Shandong Huarong MacHinery Co. v. United States

Slip Op. 06-88

UNITED STATES COURT OF INTERNATIONAL TRADE

SHANDONG HUARONG MACHINERY CO., :
LTD., SHANDONG MACHINERY IMPORT :
& EXPORT CORPORATION, LIAONING :
MACHINERY IMPORT & EXPORT :
CORPORATION, AND TIANJIN :
MACHINERY IMPORT & EXPORT :
CORPORATION, : Before: Richard K. Eaton,
: Judge
Plaintiffs, :
: Consol. Court No. 04–00460
v. : Public Version
:
UNITED STATES, :
:
Defendant, :
:
AMES TRUE TEMPER, :
:
Deft.-Intervenor. :
:

OPINION AND ORDER

[United States Department of Commerce’s Final Results on heavy
forged hand tools sustained in part, remanded in part]

Dated: June 9, 2006

Hume & Associates, PC (Robert T. Hume), for plaintiffs.

Peter D. Keisler, Assistant Attorney General, Civil
Division, United States Department of Justice; David M. Cohen,
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice (Stephen Carl Tosini), for
defendant.

Wiley, Rein & Fielding, LLP (Timothy C. Brightbill, Michael
W. Schisa, and Daniel B. Pickard), for defendant-intervenor.
Consol. Court No. 04-00460 Page 2

Eaton, Judge: This consolidated action1 is before the court

on competing USCIT Rule 56.2 motions for judgment upon the agency

record filed by Shandong Huarong Machinery Co., Ltd. (“Huarong”),

Liaoning Machinery Import & Export Corp., Ltd. and Liaoning

Machinery Import & Export Corp. (collectively “LMC”), Shandong

Machinery Import & Export Corp. (“SMC”), and Tianjin Machinery

Import & Export Corp. (“TMC”) (collectively “plaintiffs”), and by

defendant-intervenor Ames True Temper (“Ames”).

By their motions, the parties contest certain aspects of the

United States Department of Commerce’s (“Commerce” or “the

Department”) final results of the twelfth administrative review

of the antidumping orders covering heavy forged hand tools

(“HFHTs”) from the People’s Republic of China (“PRC”) for the

period of review (“POR”) beginning February 1, 2002, and ending

January 31, 2003. See HFHTs, Finished or Unfinished, With or

Without Handles, From the PRC, 69 Fed. Reg. 55,581 (ITA September

15, 2004) (“Final Results”), as amended, 69 Fed. Reg. 69,892

(December 1, 2004) (“Amended Final Results”).

In addition, Ames challenges the liquidation instructions

issued by Commerce to the United States Bureau of Customs and

1
This action includes court numbers 04-00460, 04-00526,
04-00644, and 04-00652. See Order of 2/25/2005.
Consol. Court No. 04-00460 Page 3

Border Protection (“Customs”). The court has jurisdiction over

the antidumping determination pursuant to 28 U.S.C. § 1581(c)

(2000) and 19 U.S.C. § 1516a(a)(2)(A)(i)(I), and over Ames’

challenge to the liquidation instructions pursuant to 28 U.S.C.

§ 1581(i)(4). For the following reasons, Commerce’s Final

Results are sustained in part, and remanded in part.

BACKGROUND

In February 2003, in response to requests made by plaintiffs

and Ames, Commerce initiated the twelfth administrative review of

four antidumping duty orders originally published in 1991. See

HFHTs, Finished or Unfinished, With or Without Handles, From the

PRC, 68 Fed. Reg. 14,394, 14,395 (ITA Mar. 25, 2003). The

subject orders applied to merchandise categorized as bars/wedges,

picks/mattocks, hammers/sledges, and axes/adzes sold by nearly

ninety producers. Commerce focused its review on exporters of

the subject merchandise, which included Huarong (axes/adzes,

bars/wedges), SMC (axes/adzes, bars/wedges, picks/mattocks,

hammers/sledges), LMC (axes/adzes, bars/wedges), and TMC

(bars/wedges, axes/adzes, hammers/sledges, picks/mattocks). The

Final Results were published on September 15, 2004. After

commencement of the present action, certain ministerial errors

contained in the Final Results were raised and corrected through

a voluntary remand and the Amended Final Results were published
Consol. Court No. 04-00460 Page 4

on December 1, 2004.

In the Final Results, Commerce applied adverse facts

available (“AFA”) to plaintiffs’ sales of subject merchandise on

an order-specific basis. That is, “total” AFA2 were applied to

2
Pursuant to 19 U.S.C. § 1677e(a), if:

(1) necessary information is not available on
the record, or

(2) an interested party or any other person——

(A) withholds information that has
been requested by the administering
authority or the Commission under
this subtitle,

(B) fails to provide such
information by the deadlines for
submission of the information or in
the form and manner requested
. . .,

(C) significantly impedes a
proceeding under this subtitle, or

(D) provides such information but
the information cannot be verified
as provided in section 1677m(i) of
this title,

the administering authority and the Commission shall,
subject to section 1677m(d) of this title, use the
facts otherwise available in reaching the applicable
determination under this subtitle.

19 U.S.C. § 1677e(a) (2000).

If the agency finds the above criteria to be met, and makes
the separate subjective determination that the respondent has
“failed to cooperate by not acting to the best of its ability to
(continued...)
Consol. Court No. 04-00460 Page 5

Huarong and LMC for their sales of merchandise within the scope

of the axes/adzes and bars/wedges orders, and to TMC for its

sales covered by the bars/wedges order. See Final Results 69

Fed. Reg. at 55,583. Partial AFA were applied to SMC’s sales

under the bars/wedges order. See id. Commerce also kept in

place the antidumping orders against SMC’s hammers and sledges

and LMC’s bars and wedges. See id. at 55,581; see also 19 C.F.R.

§ 351.222(d)(1) (2005). Ultimately, the Department calculated

the country-wide antidumping duty rates (“PRC-wide”) for HFHTs as

follows: bars/wedges at 139.31%; picks/mattocks at 98.77%;

hammers/sledges at 27.71%; and axes/adzes at 55.74%. See id. at

55,583.

STANDARD OF REVIEW

When reviewing a final antidumping determination from

Commerce, the court “shall hold unlawful any determination,

2
(...continued)
comply with a request for information,” then, under 19 U.S.C. §
1677e(b), the agency “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). Here, Commerce
applied what it refers to as “total adverse facts available.”
While this phrase is not referenced in either the statute or the
agency’s regulations, it can be understood within the context of
this case as referring to Commerce’s application of adverse facts
available not only to the facts pertaining to specific sales for
which information was not provided, but to the facts respecting
all of respondents’ sales encompassed by the relevant antidumping
duty order. See Gerber Food (Yunnan) Co., Ltd. v. United States,
29 CIT __, __, 387 F. Supp. 2d 1270, 1285 n.3 (2005).
Consol. Court No. 04-00460 Page 6

finding, or conclusion found . . . to be unsupported by

substantial evidence on the record, or otherwise not in

accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).

“Substantial evidence is ‘such relevant evidence as a reasonable

mind might accept as adequate to support a conclusion.’” Huaiyin

Foreign Trade Corp. (30) v. United States, 322 F.3d 1369, 1374

(Fed. Cir. 2003) (quoting Consol. Edison Co. v. NLRB, 305 U.S.

197, 229 (1938)). The existence of substantial evidence is

determined “by considering the record as a whole, including

evidence that supports as well as evidence that ‘fairly detracts

from the substantiality of the evidence.’” Id. (quoting Atl.

Sugar, Ltd. v. United States, 744 F.2d 1556, 1562 (Fed. Cir.

1984)). “As long as the agency’s methodology and procedures are

reasonable means of effectuating the statutory purpose, and there

is substantial evidence in the record supporting the agency’s

conclusions, the court will not impose its own views as to the

sufficiency of the agency’s investigation or question the

agency’s methodology.” Ceramica Regiomontana, S.A. v. United

States, 10 CIT 399, 404–05, 636 F. Supp. 961, 966 (1986), aff’d,

810 F.2d 1137, 1139 (Fed. Cir. 1987) (citing Chevron U.S.A., Inc.

v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843 (1984));

see also Elkem Metals Co. v. United States, 27 CIT __, __, 276 F.

Supp. 2d 1296, 1301 (2003).
Consol. Court No. 04-00460 Page 7

With respect to Ames’ challenge to Commerce’s liquidation

instructions, this Court applies the standard of review set forth

in 5 U.S.C. § 706(2) (2000) of the Administrative Procedure Act

(“APA”) and will “hold unlawful and set aside agency action,

findings, and conclusions found to be . . . arbitrary,

capricious, an abuse of discretion, or otherwise not in

accordance with law.” Consol. Bearings Co. v. United States, 412

F.3d 1266, 1269 (Fed. Cir. 2005) (quoting 5 U.S.C. § 706(2);

Humane Soc’y of the United States v. Clinton, 236 F.3d 1320, 1324

(Fed. Cir. 2001)) (internal quotation marks omitted). Section

706 of the APA authorizes the court to review the agency

determination under three different standards: (1) arbitrary or

capricious; (2) abuse of discretion; or (3) not in accordance

with law. See 33 Charles Alan Wright & Charles H. Koch, Jr.,

Federal Practice and Procedure: Judicial Review of Administrative

Action § 8334, at 167 n.2 (2006). “Under the ‘arbitrary and

capricious’ standard the scope of review is a narrow one.”

Bowman Transp., Inc. v. Arkansas-Best Freight System, Inc., 419

U.S. 281, 442 (1974). “Applying this standard of review, an

administrative action is to be upheld if the agency has

‘considered the relevant factors and articulated a rational

connection between the facts found and the choices made.’”

Humane Soc’y of the United States, 236 F.3d at 1324–25 (quoting

Baltimore Gas & Elec. v. Natural Res. Def. Council, Inc., 462
Consol. Court No. 04-00460 Page 8

U.S. 87, 105 (1983)).

DISCUSSION

I. Plaintiffs’ Motion

A. Application of Total AFA to Huarong’s, LMC’s, and
Company A’s Sales of Bars/Wedges: Principal/Agent
Relationships3

Huarong, LMC, and Company A (collectively “the Companies”)

contend that Commerce wrongfully applied total AFA to their sales

of bars and wedges based on its determination that they

misrepresented the nature of purported agency relationships.4 As

part of its findings, Commerce concluded that “nearly all of the

sales functions were conducted by the principal[s], and that the

agent[s’] participation was limited, for the most part, to

supplying invoices to the principal.” Issues and Decisions Mem.

for the Twelfth Admin. Rev. of the Antidumping Duty Orders on

HFHTs From the PRC (“Issues and Decisions Mem.”) at 46. Thus,

Commerce found that the purported agents were merely vehicles

employed by the principals to circumvent the payment of their

3
For purposes of confidentiality, when reference is made
to its specific relationship with Huarong, [[ ]] is referred
to as “Company A.” [[ ]] is
referred to as “Company B.” [[ ]] is not a party to the
instant action as the Final Results did not apply a rate to its
sales of subject merchandise.
4
In particular, Commerce reviewed the relationships
between Huarong and [[ ]], and LMC and [[ ]]. See
Pls.’ Mem. of Pts. and Auth. in Supp. of Mot. J. Agency R.
(“Pls.’ Mem.”) at 16–23.
Consol. Court No. 04-00460 Page 9

assigned antidumping duty rates. See Def.’s Resp. to Mots. J.

Ag. R. (“Def.’s Resp.”) at 9. In Commerce’s view, the Companies

significantly impeded the administrative review by “continually

misrepresent[ing] the true nature of their relationship with

their principal or agent during the [period of review].” Issues

and Decisions Mem. at 46.

The Companies, on the other hand, argue for the legitimacy

of their agency relationships, and insist that an application of

AFA to their bars/wedges sales is not justified because they

“provided all the information requested by Commerce and

cooperated to the best of their ability in [their] efforts to

comply with Commerce’s mandate.” Pls.’ Mem. of Pts. and Auth. in

Supp. of Mot. J. Agency R. (“Pls.’ Mem.”) at 17.

In the Final Results, Commerce found the two claimed agency

relationships to be shams. See Final Results 69 Fed. Reg. at

55,583 (“Huarong, LMC/LIMAC, and [Company A] participated in an

‘agent’ sales scheme whereby one PRC company allowed another PRC

company to enter subject merchandise under the first company’s

invoices.”). In the first arrangement, Company A allegedly

served as Huarong’s agent for its sales of bars and wedges in the

United States. In the second, LMC acted as Company B’s purported

agent for its U.S. bars and wedges sales. The Companies argue
Consol. Court No. 04-00460 Page 10

that neither relationship should serve as the basis for applying

AFA because: (1)(a) the Companies submitted to Commerce all of

the requested information as well as some additional documents

that were not part of Commerce’s demand, and thus did not impede

Commerce’s review and (b) that by doing so, they acted to the

best of their abilities to comply with Commerce’s request; and

(2) despite Company A’s and LMC’s relatively minimal

responsibilities, they performed sufficient duties to qualify

both as actual agents. See Pls.’ Mem. at 17–19; 21–23.

As an example, in support of the first argument, Huarong

claims that:

In its initial submission to Commerce, Huarong fully
disclosed that it utilized an agent for a portion of
its sales of subject merchandise bars/wedges. It also
included without request by Commerce a copy of the
agent/principal contract entered into by Huarong and
[Company A]. At no point did Huarong fail to provide
information to Commerce or provide incorrect
information. In fact, in the next submission, Commerce
asked again about agent sales, and requested that
Huarong report all such “agent sales” as its own.
Huarong complied by providing a sales flow diagram
illustrating the agency relationship, and indicated
that the agent sales had indeed been reported as sales
by Huarong.

Pls.’ Mem. at 18.

Regarding Commerce’s finding that the limited business

activities actually undertaken by Company A and LMC prevented the

establishment of an agency relationship, the companies contend
Consol. Court No. 04-00460 Page 11

that “it shows good business sense for the customer to have an

open relationship with the manufacturer, not just the agent, to

address [issues arising with the customer’s order].” Pls.’ Mem.

at 19.5

These same arguments are made with respect to Commerce’s

application of total AFA to Company A. Company A, which

purportedly acted as Huarong’s agent for sales of bars and wedges

to the United States, argues that it was equally cooperative as

Huarong and LMC in complying with Commerce’s requests. The

Companies, therefore, take the position that Commerce erred in

determining that they impeded the review, thereby justifying the

use of facts otherwise available pursuant to 19 U.S.C.

§ 1677e(a). In addition, they dispute the finding that they

failed to act to the best of their abilities by participating in,

and then concealing, a fraudulent invoicing scheme, thereby

justifying the use of AFA pursuant to 19 U.S.C. § 1677e(b).

Commerce defends its application of total AFA to the

companies by stating that “‘[r]enting’ a dumping margin merits

the application of adverse facts available.” Def.’s Resp. at 9.

5
Specifically, the companies contend that “Commerce’s
focus on what [Company A and LMC] [did] not do as . . . agent[s]
prevents it from seeing the contributions that [Company A and
LMC] provide[d] . . . .” Pls.’ Mem. at 18, 20.
Consol. Court No. 04-00460 Page 12

Commerce maintains that the Companies were participants in an

invoicing scheme whereby the “principal” employed an “agent,”

which was subject to much lower duties than the principal, as a

tool to evade Commerce’s orders. Based on Huarong’s submitted

responses regarding its relationship with Company A, Commerce

found that:

The record shows that [Company A], whose cash deposit
and assessment rates were lower than Huarong, sold
blank invoices to Huarong, which then reported the
entries as [Company A’s] to Customs and benefitted from
the very low rates applicable to [Company A].
Likewise, the record shows that LMC and [Company A]
sold their invoices to companies that reported their
entries to Customs as made by LMC or [Company A], as
appropriate, and, thus, benefitted from lower rates.

In questionnaire responses, Huarong claimed that its
relationship with [Company A] was a bona fide business
arrangement whereby [Company A] acted as an agent for
Huarong’s sales of bars/wedges to one United States
customer. However, after two supplemental
questionnaires, Huarong revealed that Huarong handled
all of the negotiations and shipping arrangements for
the sales in question. [Company A] received a fee for
simply allowing Huarong to represent to Customs that
the merchandise was [Company A] merchandise, rather
than Huarong merchandise.

Id. at 9–10 (emphasis in original). Commerce further found that

LMC provided similarly incomplete responses to the initial

section A questionnaire.

After reviewing the record of this review, we find that
[LMC] continually misrepresented the true nature of its
relationship with [Company B] during the POR. In its
questionnaire responses, . . . [LMC] claimed that its
relationship with [Company B] was a bona fide business
arrangement whereby it acted as an agent for [Company
B’s] sales to one U.S. customer. However, only by
issuing three supplemental questionnaires to [LMC] did
Consol. Court No. 04-00460 Page 13

the Department learn that [LMC] did not negotiate the
terms of (i.e., the price and quantity), or arrange
shipping for, the sales in question nor did it find new
customers for [Company B]. Instead, [Company B] paid
[LMC] to use its sales invoices to take advantage of
[LMC’s] lower cash deposit rate during the POR. Absent
our requests for additional information, the Department
would not have discovered that [LMC] did not provide
the services expected from a true “agent” . . . .

Adverse Facts Available Mem. LMC (A-570-803) (ITA Mar. 1, 2004)

at 4–5; Def.’s Conf. App. Ex. 17. The same finding was made with

respect to Company A’s submissions. See Adverse Facts Available

Mem. Company A (A-570-803) (ITA Mar. 1, 2004) at 4; Def.’s Conf.

App. Ex. 15. Thus, because, in Commerce’s view, the Companies

provided it with incomplete questionnaire responses concerning

the responsibilities of the arrangement participants, the

Department was justified in using facts otherwise available and

AFA because they had “significantly impeded the proceedings and

interfered with the assessment of accurate antidumping duties

. . . [and] thus failed to cooperate to the best of their

respective abilities.” Def.’s Resp. at 10.

The court concurs in Commerce’s finding that the Companies

initially failed to provide pertinent details concerning their

invoicing arrangements. In its review of the record, the court

examined the Companies’ initial questionnaire responses, which

reveal that the purported agency relationships, while claimed as

legitimate, were not fully explained. See generally Huarong
Consol. Court No. 04-00460 Page 14

Resp. to Questionnaire Sec. A (May 28, 2003); Company A Resp. to

Questionnaire Mini-Sec. A (Apr. 23, 2003); LMC Resp. to

Questionnaire Sec. A (May 28, 2003). In addition, the

information contained in the responses to the supplemental

questionnaires demonstrated the true nature of the arrangements.

For instance, it was not until its September 3, 2003 response to

Commerce’s supplemental section A questionnaire that Huarong

disclosed the details of the arrangement by stating that:

Usually, the customer contacts Huarong, but places the
order with [Company A]. The customer generally sends
Huarong a fax copy of the order. . . . The customer in
the United States is a long-time customer and handles
the orders as it chooses. . . . For all agent sales,
however, title to the goods passed from Huarong to the
U.S. customer. The agent did not take title. . . .

Generally Huarong negotiated the price and quantity of
the sale. . . .

Generally Huarong confirmed the purchase order by
telephone with the U.S. customer. . . .

Huarong Resp. to Supplemental Questionnaire Sec. A at 5–7 (Sept.

3, 2003) (emphasis in original).6 More specifically, Huarong

stated that “[Company A] issued the sales invoices.” Id. at 7.

In other words, the record shows that all of the sales activity

was performed by Huarong, that Company A received payment not for

carrying out duties tied to the sale of the merchandise, but for

6
Similar information was provided by LMC and [[ ]]
in their responses to the supplemental questionnaires. See LMC
Resp. to Supplemental Questionnaire Sec. A at 5–8 (Sept. 29,
2003); see also [[ ]] Resp. to Supplemental Questionnaire
Sec. A at 1–5 (Oct. 31, 2003).
Consol. Court No. 04-00460 Page 15

merely providing the principal with blank invoices and packing

lists, and that the true nature of the arrangement was not

immediately revealed to Commerce.

Similarly, both LMC and Company A ultimately reported in

their supplemental questionnaire response that, for “agent”

sales: (1) the U.S. customer contacted the principal directly;

(2) the principal negotiated the price, quantity, and shipping

terms of the merchandise; (3) the principal made the sales calls;

(4) the principal filled out the invoices and the purchase orders

with the relevant sales data; (5) the principal paid the freight

forwarder; and finally (6) that the “agents” issued the sales

invoices. See LMC Resp. to Supplemental Questionnaire Sec. A at

5–8 (Sept. 29, 2003); Company A Resp. to Supplemental

Questionnaire Sec. A at 1–5 (Oct. 31, 2003). Thus, it is

apparent that both LMC and Company A were agents in name only as

they were not burdened with any responsibilities concerning the

sales other than providing their principals with invoices and

packing lists. As with Huarong, Commerce only learned these

details after issuing supplemental questionnaires.

As a result of the inadequate answers found in the initial

section A responses, Commerce was required to issue several

supplemental questionnaires in order to get the necessary
Consol. Court No. 04-00460 Page 16

information to complete its investigation. Consequently, even

though the Companies ultimately disclosed the circumstances

surrounding their “agency” relationships, their failure to do so

until after the issuance of several supplemental questionnaires

surely significantly impeded Commerce’s investigation by

requiring the agency to prolong its review. See 19 U.S.C. §

1677e(a); see also Shandong Huarong Gen. Group Corp. v. United

States, 27 CIT __, __, slip op. 03-135 at 26 (Oct. 22, 2003) (not

published in the Federal Supplement) (finding that respondents

significantly impeded a review by submitting inaccurate

questionnaire responses that precluded Commerce from conducting

verification.).

Thus, the court’s review of the record leads it to conclude

that Commerce’s use of facts otherwise available in determining

the margins for the Companies’ sales of bars and wedges was

supported by substantial evidence and otherwise in accordance

with the law under § 1677e(a).

Having found Commerce’s use of facts otherwise available to

be justified, the court now turns to the propriety of Commerce’s

application of total AFA to the Companies’ sales of bars and

wedges to the United States. See 19 U.S.C. § 1677e(b). If an

interested party “fail[s] to cooperate by not acting to the best
Consol. Court No. 04-00460 Page 17

of its ability to comply with a request for information,”

Commerce may then use an adverse inference when choosing from the

facts otherwise available. 19 U.S.C. § 1677e(b).7 Although the

statute does not provide a standard for what constitutes acting

to the best of a party’s ability, the United States Court of

Appeals for the Federal Circuit has held that phrase to

“require[] the respondent to do the maximum it is able to do.”

Nippon Steel Corp. v. United States, 337 F.3d 1373, 1382 (Fed.

Cir. 2003). “When a respondent fails to respond to Commerce’s

requests and the information it requested is material to the

investigation, this court previously has found such behavior to

be unreasonable and the use of AFA appropriate.” Chia Far Indus.

Factory Co., Ltd. v. United States, 28 CIT __, __, 343 F. Supp.

2d 1344, 1363 (2004).

In accordance with this standard, the court finds that the

Companies’ failure initially to provide the relevant information

with respect to their invoicing arrangement, information that was

fully within their command, justified Commerce’s application of

AFA to the Companies’ sales of bars and wedges.

7
It is pertinent to note that, although § 1677e(a) and §
1677e(b) each require independent findings, “both standards are
met where a respondent purposefully withholds, and provides
misleading information.” Shanghai Taoen Int’l Trading Co., Ltd.
v. United States, 29 CIT __, __, 360 F. Supp. 2d 1339, 1345
(2005).
Consol. Court No. 04-00460 Page 18

B. Commerce’s Application of Total AFA to Huarong’s and
TMC’s Forged Tamper and Scraper Sales

Huarong and TMC next dispute Commerce’s application of total

AFA to their sales of forged tampers and scrapers. Commerce

states that, because Huarong and TMC failed to provide the

requested information, it was justified in using facts available.

See Issues and Decisions Mem. at 37; 19 U.S.C. § 1677e(a).

Commerce then applied AFA to Huraong and TMC based on its

conclusion that their actions demonstrated a failure to cooperate

by not acting to the best of their abilities to comply with its

request for information. 19 U.S.C. § 1677e(b); see Def.’s Resp.

at 13 (citing Nippon Steel, 337 F.3d at 1380).

Throughout the course of the twelfth review, Commerce asked

Huarong and TMC, as well as SMC, to provide information

concerning sales of tampers and scrapers. See Issues and

Decisions Mem. at 37. SMC “responded to the request by

explaining that they did not provide the information about the

sales data because they did not want to provide it while a scope

inquiry on the subject merchandise was still pending.” Pls.’

Mem. at 13. As of the time of Commerce’s request, the agency had

initiated formal scope inquiries as to tampers on August 4, 2003,

and for scrapers on December 2, 2003. See Issues and Decisions

Mem. at 34. The tampers inquiry terminated on July 29, 2004,

while the inquiry regarding scrapers remains open.
Consol. Court No. 04-00460 Page 19

Huarong and TMC maintain that their failure to provide

Commerce with the requested information was the result of a

miscommunication. Upon receiving Commerce’s request for

information relating to tampers and scrapers, SMC, apparently

believing these tools were not covered by the order, notified

Commerce that it would not provide the requested information

because of the pending scope inquiry. See Pls.’ Mem. at 13.

Huarong and TMC argue that, because Commerce never contested

SMC’s explanation as to why the company was not going to provide

the requested information, they assumed that Commerce had waived

its request for information on tampers and scrapers. Id.

Indeed, Huarong and TMC contend that:

[They] did not purposefully try to evade Commerce’s
request for the sales data on scrapers and tampers.
Rather, after Commerce failed to respond to SMC’s
explanation for its failure to supply the requested
information, Huarong and TMC genuinely believed that
the issue had been laid to rest. Had Commerce again
requested the information from Huarong and TMC, they
would have provided [it]. This was merely a
miscommunication among the parties, and Huarong and TMC
should not receive AFA for a mistake.

Pls.’ Mem. at 13.

In addition, Huarong and TMC argue that nothing required a

response given the pending scope inquiry concerning the products

subject to the request.8

8
Commerce ultimately did not apply AFA to SMC based on
(continued...)
Consol. Court No. 04-00460 Page 20

Commerce first supports its application of total AFA to

Huarong and TMC by maintaining that a pending scope determination

does not cut-off a party’s duty to respond to a request for

information to the best of its ability. See Def.’s Resp. at

12–13; see also 19 C.F.R. § 351.225(l)(4) (“[N]otwithstanding the

pendency of a scope inquiry, if the Secretary considers it

appropriate, the Secretary may request information concerning the

product that is the subject of the scope inquiry for purposes of

a review under this subpart.”). In addition, Commerce insists

that “‘intent’ is not a necessary factor for the application of

[AFA].” Def.’s Resp. at 12 (citing Nippon Steel, 337 F.3d at

1381).

Commerce’s application of AFA to a respondent requires that

agency to engage in the two-step analysis set forth in 19 U.S.C.

§§ 1677e(a) and 1677e(b). With respect to a respondent’s state

of mind, the Federal Circuit has provided the following

instruction:

Under subsection (a), if a respondent “fails to provide
[requested] information by the deadlines for
submission,” Commerce shall fill in the gaps with
“facts otherwise available.” The focus of subsection
(a) is respondent’s failure to provide information.
The reason for the failure is of no moment. The mere

8
(...continued)
its determination that the tampers sold by SMC were cast, and
thus information on those tools was not required. See Issues and
Decisions Mem. at 37, 38.
Consol. Court No. 04-00460 Page 21

failure of a respondent to furnish requested
information–for any reason–requires Commerce to resort
to other sources of information to complete the factual
record on which it makes its determination. As a
separate matter, subsection (b) permits Commerce to
“use an inference that is adverse to the interests of
[a respondent] in selecting from among the facts
otherwise available,” only if Commerce makes the
separate determination that the respondent “has failed
to cooperate by not acting to the best of its ability
to comply.” The focus of subsection (b) is
respondent’s failure to cooperate to the best of its
ability, not its failure to provide requested
information.

Nippon Steel, 337 F.3d at 1381 (quoting 19 U.S.C. § 1677e)

(emphasis in original). Thus, subsection (a) is triggered by a

finding that a respondent has failed to provide requested

information. For a respondent to be subjected to the application

of AFA under subsection (b), however, a more detailed analysis is

required.

Before making an adverse inference, Commerce must
examine respondent’s actions and assess the extent of
respondent’s abilities, efforts, and cooperation in
responding to Commerce’s requests for information.
Compliance with the “best of its ability” standard is
determined by assessing whether respondent has put
forth its maximum effort to provide Commerce with full
and complete answers to all inquiries in an
investigation. While the standard does not require
perfection and recognizes that mistakes sometimes
occur, it does not condone inattentiveness,
carelessness, or inadequate record keeping. . . .

To conclude that an importer has not cooperated to the
best of its ability and to draw an adverse inference
under section 1677e(b), Commerce need only make two
showings. First, it must make an objective showing
that a reasonable and responsible importer would have
known that the requested information was required to be
kept and maintained under the applicable statutes,
rules, and regulations. Second, Commerce must then
Consol. Court No. 04-00460 Page 22

make a subjective showing that the respondent under
investigation not only has failed to promptly produce
the requested information, but further that the failure
to fully respond is the result of the respondent’s lack
of cooperation in either: (a) failing to keep and
maintain all required records, or (b) failing to put
forth its maximum efforts to investigate and obtain the
requested information from its records.

Id. at 1382–83. (citations omitted); see also Hebei Metals &

Minerals Import & Export Corp. v. United States, 29 CIT __, __,

slip op. 05-126 at 6 (Sept. 22, 2005) (not published in the

Federal Supplement). Put another way, under the facts of this

case, Commerce’s use of an adverse inference cannot be based

solely on a respondent’s failure to submit requested information,

but rather requires a demonstrated failure on behalf of the

respondent to put forth its maximum efforts in attempting to

provide Commerce with the requested data.

Here, the language of 19 C.F.R. § 351.225(l)(4) makes it

clear that Commerce was entitled to seek the requested

information regardless of the status of the scope inquiries, and

that Huarong and TMC were required to respond. The question is

whether Huarong and TMC, having failed to respond, should be

excused from answering the questionnaires based on SMC’s

representations to Commerce and the Department’s subsequent

silence. The court finds that it is simply not the case that

Huarong and TMC had reason to believe that Commerce’s silence

with respect to SMC’s statements meant that they need not respond
Consol. Court No. 04-00460 Page 23

to the agency’s inquiries. Each company was directly asked to

supply information. Neither supplied the information nor did

either inquire on its own behalf whether the request had somehow

lapsed. Considering the importance of the review process,

Commerce’s failure to reply to SMC can provide no excuse for

either company’s failure to supply the information. Had the

respondents made inquiries of their own, the result might be

different, but having exerted no independent efforts to ascertain

the status of Commerce’s request, they cannot now be heard as

having relied upon the unanswered statements of another.

Taking into account the failure of both Huarong and TMC to

provide Commerce with requested information, the court does not

find error in Commerce’s decision to apply AFA to both companies’

sales of those products. It is not clear to the court, however,

that Commerce properly extended its application of AFA to cover

Huarong’s sales of all products covered by the axes/adzes and

bars/wedges orders, and TMC’s sales of all products under the

bars/wedges order. See Issues and Decisions Mem. at 38 (“[W]e

continue to apply total AFA to Huarong and TMC due to their

failure to provide the requested data for sales of forged tampers

and scrapers, respectively.”). Indeed, this Court has previously

found unreasonable the application of “total” AFA to a respondent

when Commerce had verified some, but not all of the respondent’s
Consol. Court No. 04-00460 Page 24

sales. See Goldlink Indus. Co., Ltd. v. United States, 30 CIT

__, __, slip op. 06-65 at 17–18 (May 4, 2006) (not published in

the Federal Supplement) (“The Court, therefore, remands this

issue back to Commerce to re-examine its determination to apply

total adverse facts rather than partial adverse facts for the

unverifiable sales.”) (emphasis in original). That is, Commerce

generally may use an adverse inference only with respect to the

specific information that a respondent failed to provide. See

Shandong Huarong Gen. Group Corp., 27 CIT at __, slip op. 03-135

at 42 (holding that, “the findings that justified the use of

facts available and a resort to adverse facts available with

respect to [respondents’] sales data and factors of production,

cannot be used to accord similar treatment to issues relating to

[respondents’] evidence of independence from state control.”);

see also Gerber Food (Yunnan) Co., Ltd. v. United States, 29 CIT

__, __, 387 F. Supp. 2d 1270, 1287 (2005).

Therefore, the court remands this matter for Commerce to

explain why its determination that Huarong’s and TMC’s failure to

report information on scrapers and tampers justified its apparent

application of AFA to Huarong’s total sales of merchandise

covered by the bars/wedges and axes/adzes orders, and TMC’s total

sales covered by the bars/wedges order, and not just the

merchandise for which requested information was not produced.
Consol. Court No. 04-00460 Page 25

C. 139.31% AFA Rate Applicable to TMC’s Exports of
Bars/Wedges

In selecting the rate applicable to TMC’s bars and wedges in

this administrative review, Commerce chose the PRC-wide rate of

139.31% from the eighth administrative review.

TMC objects to the application of the rate for several

reasons, among them is its claim that “the Department cannot

select unreasonably high AFA rates that have no relationship to a

respondent’s actual dumping margin.” Issues and Decisions Mem.

at 51. For TMC, because it “fully disclosed every sale of

subject merchandise during the POR . . . [,] the Department can

calculate and assess dumping margins on all of the sales . . . .”

Id. In other words, TMC argues that the 139.31% rate is

“unreasonably high and should be revised.” Id.

For its part, Commerce states that it chose the 139.31% rate

because “other more recently calculated margins for bars/wedges

do not offer an adequate incentive to induce TMC to cooperate in

this proceeding, given that these rates are either less than, or

nearly the same as, the cooperative rates calculated for TMC in

the most recent reviews of its bars/wedges sales.” Issues and

Decision Mem. at 42.
Consol. Court No. 04-00460 Page 26

The court finds that Commerce has not justified its use of

the 139.31% rate. When making a determination with respect to

the application of AFA, Commerce is required to read §§ 1677e(a)

(directing the agency to “use the facts otherwise available” in

reaching its determination when “necessary information is not

available on the record . . .”) and (b) (allowing the agency to

“use an inference that is adverse to the interests of that party

in selecting from among the facts otherwise available”)

together.9 Indeed, Commerce may not use an adverse inference

unless the use of facts otherwise available has resulted from a

respondent’s actions. Only having found that the use of facts

otherwise available is warranted may Commerce then determine that

the party has “failed to cooperate by not acting to the best of

9
The current version of section 1677e is a result of the
Uruguay Round Agreements Act of 1994, Pub. L. No. 103–465, 108
Stat. 4809 (1994). In the Statement of Administrative Action,
Congress explains that the Uruguay Round amended the prior law,
which “mandate[d] use of the best information available (commonly
referred to as BIA) if a person refuse[d] or [was] unable to
produce information in a timely manner or in the form required.”
H.R. Doc. No. 103-316 (1994) at 868. The new section 1677e
“requires Commerce and the Commission to make determinations on
the basis of the facts available . . . .” Id. at 869 (emphasis
added). Congress also states that “[w]here a party has not
cooperated, Commerce . . . may employ adverse inferences about
the missing information to ensure that the party does not obtain
a more favorable result by failing to cooperate than if it had
cooperated fully.” Id. at 870 (emphasis added). Thus, the
legislative history of section 1677e(b), its plain language, and
the holdings of this Court support a reading of the statute as
permitting Commerce to use an adverse inference only in
“selecting from among the facts otherwise available . . . .” See
Gerber, 29 CIT at __, 387 F. Supp. 2d at 1288 (quoting 19 U.S.C.
§ 1677e(b)).
Consol. Court No. 04-00460 Page 27

its ability to comply with a request for information . . . [and]

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) (emphasis added). Section 1677e(b) further

states that the “adverse inference may include reliance on

information derived from . . . (1) the petition, (2) a final

determination in the investigation under this subtitle, (3) any

previous review under section 1675 of this title or determination

under section 1675b of this title, or (4) any other information

placed on the record.” Id. Put another way, the statute can be

reasonably understood as requiring the rate selected as AFA to be

factually supported in all instances. As this Court has held,

an assessment rate, standing alone, is not a “fact” or
a set of “facts otherwise available,” and under no
reasonable construction of the provision could it be so
interpreted. The statute does not permit Commerce to
choose an antidumping duty assessment rate as an
“adverse inference” without making factual findings,
supported by substantial evidence . . . .

Gerber Food (Yunnan) Co., Ltd., 29 CIT at __, 387 F. Supp. 2d at

1285. Moreover, Commerce must also impose an AFA rate that is a

“reasonably accurate estimate of the respondent’s actual rate,

albeit with some built-in increase intended as a deterrent to

non-compliance.” Ta Chen Stainless Steel Pipe, Inc. v. United

States, 298 F.3d 1330, 1340 (Fed. Cir. 2002) (citations and

internal quotation marks omitted).
Consol. Court No. 04-00460 Page 28

Here, by merely selecting a rate from a previous review,

Commerce has not provided the court with sufficient factual

findings justifying its application of the 139.31% rate. In

particular, the Department has failed to explain why the chosen

rate represents a reasonably accurate estimate of TMC’s actual

rate to which it has added an amount to encourage TMC to

cooperate in future proceedings. Thus, because Commerce cannot,

absent adequate justification, select the highest available rate

to apply as AFA, the court remands this issue to Commerce to

afford it an opportunity to provide a factual basis for its

selection of the 139.31% rate.

D. Application of Partial AFA to SMC’s Sales of Bars and
Wedges For Failing to Report Finished Coating on Tool
Heads as a Factor of Production

In its Final Results, Commerce applied AFA to SMC’s sales of

bars and wedges based on its failure to provide data regarding

certain factors of production for those tools. See Final Results

69 Fed. Reg. at 55,583. Specifically, Commerce cites SMC’s

responses to Section C and D of the questionnaire in which SMC

indicated that the heads of those tools were coated with an

“enamel, polyurethane, varnish or other finish (not including

paint).”10 SMC Responses to Sections C and D of Questionnaire at

10
As Commerce noted, SMC’s response to the Section C
questionnaire indicated that a finished coating was applied to
SMC’s hammers/sledges, bars/wedges, and axes/adzes. Issues and
(continued...)
Consol. Court No. 04-00460 Page 29

C-11, C-15, C-18 (Aug. 11, 2003). Despite SMC’s responses, it

did not provide Commerce with any information as to the cost of

the finish coating. Based on SMC’s failure to provide the

requested finish coating cost information, Commerce used facts

otherwise available to determine that cost. See 19 U.S.C. §

1677e(a); see also Issues and Decisions Mem. at 16. In addition,

because it found that SMC failed to review the questionnaire

response for accuracy prior to submission, Commerce determined

that SMC failed to put forth its maximum efforts to provide

Commerce with requested information and used an adverse inference

in selecting from among the facts otherwise available. See 19

U.S.C. § 1677e(b); see also Issues and Decisions Mem. at 16. As

a result, Commerce used the highest ratios of finished coating

weight to steel input weight based on the data received from TMC

in this investigation to calculate the normal value of SMC’s bars

and wedges. See Issues and Decisions Mem. at 16.11

10
(...continued)
Decision Mem. at 16. The Section D questionnaire, however,
indicated only that SMC applied a finished coating to its
hammers/sledges. Id.
11
According to Commerce:

[W]e divided the weight of the finish coating
reported by TMC’s supplier for bars/wedges by
the steel input weight for TMC’s bars/wedges.
We applied the highest of these ratios to the
steel input weight for bars/wedges reported
by SMC’s supplier of bars/wedges. As partial
AFA, we then included this weight as the
(continued...)
Consol. Court No. 04-00460 Page 30

SMC insists that its questionnaire responses were induced by

“Commerce’s ‘introduction of a new system for reporting CONNUMs

that was started for the first time in this administrative

review.’”12 Pls.’ Mem. at 26 (quoting Issues and Decision Mem.

at 15). According to SMC, it never meant to inform Commerce that

a finish coating other than standard paint was applied to the

bars/wedges and it did not report the factor of production

information because, in its view, there was none to report. See

id. at 26.

Commerce maintains that the format of its questionnaire was

in no way confusing. See Def.’s Resp. at 14, 15 (“[T]he

questionnaire issued in this review was unambiguous.”). It notes

that the questionnaire specifically asked the respondents, in one

field, to indicate whether the tool heads were painted, and in a

separate field to report whether the tool heads were coated with

“an enamel, polyurethane, varnish or other finish” other than

11
(...continued)
consumption rate for finish coating [in] our
calculation of [normal value] for SMC’s
bars/wedges.

Issues and Decisions Mem. at 16.
12
“Control numbers, or CONNUMs are used by Commerce to
designate merchandise that is deemed identical based on the
Department’s model matching criteria. . . . CONNUMs are used as
the basis for product identification in most cases.” Koenig &
Bauer-Albert AG v. United States, 24 CIT 157, 161 n.6, 90 F.
Supp. 2d 1284, 1288 n.6 (2000).
Consol. Court No. 04-00460 Page 31

ordinary paint. SMC Responses to Section C and D of

Questionnaire at C-11, C-15, C-18. Commerce further supports its

application of partial AFA to SMC by citing Nippon Steel for the

proposition that the standard for using AFA “does not condone

inattentiveness, carelessness, or inadequate record keeping.”

Nippon Steel, 337 F.3d at 1382. Moreover, Commerce contends

that, if SMC found the questionnaire to be confusing, it should

have made that known to the Department prior to submitting its

answers. See Def.’s Resp. at 15.

The court finds SMC’s arguments unpersuasive. Upon review

of the subject questionnaire, it is difficult to find any

ambiguity in Commerce’s request for information regarding the

finish, if any, applied to the tools. The questionnaire asked in

Field Number 3.10, which is entitled “Paint,” whether the

“bar/wedge is painted or not painted,” and instructed the

respondent to place a “1" in the response if the tool was

painted, and a “2" in the event that no paint was applied. SMC’s

Responses to Sections C and D of Questionnaire at C-15. Directly

below Field Number 3.10 is Field Number 3.11, which is entitled

“Finish Coating.” This category directed respondent to indicate

whether the “[bar/wedge] head is coated with an enamel,

polyurethane, varnish or other finish (not including paint).”

Id. at C-16 (emphasis added). As with the paint inquiry,
Consol. Court No. 04-00460 Page 32

respondents were instructed to place a “1" in the response if

their tools were finish coated and a “2" if no such coating was

applied. With respect to its bars/wedges, SMC placed a “1" in

both the Paint and Finish Coating columns, indicating that the

tool heads were both painted and coated with some other finish.

See Pls.’ Conf. Appx., SMC’s Responses to Sections C and D of

Questionnaire. Therefore, the court agrees that the failure of

SMC to report the costs associated with the requested finish

coating factor of production warranted the use of facts otherwise

available under § 1677e(a) because, having failed to provide

Commerce with data relating to one of SMC’s questionnaire

responses, SMC prevented Commerce from calculating normal value

based on a complete factual record, and thus impeded the

investigation.

“Compliance with the ‘best of its ability’ standard [for the

use of AFA] is determined by assessing whether respondent has put

forth its maximum effort to provide Commerce with full and

complete answers to all inquiries in an investigation.” Nippon

Steel, 337 F.3d at 1382. Because it “withh[eld] information that

[had] been requested by the administering authority . . . ,” and

failed to recognize, prior to submitting its response, that it

had done so, SMC failed to put forth its maximum efforts to

provide Commerce with the requested cost data for the finish
Consol. Court No. 04-00460 Page 33

coating. 19 U.S.C. § 1677e. In addition, Commerce limited its

application of AFA to the specific area of SMC’s failure, i.e.,

the cost of the finish coating. This being the case, the court

affirms Commerce’s determination.

E. Commerce’s Decision Not to Revoke the Antidumping Duty
Order Applicable to SMC and LMC

Finally, SMC and LMC contest Commerce’s denial of their

requests to have the antidumping duty orders applicable to their

respective sales of hammers/sledges and bars/wedges revoked. See

Final Results 69 Fed. Reg. at 55,582; see also Issues and

Decision Mem. at 19–20, 26–27.

1. SMC’s Request to Revoke Antidumping Order Covering
Hammers/Sledges: Commercial Quantities

Commerce’s regulations provide that “before revoking an

order . . . the Secretary must be satisfied that, during each of

the three . . . years, there were exports to the United States in

commercial quantities of the subject merchandise to which a

revocation . . . will apply.” 19 C.F.R. § 351.222(d)(1).13 At

13
This requirement fits directly within the regulatory
burden placed on the requesting party to submit with its request:

(i) The person’s certification that the person sold the
subject merchandise at not less than normal value during the
period of review . . . and that in the future the person
will not sell the merchandise at less than fair value;

(ii) The person’s certification that, during each of
the [three] consecutive years . . . the person sold the
(continued...)
Consol. Court No. 04-00460 Page 34

issue in the instant action is Commerce’s finding that the

antidumping duty order should remain in effect because SMC did

not export its hammers and sledges to the United States in

commercial quantities for three consecutive years. Neither the

statute nor the regulations provide a definition of “commercial

quantities.” See Pls.’ Mem. at 28; see also Def.’s Resp. at 22.

SMC maintains that it complied with the regulations by

participating meaningfully in the U.S. market. See Pls.’ Mem. at

28. According to SMC, its exports significantly increased over

the three-year period encompassing 2000-2001, 2001-2002, and

2002-2003.14 While the parties agree that the total number of

pieces exported during the 2001–2002 and 2002–2003 periods

constituted commercial quantities, Commerce found that the

hammer/sledge exports during 2000–2001 failed to meet the

regulatory standard. See Pls.’ Mem. at 28; see also Def.’s Resp.

13
(...continued)
subject merchandise to the United States in commercial
quantities; and

(iii) If applicable, the agreement regarding
reinstatement in the order . . . .

19 C.F.R. § 351.222(e)(1).
14
For the period covering 2000–2001, SMC exported [[
]] pieces. In 2001-2002, the exports from the Jinma factory
totaled [[ ]]. In the 2002–2003 period, SMC exported [[
]] hammers/sledges produced at the Jinma location. Pls.’
Mem. at 28–29.
Consol. Court No. 04-00460 Page 35

at 22–23. Although the levels attained in the subsequent two

years were greater, SMC argues that the number of hammers/sledges

exported to the United States during 2000–2001 satisfied the

regulatory requirement of exporting subject merchandise in

commercial quantities. Indeed, SMC emphasizes that, during the

tenth administrative review, which covered 2000–2001, Commerce

made no mention of any failure on SMC’s part to sell the subject

merchandise in commercial quantities and gave SMC a zero percent

margin for its hammers/sledges exports. See Pls.’ Mem. at 28;

see also HFHTs From the PRC, 67 Fed. Reg. 57,789, 57,792 (Sept.

12, 2002) (“tenth review”). Because Commerce did not, at the

time of the tenth review, question whether the subject

merchandise was exported in commercial quantities, SMC insists

that Commerce is prohibited from doing so now. See Pls.’ Mem. at

29.

Commerce acknowledges that neither the statute nor the

regulations provide guidance with respect to the definition of

commercial quantities. See Def.’s Resp. at 22. For Commerce,

the absence of any formal standard requires commercial quantities

to be determined on a “case-by-case basis, based on the unique

facts of each proceeding.” Id. Commerce explains that its

current practice is to “compare[] the quantity of exports in each

period of review to an appropriate benchmark period and also
Consol. Court No. 04-00460 Page 36

consider[] sales in absolute terms, examining whether the

quantity in any of the periods was abnormally small.” Id.

(internal quotation marks omitted). In reaching its conclusion

in the instant matter, Commerce asserts that it adhered to this

practice and used the export levels for 2002–2003 as the

benchmark period. See Def.’s Resp. at 22. In other words,

Commerce compared the volume of exports by SMC to the United

States from 2000–2001 and 2001–2002 to the volume exported in

2002–2003. In comparing the exports from 2000–2001 to the

benchmark period of 2002–2003, Commerce found the former figures

to be “dwarfed” by the latter and, thus, insufficient to support

a finding that the order was no longer necessary to prevent

dumping. Id.

Next, Commerce asserts that the absence of a discussion

within the tenth review concerning whether SMC exported

hammers/sledges in commercial quantities was to be expected.

Commerce is correct. As Commerce notes, “[t]he yearly review

procedures do not require a ‘commercial quantities’ analysis.”

Id. at 24. Commerce argues that neither the fact that SMC’s

exports were not discussed in terms of commercial quantities in

the tenth review, nor the assignment of a zero margin supports a

finding that SMC complied with 19 C.F.R. § 351.222(e). This is

because whether a respondent exported the subject merchandise in
Consol. Court No. 04-00460 Page 37

commercial quantities is not a factor that Commerce considers

when assigning dumping margins. See, e.g., 19 C.F.R. § 351.213

(articulating the factors and procedures to be applied in an

administrative review. Notably absent from this list is a

requirement that the subject merchandise be exported in

commercial quantities.).

“When a particular term is not expressly defined in a

statute, the meaning of that term may be discerned by looking to

the provisions of the whole law, and to its object and policy.”

Cal. Indus. Prods., Inc. v. United States, 436 F.3d 1341, 1353

(Fed. Cir. 2006) (internal citations, alterations and quotation

marks omitted). Commerce claims that it has satisfied the

requirement of California Products, Inc. because its benchmark

methodology is a “current practice” aimed at discerning meaning

for the phrase “commercial quantities” under 19 C.F.R. §

351.222(e)(1). See Def.’s Resp. at 22.15 Using SMC’s exports

from 2002–2003 as the benchmark, Commerce found that the volume

in 2000–2001 was “abnormally small” in comparison, and, thus, did

15
In support of its assertion that the benchmark
methodology is a “current practice,” Commerce cites Determination
Not To Revoke the Antidumping Duty Order: Brass Sheet and Strip
From the Netherlands, 65 Fed. Reg. 742, 750 (Jan. 6, 2000), and
Pure Magnesium From Canada: Final Results of Antidumping Duty
Administrative Review and Determination Not To Revoke Order in
Part, 64 Fed. Reg. 12,977, 12,979 (Mar. 16, 1999). See Def.’s
Resp. at 22.
Consol. Court No. 04-00460 Page 38

not amount to “commercial quantities.” Id. What Commerce does

not explain is why its current practice fulfills the purpose of

the regulation, which is to ensure that an exporter will continue

to participate in fair trade practices upon revocation.16 See

Rules and Regulations, Antidumping Duties; Countervailing Duties

(“Preamble”), 62 Fed. Reg. 27,296, 27,325–26 (ITA May 19, 1997).

Indeed, Commerce retained the “commercial quantities” language in

the regulation even after the requisite notice and comment period

produced some remarks suggesting that the phrase was not needed.

Specifically, Commerce stated that:

[W]e believe that it is reasonable to presume that if
subject merchandise, shipped in commercial quantities,
is being dumped or subsidized, domestic interested
parties will react by requesting an administrative
review to ensure that duties are assessed and that cash
deposit rates are revised upward from zero. If
domestic interested parties do not request a review,
presumably it is because they acknowledge that the
subject merchandise continues to be fairly traded.

16
The Preamble of 19 C.F.R. § 351.222 explains why
Commerce believes an exporter must demonstrate that it had
shipped the subject merchandise in “commercial quantities” for a
three-year period. For Commerce:

The underlying assumption behind a revocation
based on the absence of dumping or
countervailable subsidization is that a
respondent, by engaging in fair trade for a
specified period of time, has demonstrated
that it will not resume its unfair trade
practice following the revocation of an
order.

Rules and Regulations, Antidumping Duties; Countervailing Duties
62 Fed. Reg. at 27,326.
Consol. Court No. 04-00460 Page 39

However, neither presumption can be made when
merchandise is not being shipped in commercial
quantities.

Preamble at 27,326; see also Pure Magnesium From Canada: Final

Results of Antidumping Duty Administrative Review and

Determination Not To Revoke Order in Part, 64 Fed. Reg. 12,977,

12,979 (Mar. 16, 1999) (“This requirement ensures that the

Department’s revocation determination is based upon a sufficient

breadth of information regarding a company’s normal commercial

practice.”).

Without further explanation, however, it is difficult to see

how the current “benchmark” methodology employed by Commerce

would further the purpose of the regulation. That is, why is

Commerce’s method a reasonable way to ensure the regulation’s

goals. For that reason, the court remands this issue in order to

allow Commerce to provide the court with an explanation as to how

its methodology results in a reasonable measure of “commercial

quantities.” That is, Commerce must explain: (1) how it arrived

at the “benchmark period”; (2) why it was reasonable in its

selection; and (3) how a comparison of the two periods

demonstrates that the exports for the year 2000–2001 do not

constitute commercial quantities.
Consol. Court No. 04-00460 Page 40

2. LMC’s Request to Revoke Antidumping Duty Order
Covering Bars/Wedges: Sale of Merchandise at Not
Less Than Normal Value

Commerce also denied LMC’s request to have the antidumping

duty order applicable to its sales of bars/wedges revoked, basing

its denial on LMC’s failure to sell its merchandise at not less

than normal value17 for three consecutive years. See 19 C.F.R. §

351.222(e)(1)(i).18 Commerce’s conclusion was based on its

application of AFA to LMC’s sales of bars and wedges for its

failure to participate to the best of its ability to provide

information on its invoicing practices, and LMC’s consequent

receipt of an above de minimis dumping margin for the period of

review. See Def.’s Resp. at 25. Because of the imposition of a

more than de minimis margin, Commerce found that LMC was

17
Normal value of the subject merchandise is defined as

the price at which the foreign like product
is first sold (or, in the absence of a sale,
offered for a sale) for consumption in the
exporting country, in the usual commercial
quantities and in the ordinary course of
trade and, to the extent practicable, at the
same level of trade as the export price or
constructed export price . . . .

19 U.S.C. § 1677b(a)(1)(B)(i).
18
This regulation provides in pertinent part that, along
with a written request to revoke, a person must submit: “(i) The
person’s certification that the person sold the subject
merchandise at not less than normal value during the period of
review . . . and that in the future the person will not sell the
merchandise at less than normal value . . . .” 19 C.F.R. §
351.222(e)(1)(i).
Consol. Court No. 04-00460 Page 41

necessarily selling its merchandise at less than normal value.

See Def.’s Resp. at 25. LMC contends that the margin was

assigned as a result of the Department’s erroneous application of

AFA to its bars/wedges sales. See Pls.’ Mem. at 31. For LMC,

the decision not to revoke the order covering its bars and wedges

cannot be based on an unlawfully assigned margin. Commerce

argues that both its application of AFA to LMC and its subsequent

assignment of an above de minimis margin were appropriate, and

that therefore its decision not to revoke the order was supported

by substantial evidence and otherwise in accordance with law.

Having previously found Commerce’s application of AFA to

LMC’s sales of bars/wedges to be supported by substantial

evidence, the court finds that the resulting margin and,

consequently, Commerce’s decision not to revoke based on LMC’s

failure to meet the regulatory requirements of 19 C.F.R. §

351.222(e)(1)(i) are supported by the same. Thus, Commerce’s

decision not to revoke the antidumping duty order covering LMC’s

sales included within the scope of the bars/wedges order is

sustained.

II. Ames’ Motion

A. Commerce’s Use of Steel Billet Instead of Hexagonal
Steel Bar as a Surrogate Value for TMC

Ames first challenges Commerce’s use of a surrogate value
Consol. Court No. 04-00460 Page 42

for steel billet when calculating the normal value of certain of

TMC’s merchandise. Under 19 U.S.C. § 1677b(c), when the subject

merchandise is exported from a nonmarket economy country

(“NME”),19 normal value may be calculated by valuing the factors

of production in a market economy country or countries considered

to be appropriate by Commerce. See 19 U.S.C. § 1677b(c)(1). As

TMC’s merchandise is exported from China, a NME, Commerce used

this methodology to determine normal value for TMC’s bars/wedges,

axes/adzes, and hammers/sledges. See Issues and Decision Mem. at

5–7. Ames does not argue with this methodology, but rather

disputes Commerce’s decision to use steel billet instead of

hexagonal steel bar when valuing this input. See Def.-Int.’s Br.

Supp. Mot. J. Agency R. (“Def.-Int.’s Br.”) at 8.

In support of its contention that Commerce valued the wrong

kind of steel, Ames points to TMC’s product catalog, which

describes certain tools as made from hexangular stock. See id.

According to Ames, the conversion of steel billet into a

hexagonal shape requires equipment that has not been shown to be

19
A “nonmarket economy country” is “any foreign country
that the administering authority determines does not operate on
market principles of cost or pricing structures, so that sales of
merchandise in such country do not reflect the fair value of the
merchandise.” 19 U.S.C. § 1677(18)(A). “Any determination that
a foreign country is a nonmarket economy country shall remain in
effect until revoked by the administering authority.” 19 U.S.C.
§ 1677(18)(C).
Consol. Court No. 04-00460 Page 43

in TMC’s possession. See id. at 9.

Commerce claims that, although TMC did have descriptive

language in its catalog indicating the use of hexagonal steel

bar, this observation alone is not dispositive. See Def.’s Resp.

at 25. Rather, Commerce relies on the record invoices from TMC’s

suppliers, which demonstrate that TMC bought substantial

quantities of steel billet and scrap rail but no hexagonal stock.

See id. at 25–26; see also Issues and Decision Mem. at 7. Thus,

the Department based its determination on data that “dealt

specifically with the inputs used and were linked to the raw

material inventory . . . .” Def.’s Resp. at 25. Commerce

concludes that the “ambiguous statement [contained in the

catalog] does not overcome the documentary evidence supplied by

TMC’s suppliers regarding the material inputs they used to

produce HFHTs.” Issues and Decision Mem. at 7.

As to Ames’ argument that TMC does not have the equipment to

transform billet into hexagonal bars, Commerce notes that,

“[g]iven that the forging process heats the steel input to a

degree such that the input can be shaped into the desired form,”

no practical barrier exists to prevent the billet from being

shaped into hexagonal bar. Id. Thus, Commerce contends that the

fact that TMC does not have access to a rolling mill or other
Consol. Court No. 04-00460 Page 44

such machinery does not foreclose a finding that TMC could

convert steel billet into hexagonal stock.

Here, Commerce’s decision is supported by its review of what

TMC actually purchased from its raw material suppliers. That is,

Commerce “examined the invoices, which dealt specifically with

the inputs used and were linked with the raw material inventory,

rather than a general reference in a brochure.” Def.’s Resp. at

25; see also Def. Conf. R. Ex. 14 (consisting of TMC’s Response

to Section D of Questionnaire (November 3, 2003)).20 Commerce

also took into account that the process TMC was known from record

evidence to have used, could produce hexagonal shapes. Ames’

argument, on the other hand, is largely based on conjecture.

Thus, the court finds that Commerce has supported its

finding with substantial evidence and sustains its conclusion.

20
In response to question twenty of Section D of the
questionnaire, which sought a list of all types of steel used to
produce the subject merchandise, TMC submitted invoices from
suppliers indicating that either scrap rail or steel billet was
purchased from [[ ]], [[ ]], [[ ]], [[
]], and [[ ]]. See Def. Conf. R. Ex. 14. The invoices
provide both the type and amount of steel purchased as well as
the tool for which the steel was intended to be used. Id.
Consol. Court No. 04-00460 Page 45

B. Commerce’s Failure to Apply AFA to TMC’s Sales of
Axes/Adzes and Picks/Mattocks Supplied by Company C21

Ames’ next contention is that Commerce erred in not applying

AFA to TMC’s sales of axes/adzes and picks/mattocks supplied by

Company C. Ames argues that because Commerce applied AFA to SMC

for failing to report data that Company C would not provide, it

should also apply AFA to TMC even though Company C did cooperate

by supplying TMC with requested information. Ames contends that

Commerce’s past practice dictates that AFA be applied to both

respondents based on Company C’s status as an interested party.

See Def.-Int.’s Br. at 12. Commerce maintains that applying AFA

to TMC, which participated to the best of its ability in this

portion of the review, would be contrary to public policy. See

Def. Resp. at 19; Issues and Decisions Mem. at 30.

Ames’ argument is rooted in its analyses of two prior

Commerce determinations: Fresh Garlic From the PRC, 68 Fed. Reg.

75,210 (Dec. 30, 2003) (“Fresh Garlic”); and Tapered Roller

Bearings and Parts Thereof, Finished and Unfinished, From the PRC

(final results), 62 Fed. Reg. 61,276 (Nov. 17, 1997) (“Tapered

Roller Bearings 1995–1996"). According to Ames, these

determinations bind Commerce to apply AFA to all respondents

associated with an uncooperative interested-party supplier,

21
For purposes of confidentiality, [[ ]] is
referred to as “Company C.” See Def.-Int.’s Br. at 11.
Consol. Court No. 04-00460 Page 46

regardless of whether a respondent cooperated or whether the

interested-party supplier cooperated with that respondent. See

Def.-Int.’s Br. at 12–13. Indeed, Ames insists that:

[A] supplying producer is an interested party whose
failure to cooperate is attributable to the exporting
respondent. . . . [A]s long as one respondent received
[AFA] for its response for this reason, any other
respondent that also sold subject merchandise to the
United States manufactured by that respondent should
also receive [AFA].

Id. at 12.

Central to Ames’ argument is its contention that Company C

is an interested party under § 1677(9).22 Id. at 13. Ames

contends that, had Commerce found Company C to be an interested

party, its lack of cooperation with respect to SMC would be

properly attributable to both SMC and TMC. Id.

In Commerce’s view, its decision to refrain from applying

AFA to TMC was proper because, unlike SMC, TMC fully complied

with Commerce’s requests. See Def.’s Resp. at 19–20. Commerce

further insists that applying AFA to TMC in this instance would

be contrary to the purpose behind AFA, which is to encourage

22
Section 1677(9) provides, in pertinent part that “[t]he
term ‘interested party’ means . . . (A) a foreign manufacturer,
producer, or exporter, or the United States importer, of subject
merchandise or a trade or business association a majority of the
members of which are producers, exporters, or importers of such
merchandise . . . .” 19 U.S.C. § 1677(9)(A).
Consol. Court No. 04-00460 Page 47

respondents to fully participate in administrative reviews. See

id. at 19. For Commerce, because “[t]he purpose of the ‘adverse

inference’ is to encourage participation, [it] properly concluded

that applying an ‘adverse inference’ to TMC, notwithstanding its

cooperation, would be contrary to that purpose.” Id. Therefore,

because TMC cooperated to the best of its ability and persuaded

Company C to do the same, Commerce maintains that its decision to

not apply AFA to TMC was reasonable.

The court agrees with Ames that Company C, as a foreign

manufacturer of the subject merchandise, is an interested party

under § 1677(9)(A) (including within the ambit of “interested

party” a “foreign manufacturer, producer, or exporter . . . of

subject merchandise . . . .”). Nonetheless, while acknowledging

that Commerce has previously applied AFA to respondents whose

interested-party suppliers failed to provide relevant factors of

production data, see Fresh Garlic at 75,210; see also Tapered

Roller Bearings 1995–1996 at 61,276, the court finds that

Commerce correctly determined that the situation presented here

is distinct from that in those past investigations.23 An

23
It is apparent that these two prior determinations are
not enough to constitute an agency practice that is binding on
Commerce. See Ranchers-Cattlemen Action Legal Foundation v.
United States, 23 CIT 861, 884–85, 74 F. Supp. 2d 1353, 1374
(1999) (“An action . . . becomes an ‘agency practice’ when a
uniform and established procedure exists that would lead a party,
(continued...)
Consol. Court No. 04-00460 Page 48

examination of the facts in those two investigations demonstrates

that, in Fresh Garlic, the supplier data was rejected as

untimely, and in Tapered Roller Bearings 1995–1996, the

respondent never actually produced any of the requested

information. Thus, although these respondents made efforts to

get interested parties to give them the information needed to be

responsive, ultimately, they failed to obtain the information in

a timely fashion or were unable to obtain the information at all.

Unlike the respondents in the investigations cited by Ames, TMC

was able to comply with Commerce’s request because it

successfully convinced Company C to provide it with the necessary

data. Commerce’s choice to recognize this cooperation by not

applying AFA was reasonable because TMC, by its cooperation and

timely production of information, did nothing that would trigger

the use of either facts otherwise available or AFA. See 19

U.S.C. § 1677e.

C. Propriety of PRC-Wide Rate Applicable to Huarong’s
Scraper Sales

Ames next objects to Commerce’s application of the PRC-wide

55.74% rate to Huarong’s sales of scrapers because, in its view,

that rate is sufficiently low that Huarong would actually benefit

23
(...continued)
in the absence of notification of change, reasonably to expect
adherence to the established practice or procedure.”).
Consol. Court No. 04-00460 Page 49

from it. See Def.-Int.’s Br. at 16. Commerce applied the PRC-

wide rate as a result of Huarong’s previously discussed failure

to report factors of production data concerning its forged

scrapers. See id. While Huarong challenges Commerce’s decision

to apply AFA to its forged scrapers sales, it does not take issue

with the calculation of the rate. See Pls.’ Mem. at 12–13.

Because Ames believes that the 55.74% rate is insufficient to

encourage cooperation, it urges the court to direct Commerce to

calculate a rate using information from Huarong’s questionnaire

responses. See Def.-Int.’s Br. at 16.

As part of its argument, Ames states that, during the

investigation, it calculated a rate based on data submitted by

Huarong and urged its use by Commerce.24 Ames claims that

Commerce failed sufficiently to take into account this proposed

24
Specifically, Ames proposed a rate to Commerce that it
claims accounted for:

(1) the omission of an amount for foreign
inland freight for the steel input from the
calculation of [normal value]; (2) the
omission of an amount for foreign brokerage
and handling from the calculation of net
export price; and (3) the inclusion of
Huarong’s reported scrap offset in the
calculation of [normal value]. Using these
assumptions and the actual data provided by
Huarong, Ames calculated a dumping margin of
[[ ]].

Def.-Int.’s Br. at 16–17.
Consol. Court No. 04-00460 Page 50

rate and thus acted in violation of 19 C.F.R. § 351.309(b)(1).

(“In making the final determination in a[n] . . . antidumping

investigation . . ., the Secretary will consider written

arguments in case or rebuttal briefs filed within the time limits

in this section.”). Notably, this rate was dramatically greater

than the PRC-wide rate. Id. at 20.25 Because it submitted its

proposed rate in writing, Ames contends that Commerce was

required by regulation to consider its claim that Huarong was

benefitting from the application of the PRC-wide rate. See id.

at 17.

In response to an argument made by Commerce, Ames takes

issue with the Department’s finding that the data Huarong

reported was incomplete and, thus, could not be used to calculate

an accurate antidumping duty rate. Ames insists that, despite

Huarong’s failure to respond to supplemental questionnaires, the

information contained in Huarong’s initial response was

sufficiently complete to support an individual rate calculation.

Id. at 18. In addition, Ames asserts that, once the decision is

made to apply AFA, Commerce is no longer burdened by the

responsibility of calculating dumping margins as accurately as

possible. Id.

25
Indeed, the rate was [[ ]] the PRC-wide rate
of 55.74%. Id. at 20.
Consol. Court No. 04-00460 Page 51

In response, Commerce first notes that it did consider the

rate calculated by Ames but found the data used in its

calculation wanting. See Def.’s Resp. at 16; see also Issues and

Decisions Mem. at 18 (“Relying upon incomplete sales and [factors

of production] data . . . would be contrary to our responsibility

to calculate accurate dumping margins. . . . We consider the

application of the AFA rate more appropriate than calculating a

margin based on incomplete and unverified sales and [factors of

production] data.”). In other words, because “Huarong refused to

answer supplemental questions on scrapers, [which] ruled out the

possibility of any verification . . .,” Commerce concluded that

the data contained in Huarong’s initial response was insufficient

to make an accurate calculation. Issues and Decisions Mem. at

18. Next, Commerce points out that in the ninth administrative

review, the most recent review in which an AFA rate was applied

to Huarong’s sales of scrapers, the rate was 18.72%. See HFHTs

From the PRC, 66 Fed. Reg. 48,026, 48,029 (ITA Sept. 17, 2001)

(final results) (“ninth review”); see also Def.’s Resp. at 16.

For the instant review, Commerce emphasizes that “the rate

selected as adverse facts available was 55.74 percent . . .[,]”

which is nearly three times as high as the most recently applied

rate. Def.’s Resp. at 16. That is, Commerce believes that an

approximate 300% rate increase would provide a sufficient

incentive to encourage cooperation in future reviews.
Consol. Court No. 04-00460 Page 52

The court agrees with Commerce’s conclusion that the PRC-

wide rate is adequate to encourage participation in future

reviews. First, the court notes that, despite Ames’ assertion to

the contrary, “[i]t is clear . . . that [Congress] intended for

an adverse facts available rate to be a reasonably accurate

estimate of the respondent’s actual rate, albeit with some built-

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

Stainless Steel Pipe, Inc., 298 F.3d at 1340 (citation and

internal quotation marks omitted). In addition, the court cannot

conclude that the factors of production data provided in

Huarong’s original response provided a sufficient basis upon

which Commerce could select an appropriate AFA rate. By failing

to submit answers to Commerce’s supplemental questionnaires,

Huarong effectively prohibited the agency from verifying the data

contained in the initial response. While “verification is a spot

check and is not intended to be an exhaustive examination of the

respondent’s business,” it does allow Commerce to ensure the

validity of the submitted data, which, in turn, leads to more

accurate rate calculations. Torrington Co. v. United States, 25

CIT 395, 444, 146 F. Supp. 2d 845, 897 (2001). Put another way,

because the information contained in Huarong’s first response was

incomplete and incapable of being verified, Commerce reasonably

determined that the response was insufficient to support the

calculation of an AFA rate. Second, it is apparent that Commerce
Consol. Court No. 04-00460 Page 53

indeed considered Ames’ written argument in compliance with its

regulations, but simply found Ames’ calculated rate to be

lacking. Finally, the court cannot find that the assigned rate

will not be adequate to encourage future cooperation. The

incentive to cooperate is found by the addition of “some built-in

increase intended as a deterrent to non-compliance,” to a

reasonable estimate of the actual rate. Ta Chen Stainless Steel

Pipe, Inc., 298 F.3d at 1340 (internal quotation marks omitted).

Ames’ rate, because it is based on unreliable data, fails to

provide a reasonable estimate of what the rate should be. In

addition, the magnitude of Ames’ rate suggests that its purpose

is to be punitive rather than merely to encourage cooperation.

See id. Thus, the court affirms Commerce’s application of the

55.74% PRC-wide rate to Huarong as supported by substantial

evidence and otherwise in accordance with law.

D. Huarong’s and SMC’s Failure to Report Data on Cast
Tamper Sales: Application of AFA

Ames’ next claim is that Commerce erred in not applying AFA

to Huarong and SMC for their failure to report sales information

concerning cast tampers. See Def.-Int.’s Br. at 20. As has been

previously discussed, Commerce applied AFA to Huarong for its

failure to report on its sales of forged tampers. See supra Part

I. B.
Consol. Court No. 04-00460 Page 54

In support of its decision not to apply AFA to Huarong and

SMC for failing to report cast tamper data, Commerce relies on

its determination in Final Results of Redetermination Pursuant to

Court Remand Tianjin Machinery Import & Export Corporation v.

United States and Ames True Temper (“Cast Pick Remand”) (ITA July

20, 2004), that found cast picks to be outside the scope of the

HFHTs orders. See Def.’s Resp. at 20. The Cast Pick Remand was

issued after the respondents had submitted their responses both

to Commerce’s initial and supplemental questionnaires. See

generally Def.’s Conf. App. (indicating that respondents

submitted their responses in 2003). Although Huarong and SMC

failed to submit any data concerning their sales of cast tampers,

Commerce, because of the new determination that picks

manufactured through a casting process were excluded from the

scope of the orders, extended that finding to all cast-

manufactured subject merchandise. Commerce cites this Court’s

holding in Am. Silicon Technologies v. United States, 27 CIT __,

__, 273 F. Supp. 2d 1342, 1346 (2003), which allowed Commerce to

apply a margin that was the subject of a pending appeal as

support for its position. The Department understands this case

to stand for the proposition that it “may follow [a] remand

decision even if [it is] still pending.” Def.’s Resp. at 20; see

D & L Supply Co. v. United States, 113 F.3d 1220, 1224 (Fed. Cir.

1997) (“A margin that has not yet been overturned is presumed to
Consol. Court No. 04-00460 Page 55

be accurate and can properly be used in the [best information

available] determination.”). Thus, having determined that cast

picks, and consequently cast tampers, were not included in the

scope of the order, Commerce argues that “Huarong’s and SMC’s

sales of non-subject [cast tampers] [are] immaterial to

Commerce’s determination and, thus, Commerce properly exercised

its discretion,” in deciding not to apply AFA. Def.’s Resp. at

20.

Initially, Ames insists that Commerce’s final scope ruling

in the Cast Pick Remand is irrelevant to the question of whether

Huarong and SMC were required to report their sales information

for cast tampers. See Def.-Int.’s Br. at 21. Ames stresses that

the subject tampers, while manufactured through a cast process,

were not excluded from coverage under the order. Id. That being

the case, Ames contends that the application of AFA is required

because Huarong and SMC failed to cooperate to the best of their

ability by not complying with Commerce’s request for data on the

tampers. Id. at 22.

[The Cast Pick Remand] . . . would only apply to the
order on picks and mattocks. It would have no
relevance with respect to tampers, which are explicitly
included in the order covering bars, wedges, and track
tools. Therefore, absent a scope ruling directly on
tampers, th[e] [bars/wedges] order would remain
unaffected.

Id. at 23.
Consol. Court No. 04-00460 Page 56

Relying on this argument, Ames next challenges what it

refers to as Commerce’s “arbitrary” decision to apply AFA for

failure to report data on forged tampers and to refrain from such

application with respect to similarly absent data on cast

tampers. Id. Specifically, Ames argues that:

Commerce applied AFA to TMC and Huarong due to their
failure to provide requested data for sales of forged
tampers and scrapers, but declined to do so on Huarong
and SMC due to their failure to report cast tampers.
There is no basis for such an arbitrary distinction.
There is no final scope determination on any of these
products . . . If Commerce begins to make distinctions
on how to report sales based on the later results of
any scope proceeding, it establishes a precedent that
will only encourage respondents not to report currently
subject sales.

Id.

The text of 19 U.S.C. § 1677e(b) gives Commerce significant

discretion to decide whether to apply AFA when calculating a

respondent’s antidumping duty rate. As such, the statute does

not require Commerce to use an adverse inference in every

instance where a respondent has not supplied information. See AK

Steel Corp. v. United States, 28 CIT __, __, 346 F. Supp. 2d

1348, 1355 (2004). Indeed, this Court has found that:

“[T]he purpose of section 1677e(b) is to provide
respondents with an incentive to cooperate, not to
impose punitive, aberrational, or uncorroborated
margins.” [Plaintiff] apparently interprets Nippon
Steel [Corp. v. United States, 337 F.3d 1373 (Fed. Cir.
2003)] to require Commerce to prove that an importer
cooperated to the best of its ability every time that
the agency decides not to apply adverse facts
Consol. Court No. 04-00460 Page 57

available. This runs counter to the discretion
afforded to Commerce by section 1677e(b) in the
application of adverse facts available.

Id. (quoting F.LLI De Cecco Di Fillipo Fara S. Martino S.p.A. v.

United States, 216 F.3d 1027, 1032 (Fed. Cir. 2000)) (emphasis in

original) (footnote omitted).

Here, Commerce determined that applying AFA to Huarong and

SMC for their failure to report data on cast tampers would

neither aid the investigation nor serve to encourage their

cooperation. For Commerce, because picks manufactured through a

cast process were found to be outside the scope of the HFHTs

orders, information relating to cast tampers was “immaterial” to

the review.26 Commerce maintains that it was not an abuse of

discretion to extend that finding to other cast tools since the

reasoning with respect to each tool would be the same.

Given the ruling on cast picks,27 it was surely not

26
On May 23, 2005, Commerce issued a final ruling finding
cast tampers to be outside the scope of the order covering
axes/adzes. See Notice of Scope Rulings, 70 Fed. Reg. 55,110,
55,111 (ITA Sept. 20, 2005) (A-570-803: HFHTs, Finished or
Unfinished, With or Without Handles, From PRC). As this
determination was made after the commencement of the instant
action, it is not part of the record, and, thus, cannot provide
the basis for Commerce’s decision. See 19 U.S.C.
§ 1516a(b)(1)(B)(i).
27
The orders covering HFHTs are applicable to merchandise
“manufactured through a hot forge operation . . . .” Cast Pick
(continued...)
Consol. Court No. 04-00460 Page 58

unreasonable for Commerce to conclude that other cast tools

should be treated in the same manner. As a result, the court

finds that it was within Commerce’s discretion to not require the

submission of unneeded data. See Timken Co. v. United States, 18

CIT 486, 489, 852 F. Supp. 1122, 1126 (1994) (“It is well-

established . . . that Commerce has broad discretion with regard

to when the use of [AFA] is appropriate. . . . If, however,

Commerce did receive all the data or exercise[d] its broad

discretion in this matter and deemed the missing information

unnecessary, then the dumping margin need not be recalculated.”).

Thus, Commerce properly refrained from using facts otherwise

available under 19 U.S.C. § 1677e(a), and, in turn, appropriately

did not use an inference adverse to SMC’s interests under 19

U.S.C. § 1677e(b).

E. Valuation of Pallets: Use of Surrogate for Scrap Steel

Ames next takes exception to Commerce’s valuation of the

steel used by each plaintiff to manufacture its shipping pallets.

See Def.-Int.’s Br. at 24. Ames contends that the Department

employed an incorrect surrogate price to value the steel, and

27
(...continued)
Remand at 3. Thus, Commerce cited the fact that “it is
undisputed that casting and forging are two separate and distinct
production processes . . .[,]” as the basis for its ruling that
cast picks were not included within the scope of the orders. Id.
at 5.
Consol. Court No. 04-00460 Page 59

that Commerce did not account for other necessary factors

involved in the pallet manufacturing process. Id.

For its part, Commerce has asked for a voluntary remand of

this matter, pointing to this court’s holding in Shandong Huarong

Mach. Co. v. United States, 29 CIT __, __, slip op. 05-54 at

20–22 (May 2, 2005) (not published in the Federal Supplement).

See Def.’s Resp. at 32 (“Because [it] is revisiting the valuation

of pallets in the context of [another] remand, [Commerce]

respectfully requests a voluntary remand concerning this issue

for further analysis.”).

The court agrees that this matter should be remanded to

Commerce for further analysis.

F. Calculation of Movement Charges: Additional Expenses

Pursuant to 19 U.S.C. § 1677a(c)(2)(A), Commerce shall

reduce the price used to establish export price28 (“U.S. price”)

by “the amount, if any, included in such price, attributable to

any additional costs, charges, or expenses, and United States

import duties, which are incident to bringing the subject

28
“Export price” is “the price at which the subject
merchandise is first sold . . . before the date of importation by
the producer or exporter of the subject merchandise outside of
the United States to an unaffiliated purchaser in the United
States . . . .” 19 U.S.C. § 1677a(a).
Consol. Court No. 04-00460 Page 60

merchandise from the original place of shipment in the exporting

country to the place of delivery in the United States . . . .”

19 U.S.C. § 1677a(c)(2); see Dupont Teijin Films USA, LP v.

United States, 27 CIT __, __, 273 F. Supp. 2d 1347, 1349 (noting

that “export price” is “sometimes referred to as ‘U.S. price.’”).

Ames argues that, in its analysis, Commerce employed a surrogate

value that did not account for all of the additional expenses

incurred by the respondents, and thus failed to deduct those

expenses from the U.S. price. See Def.-Int.’s Br. at 28.

Commerce argues that, “[b]ased upon its experience, . . . the

miscellaneous handling expenses and containerization charges

alleged by Ames, to the extent they were incurred, are captured

by the brokerage and handling and ocean freight surrogates used.”

Def. Resp. at 29; see also Issues and Decision Mem. at 14. Thus,

Commerce contends that, had it deducted the costs that Ames

urges, the potential for double-counting would have increased as

would the potential for an inaccurate calculation.

Ames insists that Commerce’s calculation of moving charges

based on an Indian surrogate value derived from Certain Stainless

Steel Wire Rod from India, 64 Fed. Reg. 856 (ITA Jan. 6, 1999)

(final results) (“Steel Wire Rod From India”), failed to

consider, among other things, loading and containerization costs

incurred by plaintiffs in the course of shipping the subject
Consol. Court No. 04-00460 Page 61

merchandise to the United States. See Def.-Int.’s Br. at 28.

Ames further claims that:

The Department’s decision is unsupported by substantial
evidence, especially when it conceded that the exporter
might have incurred certain expenses that were not part
of the surrogate value used by the Department. Such an
approach is in direct conflict with the Department’s
obligation to calculate accurate dumping margins. If
it is reasonable to assume that the exporter ultimately
would pay for these costs, then the Department cannot
ignore them and simply rely on the surrogate value
without any adjustment. . . . Quite to the contrary,
the absence of such expenses from the original source
document may be strong evidence that the surrogate
value does not contain the list of expenses cited by
Ames.

Id. at 29–30 (internal quotation marks omitted). In other words,

Ames maintains that Commerce cannot simply base its determination

not to deduct the additional expenses on its assumption that

“‘the brokerage and handling surrogate value captures these

costs.’” Id. at 30 (quoting Issues and Decision Mem. at 14).

Commerce asserts that its calculation was based on

substantial evidence because nothing indicates that the costs

provided by Ames were ever actually paid by plaintiffs. See

Def.’s Resp. at 30. Put another way, Commerce “declined to value

expenses that there was no evidence [plaintiffs] incurred.” Id.

In addition, Commerce states that:

We reviewed the public record of Stainless Steel Wire
Rod from India, but found nothing to indicate whether
the miscellaneous handling expenses cited by [Ames]
Consol. Court No. 04-00460 Page 62

. . . were covered by this surrogate value. Although
there are exceptions to this practice, it is the
Department’s experience that the freight forwarder
typically pays all of the miscellaneous expenses
necessary to export a product, then bills its customer
(typically, the exporter) for these costs. Absent
evidence to the contrary, it is reasonable to assume
that the brokerage and handling surrogate value
captures these costs. . . . Therefore, as it is likely
that the brokerage and handling surrogate value . . .
includes these miscellaneous handling expenses, to
avoid possible double counting, we have not included
the additional handling expenses identified by [Ames]
in our calculation of net U.S. price . . . .

Issues and Decision Mem. at 14. That is, without investigating

whether the “miscellaneous” costs were in fact counted in the

surrogate value, Commerce has nonetheless refrained from

deducting those values in its net U.S. price calculation.

The court finds that, despite the deference accorded to

Commerce’s application of the antidumping statute, its conclusory

determinations cannot be said to be supported by substantial

evidence. Indeed, this Court has previously remanded this issue,

stating that “[a]lthough the court agrees that Commerce need not

undergo an item-by-item analysis in calculating factors of

production, Commerce’s calculations must nevertheless be

supported by substantial evidence.” Shandong, 29 CIT at __, slip

op. 05-54 at 23 (internal citation omitted); see also Burlington

Truck Lines, Inc., 371 U.S. at 168 (finding an agency decision

that failed to “articulate any rational connection between the

facts found and the choice made,” to be unsupported by
Consol. Court No. 04-00460 Page 63

substantial evidence.). As in Shandong, the court remands the

issue of whether miscellaneous handling costs were properly

excluded from Commerce’s net U.S. price calculation. On remand,

if Commerce again finds that miscellaneous expenses such as

containerization and loading costs were included in the brokerage

and handling surrogate, it must provide a thorough explanation

for doing so.

G. Application of AFA to SMC: Ocean Freight Methodology

Ames’ next contention centers on Commerce’s decision not to

apply AFA to SMC for using a methodology in calculating ocean

freight that Commerce found wanting. See Def.-Int.’s Br. at 30.

For Ames, SMC’s failure to change its methodology to comply with

Commerce’s requests provides a sufficient basis to require

Commerce to apply AFA to this factor of production. Ames argues

that:

Commerce’s determination is not based on substantial
evidence. . . . Ames is . . . concerned that, after
explaining in detail in its brief how SMC failed to
respond to Commerce’s information requests, including
language in the requests themselves where Commerce
clearly states that the previous response was
inadequate, Commerce arrived at the conclusion that SMC
complied with its information requests. This, combined
with Commerce’s verification findings that SMC
significantly underreported its ocean freight without
exception, demonstrates an arbitrary bias. Therefore,
Commerce’s determination is without merit as it is
arbitrary and unsupported by substantial evidence on
the record.

Def.-Int.’s Br. at 30–31.
Consol. Court No. 04-00460 Page 64

Commerce agrees that “SMC reported its per-unit ocean

freight using an incorrect allocation methodology.” Issues and

Decisions Mem. at 23. Nevertheless, Commerce found that:

Given that SMC complied with our requests for
documentary evidence regarding its ocean freight
expenses, and based on our discussions with company
officials during verification, we conclude that SMC’s
use of an incorrect allocation methodology was not an
attempt to distort its actual expenses, but rather
stemmed from its belief that the allocation methodology
was reasonable.

Id. at 23–24.

Because Commerce concluded that SMC had acted to the best of

its ability in responding to a request for data, the Department

declined to apply AFA. Id. at 23 (noting that “SMC’s use of an

incorrect allocation methodology was not an attempt to distort

its actual expenses . . . .”).

The court cannot agree with Ames’ contention that Commerce’s

decision to calculate SMC’s ocean freight without using an

adverse inference demonstrated an arbitrary bias. The record

indicates that SMC reported the requested information and that

its use of an incorrect allocation method “stemmed from its

belief that the allocation methodology was reasonable.” Id. at

23–24. Moreover, the Issues and Decisions Memorandum makes it

clear that the primary reason for Commerce’s refusal to apply AFA

to SMC was because “SMC complied with [the Department’s] requests
Consol. Court No. 04-00460 Page 65

for documentary evidence regarding its ocean freight expenses

. . . .” Id. at 23. In other words, because SMC supplied the

necessary information, there was no need to use facts otherwise

available. See 19 U.S.C. § 1677e(a). Absent a valid decision to

use facts otherwise available, Commerce may not use an adverse

inference. See Gerber, 29 CIT at __, 387 F. Supp. 2d at 1284

(“If Commerce makes the findings, based on substantial record

evidence, that are required for invoking (b) of 19 U.S.C. §

1677e, it may use an inference that is adverse to the interests

of that party . . . .”) (citation and internal quotation marks

omitted). Thus, the court finds that Commerce’s decision not to

apply AFA to SMC was supported by substantial evidence and

otherwise in accordance with law.

H. Commerce’s Valuation of Ocean Freight Expenses

Ames takes the position that Commerce’s use of market

economy prices paid to a market economy supplier to value ocean

freight was unreasonable because the Department failed (1) to

determine whether the market economy purchases were significant

enough to provide a meaningful basis for valuing the input, and

(2) to determine whether what SMC and TMC purchased was

physically identical to the NME inputs. In other words, Ames

argues that SMC’s and TMC’s market economy purchases did not

provide a sufficient basis upon which Commerce could value ocean
Consol. Court No. 04-00460 Page 66

freight. Commerce states that, in valuing SMC’s ocean freight,

it took an aggregate of SMC’s invoices indicating purchases from

a market economy supplier that were paid for in market economy

currency. Def.’s Resp. at 31. Specifically:

Because the market-economy purchases were significant,
Commerce utilized SMC’s invoices to value ocean
freight. 19 C.F.R. § 351.408(c)(1) . . . . Commerce
considered the purchases in aggregate, as opposed to
upon a port basis, as urged by Ames. Ames cannot
demonstrate that this methodology is unreasonable,
instead, it simply proffers another methodology. . . .
The methodology employed by Commerce is reasonable
because, in determining normal value, ocean freight is
one input. Accordingly, it is reasonable to aggregate
freight costs rather than to add an unnecessary layer
of complexity by using port-by-port calculations, as
Ames suggests.

Id.

Commerce attempts to justify its methodology by referring to

19 C.F.R. § 351.408(c)(1)29 and noting that, when possible, it is

29
This regulation provides that:

The Secretary normally will use publicly
available information to value factors.
However, where a factor is purchased from a
market economy supplier and paid for in a
market economy currency, the Secretary
normally will use the price paid to the
market economy supplier. In those instances
where a portion of the factor is purchased
from a market economy supplier and the
remainder from a nonmarket economy supplier,
the Secretary normally will value the factor
using the price paid to the market economy
supplier.

19 C.F.R. § 351.408(c)(1).
Consol. Court No. 04-00460 Page 67

preferable to use market economy purchases from market economy

suppliers paid for in market economy currency in valuing a factor

of production under 19 U.S.C. § 1677b(c)(4). See Def.’s Resp. at

31. Moreover, in response to Ames’ claim that this methodology

was inappropriate for the present review, Commerce asserts that,

“even if Ames’ proposed methodology30 were reasonable, ‘[w]hen

Commerce is faced with the decision between two reasonable

alternatives and one alternative is favored over the other in

30
Ames’ proposed methodology suggests that:

First, Commerce must conduct an analysis by
order. . . . [T]here are in actuality four
different orders corresponding to the four
classes or kinds of merchandise [and]
[l]ikewise, there are four sets of margin
calculations per company . . . . Because
there are four orders, and four margin
calculations, Commerce must necessarily
conduct four Shakeproof [Assembly Components
Div. of Ill. Tool Works, Inc. v. United
States, 23 CIT 479, 59 F. Supp. 2d 1354]
analyses if doing so would improve the
accuracy of the margin calculations.

Second, Commerce failed to analyze whether
the market economy inputs were “physically
identical” to the non-market economy inputs
. . . . A shipment from Shanghai to Los
Angeles is not “physically identical” to a
shipment from Shanghai to New York. . . .

Commerce inappropriately addresses the issue
of port-to-port analysis under the
“significance” portion of the Shakeproof
analysis. Under Commerce’s analysis, the
transportation represents a single input.
Commerce’s contention is facially incorrect.

Def.-Int.’s Br. at 31–32.
Consol. Court No. 04-00460 Page 68

their eyes, then they have the discretion to choose

accordingly.’” Id. (quoting Tehnoimportexport UCF America v.

United States, 16 CIT 13, 18, 783 F. Supp. 1401, 1406 (1992)).

Thus, it is Commerce’s position that its choice of methodology,

although different from what Ames would have employed under the

same circumstances, was not unreasonable and was in accordance

with both its regulations and the statute.

Pursuant to 19 U.S.C. § 1677b(c)(1) and the accompanying

regulation, Commerce is to value the factors of production “based

on the best available information regarding the values of such

factors in a market economy country . . . .” 19 U.S.C. §

1677b(c)(1); see also 19 C.F.R. § 351.408(c)(1). “While Congress

has left it within Commerce’s discretion to develop methodologies

to enforce the antidumping statute, any given methodology must

always seek to effectuate the statutory purpose–calculating

accurate dumping margins.” Shakeproof Assembly Components Div.

of Ill. Tool Works, Inc. v. United States, 23 CIT 479, 483, 59 F.

Supp. 2d 1354, 1358 (1999); see also Allied-Signal Aerospace Co.

v. United States, 996 F.2d 1185, 1191 (Fed. Cir. 1993) (stating

that the purpose behind the antidumping statute “is to facilitate

the determination of dumping margins as accurately as possible

within the confines of extremely short statutory deadlines.”).
Consol. Court No. 04-00460 Page 69

Here, Commerce chose to value SMC’s ocean freight based on

that company’s aggregate market economy purchases. Although

Commerce insists that its decision to aggregate is reasonable,

and that the resultant aggregated amount rendered the total

significant, it has not given a sufficient explanation of why

that is so. Thus, the court remands this issue to afford

Commerce an opportunity to provide a more complete explanation of

its decision to aggregate. See Burlington Truck Lines, Inc., 371

U.S. at 168 (holding that an agency must “articulate [a] rational

connection between the facts found and the choice made.”).

I. Circumstances-of-Sale Adjustment to TMC’s Normal Value
to Account for the Commission Paid to its U.S. Sales
Office

Ames asserts that, because there is substantial evidence on

the record to support a circumstances-of-sale adjustment to

account for the commission paid by TMC to its U.S. affiliate, the

calculation of normal value for TMC’s U.S. sales of subject

merchandise should not have been made using a surrogate value for

selling, general and administrative expenses (“SG&A”) that did

not take the commission into account. See Def.-Int.’s Br. at 33.

In other words, Ames argues that the record supports an upward

adjustment31 of TMC’s normal value to reflect the commission paid

31
Section 1677b(a)(6)(C) provides that normal value is to
be

(continued...)
Consol. Court No. 04-00460 Page 70

to its U.S. office, which, based on TMC’s submissions, was

included in the reported gross unit price of the subject

merchandise and was paid for in a market economy currency through

a market economy bank. See id.; see also Issues and Decisions

Mem. at 32. Thus, Ames is seeking a circumstances-of-sale

adjustment. A circumstances-of-sale adjustment is made in order

to “account for certain differences . . . in the United States

and foreign markets.” 19 C.F.R. § 351.410(a). Normally, the

Secretary “will make circumstances of sale adjustments . . . only

31
(...continued)
increased or decreased by the amount of any
difference (or lack thereof) between the
export price . . . and the price described in
paragraph (1)(B) [normal value]. . . that is
established to the satisfaction of the
administering authority to be wholly or
partly due to——

(i) the fact that the quantities in
which the subject merchandise is
sold or agreed to be sold to the
United States are greater than or
less than the quantities in which
the foreign like product is sold,
agreed to be sold, or offered for
sale,

(ii) the fact that merchandise
described in subparagraph (B) or
(C) of section 1677(16)[defining
foreign like product] if this title
is used in determining normal
value, or

(iii) other difference in the
circumstances of sale.

19 U.S.C. § 1677b(6)(C).
Consol. Court No. 04-00460 Page 71

for direct selling expenses and assumed expenses.”32 Id.

According to Ames, the level of data required for making a

circumstances-of-sale adjustment was present on the record, which

includes surrogate “sales values, the material values and the

overhead values such that Commerce can compare . . . these to the

commission rate . . . and determine whether to make an

adjustment.” Def.-Int.’s Br. at 35. That is, Ames argues that

Commerce erred by refusing to make the circumstances-of-sale

adjustment even though it had sufficient information to do so.

Commerce first raises a procedural argument against Ames’

claim that a circumstances-of-sale adjustment should be made,

arguing that Ames has failed to exhaust its administrative

remedies regarding this issue. See Def.’s Resp. at 26. Indeed,

Commerce asserts that Ames is raising this claim for the first

time before this court, and, in so doing, has denied the

Department the chance to consider the argument. See id. In

response, Ames counters that it did, in fact, raise the issue of

whether the surrogate value used accounted for the commission

paid by TMC to its U.S. affiliate at the agency level.

32
“Direct selling expenses” are expenses “such as
commissions, credit expenses, guarantees, and warranties, that
result from, and bear a direct relationship to, the particular
sale in question.” 19 C.F.R. § 351.410(c). “Assumed expenses”
are “selling expenses that are assumed by the seller on behalf of
the buyer, such as advertising expenses.” 19 C.F.R. §
351.410(d).
Consol. Court No. 04-00460 Page 72

Specifically, Ames contends that:

[It] should not be penalized for having taken slightly
different positions before the agency and before this
Court. First, Ames did raise the current issue at
appeal with this Court in front of Commerce during the
administrative review. The core issue is exactly
identical – whether Commerce should increase TMC’s
normal value to account for the commission paid to its
U.S. sales office. Ames has taken only a slightly
different position with respect to the methodology used
in calculating the amount of the increase. Second,
Ames had only stated in the administrative review that
“there is no indication that the preliminary surrogate
for any factor already includes a commission.” It
never stated that “there was no evidence that the
surrogate company’s financial statements reflected the
payment of selling commissions,” as alleged by
[Commerce].

Def.-Int.’s Rep. Br. to Def.’s Resp. to Huarong’s and Ames’ Mots.

J. Ag. R. (“Def.-Int.’s Reply”) at 12.

In the alternative, Commerce argues that its determination

was simply in keeping with its past practice of “[i]n [export

price] situations, . . . not mak[ing] circumstances-of-sale

adjustments in NME cases as the offsetting adjustments to [normal

value] are not normally possible.” Issues and Decisions Mem. at

32. Commerce also makes the related assertion that, in its view,

the record did not contain substantial evidence to support such

an adjustment. See Def.’s Resp. at 28.

The court recognizes that 28 U.S.C. § 2637(d) instructs this

court to, “where appropriate, require the exhaustion of
Consol. Court No. 04-00460 Page 73

administrative remedies.” See United States v. Maxi Switch, 22

CIT 778, 785, 18 F. Supp. 2d 1040, 1046 (1998). “The exhaustion

doctrine requires a party to present its claims to the relevant

administrative agency for the agency’s consideration before

raising these claims to the Court.” Ingman v. U.S. Sec’y of

Agric., 29 CIT __, __, slip op. 05-119 at 7 (Sept. 2, 2005) (not

published in the Federal Supplement).

It also true that Commerce is accorded significant deference

when determining whether to make a circumstances-of-sale

adjustment. See NTN Corp. v. United States, 28 CIT __, __, 306

F. Supp. 2d 1319, 1340 (2004). Moreover, because of the

“imprecise information for distinguishing between direct and

indirect selling expenses in the surrogate SG&A source . . . and

the absence of non-NME information about what direct selling

expenses are included in [export price] . . .,” Commerce

maintains an established practice of not making circumstances-of-

sale adjustments in NME cases. Def.’s Resp. at 28; see, e.g.,

HFHTs, Finished or Unfinished, With or Without Handles, From the

PRC, 68 Fed. Reg. 53,347 (ITA Sept. 10, 2003); Final

Determination of Sales at Less Than Fair Value: Foundry Coke

Products From the PRC, 66 Fed. Reg. 39,487 (ITA July 31, 2001);

Issues and Decisions Mem. at 32.
Consol. Court No. 04-00460 Page 74

Here, it is evident that Ames’ statement at the agency level

that “there is no indication that the preliminary surrogate for

any factor already includes a commission,” can be read as

sufficiently raising the same argument presented in the instant

action, i.e., that a circumstances-of-sale adjustment should be

made. Def.-Int.’s Reply at 12. Thus, the court cannot agree

with Commerce’s contention that Ames has failed to exhaust its

administrative remedies.

As to the substance of Ames’ claim, it is apparent that

Commerce’s past practice to refrain from making circumstances-of-

sale adjustments in NME situations is based on its conclusion

that, in most such cases, there is not enough information on the

record to make a determination based on substantial evidence.

While this may be true in most cases, the court observes that

Commerce does not cite any evidentiary basis for its

determination in this case, other than its past practice. For

that reason, the court remands this issue to Commerce to allow

the agency to further explain its determination that the record

here was devoid of substantial evidence to permit a

circumstances-of-sale adjustment.
Consol. Court No. 04-00460 Page 75

J. Assessment Instructions to Bureau of Customs and Border
Protection

Finally, Ames insists that Commerce erred by not

specifically instructing Customs to liquidate forged tampers at

the PRC-wide rate applicable to bars/wedges, i.e., 139.31%. See

Def.-Int.’s Br. at 36. Ames provides two reasons as to why

tampers should be singled-out in the instructions. First, it

argues that Commerce did not adhere to its statement in the Final

Results that it would instruct Customs to liquidate the

merchandise in accordance with its Final Results. Id.; see Final

Results 69 Fed. Reg. at 55,584 (“The Department will issue

appraisement instructions directly to [Customs] upon the

completion of the final results of these [] reviews.”). For

Ames, the instructions were deficient because, despite language

in the Final Results indicating that “as tampers are subject to

the bars/wedges order, [Commerce] will instruct [Customs] to

liquidate entries of tampers . . . at the AFA rate of 139.31

percent,” the Department “failed to include any language [in the

instructions] directing [Customs] to liquidate tampers.” Def.-

Int.’s Br. at 36 (internal citation and quotation marks omitted).

Second, Ames contends that detailed instructions are necessary to

prevent Customs from liquidating the tampers at the lower 27.71%

rate applicable to hammers/sledges. See id. at 37 (“[Customs]

has ruled that tampers should be classified as hammers under the

HTS . . . . Thus, absent specific instructions . . . the
Consol. Court No. 04-00460 Page 76

Department’s intent to liquidate tampers at the rate for bars

will go unfulfilled. . . .”).

Commerce’s first argument is phrased as one contesting the

court’s subject matter jurisdiction over Ames’ claim. See Def.’s

Resp. at 32–33. According to Commerce, “the Court’s residual

jurisdiction is limited and, with regard to liquidation

instructions, may be asserted only if the instructions differ

from the final results . . . .” Id. at 32. In other words,

because its instructions comply with the Final Results, Commerce

argues that there is simply nothing to litigate.

Although Commerce couches its first argument in terms of

subject matter jurisdiction, its assertion is more accurately

viewed as disputing the substance of Ames’ allegation, i.e., that

the instructions are not sufficient to carry out Commerce’s

intent. Commerce suggests that, if Ames is concerned that

Customs will liquidate tampers under the incorrect rate, Ames

should register its complaint with that agency. See Def.’s Resp.

at 33. Moreover, Commerce states that “there is no evidence that

Customs is not effectively implementing the final results of

review of the order upon HFHTs.” Id. That is, Customs has done

nothing to require a special instruction that specifically

identifies how to liquidate tampers. Commerce emphasizes that,
Consol. Court No. 04-00460 Page 77

“to specifically identify tampers, and not the various other

heavy forged hand tools subject to the antidumping duty order,

would, at best, be unnecessary, and, at worst, create confusion.”

Id.

It is well settled that this Court has jurisdiction to hear

challenges to liquidation instructions. See Shinyei Corp. of Am.

v. United States, 355 F.3d 1297, 1304, 1305 (Fed. Cir. 2004)

(“‘[A]n action challenging Commerce’s liquidation instructions is

not a challenge to the final results, but a challenge to the

‘administration and enforcement’ of those final results . . . .

Thus, . . . [s]ection 1581(i)(4) grants jurisdiction to such an

action.’”) (quoting Consol. Bearings, Co. v. United States, 348

F.3d 997, 1002 (Fed. Cir. 2003)).33 Thus, this court has

jurisdiction to hear Ames’ claim.

Because Ames’ claim is based in the APA, the applicable

standard of review is that provided in 5 U.S.C. § 706. That is,

the court will “hold unlawful and set aside agency action,

findings, and conclusions found to be . . . arbitrary,

33
Under 28 U.S.C. § 1581(i)(4), the court has
jurisdiction to hear “civil actions against the United States,
its agencies, or its officers, that arises out of any law of the
United States providing for . . . [the] administration and
enforcement with respect to the matters referred to in [28 U.S.C.
§ 1581(i)(1)–(3)] or [28 U.S.C. § 1581(a)–(h)].”
Consol. Court No. 04-00460 Page 78

capricious, an abuse of discretion, or otherwise not in

accordance with law . . . .” 5 U.S.C. § 706(2). Applying this

standard, the court finds that Commerce’s issuance of liquidation

instructions that did not specifically list tampers under the

bars/wedges order was not arbitrary or capricious.34 Here,

Commerce provided Customs with instructions to liquidate

plaintiffs’ entries pursuant to the rates contained in the Final

Results, but did not specify which tools were included under each

category. See Def. Conf. App., Ex. 14. In other words, the

instructions uniformly applied to each respondent in that, for

each company, Commerce generally directed Customs how to

liquidate entries of bars/wedges, axes/adzes, hammers/sledges,

and picks/mattocks. Id. These instructions, then, reflect the

determination found in the Final Results. That Customs might, at

34
Commerce’s regulations provide, in relevant part, that:

Not later than seven days after receipt of
notice of an affirmative final injury
determination by the Commission . . . the
Secretary will publish in the Federal
Register an “Antidumping Order” . . . that:

(1) Instructs the Customs Service
to assess antidumping duties . . .
on the subject merchandise, in
accordance with the Secretary’s
instructions at the completion of
each review . . . .

19 C.F.R. § 351.211; see also Sandvik Steel Co. v. United States,
164 F.3d 596, 598 (Fed. Cir. 1998) (“Customs applies and enforces
the antidumping orders, upon referral from Commerce.”).
Consol. Court No. 04-00460 Page 79

some point in the future, not follow these instructions, does not

present the court with an issue that is ripe for judicial

review.35 See Nat’l Park Hospitality Ass’n v. Dep’t of Interior,

538 U.S. 803, 807–08 (2003) (stating that the ripeness doctrine

is “designed to prevent the courts, through avoidance of

premature adjudication, from entangling themselves in abstract

disagreements over administrative policies, and also to protect

the agencies from judicial interference until an administrative

decision has been formalized and its effects felt in a concrete

way by the challenging parties.”) (internal citation and

quotation marks omitted). In the event that Customs does not

follow the instructions, Ames has a legal remedy. See J.S.

Stone, Inc. v. United States, 27 CIT __, __, 297 F. Supp. 2d

1333, 1338 n.6 (2003), aff’d, 111 Fed. Appx. 611 (Fed. Cir. 2004)

(“[M]isapplication of an antidumping order or the erroneous

imposition of antidumping duties by Customs may be protested and

suit brought before the court pursuant to § 1581(a).”); see also

Xerox Corp. v. United States, 289 F.3d 792, 795 (Fed. Cir. 2002).

35
Ames disputes this by pointing the court to a May 10,
1996 Customs Ruling where Customs classified tampers as hammers
under the Harmonized Tariff Schedule of the United States
(“HTSUS”) 8205.20.6000. See Def.-Int.’s Br. at 37 (citing
Customs Ruling NY A81379 (May 10, 1996). Indeed, this ruling
stated that the tamper head acted like a hammer. This alone,
however, is insufficient to require Commerce to delineate every
possible HFHTs entry under each category for all respondents.
Consol. Court No. 04-00460 Page 80

Based on the foregoing, the court holds that Commerce’s

instructions complied with the Final Results, and, thus, were not

arbitrary, capricious, or an abuse of discretion, and were in

accordance with law. Therefore, the court sustains Commerce’s

liquidation instructions.

CONCLUSION

In accordance with the foregoing, the court sustains in

part, and remands in part Commerce’s Final Results. Commerce’s

remand results are due on September 7, 2006, comments are due on

October 9, 2006, and replies to such comments are due on October

20, 2006.

/s/Richard K. Eaton
Richard K. Eaton

Dated: June 9, 2006
New York, New York