MacLean-Fogg Co. v. United States

Slip Op. 12 - 99

UNITED STATES COURT OF INTERNATIONAL TRADE

MACLEAN-FOGG COMPANY, et. al.,

Plaintiffs, Before: Donald C. Pogue,
Chief Judge
v.
Consol.1 Court No. 11-00209
UNITED STATES,

Defendant.

OPINION AND ORDER

[Commerce’s remand determination is REMANDED.]

Dated: July 30, 2012

Thomas M. Keating, Lisa M. Hammond, and Kazumune V. Kano,
Hodes Keating & Pilon, of Chicago, IL, for Plaintiffs MacLean-
Fogg Co. and Fiskars Brand, Inc.

Mark B. Lehnardt, Lehnardt & Lehnardt LLC, of Liberty, MO,
for Plaintiff-Intervenors Eagle Metal Distributors, Inc. and
Ningbo Yili Import & Export Co., Ltd.

Craig A. Lewis, T. Clark Weymouth, and Brian S. Janovitz,
Hogan Lovells US LLP, of Washington, DC, for Plaintiff-Intervenor
Evergreen Solar, Inc.

Tara K. Hogan, Trial Attorney, Commercial Litigation Branch,
Civil Division, U.S. Department of Justice, of Washington, DC,
for Defendant. With her on the briefs were Stuart F. Delery,
Acting Assistant Attorney General, Jeanne E. Davidson, Director,
and Reginald T. Blades, Jr., Assistant Director. Of counsel on
the briefs was Joanna Theiss, Attorney, Office of the Chief
Counsel for the Import Trade Administration, U.S. Department of
Commerce, of Washington, DC.

Stephen A. Jones, Christopher T. Cloutier, Daniel L.
Schneiderman, Gilbert B. Kaplan, Joshua M. Snead, and Patrick J.

1
This action is consolidated with Court Nos. 11-00210, 11-
00220, and 11-00221.
Consol. Court No. 11-00209 Page 2

Togni, King & Spalding LLP, of Washington, DC, for Defendant-
Intervenor Aluminum Extrusions Fair Trade Committee.

Pogue, Chief Judge: This case returns to the court

following remand in MacLean-Fogg Co. v. United States, 36 CIT __,

836 F. Supp. 2d 1367 (2012) (“MacLean-Fogg I”). In MacLean-Fogg

I, and again upon Plaintiffs’ motion for reconsideration in

MacLean-Fogg Co. v. United States, 36 CIT __, Slip. Op. 12-81

(June 13, 2012) (“MacLean-Fogg II”), the court found that the

Department of Commerce’s (“the Department” or “Commerce”)

calculation of the all-others 374.15% countervailing duty (“CVD”)

rate2, based solely on mandatory respondents’ adverse facts

available (“AFA”) rate, while legally permissible, was neither

reasonable in this instance or based on a reasonable reading of

the record. MacLean-Fogg I, 36 CIT at __, 836 F. Supp. 2d at

1375–76. The court ordered Commerce to either explain how its

conclusion is reasonable or, alternatively, recalculate the all-

others rate. Id. On remand, Commerce continues to base the all-

others rate solely on the mandatory respondents’ AFA rate,

explaining that this is reasonable because the mandatory

2
Aluminum Extrustions from the People’s Republic of China,
76 Fed. Reg. 18,521 (Dep’t Commerce Apr. 4, 2011) (final
affirmative countervailing duty determination) (“Final
Determination”) and accompanying Issues & Decision Memorandum, C-
570-968, ARP 09 (Mar. 28, 2011), Admin. R. Pub. Doc. 385
available at http://ia.ita.doc.gov/frn/summary/PRC/2011-
7926-1.pdf (last visited July 24, 2012) (“I & D Mem.”) (adopted
in Final Determination, 76 Fed. Reg. at 18,522).
Consol. Court No. 11-00209 Page 3

respondents represent a significant portion of the market and are

therefore representative of the all-others companies. Final

Results of Remand Redetermination, ECF No. 62-1, at 1 (“Remand

Results”). Plaintiffs, who are some of the all-others companies

to whom the rate applies, again seek review of this rate.

Because Commerce failed to explain how the assumption

that Respondents used 100% of the subsidies available throughout

the entire People’s Republic of China (“PRC”) is remedial not

punitive – providing no more than an appropriate level of

deterrence – the court again remands the rate to Commerce.

This court has jurisdiction pursuant to Section

516(a)(2)(B)(I) of the Tariff Act of 1930, as amended, 19 U.S.C.

§ 1516(a)(2)(B)(I) (2006) and 28 U.S.C. § 1581(c).3

BACKGROUND4

In its investigation of Chinese producers and exporters

of aluminum extrusions, Commerce designated the three largest

exporters as mandatory respondents.5 These mandatory respondents

3
All further citations to the Tariff Act of 1930, as
amended, are to Title 19 of the U.S. Code, 2006 edition.
4
Familiarity with the court’s prior opinions is presumed.
5
The merchandise covered by the investigation are aluminum
shapes and forms created by the extrusion process and made from
aluminum alloys which correspond to the Aluminum Association
designations beginning with the numbers 1, 3, or 6. Final
(continued...)
Consol. Court No. 11-00209 Page 4

failed to respond to Commerce’s questionnaire. MacLean-Fogg I,

36 CIT at __, 836 F. Supp. 2d at 1370. Because the mandatory

respondents failed to cooperate, Commerce relied on facts

available when calculating the mandatory respondents’ CVD rates.

19 U.S.C. § 1677m. Using information provided by the domestic

industry, Commerce listed 59 subsidy programs that the importer

producers could have availed themselves of and calculated an AFA

CVD rate using the highest possible subsidization rate for each

of these 59 programs. I&D Memo at Comment 8, 67.6 The resulting

5
(...continued)
Determination, 76 Fed. Reg. at 18,521. These forms are produced
in a variety of shapes, ranging from solid to hollow profiles in
pipes, tubes, bars, and rods. They may also be prepared for
assembly by being cut-to-length, machined, drilled, punched,
notched, bent, stretched, knurled, swedged, mitered, chamfered,
threaded, and spun. Id.

When an investigation involves a large number of
respondents, the statute allows Commerce to narrow its focus to a
reasonable number of exporters or producers. See 19 U.S.C.
§ 1677f-1(e)(2). These are mandatory respondents. In contrast,
voluntary respondents are producers or exporters not initially
selected for individual examination, but who nonetheless submit
information for examination. See 19 U.S.C. § 1677m(a); 19 C.F.R.
§ 351.204(d). Consequently, the aptly named “all-others” rate
refers to all other respondents that do not fall under either of
these two categories. See 19 U.S.C. § 1671d(c)(1)(B)(i)(I).
6
Commerce made two changes between the Preliminary and
Final determinations which more than doubled the CVD rate.
Plaintiffs’ Comments on Remand Results at 16, (July 13, 2012),
ECF No. 69 (“Pls.’ Comments”). It added 23 new subsidy programs
and raised the assumed subsidy rate on 29 of the total programs
by approximately 2%. Final Determination, 76 Fed. Reg. 18,521;
I&D Memo at Comment 7, 63–66. In doing so, Commerce stated that
nothing on the record suggested that these subsidy programs were
(continued...)
Consol. Court No. 11-00209 Page 5

AFA rate for the mandatory respondents was 374.15%. MacLean-Fogg

I, 36 CIT at __, 836 F. Supp. 2d at 1371. By contrast, two

companies that were selected as voluntary respondents received

much lower individual rates of 8.02% and 9.94% respectively. Id.

When calculating the “all-others” rate for the

remaining companies, Commerce excluded the voluntary respondents’

rates from its calculations in accordance with its regulation, 19

C.F.R. § 351.204(d)(3). MacLean-Fogg I, 36 CIT at __, 836 F.

Supp. 2d at 1371. Commerce instead averaged the mandatory

respondents’ rate, resulting in an all-others rate identical to

the AFA rate. Id. In MacLean-Fogg I, Plaintiffs challenged the

regulation, the use of AFA rate in the calculation of the all-

others rate, and the exclusion of the voluntary respondents’

rate, contending that the governing statute, 19 U.S.C.

§ 1671d(c)(5)(A)(i)–(ii), unambiguously required Commerce to use

the rates of all individually investigated respondents when

calculating the all-others rate. Id. at 1372–73. This court

concluded in MacLean-Fogg I that this statute was ambiguous,

allows the use of facts available in a reasonable manner, and

permits Commerce to use mandatory respondents’ AFA rates in the

6
(...continued)
not available to non-cooperative parties and reasoned that
including all of these programs would prevent non-cooperating
respondents from avoiding newly discovered subsidy programs. I&D
Memo at Comment 8, 67.
Consol. Court No. 11-00209 Page 6

calculation of the all-others rate without a finding of non-

cooperation. Id. at 1374 n. 9. Therefore Commerce’s regulation

and methodology were reasonable. However, the court found that

Commerce’s methodology was not supported by substantial evidence

because it failed to articulate a logical connection for

attributing the high mandatory respondents’ rate to the all-other

companies, and failed to address whether the rate was remedial

rather than punitive. Id. at 1375–76.

On remand, Commerce chose to use the same methodology

and provided additional explanation for its decision. Remand

Results at 1. In addition to reiterating its earlier concerns

with rate manipulation, Commerce further explained that the

mandatory respondents’ exports represent a significant portion of

the sales of subject merchandise. Id. at 4–7. By comparison,

the voluntary respondents make up a tiny fraction of that market.

Id. at 6–7. In light of these significant differences in market

share, the Department stated that its continued exclusive use of

only the mandatory respondents’ rate in the calculation of the

all-others rate is a reasonable and reliable reading of record

evidence because such a large portion of the market is highly

representative of the entire market as a whole. Id. at 8.

Commerce considered voluntary respondents’ share of the industry

too low to be probative of the industry’s level of subsidization

or to validly challenge the representativeness of mandatory
Consol. Court No. 11-00209 Page 7

respondents’ rate. Id. at 7. Moreover, to include the voluntary

respondents’ rates would have run contrary to the policy reasons

underpinning Commerce’s regulation — namely, a fear of

manipulation of the all-others rate and a desire to maintain its

integrity from potential distortions. Id. at 4–5; see also

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

27,310 (Dep’t Commerce May 19, 1997). Specifically, Commerce

stated that voluntary respondents are more likely self-selected

because they know that their CVD rates will be lower. Remand

Results at 5. As such, their rates could potentially distort the

representativeness of the all-others rate, especially here where

such a significant segment of the industry failed to participate,

as opposed to the small percentage of the industry that did. Id.

The Department further stated that it would have relied on the

mandatory respondents’ rates regardless of whether they were

lower or higher than the voluntary respondents’ rates.7 Id.

7
Indeed, Commerce noted it has previously departed from the
mandates of its regulation to include voluntary respondents’
rates in its calculations where appropriate. Id. at 11 (quoting
Laminated Woven Sacks from the People’s Republic of China, 73
Fed. Reg. 35,639 (Dep’t. Commerce June 24, 2008) (final
affirmative countervailing duty determination and final
affirmative determination, in part, of critical circumstances)
(“Laminated Woven Sacks”). Commerce considered using the
weighted averages of both mandatory and voluntary respondents,
but ultimately rejected this approach because it neither complied
with its regulation nor mitigated its concern that the inclusion
of voluntary respondents could lead to manipulation of the all-
others rate. Remand Results at 12.
Consol. Court No. 11-00209 Page 8

at 7. Having chosen the mandatory respondents as representatives

of the market, Commerce considered it “inappropriate to ignore

the fact that [AFA] . . . had to be applied to all mandatory

company respondents” and thus used the mandatory respondent rates

even though they were based on AFA. Id. at 8–9 (quoting Laminated

Woven Sacks, 73 Fed. Reg. at 35,639. Plaintiffs again challenge

this rate.

STANDARD OF REVIEW

“The court will sustain the Department’s determination

upon remand if it complies with the court’s remand order, is

supported by substantial evidence on the record, and is otherwise

in accordance with law.” Jinan Yipin Corp. v. United States, 33

CIT __, 637 F. Supp. 2d 1183, 1185 (2009) (citing 19 U.S.C.

§ 1516a(b)(1)(B)(1)).

DISCUSSION

Plaintiffs assert again that Commerce unreasonably

excluded the voluntary respondents’ rates when calculating the

all-others rate and unlawfully applied AFA to the all-others

companies. However, they also concede that the court has already

recognized that this methodology, which averages the rates of

mandatory respondents, even where those rates are all based on

AFA, is specifically permitted by the statute. Pls.’ Comments at
Consol. Court No. 11-00209 Page 9

4; MacLean-Fogg I, 36 CIT at __, 836 F. Supp. 2d at 1374–1375.

Furthermore, the court has already approved the decision not to

include in that average the rates of the voluntary respondents.

Id.

Nonetheless, as we concluded in Maclean-Fogg I, the

chosen rate must be based on a reasonable reading of the record

evidence. Id. at 1376. Specifically, it must be based on

reliable evidence in the record and must be relevant to the all-

others respondents. See Dongguan Sunrise Furniture Co. v. United

States, 36 CIT __, Slip Op. 12-79, at *8 (June 6, 2012)

(“Commerce must provide some justification for finding that . . .

[this] rate . . . is relevant and reliable for this respondent in

this time period.”). Commerce’s responsibility is to choose “a

rate that, on this record, could reasonably be accepted as an

approximation of [][the all-others companies’] rate, albeit with

a built in increase intended as a deterrent to non-compliance.”

KYD, Inc. v. United States, 36 CIT __, 807 F. Supp. 2d 1372, 1378

(2012). This comports with the SAA requirement that the rate be

“reasonably reflective of potential [CVD] margins for non-

investigated exporters or producers.” Uruguay Round Agreements

Act, Statement of Administrative Action, H.R. Doc. No. 103-316,

vol. 1, at 873 (1994), reprinted in 1994 U.S.C.C.A.N.4040, 4201

(“SAA”).

Here, Commerce defends its choice of mandatory
Consol. Court No. 11-00209 Page 10

respondents’ rates based on its finding that the mandatory

respondents’ goods represent a significant portion of imports of

the subject merchandise. Remand Results at 6–7. Because the

mandatory respondents were responsible for a large volume of the

subject merchandise, Commerce found that they are more

representative of all producers and exporters as opposed to the

smaller, self-selected sample of voluntary respondents.8

Commerce points out that using the mandatory respondents’ rates

allows it to obtain information for a substantial majority of the

market. Id. at 10. Finally, Commerce notes that it considered

other methods of incorporating the voluntary respondents’ rate

into the all-others rate, but ultimately rejected them due to

overwhelming concerns about rate manipulation given the specific

facts in this case, namely the striking difference in import

volume between the mandatory and voluntary respondents.9 Id. at

10–12. Under these circumstances, Commerce shows it considered

the issue carefully and reasonably decided not to give weight to

8
Commerce further noted that with one lone exception, its
practice in AD and CVD investigations has never been to limit
respondents by statistical sampling, as the statute permits.
Remand Results at 8. Rather, it has always selected respondents
based on volume. Id.
9
Commerce considered using the approach in Laminated Woven
Sacks, where they averaged all rates determined to obtain an all-
others rate, and it also considered using a weighted average of
the mandatory and voluntary respondents’ rates. Remand Results
at 10–12.
Consol. Court No. 11-00209 Page 11

the voluntary respondents’ rates.

Plaintiffs continue to attack the use of the mandatory

respondents’ total AFA rate as not a “reasonable method” per se,

but this issue is resolved by the statute. Nothing in the

statute requires that the mandatory respondents’ rates, even when

based on AFA, may only be used to develop rates for uncooperative

respondents. Federal Circuit precedent is not to the contrary.

Rather, these cases set the parameters summarized in Dongguan and

KYD above. See, e.g., PAM, S.p.A. v. United States, 582 F.3d

1336 (Fed. Cir. 2009); Dongguan, 36 CIT at __, Slip Op. 12-79 at

*8 (summarizing and citing Gallant Ocean (Thai.) Co. v. United

States, 602 F.3d 1319, 1323–24 (Fed. Cir. 2010), and F.lli De

Cecco Di Filippo Fara S. Martino S.p.A. v. United States, 216

F.3d 1027, 1032 (Fed. Cir. 2000).

Moreover, as Plaintiffs concede, “if mandatory

respondents do not cooperate in a countervailing duty

investigation, Commerce has no product- or industry-specific

information establishing use or rates for individual subsidy

programs alleged to have been used.” Pls.’ Comments at 13. Thus

Commerce must necessarily base its rate determination on

secondary data that simply cannot be a direct representation of

the all-others companies’ subsidy experience. Accordingly,

Plaintiffs’ argument that the rate chosen is based on program-

specific CVD rates that include programs from investigations of
Consol. Court No. 11-00209 Page 12

different products from different industries does not render that

rate unreasonable. See PAM, 582 F.3d at 1340 (“So long as the

data is corroborated, Commerce acts within its discretion when

choosing which sources and facts it will rely on to support an

adverse inference.”).

As Commerce explained, its total-AFA rate methodology

in this case` necessarily involved program-specific CVD rates

calculated for different programs in investigations of different

products from different industries:

[F]or purposes of deriving the AFA rate for the three
noncooperating mandatory respondents, we are using the
highest non-de minimis rate calculated for the same or
similar program (based on treatment of the benefit) in
another PRC CVD investigation. Absent an above-de minimis
subsidy rate calculated for the same or similar program, we
are applying the highest calculated subsidy rate for any
program otherwise listed that could conceivably be used by
the non-cooperating companies.

Aluminum Extrusions From the People's Republic of China, 75 Fed.

Reg. 54,302, 54,305 (Dep't Commerce Sept. 7, 2010) (preliminary

affirmative countervailing duty determination) (“Prelim.

Determination”). Commerce further explains that when dealing

with non-cooperating companies, it is agency practice to “select,

as AFA, the highest calculated rate in any segment of the

proceeding.” Id.

Importantly, however, Plaintiffs point out that

Commerce assumes use, by all respondents, of 100% of subsidy

programs alleged by the petitioning U.S. industry when no
Consol. Court No. 11-00209 Page 13

respondent in any PRC CVD investigation — including in the

underlying investigation — has ever been found to use more than

about half such alleged programs. See Pls.’ Comments at 16–18.

Plaintiffs note that “out of 39 total cooperating respondents in

the 26 China CVD investigations completed to date, the most

alleged subsidy programs any cooperative respondent has been

found to use is only about half.” Pls.’ Comments at 17.

Plaintiffs have attached a survey of CVD investigations from the

PRC sorted by percentage of subsidy programs actually used, and

it appears that within these programs listed, respondents use

approximately 15%-30% of the subsidy programs that Commerce uses

in its calculations. Pls.’ Comments at Attachment 3. Thus

Plaintiffs claim that Commerce’s reliance on 100% of the

potential subsidies generate an all-others CVD rate not

reasonably related to the all-others companies actual

experience.10 Pls.’ Comments at 17; De Cecco, 216 F.3d at 1032

(“Congress could not have intended for Commerce's discretion to

include the ability to select unreasonably high rates with no

relationship to the respondent's actual dumping margin.”).

10
Commerce claims that the Plaintiffs did not demonstrate
on the record of this proceeding that any of the alleged subsidy
programs were unused, but this argument is unavailing because the
information was readily available to Commerce as it appeared in
Commerce’s published decisions. See Pls.’ Comments at Attachment
3 (listing decisions and their corresponding Federal Register
citation).
Consol. Court No. 11-00209 Page 14

It is Commerce’s role to weigh the evidence. Nucor

Corp. v. United States, 32 CIT 1380, 1414, 594 F. Supp. 2d 1320,

1356 (2008) (“It is well-established that it is an agency’s

domain to weigh the evidence”). Nonetheless, here Commerce has

calculated a deterrent for the mandatory respondents which is

based on 100% use of all alleged subsidies. Remand Results at

26, 33–34. While this could be a reasonable choice for non-

cooperating companies, Commerce has not placed an explanation on

the record why a rate that is based on fewer than “any program

otherwise listed that could conceivably be used by the non-

cooperating companies,” Prelim. Determination, 75 Fed. Reg.

at 54,305, would not be sufficient to provide a rate relevant to

the all-others companies. See Dongguan, 36 CIT __, Slip Op. 12-

79, at *8. For example, Commerce does not explain why the

preliminary 137.65% rate, based on the assumed use of 29

programs, rather than the 54 programs included in the Final

Determination, would not have been sufficient to provide an

appropriate deterrent. See Remand Results at 26.

Commerce did not find that the Plaintiffs, the all-

others companies, were non-cooperative. Notably, Commerce

acknowledged in the I&D Memo that, at the Petitioners’ urging, it

was departing from the practice of attributing subsidies

according to the specific province in which mandatory respondents

were located. I&D Memo at Comment 8. Rather, Commerce decided
Consol. Court No. 11-00209 Page 15

in this investigation to apply every single subsidy program

available throughout the PRC to the respondents, regardless of

their actual location, based on the assumption that “the same

types of subsidy programs exist across most provinces and

municipalities.” Id. The all-others companies are not the

largest companies in this investigation and Commerce has neither

explained 1) how smaller companies, which presumably are located

in one province or town, can avail themselves of subsidies that

exist in another province or town, nor 2) how the assumption that

“the same types of subsidy programs exist across most provinces

and municipalities” is a reasonable one for the all-others

companies. Thus, Commerce has not explained, based on the

evidence in the record, how the all-others rate calculated is not

punitive rather than remedial.

Accordingly, we remand for Commerce’s consideration of

this issue.11

CONCLUSION

For the forgoing reasons, Commerce’s calculations are

11
The court has considered all other arguments that the
Plaintiffs have put forth and found them to be unavailing. In
addition, because the court is remanding the CVD rate for
reconsideration, the issue of Plaintiffs’ request for review of
the preliminary rate is not yet ripe. See MacLean-Fogg II, 36
CIT at __, Slip Op 12-81, at *1–3. The court will address the
matter once a reasonable final CVD rate has been determined.
Consol. Court No. 11-00209 Page 16

REMANDED.

Commerce shall have until August 30, 2012 to complete and

file its Remand Results. Plaintiffs and Defendant-Intervenor

shall have until September 13, 2012 to file comments.

Plaintiffs, Defendant, and Defendant-Intervenor shall have until

September 27, 2012 to file any reply.

It is SO ORDERED.

/s/ Donald C. Pogue
Donald C. Pogue, Chief Judge

Dated: July 30, 2012
New York, New York