Morex Ribbon Corp. v. United States

Slip Op. 17-95
UNITED STATES COURT OF INTERNATIONAL TRADE

MOREX RIBBON CORP., PAPILLON
RIBBON AND BOW INC., AND AD-TECK PUBLIC VERSION
RIBBON, LLC,
Plaintiffs, Before: Leo M. Gordon, Judge

v.
Court No: 15-00141
UNITED STATES,
Defendant.

OPINION
[Commerce’s final results sustained.]
Dated: August 1, 2017
Jonathan M. Zelinski, Cassidy Levy Kent (USA) LLP of Washington, DC argued
for Plaintiffs Morex Ribbon Corp., Papillon Ribbon and Bow Inc., and Ad-Teck Ribbon,
LLC (dba Wrap Ribbon). With him on the briefs were James R. Cannon, Jr. and Ulrika K.
Swanson.
Kara M. Westercamp, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of Washington, DC, argued for Defendant United States. With
her on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E.
Davidson, Director, Patricia M. McCarthy, Assistant Director, and Renée Gerber, Trial
Attorney. Of counsel was Amanda T. Lee, Attorney, U.S. Department of Commerce,
Office of the Chief Counsel for Trade Enforcement and Compliance of Washington, DC.
Gregory C. Dorris, Pepper Hamilton LLP of Washington, DC argued for Defendant-
Intervenor Berwick Offray LLC.
Gordon, Judge: This action involves the third administrative review conducted by

the U.S. Department of Commerce (“Commerce”) of the antidumping duty order covering

narrow woven ribbons with woven selvedge (“NWR”) from Taiwan. See Narrow Woven

Ribbons with Woven Selvedge from Taiwan, 80 Fed. Reg. 19,635 (Dep’t of Commerce

Apr. 13, 2015) (final results of admin. review), ECF No. 19-4 (“Final Results”), and
Court No. 15-00141 Page 2

accompanying Issues and Decision Mem. for the Final Results of the Antidumping Duty

Admin. Rev. on Narrow Woven Ribbons with Woven Selvedge from Taiwan, A-583-844

(Dep’t of Commerce Apr. 6, 2015) (“Decision Mem.”), ECF No. 19-5.

Before the court is the USCIT Rule 56.2 motion for judgment on the agency record

of Plaintiffs Morex Ribbon Corp., Papillon Ribbon and Bow Inc., and Ad-Teck Ribbon, LLC

(collectively, “Plaintiffs” or “Morex”). See Pls.’ R. 56.2 Mem. Supp. Mot. J. Agency R.,

ECF No. 23 (“Morex Br.”); see also Def.’s Opp’n Pls.’ Mot. J. Admin. R., ECF No. 29

(“Def.’s Resp.”); Def.-Intervenor Berwick Offray LLC’s Opp’n Pls.’ Mot. J. Admin. R.,

ECF No. 33; Pls.’ Reply Br. Supp. Mot. J. Agency R., ECF No. 37 (“Morex Reply”).

The court has jurisdiction pursuant to Section 516A(a)(2)(B)(iii) of the Tariff Act of 1930,

as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2012),1 and 28 U.S.C. § 1581(c) (2012).

I. Background

Plaintiffs imported NWR from Hen Hao Trading Co. Ltd. a.k.a. Taiwan Tulip

Ribbons and Braids Co. Ltd. (“Hen Hao”), a producer of NWR from Taiwan, during the

period of review (“POR”). Each plaintiff paid cash deposits at the rate of 4.37%─the rate

required by Commerce at the time of entry. Compl. ¶ 7. Commerce identified Hen Hao

and another Taiwanese producer of NWR, King Young Enterprises Co., Ltd., along with

King Young’s affiliates, Ethel Enterprise Co., Ltd. and Glory Young Enterprise Co., Ltd.

(collectively “King Young”), as mandatory respondents in the administrative review and

1
Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2012 edition.
Court No. 15-00141 Page 3

forwarded questionnaires to them. See Narrow Woven Ribbons with Woven Selvedge

from Taiwan, 79 Fed. Reg. 60,449 (Dep’t of Commerce Oct. 7, 2014) (prelim. results),

PD 86 2 ; see also Decision Mem. for the Prelim. Results of the Admin. Rev. of the

Antidumping Duty Order on Narrow Woven Ribbons with Woven Selvedge from Taiwan,

A-583-844 (Dep’t of Commerce Sept. 25, 2014), PD 87.

King Young cooperated with Commerce during the administrative review and

received a calculated rate of 30.64%. Final Results, 80 Fed. Reg. at 19,636. Hen Hao,

on the other hand, withdrew from the review without submitting any information.

See Hen Hao’s Notice of Withdrawal, PD 25 at bar code 3186563-01 (Mar. 7, 2014).

Consequently, Commerce applied facts available with an adverse inference 3 and

assigned Hen Hao a total adverse facts available (“AFA”) rate of 137.20%─the highest

rate alleged in the petition (“Petition Rate”). Decision Mem. at 34.

In this action Plaintiffs challenge the assignment of the Petition Rate to Hen Hao.

For the reasons set forth below, the court sustains Commerce’s determination.

2
“PD” refers to a document contained in the public administrative record, which is found
in ECF No. 19-1, unless otherwise noted. “CD” refers to a document contained in the
confidential administrative record, which is found in ECF No. 19-2, unless otherwise
noted.
3
Under 19 U.S.C. § 1677e(a)(2), if Commerce finds that a respondent's information is
unreliable because the respondent has withheld information that Commerce requests,
failed to provide requested information in a timely manner or in the form or manner
requested, or significantly impeded the progress of the proceeding, Commerce is required
to calculate that respondent's margin using the facts otherwise available. Having decided
to apply facts available, Commerce then may draw an adverse inference against a
respondent in selecting from among the facts otherwise available when it finds that a
respondent “has failed to cooperate by not acting to the best of its ability.” 19 U.S.C.
§ 1677e(b).
Court No. 15-00141 Page 4

II. Standard of Review

The court sustains Commerce’s “determinations, findings, or conclusions” unless

they are “unsupported by substantial evidence on the record, or otherwise not in

accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). More specifically, when reviewing

agency determinations, findings, or conclusions for substantial evidence, the court

assesses whether the agency action is reasonable given the record as a whole. Nippon

Steel Corp. v. United States, 458 F.3d 1345, 1350-51 (Fed. Cir. 2006). Substantial

evidence has been described as “such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,

407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.

197, 229 (1938)). Substantial evidence has also been described as “something less than

the weight of the evidence, and the possibility of drawing two inconsistent conclusions

from the evidence does not prevent an administrative agency’s finding from being

supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607,

620 (1966). Fundamentally, though, “substantial evidence” is best understood as a word

formula connoting reasonableness review. 3 Charles H. Koch, Jr., Administrative Law and

Practice § 9.24[1] (3d ed. 2017). Therefore, when addressing a substantial evidence issue

raised by a party, the court analyzes whether the challenged agency action

“was reasonable given the circumstances presented by the whole record.” 8A, West’s

Fed. Forms, National Courts § 3.6 (5th ed. 2017).
Court No. 15-00141 Page 5

III. Discussion

In a total AFA scenario Commerce typically cannot calculate an antidumping rate

for an uncooperative respondent because the information required for that calculation

was not provided. As a substitute, Commerce relies on other sources of information

(“secondary information”), e.g., the petition, the final determination from the investigation,

prior administrative reviews, or any other information placed on the record, 19 U.S.C.

§ 1677e(b), to select a proxy that should be a “reasonably accurate estimate of the

respondent’s actual rate, albeit with some built-in increase intended as a deterrent to

noncompliance.” F.lli de Cecco di Filippo Fara S. Martino S.p.A. v United States, 216 F.3d

1027, 1032 (Fed. Cir. 2000).

When selecting an appropriate AFA proxy, Commerce’s general practice is to

choose the higher of (1) the highest rate alleged in the petition or (2) the highest margin

rate calculated in any segment of the proceeding, “unless these rates cannot be

corroborated or there are case-specific reasons that these rates are not acceptable.”

Decision Mem. at 39 (citations omitted). The proxy’s purpose “is to provide respondents

with an incentive to cooperate, not to impose punitive, aberrational, or uncorroborated

margins.” de Cecco, 216 F.3d at 1032. Although a higher AFA rate creates a stronger

incentive to cooperate, “Commerce may not select unreasonably high rates having no

relationship to the respondent’s actual dumping margin.” Gallant Ocean (Thailand) Co. v.

United States, 602 F.3d 1319, 1323 (Fed. Cir. 2010) (citing de Cecco, 216 F.3d at 1032);

see also Timken Co. v. United States, 354 F.3d 1334, 1345 (Fed. Cir. 2004) (“Commerce

must balance the statutory objectives of finding an accurate dumping margin and inducing
Court No. 15-00141 Page 6

compliance.”). Commerce must select a rate that is a “‘reasonably accurate estimate of

the respondent’s actual rate,’” Gallant Ocean, 602 F.3d at 1323 (quoting de Cecco,

216 F.3d at 1032), and has “some grounding in commercial reality.” Id. at 1324; see also

Nan Ya Plastics Corp. v. United States, 810 F.3d 1333, 1344 (Fed. Cir. 2016).4

Commerce, to the extent practicable, must corroborate secondary information with

independent sources reasonably at its disposal. 19 U.S.C. § 1677e(c). In practice,

“corroboration” involves confirming that secondary information has “probative value,”

19 C.F.R. § 351.308(d) (2014), by examining its “reliability and relevance.” Mittal Steel

Galati S.A. v. United States, 31 CIT 730, 734, 491 F. Supp. 2d 1273, 1278 (2007) (citing

Ball Bearings and Parts Thereof from France, Germany, Italy, Japan, Singapore, and the

United Kingdom, 70 Fed. Reg. 54,711, 54,712–13 (Dep’t of Commerce Sept. 16, 2005)

(final results admin. revs.)).

A. AFA Rate Selection

In the Final Results Commerce considered the following choices for an AFA rate

for Hen Hao: (1) the Petition Rate of 137.20% (the highest rate alleged in the petition);

(2) 4.37% (the only affirmative dumping margin calculated in the less than fair value

investigation); (3) 30.64% (the weighted-average margin calculated for King Young in the

4
The court notes that Congress amended the antidumping duty statute to eliminate the
requirement that a total AFA proxy reflect a respondent’s “commercial reality.” See Trade
Preferences Extension Act of 2015. Pub.L. No. 114–27, 129 Stat. 362 (2015). “Commerce
is . . . no longer required to tie an AD duty margin to the ‘commercial reality’ of the
interested party.” Fresh Garlic Producers Association v. United States, 39 CIT ___, 121 F.
Supp. 3d 1313, 1329 (2015). That amended provision does not apply to this action.
Court No. 15-00141 Page 7

current segment of the proceeding); and (4) various margins calculated using a subset of

King Young’s data. Decision Mem. at 39. In selecting an AFA rate for Hen Hao,

Commerce determined that the Petition Rate was the only rate that was sufficient to deter

non-compliance. Id. Commerce reasonably determined that the 4.37% rate would not

sufficiently deter non-compliance because it is Hen Hao’s current cash deposit rate and

“at this rate Hen Hao’s NWR has continued to be imported into the United States.” Id.

(citing Mem. Regarding Release of Customs Entry Data from U.S. Customs and Border

Protection, PD 6 at bar code 3164169-01, CD 1 at bar code 3164167-01 (Nov. 19. 2013)).

Commerce also reasonably determined that the 30.64% rate would not deter non-

compliance because it was the actual calculated dumping rate assigned to King Young,

the sole cooperative respondent for the POR. Id. Additionally, Commerce declined to

choose a rate calculated using a subset of King Young’s data, finding that use of a

contemporaneous rate calculated for a cooperative respondent “would be at odds with

the statutory purpose of AFA to induce cooperative behavior.” Id. at 40. That left the

Petition Rate of 137.20%.

Plaintiffs contend that the AFA rate is unreasonably high because as independent

importers they will be responsible to pay the increased duties, even though they had no

control over Hen Hao’s decision to withdraw from the administrative review. Morex Br. 9.

This very scenario was alluded to by the U.S. Court of Appeals for the Federal Circuit in

KYD, Inc. v. United States, 607 F.3d 760 (Fed. Cir. 2010). There, plaintiff KYD,

an independent U.S. importer of polyethylene retail carrier bags, challenged Commerce’s

assignment of the petition rate, as AFA, to an uncooperative foreign producer and
Court No. 15-00141 Page 8

exporter of the subject merchandise. KYD argued that “Commerce should apply AFA

rates only against uncooperative parties” and that “a cooperative, independent importer

should not be required to pay an assessment based on an AFA dumping margin imposed

on an uncooperative producer/exporter.” Id. at 768.

The Federal Circuit rejected KYD’s argument because it “would allow an

uncooperative foreign exporter to avoid the adverse inferences permitted by statute

simply by selecting an unrelated importer, resulting in easy evasion of the means

Congress intended for Commerce to use to induce cooperation with its antidumping

investigations.” Id. The court also recognized that in some cases “domestic importers will

have to pay enhanced antidumping margins because of the uncooperativeness of the

exporters from whom they purchase goods,” and that the possibility that U.S. importers

would have to pay increased duties was consistent with the intent behind the statute

permitting the use of AFA. Id. (“In the aggregate, . . . the importers’ exposure to enhanced

antidumping duties seems likely to have the effect of either directly inducing cooperation

from the exporters with whom the importers deal or doing so indirectly, by leaving

uncooperative exporters without importing partners who are willing to deal in their

products.”). Therefore, the possibility that Plaintiffs as domestic (U.S.-based) importers

may bear contingent liability resulting from the uncooperative behavior of its unaffiliated

exporter cannot invalidate Commerce’s AFA rate selection.

Next, Plaintiffs argue that Commerce unreasonably failed to consider as a

mitigating factor Hen Hao’s reasons for failing to comply with Commerce’s requests for

information. Morex Br. 12. Specifically, Morex contends that Hen Hao’s failure to comply
Court No. 15-00141 Page 9

was not the result of a business decision that Hen Hao would gain a better or equivalent

rate by not cooperating. Rather the burden of responding to those requests was “simply

beyond the capabilities of [Hen Hao’s] employees.” Id. (quoting Hen Hao’s Notice of

Withdrawal at 1-2, PD 25 at bar code 3186563-01 (Mar. 7, 2014)). Unfortunately for

Plaintiffs, “section 1677e(b) does not by its terms set a ‘willfulness’ or ‘reasonable

respondent’ standard, nor does it require findings of motivation or intent. Simply put,

there is no mens rea component to the section 1677e(b) inquiry.” Nippon Steel Corp.v.

United States, 337 F.3d 1373, 1383 (Fed. Cir. 2003).

Finally, Plaintiffs contend that to calculate a non-punitive rate that represents the

uncooperative respondent’s commercial reality Commerce must use a cooperative

respondent’s rate from the same POR, or a nearby period, as a baseline and add a

premium for deterrent effect. Morex Br. 10-11 (citing Lifestyle Enter., Inc. v. United States,

36 CIT ___, ___, 844 F. Supp. 2d 1283 (2012) (“Lifestyle Enterprise I”); Lifestyle Enter.

Inc. v. United States, 36 CIT ___, 865 F. Supp. 2d 1284 (2012) (“Lifestyle Enterprise II”);

Gallant Ocean, 602 F.3d 1319; Dongguan Sunrise Furniture Co. v. United States, 39 CIT

___, 2015 WL 179003 (Jan. 14, 2015) (“Dongguan Sunrise Furniture IV”)). The court

disagrees.

Plaintiffs maintain that the appropriate baseline for Hen Hao’s AFA rate is one

derived from the rates calculated for cooperative respondents—0% and 4.37% in prior

segments and 30.64% in this segment. Based on those rates, Morex contends that

Commerce’s selection of the Petition Rate is unsupported by the record. In particular,

Plaintiffs argue that the Petition Rate is over 4.5 times higher than the highest calculated
Court No. 15-00141 Page 10

rate, and therefore is unnecessarily punitive, i.e., more than a mere deterrent.

Citing Dongguan Sunrise Furniture I, 37 CIT ___, ___, 931 F. Supp. 2d. 1346, 1355

(2013), Plaintiffs also argue that Commerce failed to explain its rationale for selecting the

Petition Rate and why a lower rate—somewhere above 30.64% and below 137.20%—

would not provide a sufficient deterrent.

The court disagrees. In Lifestyle Enterprise I, the court rejected the AFA rate

because the rate was “an extreme outlier” when viewed in light of the prior reviews and

because the record suggested that the uncooperative respondent’s commercial reality

“differ[ed] significantly” from the respondent in the review from which the AFA rate was

taken. Lifestyle Enterprise I, 36 CIT at ___, 844 F. Supp. 2d at 1291. In contrast, in this

action, the Petition Rate was not an “extreme outlier” as Commerce used that rate in the

first and second administrative reviews. The first administrative review was challenged,

and this Court sustained Commece’s use of the Petition Rate. Hubscher Ribbon Corp. v.

United States, 37 CIT ___, 942 F. Supp. 2d 1375 (2013). Additionally here, unlike in

Lifestyle Enterprise I, Commerce tied the Petition Rate to Hen Hao’s commercial reality.

Specifically, Commerce found that Hen Hao supplied NWR to a Canadian reseller who

was assigned the Petition Rate as AFA in the first administrative review. Decision Mem.

at 42.

Plaintiffs’ reliance on Lifestyle Enterprise II is also misplaced. There the court held

that the AFA rate used in that case was based on “an impermissibly small percentage”

of sales and that the transactions selected by Commerce were “outside of the

mainstream.” Lifestyle Enterprise II, 865 F. Supp. 2d at 1290. In reaching its holding,
Court No. 15-00141 Page 11

the court stated that the case was “[u]nlike cases in which the rate and amount of

deterrent were facially within the bounds of commercial reality.” Id. at 1292.

Here, Commerce corroborated the Petition Rate using King Young’s margins.

These margins represented a significant number of King Young’s U.S. sales of products

within the range of the mainstream products sold by King Young during the POR. 5

Decision Mem. at 44.

Similarly, the circumstances in the Dongguan Sunrise Furniture cases are distinct

from those in this action. The question before the court in Dongguan was whether a partial

AFA rate assigned to a mostly-cooperating respondent reflected that company’s

commercial reality. See Dongguan Sunrise Furniture IV, 39 CIT at ___, 2015 WL 179003,

at * 4. Although the court remanded the underlying decision to Commerce, it did so out of

a concern that Commerce failed to account for “the large variety of individual products

and dumping margins reflected in [the respondent’s] reported sales . . . .” Id. In contrast,

here, Hen Hao did not report any sales data for the POR.

Lastly, Gallant Ocean is also distinguishable. In Gallant Ocean, the Federal Circuit

rejected Commerce’s use of the highest dumping margin stated in the petition as AFA

because the rate could not be corroborated when viewed in the context of the facts of that

record. See Gallant Ocean, 602 F.3d at 1324-25. Here, on the other hand, Commerce

5
Commerce found that [[ ]] transaction-specific margins, or [[ ]] of King Young’s
transactions, were higher than the Petition Rate. See Corroboration of Adverse Facts
Available Rate for the Final Results at 1, CD 122 at bar code 3269505-01 (Apr. 6, 2015).
Court No. 15-00141 Page 12

corroborated the Petition Rate, establishing a link between the rate and Hen Hao’s

commercial reality. See infra.

B. Corroboration

To corroborate the 137.20% rate, Commerce reviewed transaction-specific

margins submitted by King Young regarding hundreds of U.S. sales of NWR during the

POR. Decision Mem. at 41. Plaintiffs do not question Commerce’s use of King Young’s

sales data to corroborate the Petition Rate. Rather, Plaintiffs argue that Commerce used

an insufficient number of transaction-specific margins calculated for King Young. Morex

Br. 15-16. The court does not agree. The administrative record supports Commerce’s

finding that a substantial number of King Young’s actual U.S. transactions were dumped

at rates “at an even higher level than [the Petition Rate].”6 Commerce found that King

Young’s sales represented “numerous models and thousands of spools, at rates equaling

or exceeding the [P]etition [R]ate.” Decision Mem. at 41. These sales “were not isolated

sales of unusual models, but rather they [fell] well within the range of the mainstream

products sold by King Young during the POR.” Id.; see KYD, 607 F.3d at 767 (Commerce

may use cooperative companies’ transaction-specific margins to support an AFA rate

when that rate is within the range of actual selling prices). Consequently, Commerce

determined that King Young’s sales data provided a reasonable basis to corroborate the

Petition Rate and determined that the Petition Rate was “neither aberrational nor divorced

from commercial reality.” Decision Mem. at 41.

6
See footnote 5 supra.
Court No. 15-00141 Page 13

Commerce also corroborated the Petition Rate based on other record evidence,

concluding that the Petition Rate was relevant and reliable. Commerce determined that

the Petition Rate was relevant to Hen Hao in that King Young, who, like Hen Hao, is a

Taiwanese producer/exporter selling NWR to the United States, was found to be dumping

NWR at rates similar to, or higher than, the Petition Rate during the POR. Decision Mem.

at 42. Commerce noted that Plaintiffs themselves recognized that “Hen Hao’s commercial

reality is linked to King Young’s, given that [the importers] suggest various alternative

AFA rates which are derived from King Young’s data,” and that “in every segment of this

proceeding, [Commerce has] found that NWR produced in Taiwan and exported to the

United States [was] being dumped in rates exceeding 100 percent.” Id.; see Narrow

Woven Ribbons with Woven Selvedge from Taiwan, 77 Fed. Reg. 72,825 (Dep’t of

Commerce Dec. 6, 2012) (final results first admin. rev.) (dumping margin of 137.20%);

Narrow Woven Ribbons with Woven Selvedge from Taiwan, 78 Fed. Reg. 50,377

(Dep’t of Commerce Aug. 19, 2013) (final results second admin. rev.) (same).

Additionally, Commerce determined that the Petition Rate was relevant to Hen Hao

because Hen Hao previously supplied NWR to a Canadian reseller who Commerce found

to be dumping at the 137.20% rate in the first administrative review, Decision Mem. at 42,

and the application of this rate to the Canadian reseller was ultimately sustained,

see Hubscher Ribbon, 37 CIT ___, 942 F. Supp. 2d 1375.

Lastly, Commerce determined that the Petition Rate of 137.20% rate continued to

be reliable. Decision Mem. at 42. Given the absence of any information on the record to

the contrary, no basis exists to conclude that Commerce’s determination was
Court No. 15-00141 Page 14

unreasonable. See id. (noting there was “no evidence on the record that Hen Hao [did]

not continue to sell dumped NWR to the United States . . . .”). Therefore, Commerce’s

corroboration of the Petition Rate as relevant and reliable is supported by substantial

evidence.

IV. CONCLUSION

For the foregoing reasons, the court sustains Commerce’s assignment of an AFA

rate based on the Petition Rate to Hen Hao. Judgment will be entered accordingly.

/s/ Leo M. Gordon
Judge Leo M. Gordon

Dated: August 1, 2017
New York, New York