HITACHI ENERGY USA INC., Plaintiff-Appellee v. UNITED STATES, Defendant-Appellee HYUNDAI HEAVY INDUSTRIES CO., LTD., HYUNDAI CORPORATION, USA, Defendants-Appellants
2020-2114
United States Court of Appeals for the Federal Circuit
May 24, 2022
Appeal from the United States Court of International Trade in No. 1:16-cv-00054-MAB, Judge Mark A. Barnett.
MELISSA M. BREWER, Kelley Drye & Warren, LLP, Washington, DC, argued for plaintiff-appellee. Also represented by ROBERT ALAN LUBERDA, DAVID C. SMITH, JR.
JOHN JACOB TODOR, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by JEFFREY B. CLARK, JEANNE DAVIDSON, FRANKLIN E. WHITE, JR.; DAVID W. RICHARDSON, Office of the Chief Counsel for Trade Enforcement & Compliance, United States Department of Commerce, Washington, DC.
RON KENDLER, White & Case LLP, Washington, DC, argued for defendants-appellants. Also represented by DAVID EDWARD BOND.
Before NEWMAN, LOURIE, and DYK, Circuit Judges.
Appellants Hyundai Heavy Industries Co. and Hyundai Corporation, USA (collectively, “Hyundai“) seek review of an antidumping duty determination for large power transformers imported from the Republic of Korea. This is the second administrative review (“POR2“). The results of the Original Investigation (“OI“) are reported at Large Power Transformers from the Republic of Korea: Final Determination of Sales at Less Than Fair Value, 77 Fed. Reg. 40857 (July 11, 2012) (“Issues and Decision Memorandum“).
When an administrative review is requested, the antidumping duty is redetermined.
The second administrative review was initiated in August 2014, and the results are reported at Large Power Transformers from the Republic of Korea: Final Results of Antidumping Duty Administrative Review; 2013-2014, 81 Fed. Reg. 14087 (Mar. 16, 2016). This determination was subject to four appeals to the Court of International Trade, with three remands to the Department of Commerce (“Commerce“). The court‘s final decision, reported at ABB, Inc., v. United States, 443 F. Supp. 3d 1354, 1357 (Ct. Int‘l Trade 2020), is the subject of this appeal.1
This appeal of the second review concerns the application of
We conclude that Commerce erred in its statutory compliance as a matter of law, and we remand for redetermination of the antidumping duty applied to Hyundai‘s imports, based on the calculation of service-related revenue. Hyundai has the statutory right to correct the deficiencies that led to the application of adverse inferences and partial facts available.
BACKGROUND
An antidumping duty may be levied on imported products that are sold or likely to be sold in the United States at less than fair value, when such sales threaten or cause material injury to a domestic industry.
This appeal concerns methodology for valuation of service-related revenue associated with Korean large power transformers, in determining normal value and sales price. In POR2, on a first appeal of Commerce‘s decision, the Court of International Trade remanded this issue to Commerce, at the Government‘s request. In response, Commerce changed its methodology for determination of service-related revenue.
Hyundai then asked Commerce for permission to provide additional data and information. Hyundai wrote: “With respect to the factual flaws discussed above, the Department should reopen the record and issue a supplemental questionnaire to collect information regarding the New Test for service-related revenue.” Appx10067. Hyundai proposed “If the Department continues to apply the New Test, it must provide Hyundai with an opportunity to place relevant information on the record, by issuing a supplemental questionnaire.” Id. at 10069. Commerce denied the request,
Hyundai reported service-related revenue in accordance with the Commerce questionnaire. Antidumping Duty Questionnaire – Hyundai Heavy Industries, C18 (Nov. 18, 2014) see Response to Supplemental Sections B and C Questionnaire (Jun. 3, 2015) (“Where the terms of sale require Hyundai to perform such services, the gross unit price includes the value of services required.“). In the second administrative review, Hyundai followed the same procedure as previously accepted by Commerce during the original investigation and the first administrative review. See POR1 Final Results, 80 Fed. Reg. at 17035. ABB Enterprise Software, Inc. (now Hitachi Energy USA, Inc., herein, “ABB“) objected to this methodology, stating that it overstated the prices of Hyundai‘s United States sales. Commerce rejected the objection, stating that it had reviewed Hyundai‘s invoices and purchase orders and that Hyundai had properly responded to the questionnaire. Commerce stated:
Based on our review of the record evidence at verification and comments by interested parties, we have determined to rely upon Hyundai‘s reported [gross unit price] for purposes of calculating net U.S. price for its sales . . . We find that there is no evidence, based on the invoices and purchase orders examined at verification, to indicate that Hyundai has separate revenues which it has failed to report to Commerce.
Original Investigation, Issues & Decision Memorandum, Comment 4 (July 2, 2012) (summarized at 77 Fed. Reg. 40857 July 11, 2012).
ABB appealed to the Court of International Trade, objecting to several aspects of the Commerce procedure, including service-related revenues. Commerce requested a voluntary remand “to reconsider its application of its revenue-capping practice in this case, in light of this practice . . . [and to] evaluate whether its application of this practice is consistent with respect to both respondents.” Def.‘s Suppl. Mem. Addressing Standard for Voluntary Remand, ABB, Inc. v. United States, No. 1:16-cv-00054 (Ct. Int‘l Trade May 19, 2017), ECF No. 79; Appx 9945. The court stated that “Commerce‘s concerns are substantial and legitimate” and remanded for consideration. ABB, Inc. v. United States, 273 F. Supp. 3d 1200, 1205 (Ct. Int‘l Trade 2017).
On remand, Commerce revised its methodology for determining service-related revenue:
Commerce‘s capping methodology is not dependent upon whether a respondent must provide the service under the terms of sale as Hyundai contends, but whether such services were provided and whether the revenue amounts collected for the provision of such services exceed the cost of those services. Neither is Commerce‘s capping methodology dependent upon whether the service-related expenses and revenues are separate line-items on an invoice to the unrelated customer . . . Commerce‘s capping methodology, generally, may nevertheless be applied notwithstanding whether the amounts are specified in sales contracts with, or invoices to, the customer. If a respondent collects, as a portion of the final price to the customer, a portion of revenue which is dedicated to covering a service-related expense, and that service-related expense is less than the revenue set aside to cover the expense, then this is service-related revenue which is part of the material terms of sale and must be capped.
Final Results of Redetermination Pursuant To Court Remand, ABB, Inc. v. United States, No. 1:16-cv-00054 (Ct. Int‘l
Hyundai cannot prevent the application of Commerce‘s capping methodology based on a technicality concerning whether a respondent chooses to separately itemize service-related charges in sales contracts or invoices. Commerce‘s determination in this remand redetermination is not a change in methodology, but is instead an appropriate application of our capping methodology pursuant to the statute and past practice.
Appx106.
Commerce changed the way it was evaluating the data, for these changes required identification of which services were provided, and cost and price information regardless of whether they were separately negotiated or part of the sales price. Since Commerce found Hyundai‘s original submissions inadequate to determine the service-related revenue in this adjusted manner, Hyundai requested permission to provide additional information in conformity with
(d) Deficient submissions.
If the administering authority or the Commission determines that a response to a request for information under this subtitle does not comply with the request, the administering authority or the Commission (as the case may be) shall promptly inform the person submitting the response of the nature of the deficiency and shall, to the extent practicable, provide that person with an opportunity to remedy or explain the deficiency in light of the time limits established for the completion of investigations or reviews under this subtitle.
In its first remand Commerce applied a new test. As described by Hyundai, “Under the New Test, which the Department now seeks to apply in the Draft Remand, service-related revenue exists if certain sales documents identified revenue for the service, regardless of whether Hyundai was required to provide the service under the terms of sale.” Appx10069. Commerce applied its new method of determining whether service-related revenue existed for Hyundai, and then “the Department immediately states that ‘information is missing from the record due to Hyundai‘s failure to report service-related revenues’ and that this justifies the application of partial facts available.” Id.
In its request to submit additional information, Hyundai stated that “the Department appears to view its Original Test for service-related revenue to be incorrect. Reopening the factual record is therefore not only within the Department‘s discretion, it is necessary.” Id. at 10085. Denying Hyundai‘s request to provide additional information, Commerce stated that its “determination in this remand redetermination is not a change in methodology, but is instead an appropriate application of our capping methodology pursuant to the statute and past practice.” Id. at 106. Commerce characterizes Hyundai‘s responses as “avoidance,” stating that “Hyundai cannot prevent the application of Commerce‘s capping methodology based on a technicality concerning whether a respondent chooses to separately itemize service-related charges in sales contracts or invoices.” Id.
Commerce found that “Hyundai failed to cooperate to the best of its ability by not providing the information requested. Therefore, partial adverse facts available is
Hyundai appealed, stating that “the Department‘s conclusions rest on the unreasonable assertion that Hyundai should have known that the Department would retroactively revise its test with respect to service-related revenue two years after it issued the Final Results.” Defendant-Intervenors’ Comments in Opposition to the Final Results of Redetermination Pursuant to Court Remand, ABB Inc. v. United States, No. 1:16-cv-00054 (Ct. Int‘l Trade Mar. 20, 2018), ECF No. 106. It is not disputed that Hyundai responded fully to Commerce‘s questionnaire.
Hyundai also argued that the additional information Commerce was requesting was contained in previously submitted “invoices listing separate line items for services[.]” Final Results of Redetermination Pursuant to Court Remand, ABB Inc. v. United States, No. 1:16-cv-00054 (Ct. Int‘l Trade Apr. 26, 2019), ECF No. 150; Appx41-42. However, Commerce refused to consider information from this source, stating that Hyundai “did not alert” Commerce to “invoices listing separate line items for services” and therefore “failed to cooperate to the best of its ability.” Id. at 41-42.
The Court of International Trade observed that
However, the court found: “It was not until Commerce sorted through Hyundai‘s sales documentation that the agency recognized that Hyundai‘s documentation was inconsistent with its reporting.” Id. The court concluded, “under these circumstances, Commerce was not statutorily mandated to provide Hyundai a subsequent opportunity to remedy the deficiency.” Id. at 1223.
The court remanded for redetermination, explaining that Commerce had impermissibly relied on internal Hyundai communications as evidence of service-related revenue. Id. The remand included instructions “that the agency may not apply its capping methodology to those transactions or services for which Commerce relied only on internal communications among Hyundai employees or affiliates” to determine service-related revenue. Id.
Based on the continued application of adverse facts available, and applying changes to other factors, Commerce assessed a dumping margin of 16.58 %. Id. at 57. On Hyundai‘s appeal, the court again remanded to Commerce on issues not challenged on this appeal. On this remand, Commerce addressed those issues and set the dumping margin at 16.13%. Final Results of Redetermination Pursuant to Court Remand, ABB Inc. v. United States, No. 1:16-cv-00054 (Ct. Int‘l Trade Apr. 14, 2020), ECF No. 182; Appx4-14. Hyundai appealed a fourth time, and the court sustained Commerce‘s Third Remand Results. ABB, Inc. v. United States, 437 F. Supp. 3d 1289 (Ct. Int‘l Trade 2020).
Now, before us, Hyundai presses its objection to Commerce‘s refusal to allow correction of any deficiencies in the information previously submitted, as required by
DISCUSSION
Standard of Review
On appeal of a decision of the Court of International Trade concerning an antidumping duty determination of the Department of Commerce, we review the decision of Commerce on the same standard that is applied by the Court of International Trade. “Commerce‘s determination should therefore be upheld unless it is unsupported by substantial evidence on the record or is not in accordance with law.” Dupont Teijin Films USA, LP v. United States, 407 F.3d 1211, 1215 (Fed. Cir. 2005); see also SNR Roulements v. United States, 402 F.3d 1358, 1361 (Fed. Cir. 2005). “[T]his court must review the entire record for substantial evidence and compliance with the law. Substantial evidence is ‘such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.‘” Am. Silicon Techs. v. United States, 334 F.3d 1033, 1036-37 (Fed Cir. 2003) (citing Universal Camera Corp. v. N.L.R.B., 340 U.S. 474, 477 (1951)). “The court shall hold unlawful any determination, finding, or conclusion found . . . to be unsupported by substantial evidence on the record, or otherwise not in accordance with law[.]”
The Issues on Appeal
Hyundai appeals three rulings of Commerce that were sustained by the Court of International Trade: (1) Commerce‘s refusal to permit Hyundai to remedy the announced deficiency in reported information about service-related revenue, as required by
A
Hyundai‘s Request to Supplement the Record
Hyundai‘s request to supplement the record is in accordance with law. After Commerce modified its methodology for determination of service-related revenue after the first remand, Hyundai sought to provide data and information related to the new methodology. See Final Results of Redetermination Pursuant to Court Remand, ABB Inc. v. United States, No. 1:16-cv-00054 (Ct. Int‘l Trade Apr. 26, 2019), ECF No. 150; Appx28-57.
Hyundai states that its record documents already showed the break-out information now required by Commerce. In response to Commerce‘s original questionnaire and “consistent with prior segments of this proceeding,” Hyundai separately reported service-related revenue where there existed “a separate purchase order for . . . the transformer (e.g., supervision) but that related to the transformer.” Letter from Hyundai to Commerce Re: Antidumping Administrative Review of Large Power Transformers from Korea - Response to Sections B and C Questionnaires (Jan. 26, 2015); Appx2408. Hyundai explained that the relevant service-related revenue was provided in separate fields as Commerce had requested. “ADDPOPRU is sales amount under a separate purchase order for services that were not included in the purchase order for the transformer (e.g., supervision), but that are related to the transformer. ADDPOEXPU is the expense associated with the additional services.” Id.
In response to Hyundai‘s submission, Commerce sent a supplemental questionnaire directed to several items. U.S. Department of Commerce, Supplemental Questionnaire for Sections B and C of Hyundai Heavy Industries and Hyundai Corporation USA‘s Responses to the Antidumping Duty Questionnaire (May 22, 2015); Appx6140. Hyundai responded to each question. Concerning service-related revenue, Hyundai explained, “Where the terms of sale require Hyundai to perform such services, the gross unit price includes the value of services required.” Hyundai Heavy Industries Co, Ltd., Antidumping Administrative Review of Large Power Transformers from South Korea - Response to Supplemental Sections B and C Questionnaires (Jun. 3, 2015); Appx6162.
Commerce had previously rejected ABB‘s objections to Hyundai‘s responses in Commerce‘s initial action on the second administrative review:
We cannot conclude that necessary information is not available on the record, nor can we find that Hyundai withheld information requested by the Department, that it failed to provide such information in the form or manner requested, that it acted to significantly impede the proceeding, or that it provided requested information that could not be verified.
Issues and Decision Memorandum for Final Results of Antidumping Duty Administrative Review: Large Power Transformers from the Republic of Korea: 2013-2014, Comment 15 (Mar. 8, 2016); Appx9649. Commerce stated that Hyundai‘s documentation “show[s] no indication that Hyundai improperly reported its sales data.” Id.
These findings cannot be reconciled with Commerce‘s later ruling that Hyundai had “not cooperate[d] to the best of its ability.” Commerce supported its refusal to permit Hyundai to provide additional information, by stating that Hyundai had not previously provided information to the best of its ability: “We have determined not to allow
After the first remand, Commerce determined that service-related revenue would no longer be defined by the terms of the sale as it was in the original investigation, the first review, and the initial findings of the second review.
“Commerce‘s capping methodology is not dependent upon whether a respondent must provide the service under the terms of sale as Hyundai contends, but whether such services were provided and whether the revenue amounts collected for the provision of such services exceed the cost of those services. Neither is Commerce‘s capping methodology dependent upon whether the service-related expenses and revenues are separate line-items on an invoice to the unrelated customer.”
Final Results of Redetermination Pursuant To Court Remand, ABB Inc. v. United States, No. 1:16-cv-00054 (Ct. Int‘l Trade Feb. 7, 2018), ECF No. 95; Appx105-106. Thus documentation of the line-item breakouts became a factor in the administrative review.
Commerce‘s denial of Hyundai‘s request to provide any necessary information was contrary to the statute, which states in relevant part that Commerce “shall promptly inform the person submitting the response of the nature of the deficiency and shall, to the extent practicable, provide that person with an opportunity to remedy or explain the deficiency.”
In a separate proceeding on a later administrative review and a different issue, Hyundai Steel Co. v. United States, 282 F. Supp. 3d 1332, 1349 (Ct. Int‘l Trade 2018), the court held that Commerce‘s failure to timely notify a party of deficiency “is itself a violation of
B
Adverse Inferences and Applied Partial Facts Available
Commerce drew adverse inferences and applied partial facts. When necessary information is missing or unavailable, Commerce is authorized to consider whatever facts are available,
Commerce is authorized to draw an adverse inference and to apply the highest dumping margin when the respondent fails to do the maximum. See Maverick Tube Corp. v. United States, 857 F.3d 1353, 1361 (Fed. Cir. 2017) (adverse inference based on adverse facts available may be appropriate when an interested party has been notified of a defect in its questionnaire response yet continues to provide a defective response).
Section 1677e(a)(2)(D) requires that the authorization to rely on adverse facts available is subject to
Commerce is permitted by
[B]ecause it rejected Hyundai‘s request to submit additional information, the Department was unable to determine
whether there was SRR for the remaining sales. As partial adverse FA, the Department reduced all other U.S. gross unit prices “by the highest percentage difference between service-related revenue and the service-related expenses from the SEQUs with usable service-related expenses” on the record. This substantially increased the dumping margin.
Hyundai Br. 29 (internal citations omitted). “Before making adverse inference, Commerce must examine a respondent‘s actions and assess the extent of the respondent‘s abilities, efforts, and cooperation in responding to Commerce requests for information.” Nippon Steel Corp. v. United States, 337 F.3d 1373, 1382 (Fed Circ. 2003). Commerce made no such examination, and on this appeal, the only excuse offered for Commerce‘s failure to provide Hyundai with a notice of deficiency and the opportunity for remedy, was that Commerce “discovered” the deficiency only on “verification.” This argument does not track Commerce‘s prior position that the deficiency arose when Commerce changed its methodology to satisfy a prior remand from the Court of International Trade.
The government does not assert that Hyundai withheld information, or committed any of the transgressions in
The record herein provides no basis for an adverse inference and recourse to adverse facts available. It is undisputed that any incompleteness of sales data and information could have been remedied by the proffered information, but for Commerce‘s refusal to permit Hyundai to provide this information. No reasonable justification has been offered for that refusal despite Hyundai‘s repeated requests. The invocation of adverse inferences and use of partial facts available is unsupported by substantial evidence in the record.
CONCLUSION
Commerce erred in law, refusing to permit Hyundai to supplement the record with information concerning service-related revenue. Commerce thus relied on incomplete data to determine antidumping duties. The Court of International Trade erred in ratifying that refusal. We vacate the Court of International Trade‘s affirmance on this issue, and we vacate the court‘s affirmance of Commerce‘s recourse to adverse inferences and partial facts available, for that action was a result of the erroneous exclusion of information. We remand with instructions for redetermination of any dumping margin, on complete information provided in conformity with law.
VACATED AND REMANDED
COSTS