MID CONTINENT NAIL CORPORATION, Plaintiff, v. UNITED STATES, Defendant, and Dubai Wire FZE and Itochu Building Products Co., Inc., and Precision Fasteners, LLC, Defendant-Intervenors.
Court No. 12-00133
United States Court of International Trade
June 26, 2014
Slip Op. 14-72, 1307
Andrew W. Kentz, David A. Yocis, Jordan C. Kahn, and Nathan W. Cunningham, Picard Kentz & Rowe LLP, of Washington, DC, for plaintiff Mid Continent Nail Corporation. With them on the brief were Adam H. Gordon, Robert E. DeFrancesco, III, and Laura El-Sabaawi of Wiley Rein LLP, of Washington, DC.
Carrie A. Dunsmore, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for defendant United States. With her on the brief were Stuart F. Delery, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, Franklin E. White, Jr., Assistant Director. Of counsel on the brief was Melissa M. Brewer, Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, DC.
Bruce M. Mitchell, Mark E. Pardo, Ned H. Marshak, and Kavita Mohan, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of New York, NY, for defendant-intervenors Dubai Wire FZE and Itochu Building Products Co., Inc.
Michael P. House and Sabahat Chaudhary, Perkins Coie LLP, of Washington, DC, for defendant-intervenor Precision Fasteners, LLC.
CARMAN, Judge:
Three cases are consolidated before the court, each challenging portions of Certain Steel Nails From the United Arab Emi-
Background
Plaintiff in this consolidated action is domestic nail producer Mid Continent Nail Corporation (“MCN” or “Plaintiff“). Defendant-Intervenors Dubai Wire FZE and Itochu Building Products Co., Inc. (collectively “Dubai Wire“) and Precision Fasteners, LLC (“Precision“) are producers of subject merchandise from the UAE.1
I. Relationship Between Millennium and Precision
In determining whether Precision sold its product into the United States at less than fair value, Commerce calculated Precision‘s normal value (“NV“), representing the sales price of subject merchandise in Precision‘s home market, by means of constructed value (“CV“), i.e. the price at which Precision‘s nails would sell in its home market (the UAE) under ordinary market conditions. Use of CV is appropriate where, as here, the respondents do not have a viable comparison market in their home country. See
Pursuant to
The statute contains an exception to this general rule regarding price comparisons. Commerce “may” make its determination regarding sales at less than fair value “by comparing the weighted average of the normal values to the export prices (or constructed export prices) of individual transactions for comparable merchandise” if two conditions are satisfied:
(i) there is a pattern of export prices (or constructed export prices) for comparable merchandise that differ significantly among purchasers, regions, or periods of time, and
(ii) [Commerce] explains why such differences cannot be taken into account using [average-to-average or transaction-to-transaction price comparisons].
Shortly after the Uruguay Round Agreements Act, Pub. L. No. 103-465, 108 Stat. 4809 (1994) established the price comparison methods and their priorities as described above, Commerce held hearings
In its investigation of nails from the UAE, MCN alleged that the respondents had engaged in targeted dumping, so Commerce analyzed respondents’ U.S. sales data to determine whether the allegation had merit. In the preliminary results of the investigation, Commerce determined that Precision and Dubai Wire had made sales that were targeted by customer, region, and time period. 76 Fed. Reg. 68,129 (Dep‘t of Commerce Nov. 3, 2011) (preliminary determination of sales at less than fair value) (“Preliminary Results“); see also Targeted Dumping Memoranda, C.R. 105, 110. Commerce found, however, that the ordinary average-to-average methodology sufficed to account for the resulting price differences, so it did not apply the
III. Surrogate Profit Values
One of the factors Commerce may examine while determining CV, pursuant to
IV. Interest Rate Imputed to Loan from Affiliate
Dubai Wire had received a long-term loan from an affiliated company at a non-market interest rate. Id. at 32. Commerce sought evidence from which it could impute a fair market interest rate to the loan for purposes of calculating Dubai Wire‘s financial expenses when determining its CV. Upon examining the relevant record evidence, Commerce determined to impute a rate at the mid-point of Dubai Wire‘s 2010 short-term loans.
Discussion
I. Jurisdiction and Standard of Review
The Court has jurisdiction over this case pursuant to
When Commerce interprets the antidumping statute, which is within Commerce‘s purview via authority delegated by Congress, the court reviews Commerce‘s
II. Affiliation
During the investigation, MCN urged Commerce to find that Precision and Millennium were affiliated on the basis that (1) Millennium was able to exercise control over Precision in a manner meeting the definitions in
The antidumping statute states in relevant part that the term “affiliated” applies to “[a]ny person who controls any other person and such other person.”
During the investigation, MCN based its allegations of control on several grounds. First, MCN claimed that Millennium and Precision shared employees. Precision Analysis Memo at 2. According to MCN, the list of its managers that Precision submitted to Commerce during the POI included an individual identified in a 2006 letter as a [REDACTED] of Millennium. MCN also pointed to a statement made after the POI by a former Precision employee on his LinkedIn profile, in which he referred to himself as the new [REDACTED]. Id. at 3. Precision responded that the 2006 letter only shows that the person in question worked for Millennium “two years before Precision was formed” and that the man‘s statement on LinkedIn “was neither authorized nor known by Precision” and was
Second, MCN claimed that Millennium and Precision were alter egos that held themselves out to the public as a single entity. Id. MCN noted that the two companies shared a telephone number; had identical website design; [REDACTED]; were regarded as a single entity in the listings of the International Staple, Nail, and Tool Association (“ISANTA“) and International Code Council—Evaluation Service (“ICC-ES“); and marked a recent product shipment “Manufactured by Precision Fasteners (Millennium Steel and Wire).” Id. Precision attributed these mixed identifications to the [REDACTED], which involved [REDACTED]. Id. at 4. Precision noted that [REDACTED]. Id.
Third, MCN alleged that Precision and Millennium [REDACTED], with Precision [REDACTED]. Id. According to MCN, Precision [REDACTED]. Id. According to Precision, it [REDACTED] pursuant to [REDACTED]. Id. Precision notes that at verification, Commerce confirmed that Precision [REDACTED] and [REDACTED]. Id. Precision explained that its wire-drawing machines [REDACTED], which Millennium agreed to do [REDACTED]. Id.
Fourth, MCN claimed that Precision and Millennium were affiliated through a close supplier relationship because [REDACTED]. Id. at 4-5. MCN argued that Precision was dependent on [REDACTED], and that [REDACTED] Precision‘s ability to produce nails [REDACTED]. Id. at 5. Thus, MCN claimed, [REDACTED]. Id. Precision responded that [REDACTED] during the POI, after which [REDACTED]. Id. Precision noted that it moved to avoid [REDACTED] by buying machines, but [REDACTED] for access to high capacity electricity. Id.
Finally, MCN also urged Commerce to find affiliation based on the [REDACTED] between [REDACTED] resulting from Precision‘s [REDACTED]. Id. at 6. MCN claimed that Precision [REDACTED], which is typical of an affiliate rather than [REDACTED]. Id. Precision countered that its [REDACTED] were typical of [REDACTED] and it fully [REDACTED] its own production versus the [REDACTED]. Id.
Commerce examined the evidence put forward by MCN and found no affiliation between Precision and Millennium under
Regarding shared employees, Commerce found that the “evidence does not substantiate that during the POI Precision and Millennium employed even one individual concurrently,” since the companies’ [REDACTED]. Id. at 12. Commerce found no evidence that the individual who was a General Manager of Millennium in 2006 [REDACTED] came on at Precision as a Manager in 2010. Id. at 13. Commerce declined to credit the statement on a LinkedIn profile that the profile holder worked for “Millennium/Precision” for two months after the end of the POI. Id.
On Precision and Millennium holding themselves out as a single entity, Commerce found that the confusion stemmed from the [REDACTED], but found none of the evidence to suggest any “discernible ulterior motive” or “appreciable leverage to exert control.” Id. at 13-15. As to [REDACTED], Commerce found that the evidence, especially from verification, did not show that the companies [REDACTED], but did demonstrate some [REDACTED]. Id. at 15-16. Commerce found this minor entanglement insufficient to demonstrate a finding of affiliation via control. Id. at 16. As for financial relationship, Commerce noted that financial relationship is not a control factor under
A. Contentions of the Parties
1. MCN
Before the Court, MCN contends that Commerce acted contrary to the substantial record evidence in determining that Precision was not affiliated with Millennium. MCN‘s argument is that “overwhelming evidence on the record of this investigation indicates that Millennium has the ability or capacity to exert control over Precision, including the potential to impact decisions concerning the production, pricing or cost of the subject merchandise.” Mem. in Supp. of Mid Continent Nail Corp.‘s Rule 56.2 Mot. (“MCN Mem.“) at 13-14, ECF No. 41.
MCN reiterates before the Court the indicators of potential affiliation that MCN raised during the investigation: [REDACTED] (id. at 14-17); Precision‘s [REDACTED] from Millennium (id. at 18); an individual identified on LinkedIn as a [REDACTED] (id. at 18-19); an individual who in 2006 worked as a [REDACTED] at Millennium listed as Precision‘s General Manager during the POI (id. at 19); listings at ISANTA and ICC-ES implying the companies were alter egos of each other (id. at 19-20); [REDACTED] (id. at 20-21); and the companies using [REDACTED] (id. at 21). MCN also claims Precision was reliant on [REDACTED] in a close supplier relationship in which [REDACTED] needed to function. Id. at 22-
MCN claimed that the facts here were not truly distinguishable from SSWR from Korea, which Commerce purported to rely on, and therefore claims that Commerce acted contrary to its own established practice without providing a rational explanation. Id. at 28-29. Looking at the [REDACTED] between Precision and [REDACTED], MCN also points to their [REDACTED]. Id. at 29-30. MCN argues that analogous facts have undergirded findings of affiliation in past investigations. Id. at 30-31. MCN also claims that Commerce looked to the wrong time period in basing its affiliation decision on the potential future relationship between Precision and Millennium, rather than their relationship during the POI. Id. at 31-33.
2. Precision
Precision supports the Commerce determination of non-affiliation on the grounds articulated by Commerce in the Final Results. See generally Def.-Int. Precision‘s Opp‘n to Pl.‘s Mot. for J. on the Agency R. (“Precision Opp.“) at 11-34, ECF No. 66. Specifically addressing MCN‘s argument regarding Precision‘s [REDACTED], Precision argues that MCN‘s position would convert any [REDACTED] into entities involved in a control relationship, which would be an unreasonable application of the statute. Id. at 23. Regarding the former General Manager of [REDACTED] who later became Precision‘s General Manager, Precision points out that his [REDACTED]. Id. at 26. Precision also rejects MCN‘s arguments that it has a close supplier relationship with Millennium for the reasons articulated by Commerce in the Final Results. Id. at 31-34.
3. Commerce
Commerce reasserts that it properly considered and evaluated the record evidence in the Final Results, reiterating its reasoning before the Court. See generally Def.‘s Opp‘n to Pls.’ Mots. for J. Upon the Agency R. (“Commerce Opp.“) at 8-21, ECF No. 63. Commerce points out that even if MCN could demonstrate that Precision and Millennium shared employees as alleged, MCN “fails to explain how that would result in control.” Id. at 11. Similarly, Commerce notes the facts confirmed at verification regarding the companies’ [REDACTED] and argues that “although the parties’ cooperation is shown, the record does not suggest that one party is [in] the position to ‘control’ the other party” on this basis. Id. at 13. Addressing the [REDACTED] between Precision and [REDACTED], Commerce notes that there are no provisions permitting [REDACTED] to “impact decisions concerning the production, pricing,
B. Commerce‘s Affiliation Determination Is Affirmed
The Court affirms Commerce as to a lack of affiliation because Commerce applied its statute and regulations correctly, and based its decision on a reasonable assessment of the substantial evidence on the record. The Court is required to uphold the Final Results unless they are “unsupported by substantial evidence on the record, or otherwise not in accordance with law.”
It is clear that Commerce engaged in the sort of searching evaluation of the record which is to remain undisturbed under the standard of review. The parties do not dispute the nature of the record evidence, but rather the conclusions to be drawn from it. Commerce acted reasonably in coming to a negative determination on the affiliation issue, since even those pieces of record evidence suggestive of overlap between the two companies did not demonstrate that Millennium was able to control Precision‘s decisions regarding the subject merchandise.
Commerce did not dodge or ignore evidence regarding the relationship between the companies, but rather closely examined it and reached conclusions that it was able to justify with specific analyses. To take one example, Commerce examined the details of the alleged sharing of employees and chose to base its determina-
It is especially worth noting that Commerce grounded its decision on its direct observations at verification, which undercut many aspect of MCN‘s allegations regarding the [REDACTED] and provided robust evidence that Precision was not controlled by Millennium in this regard. The Court also finds that Commerce closely considered all of the evidence regarding the nature of the [REDACTED] between [REDACTED] and Precision, [REDACTED], and comprehensively interpreted the cited evidence in a reasonable manner in the context of all of the record evidence. It would be impossible for the Court to say that no reasonable fact-finder could have concluded as Commerce did on the record before it, and the Court is therefore obliged to affirm Commerce‘s finding that Precision and Millennium were not affiliated.
III. Targeted Dumping
Where a petition alleges that respondents to an antidumping investigation have engaged in targeted dumping, Commerce analyzes respondent sales to determine whether, in accordance with the statute, there is a pattern of export (or constructed export) prices for comparable merchandise showing significant differences based on the purchaser, region, or time period of the sale. I & D Memo at 4. (The existence of such a pattern is a threshold requirement for employing the average-to-transaction price comparison that constitutes the targeted dumping remedy.
In order to determine whether there is a price pattern showing significant differences along one of the targeting poles, Commerce employs a two-part test known as the Nails test.4 See I & D Memo at 4; see also Commerce Opp. at 37. First, Commerce seeks a price pattern. It determines how many of the allegedly targeted sales, by volume, were made at a price more than one standard deviation below the weighted-average price of all sales. Commerce Opp. at 37. If the results include more than 33% of all of the allegedly targeted sales (to the allegedly targeted customer, region, or in the allegedly targeted time period), then a price pattern has been found and Commerce proceeds to the next step. Id. at 37-38. In the second step of the Nails test, Commerce determines whether the price pattern exhibits significant differences by looking for a price gap. Id. at 38. To do this, Commerce first determines the volume-weighted price gap of non-targeted sales; then the weighted average price of sales to the alleged target is compared to the next higher weighted average price of non-targeted sales. Commerce determines the volume of sales for which the difference between these two weighted average sales prices exceeds the volume-weighted price gap of non-targeted sales, and if the
Employing this test here, Commerce determined that both Dubai Wire and Precision had patterns of export prices for comparable merchandise that varied significantly among customers, regions, and time periods. Final Results, 77 Fed. Reg. at 17,031; Dubai Wire Targeted Dumping Memo, C.R. 105, at 4-5; Precision Targeted Dumping Memo, C.R. 110, at 4-5.
Although Commerce had found, in the Preliminary Results, that the average-to-average methodology accounted for the targeting, Commerce changed this approach in the Final Results, deciding that the average-to-average method was insufficient to account for the price differences stemming from the targeted sales. Final Results, 77 Fed. Reg. at 17,031. Commerce therefore applied the average-to-transaction method. Id. Commerce did not discuss whether the transaction-to-transaction method might account for the price differences. Id. In applying the average-to-transaction method, Commerce applied it to all of the U.S. sales of Precision and Dubai Wire pursuant to the Withdrawal Notice, rather than limiting it to targeted sales as mandated by the limiting regulation. Id.
The relevant comments of the respondents, each of whom objected to Commerce‘s targeted dumping analysis on multiple grounds, will be described below.
A. Contentions of the Parties
1. Precision
Precision argues that Commerce‘s determination that it engaged in targeted dumping is unlawful and not supported by the record. Precision identifies as an error that “Commerce failed to examine and take into account whether, and to what extent, any of Precision‘s sales identified by Commerce as ‘targeted’ were fairly traded sales (i.e., not dumped).” Brief of Pl. Precision Fasteners, LLC in Supp. of Pl.‘s Mot. for J. upon the Agency R. (“Precision Mem.“) at 7, ECF No. 33. In fact, Precision contends that most of its sales identified as targeted by Commerce were “fairly traded.” Id. Precision‘s contention is that the statute does not permit Commerce to base a targeted dumping finding on a pattern of price differences in non-dumped sales. Id. at 7-8.
Precision also argues that the Nails test is flawed and illogical, leading to results inconsistent with the record evidence. Id. at 8. In this regard, Precision notes that the Nails test does not take into consideration that only an “insignificant number of transactions” were identified as targeted by customer and region; that Commerce relied on arbitrary geographic divisions for its region finding, rather than using previously acknowledged official regions; and that Commerce ignored evidence of significant fluctuations in materials costs in making its finding of targeting by time period. Id.
Precision also claims that, even assuming the targeting analysis was legal, Commerce cannot justify application of average-to-transaction comparisons to all of Precision‘s U.S. sales when Commerce only found evidence of targeting for less than one percent. Id. Precision argues that such action was not only unreasonable but also violated the requirement in
Precision also attacks Commerce‘s use of “zeroing” in calculating the targeted dumping remedy. Id. Zeroing is a calculation technique in which Commerce fails to treat fairly-traded sales as offsetting dumped sales, calculating them as if they were made at a zero dumping margin rather than a negative dumping margin. Precision argues that the use of zeroing in the targeted dumping calculation is inconsistent with statute and binding court precedent. Id.
2. Dubai Wire
Dubai Wire attacks Commerce‘s targeted dumping analysis on similar grounds. Dubai Wire, like Precision, argues that Commerce acted contrary to the antidumping statute when it based its targeting finding (of a pattern of prices that differed significantly) on an analysis of sales at prices above fair value. Mem. of Law in Supp. of Dubai Wire‘s Rule 56.2 Mot. for J. upon the Agency R. (“Dubai Wire Mem.“) at 9-11, ECF No. 37.
Dubai Wire contends that Commerce acts contrary to statute, court precedent, and administrative practice in its “unreasonably rigid” reliance on a “strict mathematical formula” to conduct its targeted dumping analysis in a manner that, in Commerce‘s own words, proceeds “without determining ‘why’ an exporter‘s pricing behavior may differ significantly.” Id. at 11-12 (quoting I & D Memo at 6). In doing so, Dubai Wire argues, Commerce has ignored “the established legal principle of de minimis,” which “operates to ensure that the underlying purpose of the statutory provision is carried out.” Id. at 13 (quoting Alcan Aluminum Corp. v. United States, 165 F.3d 898, 902, 905 (Fed. Cir. 1999)). Dubai Wire echoes Precision on this point, noting that only extremely small percentages of its U.S. sales support Commerce‘s findings of customer and region targeting. Id. at 13-14.
Regarding the finding that Dubai Wire targeted its sales by customer, Dubai Wire claims that Commerce improperly rejected evidence regarding these sales which established that they varied from the ordinary course of trade and could not reasonably be compared to ordinary U.S. sales. Id. at 14-16. Dubai Wire also claims that Commerce acted contrary to the evidence by failing to properly consider the sharp increase in raw material prices when it analyzed Dubai Wire‘s U.S. sales for targeting by time period. Id. at 16-20. Regarding the finding of targeting by region, Dubai Wire claims that Commerce based its determination on a small error in freight charges which was documented in the record and should have resulted in an adjustment. Id. at 20-21.
Like Precision, Dubai Wire also contends that Commerce acted contrary to law and the record evidence when it applied the average-to-transaction method to all Dubai Wire sales, rather than only the sales identified as targeted. Id. at 21-22. Dubai Wire argues that Commerce‘s interpretation of the antidumping statute to permit such broad application of the targeted dumping methodology is flawed because the results are “unnecessarily punitive” and “do[] not further the statute‘s objective.” Id. at 22. Dubai Wire also claims that Commerce has departed from “longstanding practice” without articulating any suitable rationale. Id. at 23. Dubai Wire, like Precision, argues that the Withdrawal Notice violated the APA by revoking
Commerce argues that it rightly rejected Precision and Dubai Wire‘s requests that Commerce “establish a de minimis standard,” by which it would “analyze the number of targeted sales as a percentage of total U.S. sales.” Def.‘s Opp‘n to Pls.’ Mots. for J. upon the Agency R. (“U.S. Opp.“) at 38, ECF No. 63. Commerce defends its current practice on the basis of its interpretation of the language in
Commerce also counters the argument that it erred in applying the average-to-transaction comparison method to all U.S. sales upon a finding of targeting. Id. at 40-41. Commerce first points out that the statute itself is silent as to how broadly Commerce should apply the method once a targeting finding is made, and argues from this that “nothing in the statute restricts” Commerce in this regard. Id. at 40. Commerce argues that applying the targeted dumping methodology to all sales is “the most effective way to unmask targeted dumping, and to implement the statute‘s goal,” since an exporter can use “profitable sales” to gain an offset and hide sales dumped in a targeted fashion. Id. at 40-41.
B. Commerce Must Apply the Targeted Dumping Regulation
The Court finds that Commerce violated its obligation to provide notice and opportunity for comment prior to the rescission of the targeted dumping regulation. As a consequence, the Court finds that the Withdrawal Notice is invalid. The Court will therefore remand the case back to Commerce for redetermination. On remand, Commerce must apply the targeted dumping regulation,
Pursuant to the Administrative Procedure Act (“APA“), “[g]eneral notice of proposed rule making shall be published in the Federal Register” and shall include “either the terms or substance of the proposed rule.”
The Withdrawal Notice is of the kind of “rule making” covered by the notice requirement because “new rules that work substantive changes in prior regula-
Commerce insists that it satisfied its APA notice and comment obligations when it published two notices in the Federal Register seeking comment on its implementation of the targeted dumping provisions of the statute. U.S. Opp. at 50, citing Proposed Methodology for Identifying and Analyzing Targeted Dumping in Antidumping Investigations, 72 Fed. Reg. 60,651 (Dep‘t of Commerce Oct. 25, 2007) (request for comment) and Proposed Methodology for Identifying and Analyzing Targeted Dumping in Antidumping Investigations, 73 Fed. Reg. 26,371 (Dep‘t of Commerce May 9, 2008) (request for comment). Commerce argues that it need not publish the precise content of the rule it ultimately adopts in order for the notice to be effective, but may instead take action that allows the public “the opportunity to comment meaningfully consistent with the statute.” Id. at 53.
Commerce also insists that the APA‘s good cause exception to the notice and comment requirement was met here. Id. at 54. Commerce states that it may have imposed on itself, with the limiting regulation, too much restriction as to how to conduct a targeted dumping investigation, with the effect of “inadvertently denying relief to domestic industries suffering material injury from unfairly traded imports.” Id. at 55 (internal quotations and citations omitted). Commerce identified the need to provide speedy relief under the statute to U.S. producers as justifying a public interest exception to the APA notice and comment requirements here. Id. at 55-56. Finally Commerce argues that even if the Withdrawal Notice was improperly issued, the impropriety did not harm Precision and Dubai Wire because the Withdrawal Notice placed no new requirements on them. Id. at 57-58.
The Court finds that the two requests for comment did not satisfy the APA notice and comment requirement. An APA notice must “be sufficiently descriptive to provide interested parties with a fair opportunity to comment and to participate in the rule making.” Gold East Paper (Jiangsu) Co., Ltd. v. United States, 37 CIT __, 918 F. Supp. 2d 1317, 1325 (2013) (”Gold East Paper“) (internal quotations and citations omitted). As Gold East Paper noted, the comment requests and the Withdrawal Notice make no references to each other. Id. at 1326. It is not obvious to an interested observer that connected rule making is intended, since the comment requests “discuss the methodologies that Commerce will use to determine whether targeted dumping has occurred,” but the limiting regulation “restricts Commerce‘s ability to impose the targeting remedy across all sales.” Id.
The Court furthermore finds it improper here to apply the APA‘s good cause exception to providing notice and comment prior to rule making. “The good cause exception is to be narrowly construed and only reluctantly countenanced.” Id. (quoting New Jersey v. EPA, 626 F.2d 1038, 1045 (D.C. Cir. 1980) (internal quotations omitted)). The limiting regulation was adopted only after prolonged agency consideration that included a hearing and the submission of extensive pre and post
Commerce states that APA notice and comment violations are generally subject to the harmless error rule, i.e., a violation by the agency will only result in invalidating the agency‘s action where a party has suffered prejudice from the violation. See
When, in the course of rule making, an agency violates the notice and comment requirements of the APA and the violation is not harmless, the new rule is invalid, resulting in reinstatement of the prior rule. Id. at 1008. Similarly, a regulation withdrawn in violation of the APA notice requirement will be enforced. Citibank, Fed. Savings Bank v. FDIC, 836 F. Supp. 3, 7 (D.D.C. 1993). The Court therefore rules that Commerce‘s Withdrawal Notice was invalid and, as a consequence, the Court will remand the case to Commerce. On remand, Commerce must redetermine the respondents’ dumping margins by applying the limiting regulation of
C. Ruling on Other Targeted Dumping Issues Will Be Held in Abeyance
The Court has carefully considered the numerous other issues raised by the par-
When Commerce files its remand redetermination, the parties will have a chance to file comments on the results. At that time, the parties may challenge any aspects of Commerce‘s targeted dumping methodology, and the Court will rule on such issues, as appropriate, after the redetermination and comments of the parties have been submitted for consideration.
IV. Surrogate Profit Statements
Normal value (“NV“) is determined by Commerce based on the price at which the foreign like product is sold in the comparison market, as long as there are sufficient sales of an ordinary type to serve as a proper comparison.
When faced with the need to obtain a surrogate financial statement to establish CV, Commerce applies a set of surrogate financial criteria to choose between statements available in the record. Commerce weighs “several factors, including: (1) similarity of the potential surrogate company‘s business operations and products to the respondent; (2) the extent to which the financial data of the surrogate company reflects sales in the United States as well as the home market; (3) the contemporaneity of the surrogate data to the POR; and, (4) the similarity of the customer base.” I & D Memo at 27 (citing prior administrative decisions). In applying this test, Commerce consistently takes the position that “[t]he greater the similarity in business operations and products, the more likely that there is a greater correlation in the profit experience of the companies.” Id.
Here, there were six financial statements on the record from which Commerce could seek an appropriate surrogate: BILDCO; AHI; Global Fasteners Limited (“GFL“) (a Dubai Wire affiliate); Al Jazeera Steel Products Co. SAOG (“Al Jazeera“); National Metal Manufacturing and Casting‘s Companies (“NMN“); and Conares Metal Supply Limited (“Conares“). See U.S. Opp. at 23. In the
Dubai Wire argued that Commerce should not use AHI‘s information due to the divergent industry in which AHI functioned, but sought to have Commerce use the profit statement of its affiliate GFL instead. Id. at 21-22. Precision argued that use of the AHI statement was “unlawful and unreasonable” since, as a shipbuilding company, AHI produced materials completely unlike steel nails. Id. at 22-23. Precision instead sought to have Commerce calculate CV profit by “using Precision‘s profit on the sales of drawn wire in the home market,” arguing that drawn wire and nails are generally similar. Id. at 23. Precision alternatively argued for use of “one or a combination of several other producers of merchandise in the same general category as the subject steel nails,” including GFL, BILDCO, Conares, Al Jazeera, NMN. Id.
MCN argues that AHI remained the best source of surrogate profit values. Id. at 24. MCN stated that Commerce must reject GFL data as unreasonable and inaccurate; must reject Precision‘s drawn wire sales due to insufficient quantities; and must reject the other potential contenders as less reliable than AHI. Id. at 24-25.
Commerce noted that, after issuing the Preliminary Results, the parties placed additional financial statements on the record for Commerce to consider under the test given above. Id. at 25. Commerce rejected Al Jazeera and NMN because they were not UAE companies and Commerce sought home market profit experience to the extent possible. Id. at 27. Regarding GFL, Commerce determined that GFL‘s 2010 profit calculation for sales of screws and nails was not reliable since GFL purchased its nails from affiliate Dubai Wire rather than producing them. Id. GFL also had not provided sufficient evidence about the cost difference between models of screws, and did not differentiate sufficiently between the costs of screw sales in its domestic versus export markets. Id. As a result, Commerce found that GFL‘s profit statements were unreliable and chose not to use them in calculating CV. Id. at 28. In response to the backup argument by Dubai Wire that Commerce should then simply use GFL‘s company-wide 2009 or 2010 financial statements, Commerce noted that those statements primarily reflected export sales rather than home market sales and were equally unreliable as to CV for that reason. Id.
Regarding Conares, Commerce‘s practice is to use third-party, non-proprietary, publicly available financial statements for CV profit calculations, but Conares’ statements were proprietary. Id. at 29.
Commerce also considered whether BILDCO or AHI provided a better surrogate. Neither BILDCO nor AHI produced subject merchandise, so Commerce examined which company operated most like Dubai Wire and Precision. Id. Commerce found that BILDCO was “a trader and manufacturer of building materials” and “a steel processor ... [with] a steel processing facility to cut and bend steel” that “operates within the same UAE construction industry as Dubai Wire and Precision.” Id. BILDCO also had “the same” customer base as Dubai Wire and Precision. Id. In contrast, Commerce noted that AHI‘s principal activities were “ship repair, shipbuilding and fabrication of relatively sophisticated products such as platforms, barges, and pontoons,” and AHI had as customers “the marine, offshore, and engineering industries.” Id. Considering all of these factors, Commerce determined that BILDCO‘s “business operations and products appear to be more similar to those of Dubai Wire and Precision” than the other options. Id.
A. Contentions of the Parties
1. MCN
MCN argues that Commerce‘s decision to rely on BILDCO‘s financial statement as a profit surrogate was unsupported by evidence and contrary to law. MCN Mem. at 34-39. The main thrust of MCN‘s argument is that BILDCO is more a trading company than a producer; while BILDCO appears to cut and bend rebar, MCN contends that BILDCO does not fabricate the rebar or any other steel product. Id. at 35-36. MCN contrasts this with AHI and notes that Commerce found in the Preliminary Results that AHI made products in the same category as respondents. Id. at 36. MCN cites record evidence that AHI is, predominantly, a steel fabricator. Id. at 37. MCN‘s view is that it was “manifestly unreasonable” for Commerce to switch its reliance from the AHI statement to the BILDCO statement. Id. at 37-38. MCN also claims that Commerce did not even address the low level of BILDCO‘s inventory “composed of raw materials,” or operating and staff cost ratios, submitted by MCN in the Final Results, rendering them arbitrary and contrary to law. Id. at 38-39.
2. Dubai Wire
Dubai Wire argues that Commerce should have used the GFL financial statements. Dubai Wire Mem. at 29-45. Dubai Wire argues that it and GFL “are sister companies” far more similar than Dubai Wire and BILDCO. Id. at 32-33. GFL‘s home market and export sales were all before Commerce, while BILDCO‘s U.S. sales were not and its home market profit could not be calculated. Id. at 33. Alternatively, Dubai Wire contends that Commerce should have used GFL‘s audited financial statements of profit for 2009 or 2010. Id. at 34-35. Dubai Wire also attacks Commerce‘s determination that the GFL “profit calculation results in an unreliable profit figure,” which was the rationale Commerce used for not relying on it. Id. at 35-43. Dubai Wire contends that Commerce improperly rejects Dubai Wire‘s request that CV profit be based on GFL‘s worldwide profit from its 2010 or 2009 financial statement. Id. at 43-45.
Finally, Dubai Wire claims that Commerce abused its discretion when it rejected the financial statement of Conares. Id. at 45-46. Dubai Wire placed Conares’ financial statement on the record on November 3, 2011 as confidential information, and placed a public profit and loss statement summary on the record on December
B. Commerce‘s Choice of BILDCO for Surrogate Profit Statements Is Affirmed
In reviewing Commerce‘s decision, the Court is mindful that the standard of review calls for the agency‘s decision to be upheld unless “unsupported by substantial evidence on the record, or otherwise not in accordance with law.”
Dubai Wire argues in the alternative that Commerce should have used the financial statement of Conares. Dubai Wire had placed Conares’ financial statement on the record as business proprietary information, and for that reason, Commerce declined to use it. I & D Memo at 29 (“it is our practice to use non-proprietary, publicly available financial statements when presented with third-party financial statements“). After the deadline for the submission of new factual evidence had expired, Dubai Wire attempted to place Conares’ financial statement on the record as a public document, but Commerce rejected it as untimely. Dubai Wire argues that Commerce‘s rejection was contrary to law because the data was not “new” but was simply the same data previously available to the parties under an Administrative Protection Order, now made available to the public. Dubai Wire Mem. at 46. Dubai Wire cites no authority for its argument. Commerce argues that the public version of the Conares statement was “‘new’ factual information in the sense that it had been designated as proprietary and analyzed as a proprietary document by Commerce and by the parties.” U.S. Opp. at 33.
The Court is unaware of any authority indicating whether a public document, submitted to replace a confidential document after the evidentiary submission period has expired, is new evidence for purposes of the deadline. However, the Court notes that the applicable deadline is contained in a Commerce regulation. See
V. Imputed Interest Rate
Pursuant to
Commerce considered several sources of information as potential bases of an imputed rate for Dubai Wire‘s long-term loan. MCN urged Commerce to impute a 2010 interest rate on the affiliated loan based on a weighted average of the rates of several unaffiliated bank loans held by Dubai Wire in 2010. I & D Memo at 31. MCN also argued that Commerce should increase the amount for accrued interest from 2008 and 2009 on the principal of the loan, based on MCN‘s view that the interest charged in those years was below market rate. Id. Dubai Wire contended that Commerce should base the imputed rate on a calculation from its financial statements, dividing interest expense by average 2010 loan balance. Id. If, however, Commerce chose to use a rate based on market-rate loans from 2010, Dubai Wire asked Commerce to include an unaffiliated supplier‘s loan. Id. Dubai Wire also argued that Commerce‘s rate from the preliminary results was excessive because it was based on short-term unaffiliated loans rather than long-term unaffiliated loans. Id. Finally, Dubai Wire contended that the 2008 and 2009 accrued interest was at market rate and should not be adjusted upward. Id. at 31-32.
Commerce agreed with Dubai Wire that its 2008 and 2009 accrued interest was at market rate, due to a 2004 restructuring effective through the end of 2009, and accordingly did not upwardly adjust it. Id. at 32. In setting an imputed market rate for the POI, Commerce constructed a rate representing the midpoint of Dubai Wire‘s several unaffiliated short-term 2010 loans. Id. at 33. Commerce chose to rely on these short-term loans because it found them to be the best information in the record given that they were actual rates and given that Dubai Wire did not enter into any unaffiliated long-term loans in the POI. Id. Commerce also preferred these loans over a calculation from Dubai Wire‘s financial statements based on the same finding. Id. Commerce did not include Dubai Wire‘s unaffiliated supplier loan in its calculation because it found that such loans “have considerations other than simply commercial lending” that can result in “favorable rates.” Id.
A. Positions of Parties Regarding Interest Rate Imputed to Dubai Wire
1. Dubai Wire
Dubai Wire objects to the surrogate interest rate that Commerce chose to impute to its affiliate loan. Dubai Wire claims that the record contained evidence of long-
2. MCN
MCN supports Commerce‘s decision on the imputed interest rate. MCN argues that Commerce acted in accordance with its established practice in refusing to use the loan rates of Dubai Wire‘s affiliate when there were multiple rates for loans to Dubai Wire itself on the record. Mid Continent Nail Corp.‘s Resp. to Def.-Int.‘s Mots. and Brs. in Supp. (“MCN Resp. Mem.“) at 42, ECF No. 67. MCN also points out that Commerce has previously relied on short-term unaffiliated loans as it did here. Id. at 42-43 (citing administrative determinations). As to the 2004 loan rate Dubai Wire argues Commerce should have relied upon, MCN contends that Commerce acted reasonably in relying instead on data more contemporaneous with the POI. Id. at 43. As to Dubai Wire‘s contention that Commerce erred in interpreting the 2010 loan renegotiation as a “new” loan, MCN points to a questionnaire response in which Dubai Wire itself indicated that it had “settled its outstanding dues” to the lender via the renegotiation. Id. at 43-44. MCN‘s view is that Commerce based its determination that the old loan had been satisfied by a new loan via the renegotiation on this evidence in the record and therefore acted with record support. Id. Finally, MCN notes that Dubai Wire‘s financial statements support Commerce in finding that the imputed rate Commerce chose was “comparable” to Dubai Wire‘s “actual, effective market-based interest rate during 2010,” which was “even higher” than the imputed rate “when properly time-adjusted.” Id. at 44-45.
3. Commerce
Commerce justifies its decision not to rely on the rate of Dubai Wire‘s 2004 (or its affiliate‘s 2009) long-term loan by contending that it “was not required to rely on a previously negotiated 2004 or 2009 long-term loan rate to impute interest on a 2010 long-term loan simply because they were both long-term loans.” Commerce Opp. at 34. Citing prior decisions where it declined to rely on loan rates outside the POI, Commerce claims that it was reasonable to rely on 2010 short-term loan rates instead given that the relevant long-term loans had been renegotiated in 2010, effectively nullifying the relevance of the pre-2010 rates. Id. at 34-35. Commerce also points out that the 2004 loan was, for all practical purposes, a “new” loan for 2010 because its 2004 terms were “replaced by newly renegotiated 2010 terms” effective after the end of 2009. Id. at 35. Finally, Commerce contends that Dubai Wire‘s argument that it paid non-comparable interest rates on both short-term and long-term loans in prior years is not supported by the record. Id. at 36. Commerce points out that Dubai Wire‘s argument relies on rates on loans obtained by its affiliate, not itself, and states that it acted reasonably and in accordance with the record in using rates on loans obtained by Dubai Wire itself instead of those obtained by its affiliate. Id.
B. Commerce Is Affirmed as to the Imputed Loan Rate
Dubai Wire‘s complaint about the interest rate Commerce chose to impute is a
Conclusion
For the reasons given above, it is hereby
ORDERED that the decision of Commerce that Millennium and Precision were not affiliated companies be, and hereby is, affirmed; and it is further
ORDERED that Commerce‘s decision to use the BILDCO financial statements as a source for surrogate profit values in calculating CV be, and hereby is, affirmed; and it is further
ORDERED that Commerce‘s decision as to the most appropriate interest rate to impute to the loan Dubai Wire received from an affiliate be, and hereby is, affirmed; and it is further
ORDERED that this case be remanded to Commerce for a redetermination, during the course of which Commerce must apply the targeted dumping regulation improperly withdrawn by Commerce, given that the court has ruled that the Withdrawal Notice was invalid as it violated the notice and comment requirements of the Administrative Procedure Act; and it is further
ORDERED that counsel for the parties shall confer and no later than July 14, 2014 shall submit via ECF a joint proposed scheduling order to govern the completion of the remand redetermination, the filing of comments by the parties, and the filing of a response to the comments by the Department.
GREGORY W. CARMAN
JUDGE