Ta Chen Stainless Steel Pipe, Ltd. v. United States

Slip Op. 99-117

UNITED STATES COURT OF INTERNATIONAL TRADE
_________________________________
:
TA CHEN STAINLESS STEEL :
PIPE, Ltd., :
:
Plaintiff, :
:
v. : Court No. 97-08-01344
:
THE UNITED STATES, : Public Version
:
Defendant, :
:
and :
:
AVESTA SHEFFIELD, Inc., et. al., :
:
Defendant-Intervenors. :
________________________________ :

[Antidumping determination remanded.]

Dated: October 28, 1999

Ablondi, Foster, Sobin & Davidow, p.c. (Joel Davidow and
Peter Koenig) for plaintiff.

David W. Ogden, Acting Assistant Attorney General, David
M. Cohen, Director, Velta A. Melnbrencis, Assistant Director,
Commercial Litigation Branch, Civil Division, United States
Department of Justice (Mark L. Josephs), Christine Savage,
Office of the General Counsel, United States Department of
Commerce, of counsel, for defendant.

Collier, Shannon, Rill & Scott, PLLC, (David A.
Hartquist, Jeffrey S. Beckington, and Kathleen W. Cannon) for
defendant-intervenors.
COURT NO. 97-08-01344 PAGE 2

OPINION

RESTANI, Judge: This matter is before the court on a

motion for judgment upon the agency record pursuant to USCIT

Rule 56.2. Ta Chen Stainless Steel Pipe, Inc. (“Ta Chen” or

“plaintiff”) challenges certain aspects of an antidumping duty

determination by the Department of Commerce ("Commerce" or

"the Department"). See Certain Welded Stainless Steel Pipe

from Taiwan, 62 Fed. Reg. 37,543 (Dep't Commerce 1997) (final

results of admin. rev.) [hereinafter "Final Results"]. Avesta

Sheffield Inc., Damascus Tube Division, Damascus-Bishop Tube

Co., and United Steelworkers of America (AFL-CIO/CLC) appear

as defendant-intervenors (collectively "Defendant-Intervenors"

or "Domestic Interested Parties") to Ta Chen's motion.

In 1992, Commerce determined that welded stainless steel

pipe ("WSSP") from Taiwan was being sold at less than fair

value, and accordingly issued an antidumping order. Certain

Welded Stainless Steel Pipe from Taiwan, 57 Fed. Reg. 62,300

(Dep't Commerce 1992) (amended final determination and

antidumping duty order). In December 1995, Commerce published

its notice of opportunity to request an administrative review

of the dumping order for the third administrative review

period, covering December 1, 1994 through November 30, 1995.
COURT NO. 97-08-01344 PAGE 3

Antidumping or Countervailing Duty Order, Finding, or

Suspended Investigation, 60 Fed. Reg. 62,070, 62,071 (Dep't

Commerce 1995). Ta Chen requested a review and Commerce

initiated an antidumping duty administrative review of WSSP on

February 1, 1996. Initiation of Antidumping and

Countervailing Duty Administrative Reviews, 61 Fed. Reg.

3,670, 3,671 (Dep't Commerce 1996).

Ta Chen received a dumping margin of 6.06 percent, which

was based on partial adverse facts available. Final Results,

62 Fed. Reg. at 37,556. Ta Chen challenges several aspects of

the determination leading to the application of adverse facts.

Jurisdiction and Standard of Review

The court has jurisdiction pursuant to 28 U.S.C. §

1581(c) (1994). In reviewing final determinations in

antidumping duty investigations, the court will hold unlawful

those agency determinations which are unsupported by

substantial evidence on the record, or otherwise not in

accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i) (1994).
COURT NO. 97-08-01344 PAGE 4

I. Ta Chen's affiliation with Sun Stainless

Background

Ta Chen is a Taiwanese producer of stainless steel pipe.

In its Final Results, Commerce concluded that, pursuant to 19

U.S.C. § 1677(33) (1994), Ta Chen was affiliated with one of

its US distributors, Sun Stainless, Inc. ("Sun"), on the

grounds of control.1 Final Results, 62 Fed. Reg. at 37,549.

Ta Chen disputes this finding and claims it is not affiliated

with Sun.

In its first questionnaire, Commerce asked Ta Chen to

list all companies affiliated with it, through stock ownership

or otherwise. Initial Questionnaire (Feb. 13, 1996), at A-4,

P.R. Doc. 6, Def.'s App., Tab 1, at 6. The definition of

“affiliated person” in the questionnaire’s glossary of terms

simply restated the statutory definition. Id. at App. I,

Def.’s App., Tab 1, at 10. The questionnaire also stated that

1 The name of Sun Stainless was confidential during
the administrative proceedings, as was the name San Shing (dba
“Sun Stainless”), Sun’s predecessor. Ta Chen placed Sun
Stainless’ name on the public record for these proceedings.
See Pl.'s Br. at 3 n.6. Ta Chen has since placed San Shing’s
name on the public record for the final results of the first
and second administrative review. See Certain Welded
Stainless Steel Pipe from Taiwan, 64 Fed. Reg. 33,243, 33,243
(Dep’t Commerce 1999) (final results of admin. rev.)
In the Final Results, San Shing is referred to as Company
A and Sun is referred to as Company B.
COURT NO. 97-08-01344 PAGE 5

Ta Chen should seek clarification from the Department if it

was uncertain whether a company was an affiliate. Id. at G-6,

Def.’s App., Tab 1, at 5. Commerce also asked Ta Chen to

identify its sales as either export price ("EP") or

constructed export price ("CEP").2 Id. at C-8, Def.’s App.,

Tab 1, at 7. In its response, Ta Chen listed several

affiliates, but did not include Sun. See Response to Initial

Questionnaire (Apr. 30, 1996), at 7-8, C.R. Doc. 1, Def.'s

App., Tab 2, at 4-5. Ta Chen said that none of its affiliates

sold Ta Chen pipe in the United States or Taiwan during the

1994-95 period of review (“POR”), and that none of these

affiliates were involved in any aspect of the production of

pipe. Id. at 8, Def.’s App., Tab 2, at 5. Ta Chen also

stated that its US pipe sales were EP sales, and not CEP

sales, because the price and quantity for US sales was

determined before the pipe was imported into the United

2 Commerce generally calculates the antidumping duty
by comparing an imported product’s price in the United States
to its normal value (“NV”), which represents the price of
comparable merchandise in the exporting country. The dumping
margin is the amount by which NV exceeds the US price. See 19
U.S.C. § 1673 (1994).
The US price is calculated as either EP or CEP. See 19
U.S.C. § 1677a (1994). Usually, EP is used when the foreign
exporter sells directly to an unrelated US purchaser, and CEP
is used when the exporter sells through a related party in the
United States which performs substantial selling functions.
See 19 U.S.C. § 1677a(a)-(b).
COURT NO. 97-08-01344 PAGE 6

States. Id. at 4, Def.’s App., Tab 2, at 2. Ta Chen said

that its wholly-owned US subsidiary, Ta Chen International

("TCI"), performed no function in connection with Ta Chen's US

pipe sales, other than processing paper work. Id. Ta Chen

stated that pipe did not enter a TCI warehouse in the US, but

was shipped directly from Ta Chen in Taiwan to the customer in

the United States. Id.

In its first supplemental questionnaire, Commerce

requested further information on a variety of issues,

including a request that Ta Chen explain its relationship with

Sun. First Supplemental Questionnaire (Oct. 22, 1996), at 7,

C.R. Doc. 6, Def.'s App., Tab 3, at 3. Ta Chen responded that

it had a history of doing business with Sun Stainless, and

with San Shing. Response to First Supplemental Questionnaire

(Nov. 12, 1996), at 34, C.R. Doc. 8, Def.'s App., Tab 4, at 2.

Both companies had been distributors of Ta Chen pipe. Id. Ta

Chen said that in answering Commerce's questions regarding

Sun, it assumed that Commerce was seeking information to

determine whether Ta Chen and Sun were affiliates. Id. at 35-

36, Def.’s App., Tab 4, at 3-4. Prior to describing its

relationship with Sun, Ta Chen included much legal argument in

its response regarding the statutory and regulatory

definitions of "related party" and "control." Id. at 36,
COURT NO. 97-08-01344 PAGE 7

Def.’s App., Tab 4, at 4. Ta Chen focused on the amendments

made to these definitions in the Uruguay Round Agreements Act

("URAA"), Pub. L. 103-465, 108 Stat. 4809 (1994), effective

January 1, 1995, and argued that Commerce should apply the

pre-URAA statutory definition of related parties because the

only sales Ta Chen had made to Sun in the third administrative

review period occurred in August 1994.3 Id. at 40-41, Def.’s

App., Tab 4, at 8-9. Ta Chen does not pursue this argument

before the court.

Ta Chen went on to describe a long history with San Shing

and Sun Stainless. It described several connections between

the companies which are listed in the Final Results as

follows:-

! Sun was established by current or former managers and
officers of Ta Chen;

! Sun was staffed by current or former Ta Chen employees;

! Sun distributed only Ta Chen products in the United
States;

3 The Department verified that after August 1994, Ta
Chen had made no sales to Sun, but it had made shipments to
Sun, which were imported during the POR in January 1995.
Verification Report (June 19, 1997), at 4, C.R. Doc. 30,
Def.’s App., Tab 8, at 4; Response to First Supplemental
Questionnaire, at 41, Def.’s App., Tab 4, at 9.
The period of review covers entries, as well as exports
or sales, made during the 12 month period at issue. See 19
C.F.R. § 353.22(b) (1996) & 19 C.F.R. § 351.213(e)(1)(i)
(1999).
COURT NO. 97-08-01344 PAGE 8

! TCI had physical custody of Sun's signature stamp;

! TCI had a dedicated computer connection to Sun's records
for purposes of credit monitoring;

! Ta Chen's president met with Sun's customers and
participated directly in the negotiation of prices of
Sun's resales of WSSP; and

! Sun offered its accounts receivable and inventory as
collateral for a bank loan to TCI.

Final Results, 62 Fed. Reg. at 37,549. Ta Chen did not

provide the Department with information on Sun's US sales in

response to the first supplemental questionnaire.

In its second supplemental questionnaire, Commerce asked

a series of follow-up questions regarding Ta Chen's

relationship with Sun. Commerce wanted to know if Sun bought

subject merchandise from any other companies, if any other

companies had access to Sun's records, and further detail on

Ta Chen's credit monitoring of Sun. Second Supplemental

Questionnaire (Dec. 24, 1996), at 2-3, C.R. Doc. 15, Def.'s

App., Tab 5, at 4-5. In this supplemental questionnaire

Commerce did not ask Ta Chen to supply information on Sun's US

sales, nor did it do so at any later point. Commerce also

said that it had "made no determination in the first, second

or third administrative reviews as to the proper
COURT NO. 97-08-01344 PAGE 9

classification of Ta Chen's U.S. sales." Id. at 3, Def.'s

App., Tab 5, at 5.

When Commerce issued its Preliminary Results in January

1997, three days before Ta Chen responded to the second

supplemental questionnaire, the Department preliminarily

determined that an application of facts available was

warranted for Ta Chen's US sales to Sun because Ta Chen had

misreported this portion of its US sales as EP, instead of CEP

sales. Certain Welded Stainless Steel Pipe from Taiwan, 62

Fed. Reg. 1,435, 1,435 (Dep’t Commerce 1997) [hereinafter

“Preliminary Results”]. Commerce said that the additional

information provided by Ta Chen clearly indicated that Sun and

Ta Chen were affiliates pursuant to 19 U.S.C. § 1677(33)(G),

because Ta Chen was in a position to control Sun, and that

therefore Ta Chen's sales to Sun should have been classified

as CEP sales.

In its response to the second supplemental questionnaire,

Ta Chen answered Commerce's further questions about Sun. In

particular, Ta Chen said that it had no reason to believe that

Sun purchased WSSP from any one other than Ta Chen. Response

to Second Supplemental Questionnaire (Jan. 13, 1997), at 9,

C.R. Doc. 17, Def.'s App., Tab 6, at 2. Ta Chen also stated

that it was not aware of any other company having computer
COURT NO. 97-08-01344 PAGE 10

access to Sun's records, and that Ta Chen did not have such

access to other customers. Id. Ta Chen did not provide

information on Sun's US sales at this point, nor did it do so

at any other time.

Commerce conducted a verification of Ta Chen's US sales

data at TCI's premises in Long Beach, California on June 11

and 12, 1997. Verification Report, at 1, Def.'s App., Tab 8,

at 1. Commerce issued the Final Results on July 14, 1997, and

maintained its preliminary determination that Ta Chen was

affiliated with Sun. Commerce calculated a margin based on

partial adverse facts available, and applied the adverse

inference only to a portion of Ta Chen's sales; i.e. the sales

to Sun and to Anderson Alloys (see infra for discussion of

Anderson). Final Results, 62 Fed. Reg. at 37,553. Ta Chen

contests Commerce's conclusion that it is affiliated with Sun.

Discussion

Section 1677(33) of Title 19 sets out a list of persons

who will be considered affiliated, including "Any person who

controls any other person and such other person . . . . [A]

person shall be considered to control another person if the

person is legally or operationally in a position to exercise

restraint or direction over the other person." 19 U.S.C. §

1677(33)(G).
COURT NO. 97-08-01344 PAGE 11

The Statement of Administrative Action also states that

"control" exists "if one person is legally or operationally in

a position to exercise restraint or direction over another

person." Statement of Administrative Action, accompanying

H.R. 103-5110 at 168 (1994), reprinted in 1994 U.S.C.C.A.N.

3773, 4174 ("SAA").4 The SAA explains that this definition of

control is a shift from the prior definition.

The traditional focus on control through stock ownership
fails to address adequately modern business arrangements,
which often find one firm “operationally in a position to
exercise restraint or direction” over another even in the
absence of an equity relationship. A company may be in a
position to exercise restraint or direction, for example,
through corporate or family groupings, franchises or
joint venture agreements, debt financing, or close
supplier relationships in which the supplier or buyer
becomes reliant upon the other.

SAA at 168, 1994 U.S.C.C.A.N. at 4174-75.

Commerce's regulations adopted the statutory definition

of "affiliated persons." See 19 C.F.R. § 351.102(b) (1999)

("Affiliated persons" and "affiliated parties" have the same

meaning as in section 771(33) of the Act [19 U.S.C. §

4 The Statement of Administrative Action represents
"an authoritative expression by the Administration concerning
its views regarding the interpretation and application of the
Uruguay Round Agreements . . . . The Administration
understands that it is the expectation of the Congress that
future Administrations will observe and apply the
interpretations and commitments set out in this statement."
SAA at 1, 1994 U.S.C.C.A.N. at 4040.
COURT NO. 97-08-01344 PAGE 12

1677(33)].") In its Notice of Proposed Rulemaking, Commerce

explained that "affiliated persons" is a new term, and

declined to elaborate on the meaning of either "control" or

"affiliated persons." Antidumping Duties; Countervailing

Duties, 61 Fed. Reg. 7,308, 7,310 (Dep't Commerce 1996)

(notice of proposed rulemaking and request for public

comments) (proposed regulations to conform to the URAA). In

its final rules, Commerce said it would not find that control

existed on the basis of “corporate or family groupings;

franchise or joint venture agreements; debt financing; and

close supplier relationships . . . unless the relationship has

the potential to impact decisions concerning the production,

pricing or cost of the subject merchandise.” Antidumping

Duties; Countervailing Duties, 62 Fed. Reg. 27,296, 27,380

(Dep't Commerce 1997) (final rules) [“Final Rules”].5 In the

comments to these rules, however, Commerce specifically

declined to provide further detail on the new affiliation or

5 This rule was codified at 19 C.F.R. § 351.102.
These regulations, implemented to conform to the URAA, became
applicable as of July 1, 1997. See Final Rules, 62 Fed. Reg.
at 27,417. For reviews such as the third administrative
review period for Ta Chen, initiated after January 1, 1995 but
before the rules came into effect, the Department stated that
the final rules would “serve as a restatement of the
Department’s interpretation of the requirements of the Act as
amended by the URAA.” Id.
COURT NO. 97-08-01344 PAGE 13

control standard, stating that it was "more appropriate" for

Commerce to develop its practice regarding affiliation

"through the adjudication of actual cases." Id. at 27,297.

The Department stated that it agreed that it should focus on

“relationships that have the potential to impact decisions

concerning production, pricing or cost,” but that this did not

mean that “proof is required that a relationship in fact has

had such an impact.” Id. at 27,297-98.

A) Ta Chen's connections with Sun Stainless

Ta Chen argues that none of its connections with Sun

placed it in a position to impact Sun's decisions concerning

the pricing of WSSP and, therefore, that Ta Chen and Sun

should not be considered affiliated parties.

1) Ta Chen and Sun's historical ties

The Department found that Sun was established by current

or former managers and officers of Ta Chen, “at Ta Chen’s

behest.” Final Results, 62 Fed. Reg. at 37,549. Frank

McLane,6 a member of Ta Chen’s board of directors,

incorporated Sun Stainless in the fall of 1993. Response to

6 Frank McLane’s name was considered confidential
during the third administrative review period, but was
subsequently placed on the public record in the final results
of the first and second administrative review. See Certain
Welded Stainless Steel Pipe from Taiwan, 64 Fed. Reg. at
33,244.
COURT NO. 97-08-01344 PAGE 14

First Supplemental Questionnaire, at 55, Def.’s App., Tab 4,

at 22. Sun became operational in November 1993, and Mr.

McLane resigned from Ta Chen’s board and sold his Ta Chen

stock before Sun “began dealing with Ta Chen.”7 Id. A former

TCI sales consultant, Ken Mayes,8 was principal in charge of

San Shing at the time San Shing took over TCI’s inventories

and pipe distribution in 1992, and was retained as the

principal in charge of Sun Stainless when Sun bought out San

Shing. Id. at 50-56, Def.’s App., Tab 4, at 18-23. Commerce

concluded that “given the longstanding and intimate business

dealings between [Ken Mayes] and the president of Ta Chen, we

must question the degree of operational autonomy of [San

Shing] and [Sun] while under this individual’s stewardship.”

Final Results, 62 Fed. Reg. at 37,549.

Ta Chen argues that even if it had a historical

affiliation with Sun, the fact that parties were previously

7 The Government states that Mr. McLane did not sell
his Ta Chen stock and resign from the board until after the
incorporation of Sun. Gov’t Br. at 22-23. The exact dates,
however, are unclear from the record. See Response to First
Supplemental Questionnaire, at 55-56, Def.’s App., Tab 4, at
22-23.
8 Ken Mayes’ name was also considered confidential
during the third administrative review period, but was placed
on the public record for the final results of the first and
second administrative review. See Certain Welded Stainless
Steel Pipe from Taiwan, 64 Fed. Reg. at 33,244.
COURT NO. 97-08-01344 PAGE 15

affiliated is irrelevant to the question of whether they are

currently affiliated. See Certain Iron Construction Castings

from Canada, 55 Fed. Reg. 460, 460 (Dep’t Commerce 1990)

(final results of antidumping duty admin. rev.) (fact that

respondent sold its interest in possible related party prior

to initiation of review was one reason, among others, that ITA

declined to make a finding of relatedness). Certainly the

existence of a prior affiliation should not be dispositive in

making a determination regarding current affiliation. Ken

Mayes’ intimate knowledge of TCI and Sun’s operations may have

called into doubt the operational autonomy of San Shing and

Sun, but this factor alone does not constitute substantial

evidence that Ta Chen controlled either San Shing or Sun.

Likewise, the details of Frank McLane’s relationship with Ta

Chen at the time he incorporated Sun are unclear from the

record, and are insufficient to support a finding of

affiliation.

2) Staffing of Sun by current or former Ta Chen employees

Commerce found that Sun was staffed entirely by current

or former employees of Ta Chen. Final Results, 62 Fed. Reg.

at 37,549. Ta Chen disputes this conclusion and says that no

individuals were employed by Ta Chen and Sun at the same time.

Pl.’s Br. at 53.
COURT NO. 97-08-01344 PAGE 16

Regarding allegedly common clerical staff, Ta Chen argues

that it had a surplus of clerical staff when TCI gave up its

US inventory sales business. Ta Chen says that some of these

individuals were hired by Sun. Id. at 54-55. Ta Chen admits

that it did provide Sun with some “routine clerical assistance

and training, use of office equipment, suggestions on working

with customs brokers, training on shipping procedures, and

data entry and bookkeeping type assistance.” Id. at 55. The

staff who provided such assistance allegedly were never

employees of Sun, but rather acted on Ta Chen’s behalf for Ta

Chen’s benefit.

Ta Chen argues in this regard that the movement of

employees is irrelevant to the question of whether companies

are affiliates. See Oil Country Tubular Goods from Argentina,

60 Fed. Reg. 33,539, 33,544 (Dep’t Commerce 1995) (final

determination of sales at LTFV) (finding that a common

employee/consultant is “not the same thing as board membership

and is not enough to establish control”); see also Certain

Fresh Cut Flowers from Mexico, 56 Fed. Reg. 1,794, 1,799

(Dep’t Commerce 1991) (final results of antidumping duty

admin. rev.) (shared address, phone number, and invoice forms

of two foreign importers not sufficient to lead to finding of

relatedness).
COURT NO. 97-08-01344 PAGE 17

The Department also considered that Ken Mayes had been a

common employee of Ta Chen and Sun, and that he had received

compensation from Ta Chen after the end of his employment with

Ta Chen in 1992. Final Results, 62 Fed. Reg. at 37,549. Ta

Chen counters that Ken Mayes was an independent contractor

with Ta Chen, and that he had been at liberty to work for

others even while he was retained by Ta Chen. Pl.’s Br. at

53. Moreover, Ta Chen states that Ken Mayes’ independent

contractor agreement terminated prior to his employment with

San Shing and Sun. Id. Ta Chen says that the payment to Ken

Mayes was not made until Mayes had left Sun, and that this sum

represented a one time payment which Ta Chen owed Ken Mayes

pursuant to their earlier contract. Id. at 54. The

Department has previously stated that the right to a one-time

profit sharing conveys no ownership right or control in a

company. See Porcelain-on-Steel Cookware from Mexico, 62 Fed.

Reg. 25,908, 25,914 (Dep’t Commerce 1997) (final results of

antidumping duty admin. rev.) (Department included

respondent’s profit-sharing expenses in COP analysis as an

expense, but distinguished these expenses from dividends,

because “right to participate in profit-sharing conveyed no

ownership right in [respondent company]”). Accordingly,
COURT NO. 97-08-01344 PAGE 18

Mayes’ right to a payment by Ta Chen by itself does not

suffice to establish a control relationship.

The Government argues that the history of common

personnel supports the conclusion that Ta Chen had the ability

to exercise “operational direction or restraint” over Sun.

Gov’t Br. at 23-24. In light of Oil Country Tubular and

Certain Fresh Cut Flowers, however, it is unlikely that the

existence of common clerical staff could, on its own, suffice

to support the Department’s finding of control. This is

particularly so here because Commerce did not articulate how

Ta Chen could have used the alleged common staff to direct or

restrain Sun.

3) Sun's distribution of only Ta Chen products

Another of the Department’s reasons for concluding that

Ta Chen and Sun were affiliates was the fact that Sun

distributed only Ta Chen products in the United States. Final

Results, 62 Fed. Reg. at 37,549. The Department reasoned that

this was akin to a close supplier relationship, which is a

factor specifically mentioned in both the SAA and the

Department’s regulations as indicative of control. Ta Chen

argued before Commerce, as it does here, that although Sun

bought all of its stainless steel pipe from Ta Chen, Sun was
COURT NO. 97-08-01344 PAGE 19

at liberty to buy from other producers. Final Results, 62

Fed. Reg. at 37,550; Pl.’s Br. at 51.

Ta Chen says there was no exclusivity agreement with Sun.

Further, it argues that even in the presence of such exclusive

agreements, Commerce recognizes that such contracts are

“common commercial arrangements," and that affiliated party

status does not necessarily arise from a customer buying all

of its product from one supplier. See Certain Cold-Rolled and

Corrosion- Resistant Carbon Steel Flat Products from Korea, 62

Fed. Reg. 18,404, 18,441 (Dep’t Commerce 1997) (final results

of antidumping duty admin. revs.) (respondent did not control

the home-market distributor because there was no evidence that

distributor entered into exclusive sales contract other than

voluntarily, or that the contract could not be terminated by

either party). In Open-End Spun Rayon Singles Yarn from

Austria, 62 Fed. Reg. 43,701 (Dep’t Commerce 1997) (notice of

final determination of sales at LTFV), the Department did not

find that the respondent and its sole US customer of subject

merchandise were affiliates. The Department reasoned that

because the respondent’s records showed that its US customer’s

purchases “account for only a small portion of [respondent’s]

total sales revenue,” the respondent was not reliant on this

US customer. 62 Fed. Reg. at 43,708.
COURT NO. 97-08-01344 PAGE 20

Commerce responds that a finding of affiliation can be

based on a close supplier relationship alone. The Government

cites Stainless Steel Wire Rod from Korea, 63 Fed. Reg.

40,404 (Dep’t Commerce 1998) (notice of final determination of

sales at LTFV), where the Department found that the sole

supplier, and the sole buyer, of the major input for the

production of the subject merchandise were affiliated because

the supplier was in a position to control the buyer. 63 Fed.

Reg. at 40,410. The buyer, by its own admission, had been

unable to develop an alternate source to supply the input.

“Thus, the business and economic reality is that the

relationship between the parties is significant and, as

demonstrated by evidence on the record, not easily replaced.”

Id.; see also Mitsubishi Heavy Indus., Ltd. v. United States,

54 F. Supp.2d 1183, 1190-91 (Ct. Int’l Trade 1999) (sustaining

Commerce’s determination that “any supplier that depended upon

[buyer] for 50 percent or more of its sales during each year

during a five year period [would] be potentially subject to

the restraint or direction of [the buyer]” was reasonable

interpretation of term “close-supplier”); but cf. Furfuryl

Alcohol from the Republic of South Africa, 62 Fed. Reg.

61,084, 61,086 (Dep’t Commerce 1997) (final results of

antidumping duty admin. rev.) (producer and seller not
COURT NO. 97-08-01344 PAGE 21

affiliated with its home market customers even though producer

was the only manufacturer of subject merchandise in South

Africa; Department stated that producer’s dominant position in

the home market “in and of itself” was not sufficient for a

finding of affiliation between producer and its customers).

Given the inclusion of close-supplier relationships in

the SAA and the Department’s regulations, Commerce’s decision

to consider the fact that Sun purchased WSSP exclusively from

Ta Chen as one factor, among others, as demonstrating Ta

Chen’s ability to control Sun, was reasonable. Moreover, the

determinations Ta Chen cites in support of its position that

exclusive sales agreements and close supplier relationships

are not sufficient to lead to a finding of affiliation did not

involve as many connections between the companies as Commerce

found between Ta Chen and Sun. If the affiliation finding

hinged on this factor alone, however, the court would be

reluctant to uphold the determination as based on substantial

evidence. In this case there was no exclusive sales contract,

and even when there are exclusive sales contracts, Commerce

has found that insufficient for an affiliation finding. See

Certain Cold-Rolled Carbon Steel Flat Products, 62 Fed. Reg.

at 18,441. When the court upheld Commerce’s determination

based on the “greater-than-fifty-percent-sales-dependence-for-
COURT NO. 97-08-01344 PAGE 22

five years” in Mitsubishi, the court noted that the subject

merchandise was a “highly customized product, requiring unique

technical specifications.” Mitsubishi, 54 F. Supp.2d at 1191.

By contrast, there is no suggestion in this case that Sun

would have had difficulty obtaining WSSP from other suppliers.

Nonetheless, this is one factor that may be considered by

Commerce.

4) TCI's custody of Sun's signature stamp

Commerce stated that TCI's physical custody of Sun's

signature stamp constituted prima facie evidence that Ta Chen

either "exercised, or was in a position to exercise, control

over [Sun's] disbursements." Final Results, 62 Fed. Reg. at

37,549. Ta Chen argues against the Department’s conclusion

regarding this stamp, stating that TCI had this stamp in order

to monitor Sun’s cash outflows. Pl.’s Br. at 58. Ta Chen

further states that it sold Sun a large volume of product on

extended payment terms, and that therefore TCI’s accounts

receivable from Sun “came to be one of TCI’s most significant

assets.” Id. Ta Chen says "it was precisely because Ta Chen

did not control Sun that stringent credit monitoring measures

were sought. The monitoring could provide early warning of

cash flow problems which could adversely affect ability to pay

debt." Id. at 58-59.
COURT NO. 97-08-01344 PAGE 23

Commerce considered Ta Chen’s arguments regarding the

reasons why it possessed Sun’s signature stamp and concluded

that Ta Chen had not presented evidence to counter the

presumption that it was in a position to control Sun’s

disbursements. Final Results, 62 Fed. Reg. at 37,549. Ta

Chen says TCI only stamped checks which were pre-approved by

Sun, and that Sun could write its own checks. Pl.’s Br. at

58. There is no discussion, however, of whether Ta Chen had

the right to withhold stamping Sun checks. There is also no

record evidence of a written agreement between Ta Chen and Sun

regarding Ta Chen’s use and possession of Sun’s stamp.

Possession of the signature stamp provided TCI with the means

to control Sun’s outflows, whether TCI exercised that power or

not. The statute focuses on the capacity to control, rather

than on the actual exercise of control. See Ferro Union, Inc.

v. United States, 44 F. Supp.2d 1310, 1324 (Ct. Int'l Trade

1999) (determination of “control” under URAA “not dependent on

actually exercising control, but rather on the capacity to

exercise control") (emphasis in original). The court

therefore concludes that the Department’s reasoning that

possession of the signature stamp provided Ta Chen with the

capacity to control Sun’s disbursements was substantially

supported.
COURT NO. 97-08-01344 PAGE 24

5) Ta Chen's credit monitoring of Sun

The Department also considered as indicative of control

the fact that Ta Chen, through TCI, had a dedicated computer

connection to Sun’s accounts receivable, accounts payable, and

inventory. This access was on a full-time, unlimited basis,

which required no passwords or other security mechanisms

limiting Ta Chen's access to Sun's records. Final Results, 62

Fed. Reg. at 37,549; Verification Report, at 5, Def.’s App.,

Tab 8, at 5.

Ta Chen argues that its credit monitoring of Sun via

TCI’s possession of Sun’s signature stamp was imperfect, and

that therefore Ta Chen needed another way to monitor Sun’s

credit. Pl.’s Br. at 59. Ta Chen submitted a certified

statement from an expert in the US steel industry who asserted

that, in light of Sun's purchasing of a large volume of

product on extended payment terms, the credit monitoring

exercised by Ta Chen was not inappropriate between

unaffiliated parties. Response to Second Supplemental

Questionnaire, at 41-42, C.R. Doc. 17, Pl.’s Prop. App., Tab

C, at 15-16. Ta Chen also notes a comment to UCC § 9-205

(1999) which says that “policing” or “dominion” by the secured
COURT NO. 97-08-01344 PAGE 25

party of its unaffiliated debtor is permissible and expected.9

Ta Chen also alleges that Commerce’s conclusion that Ta Chen’s

computer access to Sun’s records was indicative of control is

“speculative” because Commerce did not cite evidence as to why

unaffiliated parties would never agree to such credit

monitoring.

Ta Chen is misstating the Department’s analysis of this

issue. Commerce conceded that it is common for creditors to

“obtain reports regarding the status of a debtor’s business

activities,” but contended that the “full-time and unlimited

access to [Sun’s] computer system afforded Ta Chen a far more

invasive mechanism for monitoring than would be expected

between unaffiliated parties.” Final Results, 62 Fed. Reg. at

37,549. The court finds that Commerce did not base its

affiliation finding simply on the fact that Ta Chen monitored

Sun’s records, but rather on the means with which Ta Chen

effectuated its monitoring. Ta Chen’s unlimited access to

9 Ta Chen is referring to an official comment to UCC §
9-205 which states that nothing in the section “prevents . . .
‘policing’ or dominion as the secured party and the debtor may
agree upon; business and not legal reasons will determine the
extent to which strict accountability, segregation of
collections, daily reports and the like will be employed.”
Comment 5 to UCC § 9-205.
A finding of affiliation, however, is not inconsistent
with secured status. Whether such monitoring is legally
permissible is irrelevant to the affiliation determination.
COURT NO. 97-08-01344 PAGE 26

Sun’s accounts does seem highly invasive, and Commerce’s

conclusion that this monitoring was more invasive than the

type which would normally exist between unaffiliated parties

was substantially supported.

6) Participation by Ta Chen president in meetings with Sun
customers and negotiation of prices of Sun's resales of
WSSP

The Department also focused on the fact that Robert

Shieh, the president of Ta Chen, met with Sun’s customers and

participated in the negotiation of Sun’s resales of WSSP, to

conclude that Ta Chen and Sun were affiliates. Final Results,

62 Fed. Reg. at 37,549. Commerce found that “Ta Chen’s

statement that ‘it knew the prices which would be accepted by

[Sun]’ raise[d] additional questions about the extent to which

[Sun] was free to act in its own interest.” Id.

Ta Chen explains that when a customer wanted to buy WSSP

at a price acceptable to Sun, Ta Chen would tell the customer

to prepare a purchase order for Sun. Pl.’s Br. at 48. The

customer would then either send its order directly to Sun, or

give it to Ta Chen, who would forward the order to Sun. Id.

Ta Chen says Sun was free to accept, reject, or modify these

orders. Id. Ta Chen submitted the testimony of a US steel

industry expert to support its argument that such behavior by

Ta Chen was standard industry practice. Response to Second
COURT NO. 97-08-01344 PAGE 27

Supplemental Questionnaire, at 44, C.R. Doc. 17, Pl.’s Prop.

App., Tab C, at 18. This expert stated that mill officials

visit their unaffiliated distributors' customers and forward

the orders, so as not to undermine their distributors by

taking the order directly from the distributor’s customers.

Id.

Ta Chen may be correct in arguing that Mr. Shieh’s visits

to Sun’s customers is standard industry practice. Such visits

do, however, raise a well-founded suspicion that Ta Chen had a

great deal of access to Sun’s pricing information. For

instance, how could Ta Chen assure a seller that a particular

price was acceptable to Sun, unless Ta Chen had intimate

knowledge of Sun’s pricing and cost decisions? Moreover,

simply because certain behavior is standard industry practice

does not mean it negates a finding of control. See Final

Rules, 62 Fed. Reg. at 27,298 (declining to adopt suggestion

that Department should not consider “normal commercial

relationships” as evidence of control; relationships described

in SAA as giving rise to control “can be characterized as

‘normal’ in the sense that they are commercial relationships

commonly entered into by firms. Nevertheless . . . the SAA

indicates that they can give rise to control”). Mr. Shieh’s

ability to set the prices for Sun’s resales directly
COURT NO. 97-08-01344 PAGE 28

implicates Ta Chen’s ability to affect Sun’s pricing

decisions, in accordance with Commerce’s regulatory definition

of affiliated parties. See 19 C.F.R. § 351.102. The court

therefore concludes that this factor was a strong indicator of

Ta Chen’s ability to control Sun.

7) Debt financing

Commerce’s decision that Sun and Ta Chen were affiliated

also depended on the debt financing arrangement agreed to by

Sun. See Final Results, 62 Fed. Reg. at 37,549. Commerce

found that whether Sun “offered” its accounts receivable and

inventory as collateral for a bank loan to TCI, or whether TCI

requested that it do so, was not germane to its analysis.

“Either way . . . [Sun] ‘placed its continued ability to

operate in the hands of a putatively unaffiliated party.’”

Id. (quoting Preliminary Results, 62 Fed. Reg. at 1,436.)

In response to Commerce’s first supplemental

questionnaire, Ta Chen explained that in June of 1993, it

sought to maintain a line of credit with its bank for an

amount comparable to the amount of TCI’s accounts receivable

from San Shing.10 Response to First Supplemental

10 TCI’s accounts receivable from San Shing were [ ]
million and it sought a line of credit with its bank of [ ]
million. Response to First Supplemental Questionnaire, at 57,
(continued...)
COURT NO. 97-08-01344 PAGE 29

Questionnaire, at 57, Def.’s App., Tab 4, at 24. Ta Chen says

that TCI consented to a UCC lien in all of its accounts

receivable, “a significant portion of which was owed by San

Shing.” Id. In this response, Ta Chen suggested that in

order to obtain a more favorable interest rate, San Shing, and

subsequently Sun Stainless, provided the bank with the UCC

lien on its inventory and accounts receivable directly. Id.

Ta Chen states that later TCI asked Sun to grant the lien

directly, as a way to “simplify a still otherwise ordinary

commercial arrangement.”11 Pl.’s Br. at 63. Ta Chen says that

the security lien was limited to the unpaid amount which Sun

owed Ta Chen for product sold, and that this limitation was

stated in side letter agreements. Id. The Final Results

state that the agreement between Ta Chen/TCI and Sun was not

in writing. Ta Chen claims that the side letter agreements

10
(...continued)
Def.’s App., Tab 4, at 24.
11 Ta Chen cites Commerce’s determination in Polyvinyl
Alcohol from Taiwan, 62 Fed. Reg. 54,823 (Dep’t Commerce 1997)
(notice of termination of new shipper review), as an example
of a customer granting a security interest in its accounts
payable to a supplier, without this constituting debt
financing that leads to a finding of affiliation. The court
has trouble seeing how Ta Chen draws this conclusion from this
determination. Commerce stated that the debt financing at
issue in Polyvinyl did not establish a control relationship,
but the particulars of the debt financing are not explained in
the determination. See Polyvinyl, 62 Fed. Reg. at 54,824.
COURT NO. 97-08-01344 PAGE 30

did exist, and stated at oral argument that these were

available to the Department at verification, but that the

verifiers chose not to look at them. In its response to the

supplemental questionnaire, however, Ta Chen specifically

stated that it had been unable to find any written statement

memorializing the terms of the agreement, but that “the amount

of the TCI take down on its line of credit was to be, and

always was, less than the amount owed to TCI by [San Shing or

Sun].” Response to First Supplemental Questionnaire, at 57-

58, Def.’s App., Tab 4, at 24-25. The court is thus uncertain

whether a written agreement did exist, but finds it

unnecessary to resolve the issue. The particulars of the debt

financing suffice to support Commerce’s conclusion that it was

indicative of a control relationship.

Similar to its arguments regarding Robert Shieh’s

negotiations with Sun’s customers, Ta Chen states that there

was nothing unusual about this debt financing arrangement.12

Ta Chen also argues that the Department normally bases its

understanding of the relationship between parties on how the

12 Ta Chen again provided Commerce with the opinion of
a US steel industry expert who found that Ta Chen’s method of
securing payment from Sun was “a perfectly normal arrangement
between unaffiliated parties.” Pl.’s Br. at 65-66; see also
Response to Second Supplemental Questionnaire, at 41-42, Pl.’s
Prop. App., Tab C, at 15-16.
COURT NO. 97-08-01344 PAGE 31

parties themselves treat their relationship in their financial

statements. See Melamine Institutional Dinnerware Products

from Taiwan, 62 Fed. Reg. 1,726, 1,731 (Dep’t Commerce 1997)

(notice of final determination of sales at LTFV) (where

Department classified amounts as long-term loans “consistent

with the treatment in the respondent’s financial statement”).

Because TCI’s audited financial statements do not include a

loan from Sun in its list of loan guarantees received from

third parties, and because the auditors did not list Sun as an

affiliated party in TCI’s audited financial statements, Ta

Chen argues that the Department should have deferred to this

characterization of their relationship. Pl.’s Br. at 66; see

also Response to First Supplemental Questionnaire, at 69,

Pl.’s Prop. App., Tab A, at 37.

Ta Chen overlooks the fact that the original debt

financing agreement was entered into with Sun’s predecessor,

San Shing, and then apparently continued with Sun. This gives

rise to the question of why a new entity, Sun, would agree to

take on such a risk with a putatively unaffiliated company.

Ta Chen also minimizes aspects of the debt financing agreement

which concerned Commerce. Commerce explicitly disagreed with

Ta Chen’s argument that Sun’s pledging of it accounts

receivable and inventory to TCI “was essentially akin to TCI
COURT NO. 97-08-01344 PAGE 32

securing a lien upon [Sun] and, in turn assigning its rights

to the bank.” Final Results, 62 Fed. Reg. at 37,550.

Commerce explained:

the actual transaction involved a significant qualitative
difference. In the latter case, TCI’s security interest
would be limited to the amount [Sun] owed against
purchases of inventory. In the former case, [Sun]
unilaterally, and without consideration, assigned its
entire inventory and accounts receivable directly to
TCI’s bank to facilitate a loan for TCI. That [Sun]
would accept this risk without any consideration -
without even a written agreement memorializing the terms
and duration of the agreement – does not comport with the
commercial realities of dealings between unaffiliated
companies.

Id. Ta Chen argues that the consideration for Sun to enter

into the agreement was the extended payment terms Ta Chen gave

Sun on a large volume of product. From the record, however,

it appears that Sun had already obtained the favorable credit

terms prior to agreeing to this loan agreement. Indeed, Ta

Chen stated that a significant portion of its accounts

receivable, prior to seeking the loan, were owed to it by San

Shing as a consequence of Ta Chen’s large volume of sales to

San Shing and the extended credit terms for payments.

Response to First Supplemental Questionnaire, at 56-57, Def.’s

App., Tab 4 at 23-24. The court therefore finds supported

Commerce’s conclusion that Sun agreed to offer its inventory
COURT NO. 97-08-01344 PAGE 33

and accounts receivable as collateral for TCI’s loan without

adequate consideration.

8) Factors considered as a whole

The court finds that Commerce's determination that Ta

Chen controlled Sun is supported by substantial evidence.

Even if each of the individual connections between Ta Chen and

Sun, standing alone, may not be sufficient to establish

control, Commerce's conclusion that the numerous connections

between Ta Chen and Sun were indicative of control was

reasonable. Commerce did not rely on any one factor in

concluding that Ta Chen and Sun were affiliated parties,

rather, it determined that the combination of factors was

sufficient proof of affiliation.

Ta Chen argues that Sun paid competitive and negotiated

prices for Ta Chen pipe, and that Sun was a profitable company

which was sold for a profit. Ta Chen argues that if it were

really affiliated with Sun, it would not have sold WSSP to Sun

at a lower price and that no one would have been interested in

purchasing a company affiliated with another. Pl.’s Br. at

47. Commerce responded to this at oral argument by stating

that Ta Chen could have been establishing Sun’s future market.

Although this response is not completely satisfactory, the

possibility of drawing inconsistent conclusions from the
COURT NO. 97-08-01344 PAGE 34

evidence does not render it unsupported by substantial

evidence. See Consolo v. Federal Maritime Comm’n, 383 U.S.

607, 620 (1966) (“possibility of drawing two inconsistent

conclusions from the evidence does not prevent an

administrative agency’s finding from being supported by

substantial evidence”) (citations omitted).

Substantial evidence is "more than a mere scintilla. It

means such relevant evidence as a reasonable mind might accept

as adequate to support a conclusion." Universal Camera Corp.

v. NLRB, 340 U.S. 474, 477 (1951) (citation omitted). Even if

the court, deciding the issue anew, concluded that Ta Chen

and Sun were not affiliates, Commerce's determination would

not be overturned "merely because the plaintiff 'is able to

produce evidence . . . in support of its own contentions,’"

rather, the plaintiff's evidence "must be enough to convince

the Court that a reasonable mind would not have found

[Commerce’s] evidence sufficient to support its conclusion."

Torrington Co. v. United States, 14 CIT 507, 513-14, 745 F.

Supp. 718, 723 (1990) (quoting Hercules, Inc. v. United

States, 11 CIT 710, 755, 673 F. Supp. 454, 490 (1987)).

Ta Chen’s evidence is not sufficiently convincing for the

court to conclude that a reasonable mind would not find

Commerce’s evidence sufficient to support the affiliation
COURT NO. 97-08-01344 PAGE 35

finding. Given the numerous financial connections and

opportunities for control between Ta Chen and Sun, and Ta

Chen’s access to Sun’s pricing information, as well as its

participation in the negotiation of Sun’s sales of WSSP, the

court concludes that Commerce's determination that Ta Chen

controlled Sun was supported by substantial evidence.

Therefore, Commerce’s determination that Ta Chen and Sun were

affiliated parties is sustained.

B) Failure to provide adequate notice

The court does not find, however, that Commerce's

decision to apply facts available was made in accordance with

law. Based on its affiliation finding, Commerce concluded

that Ta Chen's sales to Sun should be classified as CEP sales,

and applied an adverse facts available margin to these sales

because Ta Chen did not provide information on Sun's US sales.

The Department, however, never specifically requested this

information. When Ta Chen learned that the Department would

classify its sales as CEP, the time for Ta Chen to place

unsolicited information on the record had passed.

Commerce argues that the questions in its original

questionnaire informed Ta Chen that, in general, it needed to

provide US sales information for its affiliated resellers.

Gov't Br. at 33-34. This argument minimizes the fact that
COURT NO. 97-08-01344 PAGE 36

Commerce specifically told Ta Chen in the second supplemental

questionnaire that it had not yet decided how to classify Ta

Chen's US sales. See Second Supplemental Questionnaire, at 3,

Def.'s App., Tab 5, at 5. Commerce must have been aware when

it issued this second supplemental questionnaire on December

24, 1996 that there was a possibility that it would treat Ta

Chen and Sun as affiliates, given that it made such a

determination in the Preliminary Results, issued two weeks

later on January 10, 1997. Commerce could therefore foresee

that in order to properly calculate Ta Chen's sales as CEP

sales, it would need information on Sun's US sales. But

Commerce did not ask for this information specifically. In

fact, it appears to have tried to avoid giving Ta Chen a

belated chance to amend.

Commerce has a statutory obligation to provide

respondents with a chance to remedy deficient submissions.

See 19 U.S.C. § 1677m(d) (1994). The statute provides in

relevant part:

If the administering authority or the Commission
determines that a response to a request for information
under this subtitle does not comply with the request, the
administering authority . . . shall promptly inform the
person submitting the response of the nature of the
deficiency and shall, to the extent practicable, provide
that person with an opportunity to remedy or explain the
deficiency in light of the time limits established for
COURT NO. 97-08-01344 PAGE 37

the completion of investigations or reviews under this
subtitle.

Commerce did not provide Ta Chen with such a remedial

opportunity to place information of Sun's US sales on the

record in this review. Commerce implies that Ta Chen could

have provided the information on Sun's US sales after the

issuance of the preliminary results. Gov't Br. at 40. The

time for Ta Chen to provide unsolicited information, however,

had already passed. See 19 C.F.R. § 353.31(a)(ii) (1996)

(submission of factual information to be submitted not later

than "the earlier of the date of publication of notice of

preliminary results of review or 180 days after the date of

publication of notice of initiation of the review").13 The

initiation of the review in this case was published on

February 1, 1996, which would have required Ta Chen to submit

all factual information by August 1, 1996, six months before

Ta Chen was informed that the Department would consider its

sales to Sun as CEP sales.

13 The current version of this regulation provides that
submission of factual information is due no later than "[for]
the final results of an administrative review, 140 days after
the last day of the anniversary month, except that factual
information requested by the verifying officials from a person
normally will be due no later than seven days after the date
on which the verification of that person is completed." 19
C.F.R. § 351.301(b)(2) (1999).
COURT NO. 97-08-01344 PAGE 38

The failure by Commerce to provide respondents with

sufficient notice can render the decision "unsupported by

substantial evidence and otherwise contrary to law." Usinor

Sacilor v. United States, 19 CIT 711, 745, 893 F. Supp. 1112,

1141-42 (1995) (Department failed to notify plaintiff that it

lacked necessary information to assess likely effects of

subsidy program in countervailing duty case; plaintiffs not

aware of deficiency until issuance of final results), aff’d in

part and rev’d in part, 1999 WL 641231 (Fed. Cir. Aug. 24,

1999). In Usinor, the court found that broad questions

initially asked of plaintiff did not "discharge [Commerce]

from its obligation to put parties on notice as to the

deficiencies in their responses." Id. The court will not

endorse "an investigation where [Commerce] sent out a general

questionnaire and a brief deficiency letter, then effectively

retreated into its bureaucratic shell, poised to penalize

[respondent] for deficiencies not specified in the letter that

[Commerce] would only disclose after it was too late, i.e.,

after the preliminary determination." Bowe-Passat v. United

States, 17 CIT 335, 343 (1993).

Although Ta Chen, unlike the respondent in Bowe-Passat,

did not try to provide the missing information after the

preliminary results, Commerce has behaved in the same way as
COURT NO. 97-08-01344 PAGE 39

it did in Bowe-Passat by failing to notify the respondent of

the deficiency when it had an opportunity to do so, prior to

issuing the preliminary results. Commerce's preliminary

determination that Ta Chen and Sun were affiliated, and its

decision to apply an adverse margin because Ta Chen failed to

provide information on Sun's US sales, does not constitute

notice pursuant to 19 U.S.C. § 1677m(d). Although it is not

completely clear that the Department would have rejected the

information had Ta Chen tried to submit it after the

preliminary results, Commerce’s less than open approach to Ta

Chen indicates rejection was likely. At oral argument, the

government argued that Ta Chen was required to ask the

Department to ask Ta Chen to provide Sun’s US sales

information. But it is Commerce, not the respondent, which

bears the burden of asking questions. See NSK Ltd. v. United

States, 19 CIT 1319, 1328, 910 F. Supp. 663, 671 (1995)

("[r]espondents should not be required to guess the parameters

of Commerce's interpretation of a phrase in the statute.")

Commerce grounds its argument on the truism that the

respondent has the burden of creating an accurate record. See

Chinsung Indus. Co. v. United States, 13 CIT 103, 106, 705 F.

Supp. 598, 601 (1989) (burden of creating an adequate record

rests with respondents). This truism, however, cannot obviate
COURT NO. 97-08-01344 PAGE 40

Commerce’s obligation to let the respondent know what

information it really wants. See Queen's Flowers de Colombia

v. United States, 981 F. Supp. 617, 628 (Ct. Int'l Trade 1997)

("alleged response deficiency cannot support application of

[best information available] where the information sought was

apparently never requested.") (citation omitted).

Commerce has an obligation to make the questions affected

by affiliation issues clear, in light of its own recognition

that affiliation is a complex concept and its decision to

develop its practice in this area on a case by case basis.14

See Final Rules, 62 Fed. Reg. at 27,297. Commerce must

therefore assure itself that it has asked questions sufficient

to provide it with enough information to make both the

affiliation determination itself and the resulting

determinations. In this case Ta Chen had a good basis to

argue that it did not control Sun and it made that argument to

14 Commerce stated in the Final Results that by the
time of this review, Ta Chen must have had an understanding of
affiliation. Final Results, 62 Fed. Reg. at 37,552. Although
the URAA went into effect in January 1995, Commerce did not
issue its final regulations to comport with the new statute
until 1997, and the third administrative review of Ta Chen
began in 1996. The court therefore cannot conclude that a
respondent in Ta Chen’s situation could be expected to have a
thorough understanding of how Commerce would apply the new
affiliation standard, where Commerce itself said that it would
develop its affiliation practice, “through the adjudication of
actual cases.” Final Rules, 62 Fed. Reg. at 27,297.
COURT NO. 97-08-01344 PAGE 41

Commerce. If a respondent reasonably believes it is not

affiliated with its reseller, and therefore that it has EP

rather than CEP sales, then it has a reason not to submit

information on the subject reseller’s US sales until Commerce

tells the respondent that it wants the information on the

particular reseller or until Commerce’s questions are clear

enough that the respondent knows what it should submit.15 In

this situation where a new statute was not fully explained and

Commerce suspected that it would make a finding of affiliation

between the importer and the US reseller, it should have

placed the respondent on notice, specifically requested

information on that reseller's US sales, and requested any

other information necessary to the CEP calculation. If

Commerce wishes to place the full burden of error of an

affiliation assessment on the respondent, at a minimum it must

make that clear, otherwise this is simply another instance of

15 Contrast this fact situation with that of respondent
in Pohang Iron and Steel Co. v. United States, No. 98-04-
00906, 1999 WL 970743, at *15 (Ct. Int’l Trade Oct. 20, 1999)
(Commerce twice asked for specific information necessary to
calculate CEP and respondent specifically declined to provide
data on basis EP applied).
COURT NO. 97-08-01344 PAGE 42

error which respondents must have an opportunity to correct

under 19 U.S.C. § 1677m(d).16

Commerce may not use Ta Chen’s failure to submit Sun’s US

sales information as justification for an application of

adverse facts available. On remand, Commerce must provide Ta

Chen an opportunity to supply the information on Sun's US

sales.

II. Purported sales to Company C

Background

In the Final Results, Commerce concluded that Ta Chen

failed to report commissions to one of its US customers,

Anderson Alloys,17 on sales purportedly made to one of its US

16 Even if Commerce’s procedures and questions are
clear, this may be insufficient to prevent Commerce from
having to provide a respondent with the opportunity to remedy
a deficient submission when it discovers the omission early
enough for remediation to occur. Defendant made clear that it
was not arguing that the statute allows an exception to the
opportunity for correction provision based on inexcusable
neglect or wilful hiding of information. This may be a defect
in the statute which Commerce is seeking to offset. In any
case, as the requisite clarity was not present here, the court
does not address this issue.
17 Subsequent to the issuance of the Final Results, Ta
Chen placed the name, Anderson Alloys, on the public record.
See Pl.'s Br. at 3 n. 6. In the Final Results, Anderson is
referred to as "one of Ta Chen's US customers."
COURT NO. 97-08-01344 PAGE 43

Customers, Company C.18 Final Results, 62 Fed. Reg. at 37,544.

Commerce concluded that Ta Chen misreported an unknown number

of sales to this customer and decided to apply adverse facts

available to all of Ta Chen's sales made to Anderson. Id.

Commerce stated that Ta Chen had not acted to the best of its

ability, and that Ta Chen's reported data did not permit

Commerce to segregate the misreported sales for purposes of

calculating the final margin. Id.

Commerce's initial questionnaire requested that Ta Chen

report the unit cost of commissions paid to affiliated and

unaffiliated selling agents, and to describe the terms under

which commissions were paid and how commission rates were

determined.19 Initial Questionnaire, at C-20, Def.'s App., Tab

1, at 8. Ta Chen responded that during the POR, it paid

commissions to only one unaffiliated party.20 Response to

Initial Questionnaire, at 48-49, Def.'s App., Tab 2, at 6-7.

18 [ ].
19 In order to calculate NV, the statute allows
Commerce to account for certain differences in the
circumstances of sales in the United States and foreign
markets. See 19 U.S.C. § 1677b(a)(6)(C)(iii) (1994).
Pursuant to its regulations, Commerce makes circumstances of
sale adjustments for direct selling expenses, including
commissions. See 19 C.F.R. § 351.410(b) & (c) (1999).
20 [ ]
COURT NO. 97-08-01344 PAGE 44

Commerce's conclusion that Ta Chen misreported

commissions stems from questions which Commerce officials

asked Robert Shieh, president of Ta Chen and TCI, during

verification at TCI in June 1997. In connection with

questions regarding TCI’s sales process, verification

officials asked Mr. Shieh to "discuss his involvement in sales

of . . . merchandise and the pricing methodology of TCI."

Verification Report, at 5, Def.'s App., Tab 8, at 5. Mr.

Shieh described his visits to various distributors during the

POR, including one visit to one of Anderson Alloy's customers,

Company C. The report goes on to state that:

Mr. Shieh also clarified that prices between Anderson
Alloys and [Company C] were negotiated by Anderson
Alloys. In addition, he stated that there are times when
Ta Chen has sold direct to [Company C]. During such
instances, Ta Chen negotiated the price with [Company C].
Ta Chen would then pay Anderson Alloys a commission.

Id. There was no further discussion or elaboration of these

sales at any point during verification.

In an internal memorandum, the case analyst stated that

"newly-disclosed facts" were made at verification, pertaining

to sales Ta Chen reported as being made to Anderson. "Ta Chen

revealed for the first time that certain of these sales had,

in fact, been made to yet another customer, [Company C], an

entity which has never before been referenced in this
COURT NO. 97-08-01344 PAGE 45

administrative review." Analysis Memorandum for Final Results

of 1994-1995 Ta Chen Review (July 1, 1997), at 2, C.R. Doc.

32, Def.'s App., Tab 9, at 2. This memorandum also

characterized Mr. Shieh's comments as a statement that

Anderson Alloys was a commissionaire on sales to Company C

during the POR. Id. The memorandum further stated:

[Ta Chen] deliberately misreported an unknown portion of
its sales to Anderson . . . . Furthermore, Ta Chen
stated affirmatively for the record that it paid
commissions to one only U.S. commissionaire . . . .
Prior to verification Ta Chen never indicated that it
paid commissions to Anderson or to any other party, and
Ta Chen's U.S. data do not reflect commission amounts on
any of the sales Ta Chen identified as being to Anderson.
Thus, Ta Chen failed not only to name Anderson as a
commissionaire, but also failed to report the commissions
it did pay to Anderson.

Id. at 3, Def.’s App., Tab 9, at 3 (emphasis in original).

After issuance of the Final Results, in which Commerce

applied adverse facts available to Ta Chen's sales to

Anderson, Ta Chen requested a correction of the Department's

treatment of these sales, claiming that the conclusion that Ta

Chen sold subject merchandise to Company C during the POR was

a ministerial error. Ministerial Error Submission (July 24,

1997), at 4, C.R. Doc. 34, Pl.s' Prop. App., Tab P, at 4.21

21 The July 24, 1997 submission was a re-submission of
Ta Chen's July 17, 1997 submission alleging a ministerial
error. Commerce determined that the July 17 submission
(continued...)
COURT NO. 97-08-01344 PAGE 46

Commerce did not, however, alter its conclusion that Ta Chen

had misreported its sales to Anderson Alloys and failed to

list Anderson as a commissionaire.

Discussion

Ta Chen argues that the conclusion that it misreported

sales to Anderson Alloys, and failed to list Anderson as a

commissionaire during the POR, is not supported by substantial

evidence. Ta Chen insists that Mr. Shieh's comments regarding

sales to Company C referred to sales made outside of the POR,

and that Mr. Shieh was responding to questions regarding Ta

Chen's sales history, not just sales during the POR. The

Domestic Interested Parties counter that the verification was

carried out to verify Ta Chen's sales information during the

POR, so Commerce could legitimately interpret Mr. Shieh's

statements as referring to sales which occurred during the

POR.

The court agrees with Ta Chen that Commerce's conclusion

is not supported by substantial evidence. As stated in the

21
(...continued)
contained new factual information, and therefore returned the
document pursuant to 19 C.F.R. § 353.38(i) (1997). Commerce
Letter Ruling (July 22, 1997), at 1, P.R. Doc. 103, Def.'s
App., Tab 11, at 1. Ta Chen was permitted to resubmit its
allegation of ministerial error without referencing the new
information. Id.
COURT NO. 97-08-01344 PAGE 47

discussion section of Ta Chen's sales to Sun, substantial

evidence is "more than a mere scintilla. It means such

relevant evidence as a reasonable mind might accept as

adequate to support a conclusion." Universal Camera Corp.,

340 U.S. at 477. The court does not substitute its own

judgment for that of Commerce, but the court will not defer to

a decision which is based on "inadequate analysis or

reasoning." USX Corp. v. United States, 11 CIT 82, 88, 655 F.

Supp. 487, 492 (1987) (rejecting analysis of ITC where ITC did

not fully analyze the issue). "[T]he absence of information

necessary for a thorough analysis may render a determination

unsupported by substantial evidence." Id. at 95, 655 F. Supp.

at 498 (citation omitted).

Commerce's analysis that Ta Chen misreported its sales to

Anderson is inadequate. There is no indication from the

verification report that Commerce had any concerns regarding

Ta Chen sales to Company C with commissions to Anderson. The

Final Results do not elaborate any reason why the discussion

at verification could justifiably lead to the conclusion that

Mr. Shieh was referring to POR sales of subject merchandise.

See Final Results, 62 Fed. Reg. at 37,544.

Mr. Shieh's statement during verification was made in

response to questions regarding the history of Ta Chen's sales
COURT NO. 97-08-01344 PAGE 48

process. The introductory paragraph to this section of the

verification report states that Ta Chen was to be "prepared to

discuss the history of Ta Chen's efforts at selling pipe in

the United States." Verification Report, at 4, Def.’s App.,

Tab 8, at 4. Mr. Shieh stated that "there are times when Ta

Chen has sold direct to [Company C]. During such instances,

Ta Chen negotiated the price with [Company C]. Ta Chen would

then pay Anderson Alloys a commission." Id. at 5, Def.’s

App., Tab 8, at 5 (emphasis added). This sole statement is

not sufficient evidence for a conclusion that Ta Chen

misreported its commissions when it was made in the context of

Ta Chen's history of its sales in the United States, and where

the verification report itself does not indicate that Mr.

Shieh's statement was in any way problematic.

Ta Chen also emphasizes that it was provided with no

opportunity to clarify Mr. Shieh's statement regarding sales

to Company C. Commerce argues that verification is not the

time to submit new information. See Tatung Co. v. United

States, 18 CIT 1137, 1142 n.3 (1994) (court accepted as

reasonable "Commerce's position that allowing respondents who

failed verification to re-submit new data, and requiring

Commerce to re-verify this information would impose an undue

burden on Commerce."); see also Chinsung, 13 CIT at 106, 705
COURT NO. 97-08-01344 PAGE 49

F. Supp. at 601-02 (stating that respondent bears the burden

of creating an adequate record). Ta Chen, unlike the

respondent in Tatung, did not fail verification. Indeed the

verification report reflects that the Department did not find

discrepancies in TCI’s information. By comparison, the

Department found "numerous errors and omissions" in the

respondent's data during verification in Tatung. Tatung, 18

CIT at 1138.

As stated in the discussion of Ta Chen's affiliation with

Sun, Commerce has an obligation to "put parties on notice as

to the deficiencies in their responses." Usinor Sacilor, 19

CIT at 745, 893 F. Supp. at 1142. In Usinor, Commerce failed

to give the plaintiffs notice that information was absent

between the issuance of its preliminary and final results.

The court held that this rendered Commerce's determination

unsupported by substantial evidence and otherwise contrary to

law. Id. at 745, 893 F. Supp. at 1141. In this case,

Commerce's determination in the Final Results that Ta Chen had

misreported sales to Anderson was a total surprise to Ta Chen.

By failing to provide Ta Chen with an opportunity to comment

on this allegation, Commerce based its conclusion on

insufficient evidence and reasoning which the court will not

uphold.
COURT NO. 97-08-01344 PAGE 50

Given this record, the court concludes that the finding

that Ta Chen misreported its sales to Anderson is not

supported by substantial evidence. On remand, Commerce must

either provide Ta Chen an opportunity to submit evidence on

the purported sales to Company C, in order for the Department

to make a determination as to whether these sales were made

during the POR, or Commerce must disregard the issue of

misreported sales and undisclosed commissions to Anderson.

III. Application of adverse facts

Ta Chen contests the Department's application of adverse

facts available, pursuant to 19 U.S.C. § 1677e (1994).

Commerce applied adverse facts available to Ta Chen's

misreported sales, i.e., its sales to Sun and Anderson. Final

Results, 62 Fed. Reg. at 37,553. It did not base Ta Chen's

margin on total adverse facts available, as requested by the

Domestic Interested Parties. Id. Rather, Commerce applied

partial adverse facts.

The Department concluded that an adverse inference was

warranted because "Ta Chen failed to provide the Department

with a complete and reliable listing of its U.S. sales," and

that this amounted to a failure on Ta Chen's part to cooperate

to the best of its ability. Preliminary Results, 62 Fed. Reg.

at 1,436. Commerce stated further in the Final Results that,
COURT NO. 97-08-01344 PAGE 51

with regard to sales to Anderson, Ta Chen misreported these

sales and failed to act to the best of its ability in this

regard. Final Results, 62 Fed. Reg. at 37,544.

The court need not resolve the issue of whether the

application of adverse facts available was warranted, in light

of the fact that it is remanding this case to provide Ta Chen

an opportunity to provide the Department with information on

Sun's US sales and on Ta Chen's sales to Anderson Alloys.22

Commerce will therefore have to recalculate the dumping margin

in light of this information and, depending on Ta Chen's

cooperation on remand, may or may not find that an application

of adverse facts available is warranted.

IV. Corroboration of the dumping margin

Commerce applied a 31.90 percent margin as partial

adverse facts available to Ta Chen's sales to Sun and to

Anderson. This margin was the highest rate from the initial

22 The court also does not address Ta Chen’s argument
that the Department may not consider the respondent’s level of
cooperation in selecting substitute information when it
applies partial adverse facts available. Pl.’s Br. at 41.
The court does note that it has upheld the application of
adverse facts to only a portion of a respondent’s data. See
Toyota Motor Sales, U.S.A., Inc. v. United States, 15 F.
Supp.2d 872, 882 (Ct. Int’l Trade 1998); Ferro Union, 1999 WL
825584, at *7 (Ct. Int’l Trade Oct. 6, 1999) (application of
partial adverse facts available furthered goal of accuracy
while maintaining adversity).
COURT NO. 97-08-01344 PAGE 52

LTFV investigation. Preliminary Results, 62 Fed. Reg. at

1,436; see also Certain Welded Stainless Steel Pipe from

Taiwan, 57 Fed. Reg. at 62,301. This resulted in a weighted-

average margin of 6.06 percent. Final Results, 62 Fed. Reg.

at 37,556.

Ta Chen argues that Commerce failed to corroborate the

margin in accordance with 19 U.S.C. § 1677e(c). In light of

the court’s instructions to Commerce on remand, however, the

court need not determine whether the application of this

margin was warranted, nor whether it was properly

corroborated. The court also does not address Ta Chen’s

arguments that the margin was based on aberrant sales.

Commerce will calculate a margin for Ta Chen based on its

findings pursuant to this remand.

Conclusion

The court affirms Commerce's finding that Ta Chen and Sun

Stainless are affiliated parties, as based on substantial

evidence. Commerce erred, however, in applying facts

available. On remand, Commerce will ask Ta Chen to provide

information on Sun's US sales. The court also finds that

Commerce’s decision that Ta Chen misreported its sales to

Anderson Alloys was not based on substantial evidence. On

remand, Commerce will provide Ta Chen with an opportunity to
COURT NO. 97-08-01344 PAGE 53

explain whether the alleged sales to Company C occurred

outside of, or during, the POR, or will disregard this issue.

Remand results are due within 60 days. Objections are

due 20 days thereafter, responses 11 days thereafter.

____________________________
Jane A. Restani
JUDGE

Dated: New York, New York

This 28th day of October, 1999