United States Court of Appeals for the Federal Circuit
2009-1282
GALLANT OCEAN (THAILAND) CO., LTD.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
Robert G. Gosselink, Trade Pacific PLLC, of Washington, DC, argued for
plaintiff-appellant. With him on the brief were Jonathan M. Freed and Ji Hyun Tak.
Carrie Dunsmore, Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, of Washington, DC, argued for defendant-appellee. On
the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director,
Patricia M. McCarthy, Assistant Director, and Stephen C. Tosini, Attorney.
Appealed from: United States Court of International Trade
Judge Evan J. Wallach
United States Court of Appeals for the Federal Circuit
2009-1282
GALLANT OCEAN (THAILAND) CO., LTD.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
Appeals from the United States Court of International Trade in case no. 07-00360,
Judge Evan J. Wallach.
___________________________
DECIDED: April 16, 2010
___________________________
Before RADER, MOORE Circuit Judges, and WILKEN, District Judge. ∗
RADER, Circuit Judge.
Gallant Ocean (Thailand) Co., Ltd. (“Gallant”) appeals from a final judgment of
the United States Court of International Trade concerning its importation of frozen
warmwater shrimp. The Court of International Trade affirmed a decision of the United
States Department of Commerce (“Commerce”) to apply an adverse facts available
(“AFA”) rate of 57.64% against Gallant. Gallant Ocean (Thailand) Co., Ltd. v. United
States, 602 F. Supp. 2d 1337 (Ct. Int’l Trade 2009). Because substantial evidence does
not support the 57.64% AFA rate, this court vacates and remands.
∗
The Honorable Claudia Wilken, District Judge, United States District Court for the
Northern District of California, sitting by designation.
I.
Commerce issues antidumping duty orders for imported merchandise that is sold
in the United States below its fair value and materially injures or threatens to injure a
domestic industry. See 19 U.S.C. § 1673 (2006). An antidumping duty reflects the
amount by which the normal value exceeds the export price of a foreign exporter’s
merchandise. 19 U.S.C. § 1673e(a)(1); 19 U.S.C. § 1677(35). This excess amount is
also known as the “dumping margin.” The normal value is the price of the merchandise
when sold for consumption in the exporting country. 19 U.S.C. § 1677b(1). If the
imported merchandise is not sold in the exporting country, the normal value is the price
at which the merchandise is sold for consumption in another similar exporting country or
the United States. Id.
Commerce periodically reviews and reassesses antidumping duties. 19 U.S.C.
§ 1675(a). During its administrative review, Commerce requests information from the
interested parties, including the foreign exporters of the subject merchandise. Upon a
finding that an interested party refuses to cooperate with these information requests,
Commerce “may use an inference that is adverse to the interests of that party in
selecting from among the facts otherwise available.” 19 U.S.C. § 1677e(b). Therefore,
Commerce can apply AFA rates against uncooperative parties. In calculating AFA
rates, Commerce may rely on information derived from (1) the petition; (2) a final
determination in the investigation; (3) any previous review; or (4) any other information
in the record. Id. “When [Commerce] relies on secondary information rather than on
information obtained in the course of an investigation or review, [Commerce] shall, to
2009-1282 2
the extent practicable, corroborate that information from independent sources that are
reasonably at [its] disposal.” 19 U.S.C. § 1677e(c).
II.
Gallant is a Thai exporter of shrimp. In December 2003, the Ad Hoc Shrimp
Trade Action Committee, a domestic committee, filed petitions with Commerce and the
International Trade Commission (“ITC”), alleging that Thai and other foreign exporters
were dumping frozen warmwater shrimp in the United States. Notice of Initiation of
Antidumping Duty Investigations, 69 Fed. Reg. 3876 (Jan. 27, 2004). Based on the
petition, Commerce calculated the Thai exporters’ dumping margin at 57.64%, as
adjusted at the initiation of the less-than-fair value investigation. Id. at 3881. Thus,
Commerce initially assigned an adjusted petition rate of 57.64% against Thai exporters.
After investigating the alleged dumping, Commerce issued an antidumping duty
order on certain frozen warmwater shrimp from Thailand. Notice of Final Determination
of Sales at Less than Fair Value and Negative Final Determination of Critical
Circumstances: Certain Frozen and Canned Warmwater Shrimp from Thailand, 69 Fed.
Reg. 76918, 76920 (Dec. 23, 2004). Commerce imposed dumping margins ranging
from 5.91% to 6.82% against Thai exporters of shrimp. Notice of Amended Final
Determinations of Sales at Less than Fair Value and Antidumping Duty Order: Certain
Frozen Warmwater Shrimp from Thailand, 70 Fed. Reg. 5145, 5146 (Feb. 1, 2005)
(“Final Antidumping Order”). Gallant did not participate in this initial investigation.
In April 2006, Commerce began its first administrative review of the antidumping
duty order for the period covering August 4, 2004 through January 31, 2006. Notice of
Initiation of Administrative Reviews of the Antidumping Duty Orders on Certain Frozen
2009-1282 3
Warmwater Shrimp from Brazil, Ecuador, India and Thailand, 71 Fed. Reg. 17819 (Apr.
7, 2006). Commerce requested 145 Thai companies, including Gallant, to submit a
quantity and value questionnaire. Id. at 17829. Gallant did not respond. Certain
Frozen Warmwater Shrimp from Thailand: Preliminary Results and Partial Rescission of
Anti-Dumping Duty Administrative Review, 72 Fed. Reg. 10669, 10673 (Mar. 9, 2007)
(“Preliminary Results”). In May 2006, Commerce asked Gallant to respond for the
second time. Id. at 10673. Gallant again did not respond. Id.
In March 2007, Commerce found that Gallant had not acted to the best of its
ability to cooperate with Commerce’s information requests and preliminarily assigned it
a 57.64% AFA rate. Id. Commerce based the AFA rate on the adjusted petition rate.
Id. at 10669-70. Commerce explained that it corroborated the adjusted petition rate with
the transaction-specific margins calculated for the three mandatory respondents: Good
Luck Product Co., Ltd. (“Good Luck Product”); Thai I-Mei Frozen Foods Co., Ltd. (“Thai
I-Mei”); and Pakfood Public Co. Ltd. and its affiliated subsidies (collectively, “Pakfood”).
Id. Specifically, both Good Luck Product and Pakfood had multiple transactions with
dumping margins above the adjusted petition rate. Id. at 10673.
In September 2007, Commerce published the final results, continuing to assign a
57.64% AFA rate to Gallant and other uncooperative parties. Id. at 52069. Commerce
assigned much lower dumping margins to cooperative parties: 10.75% for Good Luck
Product; 2.58% for Thai I-Mei; 4.29% for Pakfood; and 4.31% for all other cooperative
parties. Id.
Gallant challenged the 57.64% AFA rate as having no rational relationship to its
commercial practices. Gallant Ocean, 602 F. Supp. 2d at 1345. The Court of
2009-1282 4
International Trade affirmed Commerce’s adverse inference determination. Id. at 1346-
52. Gallant now appeals to this court. This court has jurisdiction under 28 U.S.C.
§ 1295(a)(5).
III.
This court reviews a decision of the Court of International Trade concerning
Commerce’s antidumping determination by reapplying the same standard of review
used by the Court of International Trade. Tung Mung Dev. Co. v. United States, 354
F.3d 1371, 1378 (Fed. Cir. 2004). This court upholds Commerce’s determinations
unless they are “unsupported by substantial evidence on the record, or otherwise not in
accordance with law.” Alloy Piping Prods., Inc. v. Kanzen Tetsu Sdn. Bhd., 334 F.3d
1284, 1289 (Fed. Cir. 2003) (internal citation omitted). Substantial evidence is “such
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.” Micron Tech., Inc. v. United States, 117 F.3d 1386, 1393 (Fed. Cir. 1997)
(internal citation omitted). This court reviews the record as a whole, including any
evidence that “fairly detracts from the substantiality of the evidence,” in determining
whether substantial evidence exists. Id.
IV.
Commerce has broad discretion in making antidumping determinations. F.lii De
Cecco De Filippo Fara S. Martino S.p.A. v. United States, 216 F.3d 1027, 1032 (Fed.
Cir. 2000). Commerce’s discretion is particularly great in the case of uncooperative
respondents. For example, Commerce can select from a list of secondary sources as a
basis for its adverse inferences against uncooperative parties. See 19 U.S.C.
2009-1282 5
§ 1677e(b). “Commerce’s discretion in these matters, however, is not unbounded.” De
Cecco, 216 F.3d at 1032.
An AFA rate must be “a reasonably accurate estimate of the respondent’s actual
rate, albeit with some built-in increase intended as a deterrent to non-compliance.” Id.
(emphasis added). The purpose of the AFA rate “is to provide respondents with an
incentive to cooperate, not to impose punitive, aberrational, or uncorroborated margins.”
Id. Therefore, although a higher AFA rate creates a stronger deterrent, Commerce may
not select unreasonably high rates having no relationship to the respondent’s actual
dumping margin. Id. Congress tempered the deterrent purpose with the corroboration
requirement so as “to prevent the petition rate (or other adverse inference rate), when
unreasonable, from prevailing and to block any temptation by Commerce to overreach
reality in seeking to maximize deterrence.” Id.
In this case, Commerce incorrectly presumed that the adjusted petition rate was
reliable in the face of much more reliable information and thus imposed an
unreasonably high 57.64% AFA rate against Gallant. Cf. id. at 1033 (affirming CIT’s
holding that Commerce may not use the petition rate to establish the dumping margin
when its own investigation revealed that the petition rate was not credible). The
adjusted petition rate did not and does not represent commercial reality. Commerce
calculated the adjusted petition rate based on the highest dumping margin alleged in the
petition. The fact that Commerce ultimately imposed dumping margins between 5.91%
and 6.82% for the same products after its initial investigation shows the possession of
better information and shows that the adjusted petition rate was aberrational.
Cooperating respondents’ actual dumping margins during the administrative review
2009-1282 6
period—ranging from 2.58% to 10.75%—further call into question the credibility of the
adjusted petition rate.
The 57.64% adjusted petition rate is more than ten times higher than the average
dumping margin for cooperating respondents. This high rate is also more than five
times higher than the highest rate applied to a cooperating respondent. Moreover,
nothing in the record ties the adjusted petition rate to Gallant, because Gallant did not
participate in the original investigation. Thus, the record shows that the 57.64% rate is
unrelated to commercial reality and, thus, not a “reasonably accurate estimate” of
Gallant’s actual dumping rate. Id. at 1032. Instead, the AFA rate is “punitive,
aberrational, or uncorroborated,” id., and excessive in view of the cooperative
respondents’ dumping rates. This court also perceives that a rate over five times the
highest rate imposed on similar products is far beyond an amount sufficient to deter
Gallant and other uncooperative respondents from future non-compliance.
Instead of relying on the adjusted petition rate, Commerce should have relied on
more reliable “facts otherwise available” such as the representative dumping rates of
similarly-sized and similarly-situated exporters in the original investigation and in the
administrative review. Given that over a dozen respondents submitted timely
questionnaires during the administrative review, Commerce had abundant resources
from which to calculate a reasonable AFA rate. Although Commerce has discretion in
choosing from a list of secondary information to support its adverse inferences,
Commerce must select secondary information that has some grounding in commercial
reality.
2009-1282 7
In addition, Commerce failed to corroborate the adjusted petition rate with
“independent sources that are reasonably at [its] disposal.” 19 U.S.C. § 1677e(c).
Commerce used a very small percentage of the mandatory respondents’ transactions
as corroborative evidence even though most transactions during the period of review
had significantly lower dumping margins. The record does not show that the
transactions at and above the 57.64% dumping margin reflect Gallant’s commercial
activity. Because Commerce did not identify any relationship between the small number
of unusually high dumping transactions with Gallant’s actual rate, those transactions
cannot corroborate the adjusted petition rate.
This court recognizes a distinction between the present case and both Ta Chen
Stainless Steel Pipe, Inc. v. United States, 298 F.3d 1330 (Fed. Cir. 2002), and PAM,
S.p.A. v. United States, 582 F.3d 1336 (Fed. Cir. 2009). In Ta Chen, Commerce
applied a 30.95% AFA rate against Ta Chen, which did not fully cooperate with the ITC
during its administrative review. 298 F.3d at 1339. In that case, the record showed that
Ta Chen had made a sale with a 30.95% dumping margin during the relevant period of
review. Id. Although one sale by itself does not always rise to the level of substantial
evidence, the 30.95% AFA rate was reasonable because Commerce tied it to Ta Chen’s
actual sales. In contrast, Commerce did not tie the AFA rate to Gallant’s actual
dumping margin. Also, Ta Chen was not a corroboration case as Commerce relied on
primary information—i.e., Ta Chen’s sales data from the relevant review period—in
calculating the AFA rate. Id.
In PAM, Commerce assessed a 45.49% AFA rate against PAM because sales
data from a previous administrative review showed that PAM had twenty-nine
2009-1282 8
transactions with dumping margins at or above 45.49%. 582 F.3d at 1338-40. Although
those transactions amounted to only 0.5% of PAM’s total U.S. sales in a previous
administrative review, this court, in view of the entire record, found that the transactions
were reasonably tied to PAM’s actual dumping margin. Id. at 1340. Unlike PAM,
Commerce in the present case did not show that a small percentage of the mandatory
respondents’ transactions represented a reasonably accurate estimate of Gallant’s
actual dumping margin. Instead, the record showed a large body of reliable information
suggesting the application of a much lower margin. Substantial evidence requires
Commerce to show some relationship between the AFA rate and the actual dumping
margin.
Although this court remands for recalculation of the AFA rate, this court finds that
Commerce did not err by using transactions with broken shrimp and non-broken shrimp
as corroborative evidence. The antidumping duty order covers both types of shrimp.
Also, some of the Thai exporters seem to have dumped broken shrimp into the United
States during the relevant review period. Likewise, Gallant could be dumping broken
shrimp. Of course, if broken shrimp represent a minority of the sales, Commerce
cannot base the AFA rate entirely on broken-shrimp transactions. But on this record,
Commerce did not err by using some transactions with broken shrimp as corroborative
evidence.
V.
Accordingly, substantial evidence does not support the unreasonably high AFA
rate imposed against Gallant. This court therefore vacates and remands the Court of
2009-1282 9
International Trade’s decision so that it may remand the case back to the ITC for further
proceedings consistent with this opinion.
VACATED and REMANDED
COSTS
Each party shall bear its own costs.
2009-1282 10