, would not be affected
by the errors in the further manufacturing field. See Plaintiffs Mot. for J. on an Agency Record at 8-9
(“Pls.’ Br.”).
As respondents often must do, KTN worked with USR to develop a computer program to
respond to Commerce’s questionnaire, particularly section E. The program was designed to match resold
subject merchandise that underwent further processing with its source coil. See CR 97 at 2, Memorandum
from Accountant to Director/IA (Mar. 18, 1999) (“USR Cost Verification Report”).5 In both the Cost
Verification Report and the Final Determination, Commerce identified the following errors: 1) in several
cases the surcharge for processing small amounts of material was not reported or was incorrect; 2) in some
cases the output weight exceeded the input weight; 3) some unprocessed materials were allocated costs;
4) bottom finished products were not allocated finishing costs; and 5) re-spinning processing was not
captured. See USR Cost Verification Report at 2; see also Final Determination, 64 Fed. Reg. at 30,739.
Based on the fact that a significant amount of KTN’s subject merchandise underwent further processing,
Commerce decided that the entire cost database was unreliable.
Plaintiffs argue that Commerce’s decision to reject USR’s entire database is unsupported by
substantial evidence because the errors were limited to the further manufacturing adjustment. As Plaintiffs
5
This information was not kept in the ordinary course of USR’s business operations.
Court No. 99-08-00550 Page 10
noted at the hearing held on this matter, the further manufacturing field represented one of over fifty fields
in the cost information USR submitted. Additionally, Plaintiffs argue that because the further manufacturing
adjustment has a minimal aggregate effect on USR’s reported sales value, use of partial facts available
would be more appropriate. See Pls.’ Br. at 8.
Based on the fact that seven of eighteen tested transactions contained errors, Commerce stated
in the Final Determination that it disagreed with KTN that the errors affected only a small number of
products. See Final Determination, 64 Fed. Reg. at 30,740. What Commerce, ignored, or failed to
address, in the above statement was the actual assertion KTN raised, namely, whether or not the errors
in the further manufacturing adjustment were pervasive or isolated. See, e.g., Motor Vehicles Mfrs. Ass'n
v. State Farm Mutual Automobile Ins. Co ., 463 U.S. 29, 43 (1983) (noting that a reviewing court
should not make up for deficiencies in agency’s reasoning). Commerce’s reasoning would certainly be
valid and supported by substantial evidence if it were used to support a finding that facts available should
be used in lieu of the further manufacturing data USR submitted. But based on the record evidence, a
conclusion that the remainder of USR’s cost data was tainted by the flawed computer programming is not
warranted. See 19 U.S.C. § 1677m(e) (requiring Commerce to consider information not meeting all of
the Department’s requirements under certain conditions); see also Borden, Inc. v. United States, 4 F.
Supp.2d 1221, 1245-46, opinion after remand, 1998 WL 895890, aff’d sub nom. F.LLI De Cecco
di Filippo Fara S. Martino S.p.A. v. United States, __ F.3d __ , 2000 WL 777170 (Fed. Cir. June 16,
2000) (discussing five part test); Ferro Union, Inc. v. United States, 44 F. Supp. 2d 1310, 1330 (CIT
1999) (same); Mannesmannrohren-Werke AG, 77 F. Supp. 2d at 1313 (same). Because the conduct
of antidumping investigations are largely within Commerce’s discretion, the court will provide Commerce
Court No. 99-08-00550 Page 11
an opportunity on remand to explain this issue further.
As for the five errors Commerce specifically identified as reasons for rejecting USR’s entire
database, see Final Determination, 64 Fed. Reg. at 30,739, the court finds that they would constitute
substantial evidence on which to base a finding that facts available should be used instead of USR’s further
manufacturing data. From the record it appears that Commerce was able to verify, successfully, a great
many of the remaining fields in USR’s data.6 On remand, however, it will be left to Commerce to explain
whether the remaining fields, in fact, were verified or verifiable. See Ferro Union, Inc., 74 F. Supp. 2d
at 1296 (noting Commerce’s statutory responsibility under 19 U.S.C. § 1677m(e) to use a party’s
information even if incomplete). If Commerce can explain why the other items in USR’s cost database
were unreliable or not verifiable, the court will reexamine whatever determination Commerce makes with
respect to the cost database and any use of facts available. If, however, Commerce is unable to point to
any record evidence demonstrating the unreliability or unverifiability of other data contained in the cost
database, it shall use the remainder of USR’s cost data. See 19 U.S.C. § 1677m(e).
Commerce conducted a separate verification of USR’s sales data. See CR 95, Memorandum from
Analyst/IA to Program Manager/IA (Mar. 15, 1999) (“USR Sales Verification Report”). In rejecting
USR’s entire response, however, Commerce also rejected USR’s sales data. The USR Sales Verification
Report notes several errors in USR’s sales responses. Among these were failures to report early payment
discounts, certain misreported commission payment dates, the inability to substantiate that some of the
material shipped was non-prime merchandise, and the inability to provide documentation for an invoice
6
Plaintiffs argue that Commerce verified []% of the remaining data. See Pls.’ Reply Br. at 2.
Court No. 99-08-00550 Page 12
sourced from KTN. See USR Sales Verification Report at 2. None of these errors appear to be
attributable to the computer program.
It appears that the computer program KTN designed to respond to Commerce’s questionnaire
executed correctly for the sales data, although problems were encountered in the cost verification. 7
Commerce conducted a number of sales traces and noted some discrepancies, but nothing approaching
the magnitude encountered in the cost verification. See USR Sales Verification Report at 11-14. Further,
there is no indication in the record that the invoices and other materials Commerce used to trace the sales
were generated by the computer program KTN designed to respond to the questionnaire. This leads to
an important gap in Commerce’s reasoning. If the computer program was designed to respond to
Commerce’s questionnaire for the investigation, it could not have been used to generate the actual sales
documents Commerce was able to verify. Thus, on remand Commerce must cite record evidence that
supports its conclusion that errors in the computer program would have affected KTN’s sales data.
Commerce may find on remand that it is appropriate to apply partial facts available to fill any gaps in the
sales data it could not successfully verify, but it may not disregard the sales data absent evidence in the
record that the sales data was fatally tainted by the errors in the computer program. See 19 U.S.C. §
1677m(e); see also Ferro Union, Inc., 74 F. Supp. 2d at 1297 (approving Commerce’s use of partial
adverse facts where party failed to provide information in one respect).
7
It is not clear from the Final Determination whether the computer program was even used to
generate any of the sales data Commerce verified. Although the USR Sales Verification Report notes
that the program was used to link item files with invoice history files, there is no indication that the
program did not execute successfully in this regard. See USR Sales Verification Report at 10-11.
Further, there is no indication that the actual documents Commerce used to verify USR’s sales data
would be unreliable due to programming errors.
Court No. 99-08-00550 Page 13
2. Commerce’s decision to apply an adverse inference is not supported by substantial
evidence.
On remand, Commerce may resort to facts available provided it complies with the concerns
annunciated above by the court. Since some facts available may be used, it is appropriate at this time to
examine whether Commerce may draw an adverse inference in its selection of facts available. Based upon
the reasoning provided by Commerce thus far, the court finds Commerce has not supported its decision
to draw an adverse inference with substantial evidence.
In the Final Determination, Commerce stated that the decision to draw an adverse inference was
based on its finding that KTN failed to act to the best of its ability. That finding, in turn, was based on
KTN’s “failure to conduct even rudimentary checks for the accuracy of the reported further-processing
data.” See Final Determination, 64 Fed. Reg. at 30,739. It is instructive to compare Commerce’s decision
to draw an adverse inference with respect to the German Resellers, discussed above, to Commerce’s
decision to draw an adverse inference with respect to USR.
In deciding that KTN failed to act to the best of its ability in providing the German Reseller’s data,
Commerce looked at correspondence from KTN’s counsel, which repeatedly stated that KTN would
provide legal and factual support for its position that the data was not owed. More importantly, KTN did
not notify the case analyst at Commerce, per the questionnaires’ instruction, that it was having trouble
securing the German Reseller’s data. Based upon this evidence combined with the other Thyssen affiliates’
compliance, it was permissible for Commerce to conclude that KTN failed to act to the best of its ability
in obtaining the German Reseller’s data. In contrast, the sole evidence on which Commerce based its
decision to draw an adverse inference for USR’s database was the possibility of KTN discovering and
Court No. 99-08-00550 Page 14
correcting errors in the computer program prior to verification.
While the antidumping laws leave a great deal of discretion to the agencies, that discretion has
certain limits. In particular, as this court has noted on two prior occasions, “[u]nder the URAA, Commerce
is now required to make more subtle judgments than under the previous best information available (‘BIA’)
standard.” Ferro Union, Inc., 44 F. Supp. 2d at 1329; Mannesmannrohren-Werke AG, 77 F. Supp.
2d at 1314. Indeed, the “antidumping statute may now be less administratively convenient, but Commerce
must conform . . . to the new provisions.” Ferro Union, Inc., 44 F. Supp. 2d at 1329.
In this case, it is unclear whether Commerce’s decision to draw an adverse inference is even based
on evidence in the record. Certainly the number of errors appearing in the further manufacturing field of
the cost database are part of the record. Commerce’s conclusion, however, that rudimentary checks
would have been able to identify the problem prior to verification is not based on evidence, but rather an
unwarranted inference drawn from the evidence. Commerce’s position is that had KTN used the time in
between its receipt of the cost verification agenda and the commencement of verification, it would have
discovered the errors just as Commerce did. There is no indication in the record of whether this statement
accurately describes KTN’s resources and its ability to run the checks prior to verification that would have
discovered the errors.
In making the finding required by 19 U.S.C. § 1677e(b) that a party has failed to cooperate by not
acting to the best of its ability, Commerce must decide what the party was able to do. While the former
decision is necessarily subjective, the latter is not. Commerce has not pointed to any evidence in the record
to support its determination that KTN could have run the checks prior to verification. Commerce failed
to address the critical issue, which was whether KTN, in fact, had the resources available to it prior to
Court No. 99-08-00550 Page 15
verification to discover the errors.
Commerce argues that KTN approached the verifiers on the third and final day of verification
claiming to have isolated and corrected the error in the computer program. Based on its ability to correct
the problem in such a short time frame, Commerce concluded that a check before the verification
commenced would also have enabled KTN to correct the problem. Even if it is true that such a correction
would have been possible, errors in a party’s response, alone, are not evidence that the party failed to act
to the best of its ability. See, e.g., Borden, Inc., 4 F. Supp. 2d 1221. Commerce has not pointed to a
scintilla of evidence beyond the errors in the computer program indicating KTN did not cooperate to the
best of its ability in compiling and submitting USR’s response.
On remand, Commerce must point to record evidence demonstrating that KTN had the necessary
resources to perform the checks prior to verification. If Commerce can point to such evidence, the court
will re-examine the use of an adverse inference with respect to USR’s further manufacturing data.
Commerce, however, will need to point to additional evidence beyond any failure to perform checks if it
wants to draw an adverse inference with respect to any additional facts available that may be needed. If
Commerce is unable to provide any additional evidence demonstrating KTN failed to act to the best of its
ability, it may not draw an adverse inference in applying whatever additional facts available are needed.
3. Commerce’s decision to allocate all sales of unknown origin among three suppliers is not
in accordance with law.
Prior to verification, KTN informed Commerce that a large number of sales could not be traced
to the original supplier. See Final Determination, 64 Fed. Reg. at 30,742. The reason for KTN’s inability
to link the sales was due to USR’s reporting system, which removed the original supplier’s identity once
Court No. 99-08-00550 Page 16
the merchandise was transferred between different USR warehouses. See id. Although the original
information could have been traced manually, the large number of sales involved would have placed a
significant burden on KTN. See id. Commerce drew an adverse inference in applying facts available by
allocating all sales of unknown origin among the three respondent firms in the investigations from Germany,
Mexico and Italy. See id. at 30,743. In doing so, Commerce inflated the margin by including within the
investigation sales that should not have been counted, as the product involved in at least some of these sales
was sourced from countries not within the antidumping duty investigation.
Plaintiffs argue that Commerce’s use of an adverse inference was contrary to law, because tracing
all of the sales of unknown origin manually would have imposed an unfair burden on KTN. If the basis for
Commerce’s decision had been as Plaintiffs state, the court would be deeply concerned about the propriety
of drawing an adverse inference in this instance based on a failure to cooperate to the best of one’s ability.
The Final Determination, however, discloses that Commerce did not base its decision on KTN’s ability to
trace all of the unidentified sales manually. Rather, Commerce’s decision was based on the fact that at
verification, “of seven ‘unidentified supplier’ transactions sampled at verification, [Commerce was] able to
trace immediately the outside supplier for three . . . using nothing more than a personal computer in USR’s
offices.” Id. (citing USR Sales Verification Report at 10). Based on this, Commerce concluded that nearly
half of the unidentified suppliers could have been traced without any additional burden, and that the failure
to do so demonstrated that KTN had not acted to the best of its ability. See id. Thus, Commerce’s
decision to draw an adverse inference is based on substantial evidence.
Nevertheless, while the court finds substantial evidence to support Commerce’s decision to draw
an adverse inference, by law, Commerce is obligated to ensure that the facts chosen are not unduly harsh
Court No. 99-08-00550 Page 17
or punitive, bearing in mind that even in applying an adverse inference the goal is to determine margins as
accurately as possible. See F.LLI De Cecco di Filippo Fara S. Martino S.p.A., __ F.3d __ , 2000 WL
777170, at *5 (“[T]he purpose of section 1677e(b) is to provide respondents with an incentive to
cooperate, not to impose punitive, aberrational, or uncorroborated margins.”); see also Ferro Union, Inc.,
74 F. Supp. 2d at 1297 (“The facts available statute is designed to reach a reliable margin, even in the face
of an uncooperative respondent.”). The court is unsatisfied at this point that Commerce’s decision is not
unduly harsh or punitive. The record indicates that Commerce verified the number of USR’s suppliers as
well as the relative percentages of sales attributable to each. See Final Determination, 64 Fed. Reg. at
30,743. Despite this, Commerce used an allocation methodology that attributed to KTN more than
double the amount of the verified percentage of KTN’s sales by volume to USR during the period of
investigation. The court remands this issue to Commerce to explain how the result meets the purpose of
the facts available statute. In that regard, it would be useful for Commerce to explain the resulting impact
on the margin that its allocation methodology had compared to using an allocation methodology more in
line with the verified relative percentages.
4. Commerce must explain its decision not to deduct the verified movement and selling
expenses from gross unit prices.
In calculating KTN’s margin, Commerce failed to deduct KTN’s verified movement and selling
expenses. Commerce assigned the adverse facts available margin to the weighted average unit value for
USR’s sales. See id. at 30,714. Commerce defends its decision by arguing that the calculated margin
already had deductions for movement and selling expenses. See Def.’s Br. at 29. KTN, in response,
argues that Commerce’s defense supports KTN. KTN argues that by applying the adverse facts available
Court No. 99-08-00550 Page 18
margin to USR’s sales that were net of movement and selling expenses without using USR prices that were
net of movement and selling expenses, Commerce arbitrarily inflated the dumping calculation. See Pls.’
Reply at 13. Depending upon the remand determination, it may not be necessary for Commerce to visit
this issue. If, however, it is necessary, Commerce must explain how its methodology does not result in an
arbitrary result. If Commerce determines that this was an error, Commerce may correct the error in the
remand results.
5. USR’s Sales of Non-Subject Merchandise.
In the Final Determination, Commerce rejected KTN’s argument that a quantity adjustment was
appropriate because certain sales involving non-subject merchandise should be excluded. See Final
Determination, 64 Fed. Reg. at 30743. Upon further review, Commerce concedes that its failure to
exclude the non-subject merchandise was in error and requests a remand to recalculate the dumping margin
to exclude sales of the non-subject merchandise. See Def.’s Br. at 29. The court agrees with the reasoning
provided by Plaintiffs and Defendant for remanding this aspect of the Final Determination and will so order.
IV. CONCLUSION
For the foregoing reasons, the Final Determination is remanded in part, and sustained in part.
Accordingly, it is hereby
ORDERED that this matter is remanded to Commerce; and it is further
ORDERED that Commerce’s decision to apply an adverse inference with respect to the German
Resellers is sustained; and it is further
ORDERED that Commerce must explain why the adverse facts selected for the German Resellers
were rationally related to KTN’s sales and indicative of its customary selling practices; and it is further
Court No. 99-08-00550 Page 19
ORDERED that Commerce must explain why the adverse facts selected for the German Resellers
were not unduly harsh or punitive; and it is further
ORDERED that Commerce must explain whether the fields, beside the further manufacturing fields,
in USR’s cost database were verified or verifiable; and it is further
ORDERED that if Commerce finds the remaining fields in USR’s cost database were verified or
verifiable it must use the actual numbers; and it is further
ORDERED that Commerce must explain why USR’s sales database was affected by the errors
in USR’s cost database; and it is further
ORDERED that if Commerce is unable to point to substantial evidence demonstrating that the sales
database was affected by errors in the cost database, it must use USR’s actual data, subject to filling any
gaps, as noted in the court’s opinion, with facts available; and it is further
ORDERED that Commerce must point to substantial evidence in the record demonstrating that
KTN had the ability to run checks to discover and correct the errors in the computer programming prior
to verification; and it is further
ORDERED that if Commerce is unable to point to substantial evidence in the record of KTN’s
ability to discover and correct the errors in the computer programming prior to verification, or other facts
evincing a failure to cooperate, Commerce must not draw an adverse inference in choosing from the facts
available for the further manufacturing data; and it is further
ORDERED that Commerce must point to additional evidence in the record, beside the errors in
the computer program, before drawing adverse inferences for any remaining use of facts available; and it
is further
Court No. 99-08-00550 Page 20
ORDERED that Commerce’s decision to draw an adverse inference with respect to the allocation
of sales of unidentified origin is sustained; and it is further
ORDERED that Commerce must explain why the allocation methodology for the sales of
unidentified origin is not unduly harsh or punitive; and it is further
ORDERED that Commerce must explain its decision not to deduct verified movement and selling
expenses from gross unit prices; and it is further
ORDERED that Commerce exclude the non-subject merchandise from its calculation of the
dumping margin; and it is further
ORDERED that Commerce’s remand results are due to be filed within sixty days from the date of
this decision. Any comments by the parties to the remand results are due on or before 20 days from the
date of Commerce’s filing and are limited to 20 pages, any rebuttal comments are due 20 days thereafter
and are limited to 10 pages.
Dated: ___________________ ___________________________
New York, NY Judith M. Barzilay
Judge