Rubberflex Sdn. Bhd. v. United States

Slip Op. 99-68

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: RICHARD W. GOLDBERG, JUDGE

RUBBERFLEX SDN. BHD. AND
RUBFIL SDN. BHD.,

Plaintiffs,
Court No. 97-12-02180
v.

UNITED STATES OF AMERICA,

Defendant.

[Court remands the final results in the second administrative
review of the antidumping duty order of the U.S. Department of
Commerce.]

Dated: July 23, 1999

White & Case LLP, (Walter J. Spak, David E. Bond, Richard G.
King, and Edward Meyers) for plaintiffs Rubberflex Sdn. Bhd. and
Rubfil Sdn. Bhd.

David W. Ogden, Acting Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice; Velta A. Melnbrencis,
Assistant Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice; Office of the Chief Counsel
for Import Administration, United States Department of Commerce
(Mildred E. Steward), of counsel, for defendant.
Court No. 7-12-02180 Page 2

OPINION

GOLDBERG, Judge: In this action, the Court reviews challenges to

the Department of Commerce’s (“Commerce”) final determination for

the second administrative review of an antidumping duty order

covering extruded rubber thread from Malaysia. Extruded Rubber

Thread From Malaysia; Final Results of Antidumping Duty

Administrative Review, 62 Fed. Reg. 62,547 (Nov. 24, 1997)

(“Final Results”). Plaintiff Rubberflex Sdn. Bhd. (“Rubberflex”)

argues that (1) the manner in which Commerce conducted the second

administrative review, particularly verification, prejudiced

Rubberflex; (2) Commerce was able to verify most of Rubberflex’s

responses and therefore should not have used total “best

information available” (“BIA”) to assign Rubberflex a dumping

margin; and (3) the duty rate of 29.83% assigned to Rubberflex in

the second review was arbitrary in light of the 20.38% rate

assigned to Rubberflex in the third review. The Court addresses

these arguments in Section I.

Plaintiff Rubfil Sdn. Bhd. (“Rubfil”) argues that, in

calculating the net price for Rubfil’s U.S. sales, Commerce

erroneously failed to convert Rubfil’s ocean freight expenses

from Malaysian ringgits to U.S. dollars. The Court addresses
Court No. 7-12-02180 Page 3

this argument in Section II.

The Court exercises jurisdiction over this matter pursuant

to 28 U.S.C. § 1581(c) (1994). The Court remands the Final

Results.

I.
RUBBERFLEX

A. Background

1. Summary of the Second Administrative Review

On October 7, 1992, Commerce published an antidumping order

covering extruded rubber thread from Malaysia. See Antidumping

Duty Order and Amendment of Final Determination of Sales at Less

Than Fair Value: Extruded Rubber Thread from Malaysia, 57 Fed.

Reg. 46,150 (Oct. 7, 1992). Rubberflex was one of the two

respondents in the underlying antidumping investigation. See id.

at 46,151. During the second anniversary month of the order,

Rubberflex, three other Malaysian producers and exporters of

extruded rubber thread, and petitioner North American Rubber

Thread requested an administrative review of the order, which

Commerce agreed to undertake. See Initiation of Antidumping and

Countervailing Duty Administration Reviews, 59 Fed. Reg. 56,459

(Nov. 14, 1994) (covering the period from October 1, 1993 through
Court No. 7-12-02180 Page 4

September 30, 1994).1

Commerce issued Rubberflex a questionnaire for the second

review on or around February 8, 1995.2 See Letter from APO

Specialist to White & Case Transmitting Questionnaire (Feb. 8,

1995), Pub. Admin. R., Fiche 2, Frame 25. On April 17, 1995,

1
The underlying administrative review was conducted
prior to January 1, 1995. Consequently, the applicable law in
this case is the antidumping statute as it existed prior to the
amendments made by the Uruguay Round Agreements Act, Pub. L. No.
103-465, 108 Stat. 4809 (1994). See Torrington Co. v. United
States, __ Fed. Cir. (T) __, __, 68 F.3d 1347, 1352 (1995).
2
The administrative record contains only the first page
of Commerce’s letter transmitting a questionnaire to Heveafil
Sdn. Bhd., another respondent in the review. Notably, the record
does not contain the actual questionnaire sent to any respondent
in the review, including Rubberflex.

A gap in the administrative record such as this
potentially compromises the Court’s ability to conduct a
meaningful review of the Final Results. For example, in
contesting Commerce’s use of BIA, Rubberflex contends it used the
proper date of sale methodology to report U.S. sales. Commerce
disagrees, claiming Rubberflex did not report “all of its sales
to the United States that were required by the questionnaire.”
Final Results, 62 Fed. Reg. at 62,551 (emphasis added). Without
the questionnaire, however, it is impossible for the Court to
know precisely what information Commerce solicited from
Rubberflex, and whether Rubberflex in fact complied with that
request. Although the Court does not reach the merits of this
issue, see discussion Section I(C) infra, the parties will
nevertheless be forced to readdress this issue on remand. In
doing so, the Court urges them to reach an agreement as to the
precise terms of the questionnaire that should be part of the
administrative record.
Court No. 7-12-02180 Page 5

Rubberflex timely submitted its response to Commerce’s

questionnaire. See Letter from White & Case to Secretary of

Commerce (Apr. 17, 1995), Conf. Admin. R., Fiche 30 - 37, Frame

1.

On or around September 3, 1996, Commerce issued Rubberflex a

supplemental questionnaire3 for the second administrative

review.4 Rubberflex requested an extension of time in which to

file its response to the supplemental questionnaire. See Letter

3
The record does not contain the supplemental
questionnaire Commerce issued to Rubberflex either. The Court
emphasizes once again that its ability to conduct a meaningful
review is dependant upon the record. It will not condone
speculation on the part of Commerce or Rubberflex, and therefore,
will not itself engage in speculation. Thus, although the record
contains the supplemental questionnaire Commerce sent to Rubfil
on September 3, 1996, the Court cannot and will not assume the
questionnaire Commerce issued to Rubberflex is the same.
4
At the same time, Commerce issued Rubberflex a
supplemental questionnaire for the third administrative review,
which Commerce had initiated in November, 1995. See Initiation
of Antidumping and Countervailing Duty Administrative Reviews, 60
Fed. Reg. 57573 (Nov. 16, 1995) (Extruded Rubber Thread from
Malaysia). Beginning with the supplemental questionnaire,
Commerce conducted the second and the third reviews in tandem,
including, most importantly, simultaneous verification for the
second and the third reviews in Malaysia. See, e.g., Memo from
Analyst/IA to File Regarding Cost and Sales Verification of
Rubberflex and Confusion of Review Periods (Feb. 14, 1997)
(“Verification Memo”), Pub. Admin. R., Fiche 25, Frame 62. For
the Court’s analysis of the results of the third administrative
review, see Heveafil Sdn. Bhd. v. United States, No. 97-07-01152,
slip op. 99-69 (July 23, 1999).
Court No. 7-12-02180 Page 6

from White & Case to Secretary of Commerce Requesting Extension

to File Supplemental Questionnaire Response (Sept. 11, 1996),

Pub. Admin. R., Fiche 19, Frames 69-71. Commerce granted the

request and allowed Rubberflex two additional business days to

file. See Letter from Program Manager/IA to White & Case

Granting Extension of Time (Sept. 13, 1996), Pub. Admin. R.,

Fiche 19, Frame 72. On September 17, 1996, Rubberflex timely

filed its response to Commerce’s supplemental questionnaire. See

Letter from White & Case to Secretary of Commerce Transmitting

Rubberflex Supplemental Questionnaire Response (Sept. 17, 1996),

Pub. Admin. R., Fiche 20, Frame 1, Conf. Admin. R., Fiche 51-52,

Frame 1.

On Wednesday, September 18, 1996, the day afer receiving

Rubberflex’s supplemental response, Commerce issued Rubberflex a

verification outline. See Letter from Program Manager/IA to

White & Case Transmitting Verification Outline for Rubberflex

(Sept. 18, 1996) (“Verification Outline”), Pub. Admin. R., Fiche

20, Frame 67. And on Monday, September 23, 1996, Commerce began

verification of Rubberflex’s sales and cost data in Malaysia.

Commerce completed verification on October 5, 1996. Commerce

also conducted verification of U.S. sales data in North Carolina
Court No. 7-12-02180 Page 7

at Rubberflex’s affiliated reseller, Flexfil Corporation, from

October 16 through October 18, 1996.

On December 12, 1996, Commerce issued an internal memorandum

concluding that Rubberflex had failed verification. See Memo

From Office DIR/IA to DAS/IA; Rubberflex – Reasons for Failed

Verification – Recommendation Memo for Using Facts Available

(Dec. 12, 1996), Pub. Admin. R., Fiche 25, Frame 30. In response

to the memo, Rubberflex complained that the case handlers had

confused issues between the second and the third reviews in

making their determination. Consequently, Commerce agreed to

separate its findings by review period. See Verification Memo,

Pub. Admin. R., Fiche 25, Frame 62.

On February 13, 1997, Commerce published its preliminary

determination for the second administrative review. Because

Commerce “found that responses provided by Rubberflex could not

be verified,” it resorted to total BIA and assigned Rubberflex a

dumping margin of 29.83%.5 Notice of Preliminary Results of

5
Commerce is required to use BIA when it is unable to
verify a respondent’s information. See 19 U.S.C. § 1677e (1988);
19 C.F.R. § 353.37(a) (1994). In practice, Commerce applies
either “total” BIA or “partial” BIA. “Commerce applies total BIA
when a respondent has failed to submit information in a timely
manner, or when part of the submitted data is sufficiently
flawed, so that the response as a whole is rendered unusable.”
Court No. 7-12-02180 Page 8

Antidumping Duty Administrative Review: Extruded Rubber Thread

from Malaysia, 62 Fed. Reg. 6758, 6759 (Feb. 13, 1997)

(“Preliminary Results”).

On March 10, 1997, Rubberflex submitted a case brief

challenging various aspects of the Preliminary Results. See

Brief from White & Case to Secretary of Commerce Regarding

Rubberflex (Mar. 10, 1997) (“Case Brief”), Pub. Admin. R., Fiche

27, Frame 1, Conf. Admin. R., Fiche 61, Frame 1. Rubberflex

argued that (1) despite Commerce’s claims to the contrary,

Commerce was able to verify Rubberflex’s responses at

verification; (2) Commerce had no legal basis for using total BIA

to determine Rubberflex’s dumping margin and, at most, should

have used BIA for specific responses (“partial BIA”); and (3) the

National Steel Corp. v. United States, 18 CIT 1126, 1131, 870 F.
Supp. 1130, 1135 (1994). It “applies partial BIA,” on the other
hand, “when only part of the submitted information is deficient.”
Id.
Further, when applying total BIA, Commerce employs a
two-tiered methodology. See Allied-Signal Aerospace Co. v.
United States, __ Fed. Cir. (T) __, __, 996 F.2d 1185, 1188
(1993) (upholding the two-tier BIA methodology as reasonable).
Essentially, when a respondent refuses to cooperate or impedes
the review process, Commerce applies first-tier total BIA. When
a respondent is cooperative, however, Commerce applies second-
tier total BIA, which is generally more favorable to a
respondent. See id. In this case, Commerce assigned Rubberflex
a dumping margin using total, second-tier BIA, or the highest
rate assigned to any firm in the second review.
Court No. 7-12-02180 Page 9

preliminary results, the verification report, and other Commerce

documents contained numerous errors and inconsistencies. See id.

passim. Rubberflex emphasized in its Case Brief that it had

cooperated to the best of its ability throughout a difficult and

disorganized review process, and argued that Commerce should bear

primary responsibility for any problems that arose in connection

with verification. See Pub. Admin. R., Fiche 27, Frames 42-45,

Conf. Admin. R., Fiche 61, Frames 42-45.

To further air its concerns, Rubberflex scheduled a meeting

with the Commerce officials responsible for the second

administrative review.6 The meeting was held on April 14, 1997,

and included Mr. Jeffrey P. Bialos, Principle Deputy Assistant

Secretary for Import Administration, and the case handlers

responsible for the second and third reviews. See Pl.’s Br. in

Supp. of Mot. For J. Upon the Agency R. (“Pl.’s Br.”), at 8.

On November 12, 1997, Commerce issued a memo to file that

6
The index to the administrative record does not contain
an entry for this meeting, nor is the Court aware of any record
transcript of the proceedings. Thus, the Court assumes that this
meeting does not qualify as an “ex parte meeting between . . .
interested parties or other persons providing factual information
in connection with a proceeding,” 19 U.S.C. § 1677f(a)(3), such
that it is required to be part of the record. See 19 U.S.C. §
1516a(b)(2)(A)(i).
Court No. 7-12-02180 Page 10

analyzed the business proprietary information in Rubberflex’s

Case Brief. See Memo from Analyst/IA to File: Final Results of

Administrative Review (Nov. 12, 1997), Pub. Admin. R., Fiche 28,

Frame 34, Conf. Admin. R., Fiche 62, Frame 18. A portion of the

analysis compared Rubberflex’s questionnaire responses to the

revised information Rubberflex attempted to submit at

verification. Finally, on November 24, 1997, Commerce issued the

Final Results. As in the Preliminary Results, Commerce relied on

total BIA and assigned Rubberflex a margin of 29.83%. See Final

Results, 62 Fed. Reg. at 62,548, 62,558.

2. Rubberflex’s Allegations

Rubberflex offers, in addition, its own view of the facts

relevant to this suit. Specifically, Rubberflex alleges that (1)

Commerce conducted the entire second administrative review in an

extremely disorganized, irresponsible, and prejudicial manner;

(2) Commerce denied Rubberflex’s request to reschedule

verification to a mutually convenient time; (3) Commerce gave

Rubberflex only two business days to prepare for verification;

(4) at verification, Commerce tacitly accepted Rubberflex’s

proposal to submit all corrections at the conclusion of
Court No. 7-12-02180 Page 11

verification and then refused to accept such submissions; (5)

Commerce case handlers conducted verification according to an

undisclosed methodology; (6) Commerce case handlers were not

adequately prepared for verification, thereby causing delay; and

that (7) despite such delays, Commerce case handlers refused to

work past 5:00 p.m. or on weekends.

Rubberflex first notes that after initiating the second

review and issuing the questionnaire, Commerce did nothing for 18

months; then, when Commerce resumed work on the review, it

compressed all remaining activities for two periods of review

into a 45-day period. By Rubberflex’s account, it contacted the

case handler assigned to the second review several times during

the 18-month period of inactivity to determine when Commerce

planned to issue a supplemental questionnaire and conduct

verification. Rubberflex alleges it was told that “it was

unclear who would be handling the review and, therefore, no work

was being performed on the Responses.” Case Brief, Pub. Admin.

R., Fiche 27, Frame 42, Conf. Admin. R., Fiche 61, Frame 42.

According to Rubberflex, the case handler finally contacted

Rubberflex on or around August 30, 1996, one year and nine months

after the initiation of the second review, to inform it that
Court No. 7-12-02180 Page 12

verification for both the second and third reviews would be

conducted in late September and early October. See Case Brief,

Pub. Admin. R., Fiche 27, Frame 43, Conf. Admin. R., Fiche 61,

Frame 43. Rubberflex claims it was not even asked whether its

counsel would be available during that time frame or whether

those dates were feasible for the company. See Pl.’s Br., at 5.

At this point, Rubberflex claims it informed the case handler

that the company had only two accountants and therefore would

likely be unable to prepare supplemental responses for both

reviews and prepare for verification in the time frame allotted

by Commerce. Rubberflex alleges that to foreclose this potential

problem it requested a two-week postponement of verification, but

that Commerce denied the request.7 See Case Brief, Pub. Admin.

R., Fiche 27, Frame 43, Conf. Admin. R., Fiche 61, Frame 43.

Rubberflex also notes that Commerce gave it only two

business days to prepare for verification. See Case Brief, Pub.

Admin. R., Fiche 27, Frame 43-44, Conf. Admin. R., Fiche 61,

7
Counsel for Rubberflex represented to the Court during
oral argument that Commerce refused to reschedule verification
for the second and the third reviews because it needed to comply
with the newly-imposed statutory deadlines governing the third
review. Tr. of Oral Argument (Mar. 25, 1999), at 57. Under
current regulations, the deadline for completing a review is a
little over one year. See 19 C.F.R. Pt. 351, Annex IV (1998).
Court No. 7-12-02180 Page 13

Frame 43-44. As the record shows, Rubberflex submitted its

supplemental questionnaire response on September 17, 1996,

Commerce issued Rubberflex a verification outline on Wednesday,

September 18, and Commerce began verification on Monday,

September 23, 1996. As a result, Rubberflex claims it had only

Thursday, September 19 and Friday, September 20 to prepare for

verification.

While preparing for verification, Rubberflex, by its own

account, discovered errors in its questionnaire responses.

Rubberflex claims it could not prepare corrected worksheets by

the start of verification, however, because it only had two

business days to prepare. To address the situation, Rubberflex

alleges it informed Commerce of the errors at the start of

verification, and proposed to prepare corrected worksheets each

night after the case handlers left and then present them as the

need arose during verification. See Pl.’s Br., at 6; see

generally Case Brief, Pub. Admin. R., Fiche 27, Frames 40-41,

Conf. Admin. R., Fiche 61, Frames 40-41. In addition, Rubberflex

alleges that it offered to submit one collection of revisions to

the case handlers at the close of verification. See Case Brief,

Pub. Admin. R., Fiche 27, Frame 49, Conf. Admin. R., Fiche 61,
Court No. 7-12-02180 Page 14

Frame 49; Pl.’s Br., at 6-7. According to Rubberflex, the case

handlers did not object, and consequently Rubberflex proceeded

with that understanding. Rubberflex alleges, however, that

despite this tacit agreement, the case handlers refused to accept

Rubberflex’s corrected worksheets on the last day of

verification.8 See id.

Rubberflex also asserts that the case handlers conducted

verification according to “their own, personal methodology”

instead of following the outline furnished by Commerce. Pl.’s

Br., at 7. The consequence of this, as the Court understands it,

is that Rubberflex prepared worksheets prior to the start of

verification in the order of the verification outline; yet,

because the case handler’s new methodology changed the order of

verification, the process was held up a number of times while

Rubberflex prepared worksheets it had anticipated needing later

8
Following verification, the record shows that
Rubberflex attempted to submit the corrections presented to case
handlers during verification, as well as several documents the
case handlers allegedly had not accepted on grounds that there
was insufficient time to verify the data. See Letter from White
& Case Submitting Two Exhibits Not Accepted in Malaysia Due to
Time Constraints (Oct. 22, 1996), Pub. Admin. R., Fiche 24, Frame
78, and Letter from White & Case Submitting Summary of
Corrections Presented During U.S. Verification (Oct. 23, 1996),
Pub. Admin. R., Fiche 24, Frame 73.
Court No. 7-12-02180 Page 15

on in the process. Tr. of Oral Argument, at 19-20.

Finally, Rubberflex asserts that Commerce’s case handlers

were not familiar with Rubberflex’s responses, particularly those

relating to costs, at the start of verification. Pl.’s Br., at

14. Rubberflex believes that, as a result, it wasted a great

deal of time during verification familiarizing the case handlers

with its data. Rubberflex complains that in spite of the wasted

time, the case handlers refused to work past 5:00 p.m. or on the

weekends. See Pl.’s Br., at 7, 14.

B. Standard of Review

The Court will sustain Commerce’s Final Results if they are

supported by substantial evidence on the record and are otherwise

in accordance with law. See 19 U.S.C. § 1516a(b)(1)(B) (1994).

By law, Commerce is required to “verify all information

relied upon in making . . . a review and determination.” 19

U.S.C. § 1677e(b)(3) (1988). Outside of this mandate, however,

Congress has not prescribed any verification procedures. See

Micron Tech., Inc. v. United States, __ Fed. Cir. (T) __, __,

117 F.3d 1386, 1394 (1997). Instead, “Congress has implicitly

delegated to Commerce the latitude to derive verification
Court No. 7-12-02180 Page 16

procedures ad hoc.” Id. at __, 117 F.3d at 1396. At the same

time, Commerce has not defined the requirements or procedures

associated with verification in any formal way. See id. at __,

117 F.3d at 1395. Thus, when reviewing the procedures Commerce

uses at verification, the Court does not look to “previously-set

standards.” Id. at __, 117 F.3d at 1396. Rather, it “review[s]

verification procedures employed by Commerce in an investigation

for abuse of discretion.” Id.

The Federal Circuit and this court have routinely sustained

Commerce’s administration of reviews and verifications as within

its discretion.9 In spite of, or perhaps because of, the wide

9
See, e.g., American Alloys, Inc. v. United States, __
Fed. Cir. (T) __, __, 30 F.3d 1469, 1475 (1994) (noting that “the
statute gives Commerce wide latitude in its verification
procedures”); PPG Indus., Inc. v. United States, __ Fed. Cir. (T)
__, __, 978 F.2d 1232, 1238 (1992) (recognizing Commerce’s
“authority to determine the extent of investigation and
information it needs”); Emerson Power Transmission Corp. v.
United States, 19 CIT 1154, 1160, 903 F. Supp. 48, 54 (1995)
(noting Commerce’s discretion whether to request post-
verification information); Persico Pizzamiglio, S.A. v. United
States, 18 CIT 299, 307 (1994) (finding Commerce’s decision to
conduct a 3-day overseas verification reasonable); NSK Ltd. v.
United States, 16 CIT 745, 750, 798 F. Supp. 721, 725 (1992)
(upholding Commerce’s rejection of untimely factual information);
Monsanto Co. v. United States, 12 CIT 937, 944, 698 F. Supp. 275,
281 (1988) (upholding Commerce’s acceptance of post-verification
information which corrects or clarifies original response and
recognizing Commerce’s discretion to determine the adequacy of a
response); Hercules, Inc. v. United States, 11 CIT 710, 726, 673
Court No. 7-12-02180 Page 17

latitude given Commerce in conducting reviews and verifications,

however, “[t]he Court must be ever vigilant of abuse of

discretion by the agency.” Wheatland Tube Corp. v. United

States, 17 CIT 1230, 1236, 841 F. Supp. 1222, 1227 (1993).

C. Discussion

Rubberflex argues three major points in its papers. It

challenges (1) the manner in which Commerce conducted its review

and verification; (2) Commerce’s use of total BIA; and (3) the

duty rate assigned to Rubberflex. In the following discussion,

the Court first examines Commerce’s administration of the second

administrative review and concludes that Commerce abused its

discretion. Commerce’s conduct during the review, specifically

its issuance of a verification outline to Rubberflex two business

days prior to verification, effectively prejudiced Rubberflex.

Commerce’s abuse of discretion seriously compromises the validity

of its verification results in this case, and impairs this

Court’s ability conduct a meaningful review. Accordingly, the

Court takes the extraordinary step of remanding this case to

Commerce with instructions to repeat verification. Given the

F. Supp. 454, 469 (1987) (recognizing Commerce’s sole discretion
“to select a particular verification methodology”).
Court No. 7-12-02180 Page 18

remedy ordered by the Court, there is no need to reach

Rubberflex’s second and third issues at this time.

1. Evidence on the record
The Court’s statutory mandate dictates that it review the

“evidence on the record.” 19 U.S.C. § 1516a (b)(1)(B)(i) (1994);

see also Koyo Seiko Co., Ltd. v. United States, 21 CIT __, __,

955 F. Supp. 1532, 1544 n.9 (1997) (“The Court’s review of a

final determination is limited to a review of the administrative

record.”). Accordingly, the Court in this case may address

Rubberflex’s allegations only if they are part of the

administrative record. Thus, as an initial matter, the Court

must ensure that the evidence Rubberflex presents to support its

claims is part of the administrative record.

Generally, the administrative record includes all

information presented to or obtained by the Secretary during the

review, copies of all determinations and notices published in

Federal Register, and transcripts or records of all conferences,

hearings, and ex parte meetings. See 19 U.S.C. § 1516a (b)(2)(A)

(1994). Thus, the administrative record in this case includes,

for example, Commerce’s questionnaires, Rubberflex’s responses,

and verification exhibits. Importantly, Rubberflex’s Case Brief
Court No. 7-12-02180 Page 19

is also part of the administrative record. The Case Brief is

significant because it was the company’s first formal, written

opportunity to contest Commerce’s preliminary determination.

Yet, Rubberflex’s Case Brief does not reflect all of the

allegations it currently levies against Commerce. In particular,

Rubberflex does not allege in its Case Brief that (1) the case

handlers conducted verification according to an undisclosed

methodology, (2) the case handlers were not prepared for

verification, or (3) the case handlers refused to work past 5:00

p.m. or on the weekends. And, no other evidence on the record

documents those claims. Therefore, because the Court’s review is

limited to the administrative record, there is no basis to

address these three allegations.

In contrast, however, Rubberflex does assert in its Case

Brief that Commerce (1) conducted the second administrative

review in a negligent manner, (2) refused to reschedule

verification to a mutually convenient time, (3) allowed

Rubberflex only two business days to prepare for verification,

and (4) contravened the agreement for submission of corrections.

And, Commerce responded to all but one of these allegations in

its Final Results. Thus, in reviewing whether Commerce’s conduct
Court No. 7-12-02180 Page 20

during the review and verification prejudiced Rubberflex, the

Court considers these four allegations.

2. Commerce’s issuance of a verification outline two
business days prior to the start of verification
constitutes an abuse of discretion

The Court finds that Commerce’s conduct in this case

constitutes an abuse of discretion. Commerce’s tardy issuance of

a verification outline precluded Rubberflex from having a

meaningful opportunity to participate in the review process. The

effects of this action reverberated through verification, and

thus the Court cannot sustain Commerce’s Final Results.

As a general matter, Commerce justifies its administration

of the second review and verification as consistent with its

discretionary authority. In response to Rubberflex’s numerous

allegations, Commerce stated that

Rubberflex was given sufficient notice of the
timing of verification, and the Department
followed the same standard procedures, and
issued a standard verification outline which was
substantially similar for the verification of
information in both the 1993-1994 and 1994-1995
reviews. These procedures were similar to those
followed in the original investigation, when
Rubberflex underwent verification. Thus, there
is little evidence that the Department’s conduct
of the case placed an unreasonable burden on
Rubberflex. Rather, in this case, as in
Court No. 7-12-02180 Page 21

virtually every case the Department conducts,
the burden on respondents is to provide accurate
and timely data which can be verified. To the
greatest extent possible, the Department strives
to be flexible with deadlines for respondents;
ultimately, however, it is respondents’
responsibility to meet this burden.
Nevertheless, we took into account Rubberflex’s
level of cooperation in this case in our
selection of the appropriate BIA rate for
Rubberflex’s dumping margin.

Final Results, 62 Fed. Reg. at 62,555. The Court finds Commerce’s

attempt to rationalize its behavior unacceptable.

Commerce’s statutory mandate is to determine dumping margins

as accurately as possible. See Rhone Poulenc, Inc. v. United

States, 8 Fed. Cir. (T) 61, 67, 899 F.2d 1185, 1191 (1990). To

determine accurate margins, Commerce must gather accurate data

from respondents. And to do that, Commerce must give respondents

a reasonable opportunity to participate in the review and

verification process. See Bowe-Passat v. United States, 17 CIT

335, 339 (1993) (noting that “[t]he review process is [supposed to

be] bilateral and interactive”). This includes giving respondents

advance notice of on-site activities, adequate time to complete

requests for information, and predictable scheduling of the review

and verification. Thus, while Commerce generally has discretion

to schedule a review and allocate resources to a review as it sees
Court No. 7-12-02180 Page 22

fit, it must do so within the confines of its statutory mandate.

When its actions compromise the accuracy of dumping margins, then

it has abused its discretion.

In particular, Commerce has an obligation to issue a

verification outline a reasonable amount of time prior to the

start of verification. An examination of Rubberflex’s Case Brief,

Pub. Admin. R., Fiche 27, Frames 43-44, Conf. Admin. R., Fiche 61,

Frames 43-44, as well as other evidence in the record,

demonstrates that Commerce issued a verification outline to

Rubberflex on Wednesday, September 18, and began verification on

Monday, September 23, two business days (Thursday, September 19

and Friday, September 20) later.

In this case, two business days was not a reasonable amount

of time in advance of verification for Commerce to issue an

outline, and the verification outline itself demonstrates why.

First, the outline requires respondents to report errors prior to

verification. Specifically, the outline instructs Rubberflex to

“[a]dvise verifiers of any data or informational errors found

during preparation for verification prior to the start of
Court No. 7-12-02180 Page 23

verification.”10 Verification Outline, Pub. Admin. R., Fiche 20,

Frame 71 (emphasis in original). Commerce’s rationale for

requiring a respondent to report errors prior to verification is

obvious. The policy benefits both Commerce and respondent by

ensuring that both parties are fully prepared for verification and

that Commerce has an opportunity to review and digest changes to a

respondent’s data before verification. The Court does not dispute

the wisdom underlying this policy.

Once Commerce delivers this exhortation to respondents,

however, it must give them a reasonable opportunity to comply. In

this case, Commerce was well aware that counsel for Rubberflex

were American attorneys based out of Washington, D.C. Traveling

from Washington to Kuala Lumpur, Malaysia alone takes at least one

full day of travel. And yet, by issuing Rubberflex a verification

10
In contrast, the outline states that Commerce would
accept new information at verification “when that information
makes minor corrections to information already on the record.”
Verification Outline, Pub. Admin. R., Fiche 20, Frame 68. This
suggests a construct whereby a respondent must notify Commerce of
“errors” in data prior to verification, but can submit
“corrections” at verification. The Court is not sure whether
Commerce distinguishes between “errors” and “corrections,” and if
so, where it draws the line between the two. In any event, the
Court understands the outline as requiring a respondent to submit
significant changes prior to verification, and as putting
respondent on notice that Commerce’s case handlers would accept
only minor changes during verification.
Court No. 7-12-02180 Page 24

outline two business days prior to verification, Commerce

effectively gave Rubberflex only two business days to review the

verification outlines and check for errors in verification

worksheets and exhibits. Therefore, it is at a minimum

disingenuous for Commerce, on the facts of this case, to require

Rubberflex to advise it of errors “prior to the start of

verification” and then begin verification almost immediately

thereafter.

Indeed, when Commerce fails to issue a verification outline

until the last moment, it is entirely unreasonable to expect a

respondent to report errors found “during preparation for

verification prior to the start of verification.” In this case,

one reason Commerce refused to accept Rubberflex’s corrected

worksheets at verification is because “Rubberflex failed to

provide written disclosure of changes made to its questionnaire

response on the first day of verification,” but instead “provided

[corrections] piecemeal, and late in the verification exercise.”

Final Results, 62 Fed. Reg. at 62,552. Yet Rubberflex’s failure

to provide all corrections at the start of verification resulted

not from its own inadequacy, but from Commerce’s dilatory behavior

in issuing the verification outline two business days prior to the
Court No. 7-12-02180 Page 25

start of verification. Thus, because Commerce “took the lateness

of the information [Rubberflex’s corrections] into account in

concluding that Rubberflex’s response could not be verified,”

Def.’s Br., at 42, the Court cannot sustain Commerce’s

determination that Rubberflex failed verification.

The second reason Commerce must issue a verification outline

a reasonable amount of time prior to verification is that the

outline provides critical information so that a respondent may be,

in Commerce’s words, fully “prepare[d] for the verification in

advance.” Def.’s Br., at 23. As a general matter, the outline

identifies the source documents required by Commerce, the subject

matter areas to be covered during verification, the kinds of

facilities Commerce wishes to tour, and the methods Commerce will

employ to verify information. See, e.g., Pub. Admin. R., Fiche

20, Frame 79 (“The verification outline provides examples of the

types of verification procedures which will be performed and

general areas to be discussed.”). This general information is

important because it defines the final scope and breadth of

verification for a respondent.11

11
The scope of verification may not be conterminous with
the scope of inquiry in Commerce’s original and supplemental
questionnaires. Indeed, “[v]erification is a spot check and is
Court No. 7-12-02180 Page 26

More importantly, the verification outline also contains

specific details without which a respondent cannot complete

preparation for verification. For example, in this case, the cost

of production/constructed value verification agenda Commerce

issued Rubberflex “sets forth priorities of the items to be

verified and specific products for which we will perform initial

testing.” Verification Outline, Pub. Admin. R., Fiche 20, Frame

79 (emphasis added). And, the outline alerted Rubberflex to

particular questionnaire responses Commerce wanted to cover during

verification. For example, Commerce directed Rubberflex to

“[e]xplain and document how you derived average purchase costs for

packing materials as described in Exhibit B-8 of your April 15,

1996 QR [questionnaire response]. Demonstrate that you have not

reused any packing materials.” Verification Outline, Pub. Admin.

R., Fiche 20, Frame 75. Commerce also identified the home and

U.S. market circumstance-of-sale adjustments it planned to analyze

during verification, as well as specific portions of Rubberflex’s

questionnaire response relating thereto. See Verification

not intended to be an exhaustive examination of the respondent’s
business. ITA has considerable latitude in picking and choosing
which items it will examine in detail.” Monsanto v. United
States, 12 CIT 937, 944, 698 F. Supp. 275, 281 (1988).
Court No. 7-12-02180 Page 27

Outline, Pub. Admin. R., Fiche 20, Frames 75, 78.

Importantly, the verification outline also provides a

respondent its first glimpse at the transactions Commerce will

“spot-check” at verification. For example, Appendix A of the

outline Commerce issued Rubberflex lists the home market sales

transactions pre-selected for verification and the supporting

source documentation required for verification. See Verification

Outline, Pub. Admin. R., Fiche 20, Frame 73. Likewise, Appendix B

listed the U.S. sales Commerce had pre-selected for verification.

See Verification Outline, Pub. Admin. R., Fiche 20, Frame 76.

Commerce attempts to downplay the importance of both the

verification outline and when it was issued in this case. To do

so, it claims it followed “standard procedures, and issued

[Rubberflex] a standard verification outline.” Final Results, 62

Fed. Reg. at 62,555. This argument is unavailing. First, as

demonstrated above, the verification outline issued to Rubberflex

contained not only “standard” verification guidance, but

information specific to this verification. To be sure, if every

outline Commerce issued was an exact copy of the last, there would

be no point in issuing an outline. And, the Court doubts very

much that Commerce would waste its efforts engaging in a
Court No. 7-12-02180 Page 28

meaningless exercise for every verification it conducts.12

Moreover, Commerce has the authority to alter, and should alter, a

so-called “standard” outline to address factors specific to a

particular review period, respondent, or industry.

Commerce also maintains it did not act unreasonably because

the verification procedures it used in the second review “were

similar to those followed in the original investigation.”13 Final

Results, 62 Fed. Reg. at 62,555. This is simply unacceptable.

Having chosen to provide an outline that creates obligations on a

respondent’s part, Commerce is required to issue a verification

outline a reasonable amount of time prior to the start of

verification. Such obligation does not change simply because

12
Moreover, this argument strikes the Court as somewhat
inconsistent with Commerce’s representations at oral argument.
Counsel for Commerce strenuously argued to this Court that
Commerce has no “standard” verification procedures. See Tr. of
Oral Argument (March 25, 1999), at 35 (“[t]here is no strict
methodology in terms of how a verification occurs”).
13
It seems to the Court that Commerce wants to have it
both ways in this case. Commerce implies here that respondents
like Rubberflex should anticipate that Commerce will conduct
verification exactly as it has in the past, and in advance and
without notice, prepare under that assumption. Yet, at the same
time, Commerce “has not restricted itself by clarifying . . .
verification requirement[s],” Micron Tech, __ Fed. Cir. (T) at
__, 117 F.3d at 1396, and fiercely defends its discretion to
conduct reviews and verification using ad hoc procedures.
Court No. 7-12-02180 Page 29

Commerce has conducted a prior review. First, each administrative

review is a separate proceeding, see 19 U.S.C. § 1675(a)(1), and

thus neither Commerce, nor a respondent, can rely on documents

issued in a prior proceeding. Second, as shown, there are

portions of the Verification Outline that Rubberflex could not

have anticipated, even based on the original investigation.

Nonetheless, Commerce also argues that the compressed time

frame in which it issued Rubberflex an outline and commenced

verification had no effect on the outcome of verification because

Rubberflex was given “sufficient notice of the timing of

verification.” Id. Commerce’s theory is that Rubberflex

submitted its original questionnaire response in April, 1995 and

thus had over one year to prepare for verification. Def.’s Br.,

at 23. This misses the point. In April, 1995, Commerce had not

yet issued Rubberflex a verification outline. And without having

received the verification outline, Rubberflex could not have

definitively known the scope of verification, specific responses

on which Commerce would focus, or the transactions Commerce pre-

selected, and therefore could not have prepared fully for

verification.

Commerce’s claim that verification was not compromised by the
Court No. 7-12-02180 Page 30

tardy issuance of the outline is also belied by the administrative

and logistical tasks that a respondent must perform prior to

verification. For instance, Commerce requires respondents to make

two copies of all relevant documents for the case handlers. See

Verification Outline, Pub. Admin. R., Fiche 20, Frame 68.

Clearly, it would be unreasonable and wasteful for a respondent to

make copies of all documents relating to costs, for example, and

thus the verification outline is required to narrow the task.

And, in this case, Rubberflex was required, “[f]or each of the

pre-selected sales,” to make “copies of the . . . [supporting]

documents with English translations . . .[to] be made available

for the analysts at the beginning of sales verification.”

Verification Outline, Pub. Admin. R., Fiche 20, Frame 74. Again,

before receiving the outline a respondent cannot know which

transactions Commerce has pre-selected, and therefore which

documents to translate and copy. The Court imagines that

translating and copying might take significant time, depending on

the scope of verification and the technology available on-site,

further justifying the finding that a verification outline must be

issued a reasonable amount of time in advance of verification.

For all of the foregoing reasons, the Court holds that
Court No. 7-12-02180 Page 31

Commerce’s issuance of a verification outline to Rubberflex two

days prior to the start of verification was an abuse of

discretion.

3. Remedy
Commerce’s conduct, which constituted an abuse of discretion,

“[d]id not promote cooperation or accuracy or reasonable

disclosure by cooperating parties intended to result in realistic

dumping determinations,” Bowe-Passat, 17 CIT at 343, and

compromised the validity of the verification process from the

outset. Thus, the Court takes the extraordinary step of ordering

the parties to repeat verification. Cf. Wheatland Tube Corp. v.

United States, 17 CIT 1230, 1235-36, 841 F. Supp. 1222, 1227

(1993) (noting that an exercise of discretion will not be

sustained when it contravenes statutory objectives);

Tehnoimportexport v. United States, 15 CIT 250, 259, 766 F. Supp.

1169, 1178 (1991) (noting that a court may remand when an act is

an abuse of discretion and “undermined the interests of justice”).

Accordingly, the Court orders the parties to confer and file

a scheduling order within ten days of the date of publication of

this opinion. That scheduling order shall list the dates on which

(1) Commerce will issue Rubberflex a verification outline, (2)
Court No. 7-12-02180 Page 32

Commerce will conduct verification, and (3) Commerce will file

remand results with the Court. Remand results must be filed with

the Court no later than ninety (90) days after the date of

publication of this opinion. The Court emphasizes that it is

allowing the parties more time than for the typical remand and

does not anticipate any requests for extensions.

The Court expects the parties to approach remand verification

in a rational, reasonable manner, and in the spirit of cooperation

and compromise. For example, the parties should confer and decide

how to resolve the gaps in the administrative record, i.e., the

missing questionnaires. And, the Court encourages the parties to

expedite the verification process by exploring the possibility of

stipulating to the reliability of selected data.

The best use of this Court’s resources is not to referee this

dispute. The Court senses that verification was hindered by

mistakes and acrimony on the part of both parties. The Court

cannot predict what would have been different had Commerce issued

Rubberflex a verification outline a reasonable amount of time

prior to verification, and had verification been conducted in a

more cooperative and less contentious manner. And in remanding

the case, the Court makes no judgment about the substantive
Court No. 7-12-02180 Page 33

outcome of the review. Commerce may well have been correct in

resorting to BIA and assigning Rubberflex a dumping margin of

29.83%. Or Rubberflex may be correct in asserting its margin

should instead be less than 1%. See Pl.’s Br., at 3. The Court

is confident, however, that Commerce did not arrive at the current

margin in a fair and reasonable manner. Commerce assigned a

dumping margin using BIA, and based its use of BIA on its finding

that Rubberflex had failed verification. Yet, verification was

prejudiced. Thus, the Court remands the case for Commerce to

reach its determination in a fair and reasonable manner.

II.
RUBFIL

Rubfil argues that Commerce’s calculation of its U.S. price

is unsupported by substantial evidence and contrary to law.

According to Rubfil, Commerce’s questionnaire required Rubfil to

report expenses in the currency in which those expenses were

incurred. Therefore, Rubfil reported the ocean freight expenses

associated with its U.S. sales in Malaysian ringgits, the currency

in which those expenses were incurred. Rubfil complains, however,

that when Commerce deducted ocean freight expenses from the gross

price of Rubfil’s U.S. sales, Commerce did not convert the
Court No. 7-12-02180 Page 34

expenses from ringgits to U.S. dollars. Commerce’s mistake,

Rubfil claims, resulted in an artificially low net U.S. price,

which in turn, led to a higher dumping margin.

Commerce agrees that it never converted Rubfil’s ocean

freight expenses from Malaysian ringgits to U.S. dollars, and

requests a remand to correct its mistake. Accordingly, the Court

remands this case, as it relates to Rubfil, in order for Commerce

to convert Rubfil’s ocean freight expenses to U.S. dollars and to

recalculate Rubfil’s U.S. price.
Court No. 7-12-02180 Page 35

III.
CONCLUSION

For the foregoing reasons, the Court remands the Final

Results to Commerce. An order will be entered accordingly.

_______________________
Richard W. Goldberg
JUDGE
Date: July 23, 1999
New York, New York