Tianjin MacHinery Import & Export Corp. v. United States

Slip Op. 04-125

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: HONORABLE RICHARD W. GOLDBERG, SENIOR JUDGE

TIANJIN MACHINERY IMPORT &
EXPORT CORP., LIAONING MACHINERY
IMPORT & EXPORT COMPANY,
SHANDONG HUARONG GENERAL GROUP
CORP., AND SHANDONG MACHINERY
IMPORT & EXPORT CORP.,

Plaintiffs,

v. Court No. 02-00637

UNITED STATES,

Defendant,

and

AMES TRUE TEMPER,

Defendant-Intervenor.

[Court sustains Final Results; Commerce’s fifteen-day liquidation
policy not in accordance with law.]

Dated: October 4, 2004

Hume & Associates PC (Robert T. Hume) for Plaintiffs Tianjin
Machinery Import & Export Corp. and Shandong Huarong General
Group Corp.

Peter D. Keisler, Assistant Attorney General, David M. Cohen,
Director, Jeanne E. Davidson, Deputy Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Stephen C. Tosini); Barbara J. Tsai, Of Counsel, Office
of Chief Counsel for Import Administration, United States
Department of Commerce, for Defendant United States.

Wiley Rein & Fielding LLP (Eileen P. Bradner) for Defendant-
Intervenor Ames True Temper.
Court No. 02-00637 Page 2

OPINION

GOLDBERG, Senior Judge: In this action, Plaintiffs Tianjin

Machinery Import & Export Corp. (“TMC”) and Shandong Huarong

General Group Corp. (“Huarong”) (collectively “Plaintiffs”)1

challenge the final determination of the United States Department

of Commerce (“Commerce”) in the tenth administrative review of

antidumping duty orders covering heavy forged hand tools in Heavy

Forged Hand Tools From the People’s Republic of China: Final

Results and Partial Rescission of Antidumping Duty Administrative

Review and Determination Not To Revoke in Part, 67 Fed. Reg.

57789 (Sept. 12, 2002) (“Final Results”).2 The Final Results

covers the period of review from February 1, 2000 through January

31, 2001. Pursuant to USCIT Rule 56.2, Plaintiffs move for

judgment on the agency record.

1
Plaintiffs Liaoning Machinery Import & Export Company and
Shandong Machinery Import & Export Corp. were removed from the
case pursuant to Plaintiffs’ Second Amended Complaint filed on
November 8, 2002. Second Am. Compl. at 1.
2
After Commerce issued its Final Results, Plaintiffs and
Defendant-Intervenor Ames True Temper filed ministerial error
allegations with Commerce. See Hand Tools From the People’s
Republic of China – Clerical Errors In Final Determination,
Proprietary Appendix to Motion of Plaintiffs Tianjin Machinery
Import & Export Corp. and Shandong Huarong General Group Corp.
for Judgment on the Agency Record (“Pls.’ Conf. App.”) at Ex. 5
(Sept. 16, 2002). On February 6, 2003, Commerce responded to the
parties’ allegations by issuing its Final Results of
Redetermination Pursuant to Court Remand, see id. at Ex. 4, which
Plaintiffs also challenge. Because the relevant portions of the
Final Results of Redetermination Pursuant to Court Remand merely
reiterate Commerce’s stance in the Final Results, the Court will
refer to both determinations collectively as the “Final Results.”
Court No. 02-00637 Page 3

For the reasons that follow, the Court sustains the Final

Results, but finds that Commerce’s new policy of issuing

liquidation instructions within fifteen days of publication of

the final results of review is not in accordance with law. The

Court has jurisdiction over this matter pursuant to 28 U.S.C. §

1581(c) and (i).

I. STANDARD OF REVIEW

The Court will sustain the Final Results unless it is

“unsupported by substantial evidence on the record, or otherwise

not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B). To

determine whether Commerce’s construction of the statutes is in

accordance with law, the Court looks to Chevron U.S.A., Inc. v.

Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

The first step of the test set forth in Chevron requires the

Court to determine “whether Congress has directly spoken to the

precise question at issue.” Id. at 842. It is only if the Court

concludes that “Congress either had no intent on the matter, or

that Congress’s purpose and intent regarding the matter is

ultimately unclear,” that the Court will defer to Commerce’s

construction under step two of Chevron. Timex V.I., Inc. v.

United States, 157 F.3d 879, 881 (Fed. Cir. 1998). If the

statute is ambiguous, then the second step requires the Court to

defer to the agency’s interpretation so long as it is “a

permissible construction of the statute.” Chevron, 467 U.S. at
Court No. 02-00637 Page 4

842. In addition, “[s]tatutory interpretations articulated by

Commerce during its antidumping proceedings are entitled to

judicial deference under Chevron.” Pesquera Mares Australes

Ltda. v. United States, 266 F.3d 1372, 1382 (Fed. Cir. 2001)

(interpreting United States v. Mead, 533 U.S. 218 (2001)).

Accordingly, the Court will not substitute “its own construction

of a statutory provision for a reasonable interpretation made by

[Commerce].” IPSCO, Inc. v. United States, 965 F.2d 1056, 1061

(Fed. Cir. 1992).

II. DISCUSSION

A. Commerce’s Decision to Apply Adverse Facts Available to the
Packing Factor of Production for TMC’s Hammers/Sledges Is
Supported by Substantial Evidence and Otherwise in
Accordance with Law.

For the cost portion of TMC’s verification, Commerce

preselected one of TMC’s three hammer factories. See Defendant’s

Response in Opposition to Plaintiffs’ Rule 56.2 Motion for

Judgment Upon the Agency Record (“Def.’s Br.”) at 6. When

Commerce arrived at the factory, Commerce discovered that it had

closed approximately ten months before verification. See

Verification Report (TMC’s Hammer Factory), Defendant’s Appendix

to Defendant’s Response in Opposition to Plaintiffs’ Rule 56.2

Motion for Judgment Upon the Agency Record (“Def.’s App.”) at Ex.

7 (July 24, 2002). As a result, there were no packing materials

present that Commerce could weigh to verify the packing factors

reported in the review. Id. at 8. Moreover, there were no
Court No. 02-00637 Page 5

records available documenting the weights of the packing

materials. See id. Commerce concluded that adverse inferences

were warranted, and therefore applied the highest reported

packing rate as adverse facts available (“AFA”) for all of TMC’s

hammers, regardless of whether they were made by the closed

factory or not. See Issues and Decision Memorandum for the

Administrative Reviews of Heavy Forged Hand Tools from the

People’s Republic of China – February 1, 2000 through January 31,

2001, Def.’s App. at Ex. 11 at Cmt. 22 (Sept. 3, 2002) (“Issues

and Decision Memo”); Memorandum of Points and Authorities in

Support of Motion of Plaintiffs Tianjin Machinery Import & Export

Corp. and Shandong Huarong General Group Corp. for Judgment on

the Agency Record (“Pls.’ Br.”) at 9.

The asserted basis for Commerce’s decision to apply AFA is

that “TMC was responsible for demonstrating the reliability of

its own data, [and] its failure to do so supports [the]

conclusion that [TMC] did not act to the best of its ability.”

Issues and Decision Memo at Cmt. 22. Commerce assumes that “when

a respondent prepares its response, it [will] maintain the

records which were used to compile its data.” Id. Furthermore,

Commerce reasons that because TMC maintained records for a

variety of reported factors of production despite the closure of

its factory, “[i]t is . . . reasonable to assume that [TMC] would

have maintained records for all reported [factors of
Court No. 02-00637 Page 6

production,]” including packing factors. Id. Thus, Commerce

concluded that TMC’s failure either to maintain packing records

or to provide actual packing materials for weighing constituted a

failure to act to the best of its ability, warranting application

of AFA. See id.

Before Commerce is allowed to apply AFA, Commerce must find

that “an interested party has failed to cooperate by not acting

to the best of its ability to comply with a request for

information[.]” 19 U.S.C. § 1677e(b). “The statutory mandate

that a respondent act to ‘the best of its ability’ requires 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).

For Commerce to conclude that a respondent failed to cooperate to

the best of its ability and to draw an adverse inference under 19

U.S.C. § 1677e(b), Commerce need only make two showings.

First, it must make an objective showing that a
reasonable and responsible [respondent] 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
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.
Court No. 02-00637 Page 7

Id. at 1382-83 (internal citation omitted); see also China Steel

Corp. v. United States, 28 CIT __, __, 306 F. Supp. 2d 1291, 1304

(2004).

The first requirement is easily satisfied. As the Court has

held, “[t]here can . . . be no doubt that a reasonable and

responsible producer, seeking an administrative review, will have

accurate records of its factors of production.” Shandong Huarong

Gen. Group Corp. v. United States, 27 CIT __, __, Slip Op. 03-135

at 36 (Oct. 22, 2003).

With regard to the second requirement, it is undisputed that

TMC did not provide either packing materials for weighing3 or

records documenting packing weights, even though Commerce

expressly notified TMC in advance that packing materials and

documentation would be required for verification. See

Verification Agenda Outline for TMC, Def.’s App. at Ex. 3 at 10

(Apr. 9, 2002). TMC claims that it has never maintained records

of packing weights, but rather, has always provided and verified

3
TMC’s failure to provide packing materials for weighing
was due, at least in part, to the fact that the factory selected
for verification was closed and no longer had any inventory
present. However, TMC conceded at oral argument that it could
have furnished packing materials from another factory to be
weighed as a substitute. See Oral Argument Tr. at 47 (“Could we
have given packing material for a second factory . . . ? That is
a possibility and, to my knowledge, that . . . option was never
discussed.”). In light of this admission, the Court is reluctant
to conclude that TMC put forth its maximum effort in providing
Commerce with materials for weighing. It is unnecessary for the
Court to reach this issue, however, since TMC’s failure to
maintain records of packing weights is dispositive.
Court No. 02-00637 Page 8

packing data by weighing actual inventory. Plaintiffs’ Reply

Brief (“Pls.’ Reply Br.”) at 8. Thus, TMC asserts, short of

weighing inventory, there is no way to verify packing weights.

See id.

TMC’s argument is unpersuasive. A respondent’s failure to

maintain required records is not an adequate defense to a

determination by Commerce that the respondent failed to act to

the best of its ability. The Court of Appeals for the Federal

Circuit has clearly articulated that “the [best of ability]

standard does not condone . . . inadequate record keeping.”

Nippon Steel, 337 F.3d at 1382. It assumes that respondents are

familiar with the rules and regulations that apply, and requires

respondents to “take reasonable steps to keep and maintain full

and complete records documenting the information that a

reasonable [respondent] should anticipate being called upon to

produce[.]” Id.

TMC has not adduced any evidence to suggest that maintaining

packing records would be impossible, or even impracticable;

rather, TMC merely asserts that its methodology does not involve

maintaining packing records. TMC’s assertion supports the

subjective showing by Commerce that TMC’s failure to respond

fully is the result of its own lack of cooperation in failing to

keep and maintain all required records. As such, the Court

concludes that the second requirement for applying AFA is met.
Court No. 02-00637 Page 9

Accordingly, the Court finds Commerce’s conclusion that TMC

failed to cooperate by not acting to the best of its ability, and

its consequential decision to apply AFA to TMC’s packing factor

of production, to be supported by substantial evidence and

otherwise in accordance with law.

B. Commerce’s Decision to Apply Adverse Facts Available for
Wooden Pallets to All of TMC’s Hammers Is Supported by
Substantial Evidence and Otherwise in Accordance with Law.

TMC challenges Commerce’s decision to apply AFA for wooden

pallets to all of TMC’s hammers, regardless of whether they were

made by the factory that failed verification. During the review,

TMC reported that one of its factories did not use wooden pallets

at all, while other factories only used wooden pallets for some

hammers. See Heavy Forged Hand Tools from China – TMC Additional

Response to the Department’s December 6, 2001, Supplemental

Questionnaire, Pls.’ Conf. App. at Ex. 10 (Feb. 6, 2002).

Moreover, TMC’s sales documents (specifically, the bills of

lading) indicate whether the hammers were placed on wooden

pallets, metal pallets, or no pallets. See Sample Sales Traces

TMC, id. at Ex. 9. Thus, TMC objects to Commerce’s application

of AFA to all hammers sold, regardless of whether they were

shipped on pallets. See Pls.’ Br. at 31-32. TMC asserts that

even if Commerce was justified in applying AFA to its packing

factor of production, Commerce erred in applying AFA to pallets

for all of its hammer factories. See id. at 31.
Court No. 02-00637 Page 10

TMC’s argument attempts to distinguish pallets from the

packing factor of production. Commerce’s verification

methodology, however, does not permit this distinction to be

drawn. In fact, Commerce’s methodology includes pallets in the

packing factor of production, and does not contemplate using

information from sales documents to verify packing factors. See

Verification Agenda Outline for TMC, Def.’s App. at Ex. 3 at 10

(Apr. 9, 2002); Def.’s Br. at 34. As a result, TMC’s argument

hinges on the invalidity of Commerce’s verification methodology.

The Court reviews Commerce’s verification procedures for an

abuse of discretion. Shakeproof Assembly Components, Div. of

Ill. Tool Works, Inc. v. United States, 268 F.3d 1376, 1383-84

(Fed. Cir. 2001) (citing Micron Tech., Inc. v. United States, 117

F.3d 1386, 1396 (Fed. Cir. 1997)). While “all information relied

upon in making . . . a final determination in a review” is

required to be verified under 19 U.S.C. § 1677m(i)(1), the

statute does not delineate the precise means for conducting

verification. 19 U.S.C. § 1677m(i)(1) (1994). Rather, “[t]he

decision to select a particular [verification] methodology rests

solely within Commerce’s sound discretion.” Hercules, Inc. v.

United States, 11 CIT 710, 726, 673 F. Supp. 454, 469 (1987).

Moreover, in selecting its verification procedures, Commerce is

given “wide latitude,” see Am. Alloys, Inc. v. United States, 30

F.3d 1469, 1474 (Fed. Cir. 1994), and is owed “considerable
Court No. 02-00637 Page 11

deference” by the Court. See Daewoo Electronics Co. v. United

States, 6 F.3d 1511, 1516 (Fed. Cir. 1993).

In the instant case, Commerce’s decision not to use

information contained in TMC’s sales documents to verify TMC’s

packing factors is reasonable. The sales and cost portions of

verification are conceptually distinct and are conducted for

separate purposes. The sales portion is undertaken to verify

sales information (such as the type of merchandise shipped, the

port of loading, and shipper expenses) by examining sample bills

of lading. The cost portion is conducted to verify factor of

production information (such as packing data) by visiting a

preselected factory and either weighing actual packing materials

or reviewing records of packing weights. Commerce’s methodology

does not contemplate using incidental information from sample

sales documents to verify factor of production data. The Court

finds nothing on the record to suggest that Commerce abused its

discretion in this regard.

TMC’s claim that pallets are distinct from the packing

factor of production is also without merit. Commerce determined

in advance that pallets would be verified as a packing factor of

production, and expressly notified TMC of this fact prior to

verification. See Verification Agenda Outline for TMC, Def.’s

App. at Ex. 3 at 10 (Apr. 9, 2002). Moreover, since pallets are

used to package the merchandise at issue, such a methodology is
Court No. 02-00637 Page 12

reasonable. “When Commerce applies a reasonable standard to

verify materials submitted and the verification is supported by

such relevant evidence as a reasonable mind might accept, the

Court will not impose its own standard, superceding that of

Commerce.” Hercules, 11 CIT at 726, 673 F. Supp. at 469

(internal quotation omitted).

Accordingly, the Court holds that Commerce’s decision to

apply AFA to pallets is supported by substantial evidence and

otherwise in accordance with law.

C. Commerce’s Application of Adverse Facts Available in
Calculating Huarong’s Labor Rate Is Supported by Substantial
Evidence and Otherwise in Accordance with Law.

Huarong argues that Commerce improperly resorted to AFA in

calculating its labor rate because Commerce did not demonstrate

that Huarong failed to act to the best of its ability during the

review. Pls.’ Br. at 18. Huarong claims that it complied with

Commerce’s requests for information, and attributes the

disparities observed during verification to errors on the part of

Commerce in using the methodology supplied by Huarong to

calculate labor production figures. Id. at 20. Specifically,

Huarong contends that Commerce should have divided certain

production figures by the number of team members. Id. at 25. In

addition, Huarong asserts that Commerce did not provide it with

an adequate opportunity to correct deficiencies in its

submissions. See id. at 26.
Court No. 02-00637 Page 13

Commerce contends that Huarong did not cooperate to the best

of its ability in providing information regarding labor

production rates. Def.’s Br. at 13-14. According to Commerce,

Huarong’s labor production computations proved incorrect, despite

supplemental requests for information, and did not survive

verification. Id. at 19. In addition, Huarong deemed erroneous

and subsequently retracted the explanation for the discrepancy

that it originally provided to Commerce. Id. at 22. Huarong

ultimately attributed the discrepancy to Commerce’s faulty

application of the provided methodology, and suggested a

modification in the calculations. Id. at 20. Commerce contends

that Huarong’s belated effort at correction is improper, and

further notes that the labor production rates proved inaccurate

even using Huarong’s post-verification methodology. Id. at 19-

20.

The Court first examines whether Huarong, through its

questionnaire responses, “create[d] an accurate record and

provide[d] Commerce with the information requested[.]” Reiner

Brach GmbH & Co. KG v. United States, 26 CIT __, __, 206 F. Supp.

2d 1323, 1333 (2002). Huarong’s initial response to Commerce’s

request for information was inadequate, and Commerce provided

Huarong with a supplemental questionnaire to clarify ambiguities

in the information. See Huarong’s Section D Response to

Department’s Supplemental Questionnaire, Def.’s App. at Ex. 2
Court No. 02-00637 Page 14

(Jan. 15, 2002). Specifically, Huarong was asked to submit

worksheets showing the calculation of its reported labor caps.

Id. at 12. It responded with a formula multiplying the number of

workers by number of hours worked and divided by number of pieces

produced. See id. (“Based on years of experience, Huarong has

worked out labor ratings which are close to the production

records verified by the Department in prior reviews. For heat

treatment, as an example, there are six (6) workers in one (1)

shift, one (1) skilled and five (5) unskilled. Each shift

processes 3430 pieces each work day, which is eight (8) hours.”).

The methodology set forth in Huarong’s supplemental questionnaire

response makes no mention of team production or division by

number of team members. Thus, based on the information in the

supplemental questionnaire response for the tenth review,

Commerce did not have notice or reason to believe that it should

divide labor figures by number of team members.

Huarong counters that Commerce verified its labor production

figures in the ninth review, and therefore should have known to

divide certain production figures by number of team members.

Pls.’ Br. at 25. Huarong, however, did not reference ninth

review methodology in its responses to Commerce’s questionnaires,

and did not alert Commerce prior to verification that the

calculations should include division by team members. In

addition, as Commerce notes, it need only rely on information
Court No. 02-00637 Page 15

provided in a given review to arrive at its decision. See Cinsa,

S.A. de C.V. v. United States, 21 CIT 341, 349, 966 F. Supp.

1230, 1238 (1997) (observing that each administrative review is a

separate exercise of administrative procedure opening the

possibility of different conclusions based on different facts

accumulated). Commerce indicated in the Preliminary Results that

it intended to rely exclusively on the formula provided by

Huarong in the current review, noting that because past

computations produced discrepancies and were not verified, it

would not blindly incorporate past methods into the present

calculations. See Heavy Forged Hand Tools, Finished or

Unfinished, With or Without Handles, from the People’s Republic

of China, Preliminary Results and Preliminary Partial Rescission

of Antidumping Duty Administrative Reviews, Notice of Intent Not

To Revoke in Part and Extension of Final Results of Reviews, 67

Fed. Reg. 10123, 10126 (Mar. 6, 2002) (“Preliminary Results”).

Thus, the Court finds that Commerce did not err in failing to

divide certain production figures by number of team members.

Commerce subsequently conducted verification at Huarong’s

headquarters from May 27 through May 31, 2002. See Verification

Report of Huarong, Def.’s App. at Ex. 8 (July 24, 2002). At

verification, Commerce was unable to re-create or explain the

method by which Huarong arrived at its labor production figures.

Issues and Decision Memo at Cmt. 18. Commerce then afforded
Court No. 02-00637 Page 16

Huarong the opportunity to explain the discrepancy in production

figures, which company officials attributed to an inflated

estimate of labor time. See Verification Report of Huarong,

Def.’s App. at Ex. 8 at 21-22 (July 24, 2002) (“Company officials

explained that the difference between the labor in the production

record and their reported figures was due to the fact that the

workers did not necessarily work an entire 8 hours per shift.

They stated that the use of an 8 hour shift would inflate the

labor time for processes where laborers worked fewer hours. For

example, after using Huarong’s reported formula, it shows that it

took [***] and [***] minutes to paint each piece for CONNUMU 5.

However, company officials stated that it is unlikely that it

took this much labor time to dip a CB or WB into paint. We asked

officials to provide the correct amount of time for each shift.

However, they could not provide an estimation of the time workers

worked on each process for each shift.”).

Two months later, Huarong retracted the explanation

originally offered by its officials, replacing it with the

contention that Commerce “erred . . . when it failed to include

the number of workers in the denominator as well as the numerator

for some of the[] calculations.” Administrative Case Brief of

Respondents, Def.’s App. at Ex. 9 at 23 (July 31, 2002).

Commerce determined that this post-verification amendment to

Huarong’s reported methodology was inappropriate. Issues and
Court No. 02-00637 Page 17

Decision Memo at Cmt. 18. Accordingly, Commerce declined to

accept the correction and recalculate Huarong’s labor production

figures. See id.

Agencies generally enjoy broad discretion in fashioning

rules of administrative procedure, including the authority to

establish and enforce time limits on the submission of data by

interested parties. See Vt. Yankee Nuclear Power Corp. v.

Natural Res. Def. Council, Inc., 435 U.S. 519, 544-45 (1978). In

accordance with this principle, Commerce has promulgated

regulations setting forth deadlines for submitting factual

information. Specifically, 19 C.F.R. § 351.301(b)(2) states that

“factual information requested by the verifying officials from a

person normally will be due no later than seven days after the

date on which the verification of that person is completed[.]”

19 C.F.R. § 351.301(b)(2). Moreover, 19 U.S.C. § 1677m(d)

provides that “[i]f [a] person submits further information in

response to [a] deficiency and . . . such response is not

submitted within the applicable time limits, then [Commerce] may

. . . disregard all or part of the original and subsequent

responses.” 19 U.S.C. § 1677m(d). Both the statute and the

regulation underscore the breadth of Commerce’s discretion in

fashioning the temporal parameters of administrative proceedings,

and force parties to submit information within a specified time

frame in the interests of fairness and efficiency. See Gulf
Court No. 02-00637 Page 18

States Tube Div. of Quanex Corp. v. United States, 21 CIT 1013,

1040, 981 F. Supp. 630, 653 (1997) (“Commerce’s policy of setting

time limits on the submission of factual information is

reasonable because Commerce clearly cannot complete its work

unless it is able at some point to ‘freeze’ the record and make

calculations and findings based on that fixed and certain body of

information.”) (internal quotation omitted).

The correction in this case was submitted two months after

verification and approximately six weeks before Commerce issued

the Final Results. As such, the correction was tendered at the

last minute, and its acceptance or rejection was well within

Commerce’s discretion. See 19 U.S.C. § 1677m(d). Commerce did

not abuse its discretion by disregarding Huarong’s correction and

declining to modify its calculations after so much time had

elapsed since verification. Id.

Huarong suggests that the errors in its data were obvious

and that Commerce should have alerted company officials of the

incorrect calculations immediately. See Pls.’ Reply Br. at 17-

19. Huarong implies that it could have cooperated in a better

and more timely fashion had Commerce informed it of readily

observable and remediable errors in its data. See id. Commerce,

however, is under no obligation to request or accept substantial

new factual information from a respondent after discovering that

a response cannot be corroborated during verification. See
Court No. 02-00637 Page 19

Reiner Brach, 26 CIT at __, 206 F. Supp. 2d at 1334; Bergerac,

N.C. v. United States, 24 CIT 525, 532, 102 F. Supp. 2d 497, 503-

04 (2000). Verification is intended to test the accuracy of data

already submitted, rather than to provide a respondent with an

opportunity to submit a new response. See Acciai Speciali Terni

S.P.A. v. United States, 25 CIT 245, 260-61, 142 F. Supp. 2d 969,

986 (2001) (citing Certain Cut-to-Length Carbon Steel Plate from

Sweden, 62 Fed. Reg. 18396, 18401 (Apr. 15, 1997)); see also

Verification Agenda Outline for Huarong, Def.’s App. at Ex. 4 at

2 (Apr. 9, 2002) (“[V]erification is not intended to be an

opportunity for submitting new factual information. New

information will be accepted at verification only when i) the

need for that information was not previously evident, ii) the

information makes minor corrections to the information already on

the record, or iii) the information corroborates, supports, or

clarifies information already on the record.”). While Commerce

is required to allow respondents to correct clerical errors

discovered late in the administrative process, clerical errors

are distinguished from substantive errors and do not encompass

methodological modifications.4 See Torrington Co. v. United

States, 22 CIT 136, 137 (1998).5

4
Clerical errors result from inaccurate copying or
duplication, or other similar unintentional errors. See World
Finer Foods, Inc. v. United States, 24 CIT 541, 549-50 (2000).
5
See also Maui Pineapple Co. v. United States, 27 CIT __,
__, 264 F. Supp. 2d 1244, 1261 (2003) (citing Certain Fresh Cut
Court No. 02-00637 Page 20

The errors in Huarong’s formula were neither self-evident

nor the result of a clerical mistake. Rather, the errors were

substantive in nature, and could be corrected only by modifying

Huarong’s original methodology. Commerce therefore was not

required to alert Huarong of the errors or to accept substantive

corrections post-verification.

Once Commerce identifies a discrepancy in the data submitted

by a respondent, it must also find that the respondent failed to

cooperate to the best of its ability for AFA to be warranted.

See 19 U.S.C. § 1677e(b); see also Nippon Steel Corp. v. United

States, 337 F.3d 1373, 1381 (Fed. Cir. 2003). Commerce is not

required to show intentional noncooperation to apply AFA; it need

only demonstrate that the respondent did not put forth its

maximum effort possible. See Nippon Steel, 337 F.3d at 1382-83

(“The ordinary meaning of ‘best’ means ‘one’s maximum effort,’ as

in ‘do your best.’ . . . While intentional conduct, such as

Flowers From Colombia, 61 Fed. Reg. 42833, 42834 (Aug. 19, 1996),
where Commerce stated that it will “accept corrections of
clerical errors under the following conditions: (1) The error in
question must be demonstrated to be a clerical error, not a
methodological error, an error in judgment, or a substantive
error; (2) [Commerce] must be satisfied that the corrective
documentation provided in support of the clerical error
allegation is reliable; (3) the respondent must have availed
itself of the earliest reasonable opportunity to correct the
error; (4) the clerical error allegation, and any corrective
documentation, must be submitted to [Commerce] no later than the
due date for the respondent’s administrative case brief; (5) the
clerical error must not entail a substantial revision of the
responses; and (6) the respondent’s corrective documentation must
not contradict information previously determined to be accurate
at verification”).
Court No. 02-00637 Page 21

deliberate concealment or inaccurate reporting, surely evinces a

failure to cooperate, the statute does not contain an intent

element.”). Although the standard does not demand perfection, it

censures inattentiveness and carelessness. Id. at 1382. To draw

an adverse inference, Commerce must show that the party did not

behave in the manner of a reasonable and responsible respondent,

and that it failed to put forth its maximum effort in

investigating and obtaining the requested information. Id.

Commerce properly applied AFA in this case because Huarong

had the ability to timely provide accurate and comprehensive

labor production data and simply failed to do so. Commerce, in

accordance with 19 U.S.C. § 1677m(d), alerted Huarong of

deficiencies in its data by issuing a supplemental questionnaire

requesting additional information. A reasonable respondent

acting to the best of its ability would have ensured that the

information set forth in its supplemental questionnaire response

was comprehensive. In contrast, the information provided by

Huarong in its supplemental questionnaire response was incomplete

and failed to mention methodological modifications for certain

production processes. A reasonable respondent also would have

promptly provided Commerce with a corrected formula upon

Commerce’s post-verification request. In contrast, Huarong

waited two full months to provide Commerce with a revised formula

incorporating a substantial methodological modification. In both
Court No. 02-00637 Page 22

of these respects, then, Huarong did not put forth its maximum

effort; thus, Commerce’s decision to apply AFA is warranted.

In drawing an adverse inference, Commerce must clearly

articulate the manner in which a party failed to cooperate to the

best of its ability, and why the missing information is

significant to the progress of the proceeding. See Borden, Inc.

v. United States, 22 CIT 233, 264, 4 F. Supp. 2d 1221, 1246

(1998). Commerce provided an adequate explanation of its

decision to apply AFA in this case, citing its reliance on the

methodology provided by Huarong, the verification failure, and

Huarong’s belated effort at correcting the requested data. See

Issues and Decision Memo at Cmt. 18.

Accordingly, Commerce’s decision to apply AFA in calculating

Huarong’s labor production rate is supported by substantial

evidence and otherwise in accordance with law.

D. Because TMC Failed to Apply for a Scope Ruling Regarding
Cast Iron Picks, TMC Did Not Exhaust Its Administrative
Remedies.

Commerce decided that TMC failed to cooperate to the best of

its ability by neglecting to report its U.S. sales of three cast

iron picks. See Issues and Decision Memo at Cmt. 21.

Specifically, Commerce determined that cast iron picks fall

within the scope of the antidumping duty orders covering heavy

forged hand tools, based on both the language of the orders and a

2001 scope ruling at TMC’s behest with regard to Pulaski axes,
Court No. 02-00637 Page 23

which excluded production method from scope determinations. See

Final Scope Ruling – Antidumping Duty Orders on Heavy Forged Hand

Tools, Finished or Unfinished, With or Without Handles, from the

People’s Republic of China – Request by Tianjin Machinery I/E

Corp. for a Ruling on Pulaski Tools, Public Appendix to Motion of

Plaintiffs Tianjin Machinery Import & Export Corp. and Shandong

Huarong General Group Corp. for Judgment on the Agency Record

(“Pls.’ Pub. App.”) at Ex. 14 at 7 (Mar. 8, 2001) (“Pulaski Tools

Final Scope Ruling”). As a result, Commerce applied AFA to

derive the margin for TMC’s unreported cast iron pick sales.

Issues and Decision Memo at Cmt. 21. TMC counters that Commerce

erred in applying AFA because the antidumping duty orders discuss

forging as an exclusive, rather than illustrative, production

method. See Pls.’ Reply Br. at 21.

Under 19 C.F.R. § 351.225(b), a determination regarding the

scope of an antidumping duty order can be initiated by Commerce

or, under 19 C.F.R. § 351.225(c)(1), by the application of an

interested party. Thus, if a question arises as to whether

certain merchandise is encompassed by an antidumping duty order,

an interested party may request that Commerce issue a scope

ruling to clarify the order’s application to the merchandise in

question.

In this case, it is unclear whether cast iron picks fall

within the scope of the antidumping duty orders. The Pulaski
Court No. 02-00637 Page 24

Tools Final Scope Ruling referenced by both parties is ambiguous

in its analysis of the antidumping duty orders, and it provides

ambivalent guidance regarding the orders’ applicability to cast

iron picks. Moreover, given Commerce’s exclusion of production

method from scope determinations in the Pulaski Tools Final Scope

Ruling, TMC should have hesitated to conclude that cast iron

picks fall outside the scope of the antidumping duty orders

because they are cast rather than forged. See Pulaski Tools

Final Scope Ruling at 7. Instead, TMC should have requested a

scope determination from Commerce to resolve the issue. It had

an opportunity to do so when Commerce issued the Preliminary

Results stating its intent to consider cast iron picks as falling

within the purview of the antidumping duty orders. See

Preliminary Results, 67 Fed. Reg. at 10123. However, TMC never

applied for a scope ruling.6

Whenever warranted, the Court is obligated to require the

exhaustion of administrative remedies before an issue may be

properly addressed here. 28 U.S.C. § 2637(d). “The detailed

scope determination procedures that Commerce has provided

constitute precisely the kind of administrative remedy that must

be exhausted before a party may litigate the validity of the

6
See Oral Argument Tr. at 30 (“[Y]ou’re sitting at a
verification and they now say you should have asked before for a
scope ruling. And certainly, the issue had – it was not on our
radar screen, to use that oft-used phrase. We – it never
occurred to us . . . .”).
Court No. 02-00637 Page 25

administrative action.” Sandvik Steel Co. v. United States, 164

F.3d 596, 599-600 (Fed. Cir. 1998).

Accordingly, because TMC failed to exhaust its

administrative remedies, the Court declines to exercise

jurisdiction to address whether Commerce properly applied AFA as

a result of TMC’s failure to report its cast iron pick sales.

E. Commerce’s Decision to Use Indian Import Data for the Period
Covering February through December 2000 as the Surrogate
Value for the Handles on TMC’s Hammers and Axes Is Supported
by Substantial Evidence and Otherwise in Accordance with
Law.

During the period of review, TMC exported hammers and axes

with wooden and fiberglass handles. Pls.’ Br. at 32. In

accordance with 19 U.S.C. § 1677b(c)(1), Commerce used Indian

import data for the period covering February through December

2000 as the surrogate value for the handles.7 Id. at 33; Def.’s

Br. at 5. However, Commerce previously determined in a new
7
19 U.S.C. § 1677b(c)(1) provides:

If--
(A) the subject merchandise is exported from a
nonmarket economy country, and
(B) [Commerce] finds that available information
does not permit the normal value of the subject
merchandise to be determined . . . ,
[Commerce] shall determine the normal value of the
subject merchandise on the basis of the value of
the factors of production utilized in producing
the merchandise . . . . [T]he valuation of the
factors of production shall be based on the best
available information regarding the values of such
factors in a market economy country or countries
considered to be appropriate by [Commerce].

19 U.S.C. § 1677b(c)(1).
Court No. 02-00637 Page 26

shipper review for heavy forged hand tools that the same Indian

import data for the period covering February through July 2000

was aberrational. See Heavy Forged Hand Tools From the People’s

Republic of China: Final Results of New Shipper Administrative

Review, 66 Fed. Reg. 54503 (Oct. 29, 2001).

TMC asserts that Commerce should have also rejected as

aberrational the February through July 2000 Indian import data

used to value the handles on TMC’s hammers and axes. Pls.’ Br.

at 34. At a minimum, TMC contends that Commerce should have

explained how it determined that this data was aberrational in

the new shipper review, but not in the present review. Id. at

33-34. TMC further claims that Commerce failed to evaluate the

Indian data against the U.S. benchmark, and that had it done so,

it would have realized the Indian data was aberrational. Id. at

32-33. TMC also points to Commerce’s obligation under 19 U.S.C.

§ 1677b(c)(1) to select the “best available information” when

valuing factors of production, arguing that Commerce did not show

how the Indian import data, rather than Indonesian import data,

was in fact the best available information. See Pls.’ Reply Br.

at 10-11.

The Court readily disposes of TMC’s first line of argument

by applying the doctrine of exhaustion of administrative

remedies. As noted above, “[t]he doctrine . . . provides that no

one is entitled to judicial relief for a supposed or threatened
Court No. 02-00637 Page 27

injury until the prescribed administrative remedy has been

exhausted.” Sandvik Steel Co. v. United States, 164 F.3d 596,

599 (Fed. Cir. 1998) (quoting McKart v. United States, 395 U.S.

185, 193 (1969)) (internal quotation omitted). The exhaustion

doctrine is “particularly pertinent” where, as here, “the

function of the agency and the particular decision sought to be

reviewed involve exercise of discretionary powers granted the

agency by Congress, or require application of special expertise.”

McKart, 395 U.S. at 194.

TMC did not raise its contention regarding differential

treatment of the February through July 2000 Indian import data in

its administrative case brief. See Administrative Case Brief of

Respondents, Def.’s App. at Ex. 9 at 13-17 (July 31, 2002). Had

TMC identified this issue during the administrative review,

Commerce could have addressed it in the Issues and Decision Memo.

By not raising its “argument with reasonable clarity and

avail[ing Commerce] with an opportunity to address it[,]” Timken

Co. v. United States, 25 CIT 939, 958, 166 F. Supp. 2d 608, 628

(2001), TMC failed to exhaust its administrative remedies.

Therefore, the Court declines to exercise jurisdiction over this

issue.

The Court turns next to TMC’s claim that Commerce failed to

evaluate the Indian data against the U.S. benchmark. Contrary to

TMC’s contention, Commerce did make such a comparison. Indeed,
Court No. 02-00637 Page 28

Commerce considered but ultimately rejected Indian import data

for January 2001, explaining that “[t]he Department has excluded

from the Indian import data the month of January 2001, which has

a monthly value that is high enough in relation to the U.S.

benchmark and the rest of the Indian data to be considered

aberrational.” Issues and Decision Memo at Cmt. 7 (emphasis

added). Accordingly, the Court finds TMC’s assertion to be

unfounded.

TMC’s argument that Commerce did not show how the Indian

import data, rather than Indonesian import data, was the “best

available information” is also unavailing. Commerce values the

factors of production in a nonmarket economy country “based on

the best available information regarding the values of such

factors in a market economy country or countries considered to be

appropriate by [Commerce].” 19 U.S.C. § 1677b(c)(1). “While the

statute does not define ‘best available information,’ it grants

to Commerce broad discretion to determine the best available

information in a reasonable manner on a case-by-case basis.”

Anshan Iron & Steel Co. v. United States, 27 CIT __, __, Slip Op.

03-83 at 7 (July 16, 2003) (quoting Timken, 25 CIT at 944, 166 F.

Supp. 2d at 616) (internal quotation omitted). In fact,

“Commerce need not prove that its methodology was the only way or

even the best way to calculate surrogate values for factors of

production as long as it was a reasonable way.” Coalition for
Court No. 02-00637 Page 29

the Pres. of Am. Brake Drum & Rotor Aftermarket Manufacturers v.

United States, 23 CIT 88, 118, 44 F. Supp. 2d 229, 258 (1999).

The record shows that Commerce’s decision to use Indian data

was well within Commerce’s broad discretion. Commerce determined

that the average unit value of 289.06 rupees per kilogram (US

$6.38 per kilogram) for Indian imports during the eleven-month

period was sufficiently viable to be used as a surrogate value.

Response of Defendant-Intervenor to Motion by Plaintiffs for

Judgment on the Agency Record (“Def.-Intvr.’s Br.”) at 25; see

also Pls.’ Br. at 34; Def.’s Br. at 40. While the Indian value

was higher than the 2000 benchmark Indonesian unit value

proffered by TMC, the Indian value was substantially lower than

the 1999 Indonesian unit price of $11.168 per kilogram. Def.-

Intvr.’s Br. at 25. Given the fluctuations in market prices and

the wide variations in benchmark prices, the Court finds that the

Indian data was a reasonable and appropriate surrogate value.

Accordingly, Commerce’s use of Indian import data for the

period covering February through December 2000 as the surrogate

value for handles is supported by substantial evidence and

otherwise in accordance with law.

F. Commerce’s Fifteen-Day Liquidation Policy Is Not in
Accordance with Law.

Shortly before issuing the Final Results, Commerce posted a

notice on its website announcing its implementation of a new

liquidation policy. The notice states that Commerce intends to
Court No. 02-00637 Page 30

issue liquidation instructions to Customs “within 15 days of

publication of the final results of review in the Federal

Register or any amendments thereto.” Announcement Concerning

Issuance of Liquidation Instructions Reflecting Results of

Administrative Reviews, Pls.’ Pub. App. at Ex. 13 (Aug. 9, 2002).

Plaintiffs challenge this new liquidation policy on the

grounds that it conflicts with the sixty-day period set forth in

USCIT Rule 3(a)(2) for perfecting an appeal. Pls.’ Br. at 35.

Plaintiffs further contend that the new policy will result in a

flood of preliminary injunction motions before the Court by

parties seeking to stay liquidation and preserve the Court’s

jurisdiction. See id.

Commerce posits that the new policy is in accordance with

law because nothing in Rule 3(a)(2) prohibits a party from filing

its summons and complaint together within fifteen days after

publication of the final results. Def.’s Br. at 42-43. Commerce

also asserts that in light of the Federal Circuit’s determination

in International Trading Co. v. United States that entries not

liquidated within six months of the publication of final results

are deemed liquidated at the cash deposit rate, it would be

administratively unwise for Commerce to wait sixty days before

sending liquidation instructions to Customs. Id. at 43.

Rule 3(a)(2) implements the statutory directive of 19 U.S.C.

§ 1516a(2)(A) that an interested party may challenge an
Court No. 02-00637 Page 31

administrative determination by filing a summons within thirty

days of the date of publication of the final results in the

Federal Register, and by subsequently filing a complaint within

thirty days thereafter. 19 U.S.C. § 1516a(2)(A). On its face,

then, § 1516a(2)(A) allows a plaintiff to wait thirty days before

filing its summons, and to wait an additional thirty days before

filing its complaint. The fact that a party could file both its

summons and complaint within fifteen days is immaterial. Because

Commerce’s fifteen-day liquidation policy directly contravenes

the time frame established by § 1516a(2)(A) for filing a summons

and a complaint, the Court finds that Commerce’s new policy is

not in accordance with law.8

Moreover, the Court is concerned that Commerce’s new policy

will compel parties, in every instance, to seek a preliminary

injunction within fifteen days to prevent liquidation and

preserve the Court’s jurisdiction, regardless of whether the

party ultimately decides to challenge any aspects of the final

8
Commerce argues that Plaintiffs do not have standing
because they waited eighteen days (instead of fifteen) to file
their summons and complaint. See Def.’s Br. at 45. The Court
disagrees. 19 U.S.C. § 1516a(2)(A) permits parties to wait
thirty days before filing their summons, and an additional thirty
days before filing their complaint. However, because of
Commerce’s new liquidation policy, Plaintiffs felt compelled to
file their summons and complaint within eighteen days.
Plaintiffs were injured to the extent that Commerce’s new policy
required them to file their summons and complaint prematurely;
the fact that Plaintiffs waited for eighteen days instead of
fifteen is beside the point. Thus, Plaintiffs do have standing
to challenge Commerce’s new liquidation policy.
Court No. 02-00637 Page 32

determination. As a result, in addition to imposing financial

burdens on litigants in the form of increased attorney’s fees and

court costs, the policy will also impose a substantial burden on

the Court by inundating it with preliminary injunction motions.

Although Commerce contends that it would be administratively

unwise to wait sixty days before issuing liquidation

instructions, the rationale offered by Commerce at oral argument

to support this assertion is wholly insufficient. Commerce’s

entire argument is as follows:

[I]t does take a while for Commerce to issue the
instructions, for those instructions to make it to the
ports at Customs, and then for the individual Port
Directors to actually liquidate those entries. It’s a
time-consuming process that takes double-checking and
double-checking to make sure that there are no
inadvertent liquidations.

Oral Argument Tr. at 72. Commerce’s argument is conveniently

vague and entirely fails to address exactly how “time-consuming”

the liquidation process is. As a result, the Court finds that

Commerce has not adequately explained how it would be

administratively unwise to wait sixty days, instead of fifteen,

before issuing liquidation instructions.

Accordingly, the Court holds that Commerce’s fifteen-day

liquidation policy is not in accordance with law.

III. CONCLUSION

For the aforementioned reasons, the Court sustains the Final

Results, but finds that Commerce’s fifteen-day liquidation policy
Court No. 02-00637 Page 33

is not in accordance with law. Judgment will be entered

accordingly.

/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge

Date: October 4, 2004
New York, New York