Rebar Trade Action Coalition v. United States

Slip Op. 18-114
UNITED STATES COURT OF INTERNATIONAL TRADE
REBAR TRADE ACTION COALITION,
Plaintiff,
v.
UNITED STATES,
Defendant,
and
GRUPO SIMEC ET AL.,
Defendant-Intervenors.
Before: Claire R. Kelly, Judge
Court No. 17-00184
PUBLIC VERSION
OPINION AND ORDER
[Remanding 	the 	U.S. 	Department 	of 	Commerce’s 	final 	determination 	in 	the 	first
administrative review of steel concrete reinforcing bar from Mexico.]
Dated: September 7, 2018
John R. Shane and Maureen Elizabeth Thorson, Wiley Rein, LLP, of Washington, DC,
argued for plaintiff, Rebar Trade Action Coalition. 	With them on the brief was Alan
Hayden Price.
Margaret Joy Jantzen, Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, argued for defendant. 	With her on the brief
were Reginald T. Blades, Jr., Assistant Director, Jeanne E. Davidson, Director, and Chad
A. Readler, Acting Assistant Attorney General. 	Of Counsel on the brief was Kristen
McCannon, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance,
U.S. Department of Commerce, of Washington, DC.
Rosa S. Jeong, Greenberg Traurig, LLP, of Washington, DC, argued for defendant-
intervenors, Grupo Simec; Orge S.A. de C.V.; Compania Siderurgica del Pacifico S.A. de
C.V.; Grupo Chant S.A.P.I. de C.V.; RRLC S.A.P.I. de C.V.; Siderurgica del Occidente y
Pacifico S.A. de C.V.; Simec International 6 S.A. de C.V.; Simec International 7 S.A. de
C.V.; and Simec International 9 S.A. de C.V. With her on the brief was Irwin P. Altschuler.
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PUBLIC VERSION
Kelly, Judge: 	This action is before the court on a motion for judgment on the
agency record challenging various aspects of the U.S. Department of Commerce’s
(“Department” or “Commerce”) final determination in the first administrative review of the
antidumping duty (“ADD”) order covering steel concrete reinforcing bar (“rebar”) from
Mexico. See [Rebar Trade Action Coalition’s] Mot. J. Agency R., Dec. 13, 2017, ECF No.
23; see also Steel Concrete Reinforcing Bar From Mexico, 82 Fed. Reg. 27,233 (Dep’t
Commerce Sept. 14, 2017) (final results of [ADD] administrative review; 2014–2015)
(“Final Results”) and accompanying Decision Mem. for the Final Results of [ADD]
Administrative Review: Steel Concrete Reinforcing Bar from Mexico; 2014–2015, A-201-
844, (June 7, 2017), ECF No. 19-5 (“Final Decision Memo”); Steel Concrete Reinforcing
Bar From Mexico, 79 Fed. Reg. 65,925 (Dep’t Commerce Nov. 6, 2014) ([ADD] order).
Plaintiff, Rebar Trade Action Coalition (“RTAC” or “Plaintiff”), a coalition of domestic
producers of the subject merchandise, commenced this action pursuant to section
516A(a)(2)(A)(i)(I) and 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended, 19 U.S.C.
§ 1516a(a)(2)(A)(i)(I) and 1516a(a)(2)(B)(iii) (2012).1 See Summons, July 17, 2017, ECF
No. 1; Compl., July 24, 2017, ECF No. 9.
Plaintiff challenges three aspects of Commerce’s final determination. 	See Mem.
Pl. [RTAC] Supp. Rule 56.2 Mot. J. Agency R., Dec. 14, 2017, ECF No. 27 (“Pl.’s Br.”).2
1 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of Title 19
of the U.S. Code, 2012 edition.
2 The briefs filed in this action contain significant bracketing of information designated as
confidential. 	The court, having reviewed the briefs and mindful of the need to have readable
public opinions, requested that the parties confer and identify the information that could be
unbracketed and made public. See Letter [Requesting Identification Info. to be Unbracketed] at
(footnote continued)
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PUBLIC VERSION
Plaintiff challenges as not in accordance with law and unsupported by substantial
evidence Commerce’s (i) decision not to collapse six non-rebar producing affiliates of
respondent Grupo Simec S.A.B. de C.V. and Orge S.A. de C.V. (“Simec”) that owned
fixed assets, see id. at 9–17; (ii) application of transactions disregarded and major input
rules to adjust the reported costs of the non-collapsed fixed asset owning affiliates of
Simec, see id. at 17–26; see also 19 U.S.C. § 1677b(f)(2)–(3); and (iii) decision not to
apply total or partial facts available with an adverse inference to Simec.3 See id. at 26–
38.4
For the reasons that follow, the court remands to the agency for further explanation
or reconsideration consistent with this opinion Commerce’s (i) decision not to collapse six
fixed asset owning companies affiliated with Simec, (ii) application of the transactions
disregarded and major input rules, (iii) decision not to apply total facts available to Simec,
or facts otherwise available to Simec’s cost reporting, and (iv) decision not to apply
adverse inferences.
2–3, June 8, 2018, ECF No. 44. The parties filed a joint status report complying with the court’s
request and identifying five terms and concepts that could be unbracketed uniformly throughout
the parties’ filed submissions. See Joint Status Report, June 19, 2018, ECF No. 49. As a result,
in this opinion, the court will make public information that may appear bracketed in the briefs filed
on the docket of this action and in relevant administrative record documents.
3 Although 19 U.S.C. § 1677e(a)–(b) and 19 C.F.R. § 351.308(a)–(c) each separately provide for
the use of facts otherwise available and the subsequent application of adverse inferences to those
facts, parties sometimes use the shorthand “adverse facts available” or “AFA” to refer to its use
of such facts otherwise available with an adverse inference.
4 On September 1, 2017, Defendant submitted indices to the public and confidential administrative
records underlying Commerce’s final determination. These indices are located on the docket at
ECF No. 19-2–3. 	All further references in this opinion to administrative record documents are
identified by the numbers assigned by Commerce in these indices.
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PUBLIC VERSION
BACKGROUND
Commerce 	initiated 	this 	first 	administrative 	review 	covering 	subject 	imports
entered during the period of review, April 24, 2014 through October 31, 2015. 	See
Initiation of Antidumping and Countervailing Duty Administrative Reviews, 81 Fed. Reg.
736, 737 (Dep’t Commerce Jan. 7, 2016). 	Commerce’s review covered respondents
Deacero S.A.P.I de C.V., and Grupo Simec S.A.B. de C.V. and Orge S.A. de C.V. Id.
In its final determination, as it had done in its preliminary determination, Commerce
collapsed Grupo Simec S.A.B. de C.V., Orge S.A. de C.V., Compania Siderurgica del
Pacifico S.A. de C.V., Grupo Chant S.A.P.I. de C.V., RRLC S.A.P.I. de C.V., Siderurgica
del Occidente y Pacifico S.A. de C.V., Simec International 6 S.A. de C.V., Simec
International 7 S.A. de C.V., and Simec International 9 S.A. de C.V. (“Grupo Simec” or
the “collapsed group”), and determined that the companies should be treated as a single
entity because record evidence showed that there was a significant potential for
manipulation of price or production. 	See Final Decision Memo at 31–32; Final Results,
82 Fed. Reg. at 27,234 n.10; Steel Concrete Reinforcing Bar From Mexico, 81 Fed. Reg.
89,053, 89,053 n.5 (Dep’t Commerce Dec. 9, 2016) (preliminary results of [ADD]
administrative review; 2014–2015) (“Prelim. Results”) and accompanying Decision Mem.
for the Prelim. Results of [ADD] Administrative Review: Steel Concrete Reinforcing Bar
from Mexico; 2014–2015 at 3–4, A-201-844, PD 127, bar code 3527282-01 (Dec. 5,
2016). 	Commerce, however, rejected RTAC’s argument that six other Simec affiliates
that owned fixed assets, but were not producers of the subject merchandise, should also
have been collapsed. 	See Final Decision Memo at 31–32. 	For the Final Results,
Commerce continued to calculate a weighted-average dumping margin of 0.56% for
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PUBLIC VERSION
Deacero S.A.P.I de C.V. and 0.00% for Grupo Simec S.A.B. de C.V., as it had done in its
preliminary determination. 	See Final Results, 82 Fed. Reg. at 27,234; Prelim. Results,
81 Fed. Reg. at 89,053.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to 19 U.S.C. § 1516a(a)(2)(B)(iii) and 28 U.S.C.
§ 	1581(c), 	which 	grant 	the 	court 	authority 	to 	review 	actions 	contesting 	the 	final
determination in an administrative review of an antidumping duty order. 	The court will
uphold Commerce’s determination 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)(i).
DISCUSSION
I. 	Commerce’s Decision Not to Collapse the Non-Producers
Plaintiff challenges Commerce’s decision not to collapse six companies that were
affiliated with Simec, the parent company, and owned fixed assets used to produce the
subject merchandise at issue here, but were themselves non-producers. See Pl.’s Br. at
9–17. 	Defendant argues that Commerce’s determination is in accordance with law and
is supported by substantial evidence because Commerce does not have a practice of
collapsing non-producers that own fixed assets and, even if it did, the six non-collapsed
fixed asset owning companies did not have a significant potential to manipulate price or
production. See Def.’s Resp. Pl.’s Mot. J. Agency R. at 11–14, Mar. 7, 2018, ECF No. 30
(“Def.’s Resp. Br.”); see also 19 C.F.R. § 351.401(f).5 	For the following reasons,
Commerce’s decision not to collapse is not in accordance with law and is not supported
5 Further citations to Title 19 of the Code of Federal Regulations are to the 2016 edition.
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PUBLIC VERSION
by substantial evidence, and is remanded to the agency for further explanation or
reconsideration consistent with this opinion.
Commerce’s regulation permits it to
treat two or more affiliated producers as a single entity where those
producers have production facilities for similar or identical products that
would not require substantial retooling of either facility in order to restructure
manufacturing 	priorities 	and 	[Commerce] 	concludes 	that 	there 	is 	a
significant potential for the manipulation of price or production.6
19 C.F.R. § 351.401(f)(1). 	In assessing whether there is a “significant potential for the
manipulation of price or production,” Commerce may consider:
(i) The level of common ownership;
(ii) The extent to which managerial employees or board members of one
firm sit on the board of directors of an affiliated firm; and
(iii) Whether operations are intertwined, such as through the sharing of
sales information, involvement in production and pricing decisions, the
sharing of facilities or employees, or significant transactions between the
affiliated producers.
19 C.F.R. § 351.401(f)(2).
Although Commerce’s collapsing regulation speaks of treating two or more
affiliated producers as a single entity, Commerce has developed a practice of collapsing
non-producers with affiliated producers of subject merchandise if the non-producers meet
the factors set out in 19 C.F.R. § 351.401(f)(2). See [Commerce’s] Affiliation & Collapsing
Mem. for the Grupo Simec at 6, 6 n.26, PD 131, bar code 3528081-01 (Dec. 5, 2016)
(“Prelim. Collapsing Memo”) (providing citations to prior final determinations issued by
6 If affiliated producers are collapsed, those companies may be considered a single entity.
Collapsing entities allows sales of one collapsed entity to be considered sales of the other for
purposes of Commerce’s dumping margin calculation. See 19 C.F.R. § 351.401(f)(1); 19 U.S.C.
§ 1675(a)(2)(A)(ii); 19 U.S.C. § 1677b(a).
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PUBLIC VERSION
Commerce applying the 19 C.F.R. § 351.401(f)(2) criteria to determine whether non-
producers should be collapsed and describing the regulatory criteria as “instructive”); see,
e.g., Issues and Decision Mem. for the [ADD] Investigation of Certain Frozen and Canned
Warmwater 	Shrimp 	from 	Brazil 	at 	14, 	A-351-838, 	(Dec. 	23, 	2014), 	available 	at
https://enforcement.trade.gov/frn/summary/brazil/04-28110-1.pdf 	(last 	visited Sept. 4,
2018). Commerce may deviate from a prior practice as long as it explains why doing so
is justified under the circumstances. See Save Domestic Oil, Inc. v. United States, 357
F.3d 1278, 1283–84 (Fed. Cir. 2004).
In the final determination, Commerce explains that it did not collapse the six fixed
asset owning companies because they are not producers of the subject merchandise and
that nothing on the record contravenes that conclusion. See Final Decision Memo at 32;
see also [Simec’s] Fifth Suppl. Questionnaire Resp. at Ex. S5-1, CD 179, bar code
3524835-01 (Nov. 22, 2016) (“Fifth Suppl. Questionnaire Resp.”) (listing nine fixed asset
owning companies affiliated with Simec; six of which were not collapsed). 	Instead, the
six companies owned fixed assets, i.e., the facilities and production equipment, and
leased 	those 	fixed 	assets 	to 	the 	collapsed 	companies 	to 	produce 	the 	subject
merchandise.7 	See [Commerce’s] Final Results Sales & Cost Analysis Memo at 2, CD
237, bar code 3579897-01 (June 7, 2017) (“Final Calc. Memo”); Final Decision Memo at
32. 	According to Commerce, because the facilities and the production equipment used
to produce the subject merchandise were leased, the six fixed asset owners did not have
access to the fixed assets and did not meet the requirements for collapsing. 	See Final
Decision Memo at 32; Final Calc. Memo at 2.
7 The leases were provided at 	See Final Calc. Memo at 2.	[[ 	]].
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PUBLIC VERSION
Commerce failed to explain why it did not use the 19 C.F.R. § 351.401(f)(2) criteria
to determine whether the six non-producing fixed asset owning companies should be
collapsed. 	In the preliminary collapsing memorandum, Commerce asserts that it has
applied 19 C.F.R. § 351.401(f) to non-producers in the past to determine whether
collapsing is warranted. 	See Prelim. Collapsing Memo at 6. 	In the final determination,
however, Commerce states that “[its] practice is to collapse producers of subject
merchandise and prevent the manipulation of price or production[,]” and cites to the
preliminary collapsing memorandum as support. 	Final Decision Memo at 31 (citing
Prelim. Collapsing Memo at 7). 	Commerce has not offered an explanation for why it
deviated from its practice of incorporating the criteria of 19 C.F.R. § 351.401(f) into its
analysis of whether non-producers should be collapsed. If Commerce is going to deviate
from its practice, it must acknowledge it is doing so and explain why it is reasonable to do
so. 	See Save Domestic Oil, Inc., 357 F.3d at 1283–84. 	Therefore, Commerce’s
determination is not in accordance with law.
Commerce’s decision is also unsupported by substantial evidence. Commerce’s
only explanation for its determination is that the fixed asset owners lacked access to the
assets, and therefore could not produce the subject merchandise.8 See Final Calc. Memo
8 Defendant-Intervenors argue that Commerce engaged in the collapsing analysis, without
explicitly referring to the individual factors of 19 C.F.R. § 351.401(f)(2). 	See Def.-Intervenors’
Resp. Br. Opp’n Pl.’s Mot. J. Agency R. at 11–13, Mar. 8, 2018, ECF No. 34 (“Def.-Intervenors’
Resp. Br.”); Oral Arg. at 00:38:00–00:42:23. 	However, the final determination and the final
calculation memorandum only conclude that the existence of a lease means that the production
equipment cannot be used by different entities at the same time and therefore collapsing is
unwarranted. 	See Final Decision Memo at 32; Final Calc. Memo at 2. 	Therefore, it is not
reasonably discernable that Commerce engaged in the collapsing analysis using 19 C.F.R.
§ 351.401(f)(2) criteria for the companies in the non-collapsed group.
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PUBLIC VERSION
at 2; Final Decision Memo at 32.9 However, given the cost of the lease arrangements10
and the fact that the leases themselves are not on the record, it is not reasonably
discernable what record evidence Commerce relied upon to reach its determination.11
However, there is record evidence indicating that the companies leasing the facilities and
production equipment and the companies receiving the benefits of these leases are all
virtually wholly owned by Simec, the parent company. 	See [Simec’s] Sec. A Resp. at
Exs. A-2a–c, PD 17, bar code 3443882-01 (Feb. 22, 2016). 	There is also evidence on
the record indicating that at least
were 	shareholders of two, separate Simec affiliated companies,
both collapsed. See Fifth Suppl. Resp. at Ex. S5-7.12 There is also record evidence that
the non-collapsed and collapsed companies engaged in the same kinds of intercompany
transactions that Commerce noted as indicative of intertwining operations when analyzing
9 Defendant argues that even if, as Plaintiff claims, the 	leases evidenced a “close
relationship” between the six fixed asset owning companies and the companies in the collapsed
group and created the potential for manipulation, Commerce accounted for this issue by applying
the transactions disregarded and major input rules of 19 U.S.C. § 1677b(f)(2)–(3). Def.’s Resp.
Br. at 14 (quoting Pl.’s Br. at 16); see also 19 U.S.C. § 1677b(f)(2)–(3). Defendant’s explanation
is unpersuasive because it is a post-hoc rationalization, not relied upon by Commerce, and the
transactions disregarded and major input rules are distinct from Commerce’s collapsing analysis
pursuant to 19 C.F.R. § 351.401(f)(1)–(2).
10 The leases were provided at 	See Final Calc. Memo at 2.
11 Defendant’s argument that 19 C.F.R. § 351.401(f)(2) requires a significant potential for control,
and not just the mere possibility of control, see Def.’s Resp. Br. at 11–13, does not excuse
Commerce’s failure to conduct an analysis as provided for under the regulation and adopted by
Commerce through practice, of whether the relationship between the collapsed and non-collapsed
companies created a significant potential for the manipulation of price or production.
12 In response to Commerce’s question to provide a list of shareholders of rebar producing
companies, see Fifth Suppl. Questionnaire Resp. at 4–5, Simec produced exhibit S5-7, which lists
as the
shareholder of 	a collapsed company, and
as the
shareholder of 	a collapsed company. See
id. at Ex. S5-7.
[[
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PUBLIC VERSION
whether the companies in the collapsed group should be collapsed,13 see Prelim.
Collapsing Memo at 8, and the existence of which suggests that the operations of the
non-collapsed and the collapsed groups are likewise intertwined. 	See, e.g., [Simec’s]
Sec. A, B, & D Suppl. Questionnaire Resp. at Ex. D-26A, CD 133, bar code 3504495-02
(Sept. 7, 2016) (“Second Suppl. Questionnaire Resp.”). Further, there is record evidence
that the senior board management of the collapsed companies that owned fixed asset
owning companies overlapped with companies that were collapsed, but did not own
assets. 	See Prelim. Collapsing Memo at 8 (citations omitted). 	Commerce does not
address the senior management structure of the non-collapsed group in the final
determination, and no party directs the court to record evidence of the non-collapsed
group’s individual senior board management. 	There is also no evidence on the record
supporting the contention that the non-collapsed group could not have manufactured the
subject merchandise. Commerce must explain why its determination not to collapse the
six fixed asset owning companies is reasonable in light of the evidence that detracts from
its determination, namely: the legal corporate structure of Simec, the cost of the leases,
and record evidence of the pervasive ownership of all the subsidiaries by Simec. 	See
Universal 	Camera 	Corp. 	v. 	NLRB, 	340 	U.S. 	474, 	488 	(1951) 	(noting 	that 	“[t]he
substantiality of evidence must take into account whatever in the record fairly detracts
from its weight.”). 	Commerce has not explained why its determination is reasonable on
this record, and therefore, its determination is unsupported by substantial evidence.
13 In the preliminary collapsing memorandum, Commerce notes that the financial statements of
some of the collapsed companies record
between the collapsed companies. Prelim. Collapsing Memo at 8 (citing Second
Suppl. Questionnaire Resp. at Ex. D-26A).
[[
]]
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II. 	Commerce’s Application of the Transactions Disregarded and Major Input
Rules
Plaintiff challenges Commerce’s decision to adjust the costs incurred by the non-
collapsed fixed asset owning companies by relying on the books and records of Grupo
Simec and of certain collapsed fixed asset owners, as not in accordance with law and
unsupported by substantial evidence.14 	See Pl.’s Br. at 20–26. 	Defendant argues that
Commerce 	properly 	adjusted 	the 	costs 	of 	the 	non-collapsed 	fixed 	asset 	owning
companies given that the non-collapsed affiliates’ financial statements were not on the
record. 	See Def.’s Resp. Br. at 14–17. 	For the reasons that follow, the court remands
Commerce’s application of the transactions disregarded and major input rules to the
agency for further explanation or reconsideration consistent with this opinion.
In the calculation of normal value, Commerce may revise prices between affiliates
using the transactions disregarded and major input rules, if Commerce determines that
the reported prices are below market value. See 19 U.S.C. § 1677b(f)(2)–(3); 19 C.F.R.
§ 351.401(b). 	Pursuant to the transactions disregarded rule, Commerce may disregard
transactions between persons found to be affiliated for purposes of calculating costs of
production “if, in the case of any element of value required to be considered, the amount
representing that element does not fairly reflect the amount usually reflected in sales of
merchandise under 	consideration 	in 	the market under 	consideration.” 	19 U.S.C.
§ 1677b(f)(2). 	In applying the transactions disregarded rule, Commerce’s practice is to
14 For the final determination, Commerce relied on the financial experience of 	fixed asset
owning companies to estimate the general and administrative expense ratio of the six non-
collapsed fixed asset owners. 	Final Calc. Memo at 3; Final Decision Memo at 32–33. 	The
companies were
See Fifth Suppl. Questionnaire Resp.
at Ex. S5-1. 	However, to calculate the financial expense ratio of the non-collapsed group,
Commerce relied on the consolidated financial records of Grupo Simec. Final Calc. Memo at 3.
[[ 	]]
[[ 	]] 	[[
]].
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adjust the transfer price for the service or input at issue so that it reflects the market price.
See, e.g., Issues & Decision Mem. for the Final Affirmative Determination in the Less than
Fair Value Investigation of Certain Cold-Rolled Steel Flat Products from Brazil at 38, A-
351-843, 	(July 	20, 	2016), 	available 	at 	http://ia.ita.doc.gov/frn/summary/brazil/2016-
17951-1.pdf (last visited Sept. 4, 2018) (explaining that Commerce has an “express
preference for market value” and will look to “any reasonable source for market value” if
respondent’s own purchases or an affiliate’s sales are not available (citations omitted));
Issues and Decision Mem. for the Final Affirmative Determination in the Less than Fair
Value Investigation of Certain Cold-Rolled Steel Flat Products from the United Kingdom
at 28, A-412-824, (July 20, 2016), available at http://ia.ita.doc.gov/frn/summary/uk/2016-
17940-1.pdf (last visited Sept. 4, 2018) (adjusting the price paid for the inputs to include
the 	acquisition 	cost 	the 	affiliate 	paid 	to 	the 	unaffiliated 	entity, 	plus 	the 	selling,
administrative, and general costs of the affiliate); Issues & Decision Mem. for the Final
Determination of the Less-Than-Fair-Value Investigations of Certain Steel Nails from
Malaysia 	at 	20–22, 	A-557-816, 	(May 	13, 	2015), 	available 	at
http://ia.ita.doc.gov/frn/summary/malaysia/2015-12250-1.pdf (last visited Sept. 4, 2018)
(adjusting the transfer price to reflect the market values on the record); Stainless Steel
Round Wire from Canada, 64 Fed. Reg. 17,324, 17,335 (Dep’t Commerce Apr. 9, 1999)
(notice of final determination of sales at less than fair value) (adjusting transfer price
between affiliates to reflect market price). Pursuant to the major input rule, if the affiliated-
party transaction involves the production of a major input to the merchandise, Commerce
“may determine the value of the major input on the basis of information available
regarding [the] costs of production,” if the cost for the input is greater than determined
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using the transactions disregarded rule. 	See 19 U.S.C. § 1677b(f)(3). 	Further, the
agency will normally determine the value of a major input by the higher of the price paid,
the market price, or the cost of producing it. See 19 C.F.R. § 351.407(b).
In the final determination, Commerce concludes that the six non-collapsed fixed
asset owning companies provided services to Grupo Simec at below-market rates. See
Final Decision Memo at 32. Commerce, therefore, revised the general and administrative
expenses (“G&A”), reported fixed overhead costs, and financial expenses of the cost data
pursuant to 19 U.S.C. § 1677b(f)(2)–(3). 	See id. at 29–30, 32–33; Final Calc. Memo at
2–3. 	To revise the G&A expense ratio for the non-collapsed fixed asset owners,
Commerce relied on the financial records of certain fixed asset owning companies that
were collapsed and make up the entity, Grupo Simec. See Final Calc. Memo at 3, Attach.
1. 	To revise the financial expense ratio for the non-collapsed fixed asset owners,
Commerce relied on the consolidated financial expense ratio of Grupo Simec. 	Id.
Commerce then revised the fixed overhead costs reported at the five plants that produced
rebar, by adding the resulting estimates for G&A and financial expenses. 	Id. at 2–3.
Defendant argues that Commerce’s decision was reasonable because the collapsed fixed
asset owning companies were good comparators for the cost experiences of the
companies in the non-collapsed group. See Def.’s Resp. Br. at 15–16.
In the final determination, Commerce does not explain why it relied on the cost
experiences of certain collapsed fixed asset owning companies to revise the costs of the
non-collapsed group, and Defendant’s explanation is a post hoc rationalization of
Commerce’s selection. 	Further, even if it was reasonably discernable that Commerce
relied on the cost experiences of certain collapsed fixed asset owners because they
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served as good comparators for the cost experiences of the non-collapsed companies,
that explanation is not supported by the record. 	Commerce does not identify record
evidence demonstrating that the cost experiences of the companies in the collapsed
group that owned fixed assets were similar to those of the companies in the non-collapsed
group, and finds similarity based solely on the fact that the two groups owned fixed
assets.15 However, the record reveals that the costs incurred by the non-collapsed asset
owners are distinct in important ways from those of the collapsed-fixed asset owners. 16
The record does not provide the financial statements for the six non-collapsed fixed asset
owning companies. 	The final determination does not explain how, in light of record
evidence demarcating the differences in the cost experiences of the collapsed and non-
collapsed 	fixed 	asset 	owning 	companies, 	Commerce 	reached 	its 	determination.
Therefore, Commerce’s determination is not supported by this record and is remanded to
the agency for further explanation or reconsideration consistent with this opinion.
The 	Defendant-Intervenors 	argue 	that 	Plaintiff’s 	challenge 	to 	Commerce’s
application of the transactions disregarded and major input rules is “factually inaccurate”
because Commerce had the necessary information it needed to make the adjustments to
the cost data. See Def.-Intervenors’ Resp. Br. Opp’n Pl.’s Mot. J. Agency R. at 18, Mar.
8, 2018, ECF No. 34. 	More specifically, the Defendant-Intervenors argue that “the
15 	Defendant, 	likewise, 	does 	not 	identify 	record 	evidence 	supportive 	of 	Commerce’s
determination, reiterates that it was reasonable for Commerce to use as comparators the
collapsed companies that owned fixed assets, and argues that no record evidence
undermines Commerce’s position. See Def.’s Resp. Br. at 15–16.
16 For example, record evidence shows that in the Mexicali and Guadalajara plants the non-
collapsed fixed asset owning companies took on the 	of the depreciation expenses in
those plants. 	See Fifth Suppl. Resp. at Ex. S5-1, Ex. S5-2. 	However, Commerce’s cost
adjustments to the non-collapsed group rely on data from the collapsed asset owners who took
on the 	See Final Calc. Memo at 2–3, Attach. I.
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financial results of the Non-Producing Asset Owners” were consolidated, and cite to
several record documents as support.17 Id. (citing [Simec’s] Fourth Suppl. Questionnaire
Resp. at Exs. S4-2–3, CD 162, bar code 3520897-01 (Nov. 7, 2016); Sec. A Resp. at Ex.
A-6b at 11). 	In the final determination, Commerce cites Exhibit S4-2 as part of its
explanation for why Simec’s revised reporting methodology was reasonable and results
in a reliable G&A expense ratio. See Final Decision Memo at 30–31. Plaintiff, however,
challenges the data contained in that exhibit and others cited by the Defendant-
Intervenors as omitting costs of some of the non-collapsed fixed asset owners, and as
unreliable without the corroboration of individual financial statements of the non-collapsed
fixed asset owning companies. See Reply Br. Pl. [RTAC] at 12–13, 12 n.5, Apr. 11, 2018,
ECF No. 35 (“Pl.’s Reply Br.”). 	However, even if Grupo Simec’s consolidated financial
statements fully capture the G&A expenses of all six non-producing fixed asset owners,
it is not reasonably discernable why Commerce adjusted the G&A calculations for the
non-collapsed group based on the cost experiences of certain collapsed fixed asset
owning companies, instead of relying on expenses provided in the company wide
consolidated statements. See Final Calc. Memo at 2; Final Decision Memo at 32.
17 Both the Defendant and the Defendant-Intervenors challenge Plaintiff’s argument that
Commerce’s calculations did not include the depreciation expenses of the six non-collapsed fixed
asset owning companies. See Def.’s Resp. Br. at 16–17; Def.-Intervenors’ Resp. Br. at 18–19;
see also Pl.’s Br. at 23–25. In its reply, however, Plaintiff explains that in light of the responsive
briefs filed in this action it acknowledges that Commerce’s final calculations do reconcile the
depreciation expenses 	and not just the
collapsed fixed asset owning companies. See Reply Br. Pl. [RTAC] at 9 n.4, Apr. 11, 2018, ECF
No. 35. 	Nevertheless, Plaintiff maintains its challenge to Commerce’s cost adjustment of the
depreciation 	expenses 	because 	there 	is 	no 	independent 	documentation 	on 	the 	record
corroborating the financial experiences of the non-collapsed fixed asset owning companies
affiliated with Simec. See id.
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Commerce also did not explain why it valued a major input at cost. 	The relevant
regulation provides that Commerce will value a major input using the higher of the transfer
value, market value, or cost.18 	19 C.F.R. § 351.407(b). 	In the final determination,
Commerce states that it will apply the transactions disregarded rule, but does not explain
why it chose to value the service, i.e., the leases provided by the non-collapsed fixed
asset owning companies to the collapsed group to produce the subject merchandise, at
cost. 	See Final Decision Memo at 32–33; Final Calc. Memo at 2–3. 	Accordingly,
Commerce’s determination is also not in accordance with law and is remanded back to
the agency for further explanation or reconsideration consistent with this opinion.
III. 	Commerce’s Decision Not to Apply Total or Partial Facts Available
Plaintiff challenges Commerce’s decision not to apply total facts available to
calculate Simec’s dumping margin, or in the alternative, not to apply facts otherwise
available to Simec’s cost reporting, given that necessary information was missing from
the record. 	See Pl.’s Br. at 26–31. 	Specifically, Plaintiff argues that Simec’s reporting
methodology 	delayed 	the 	disclosure 	of 	information 	necessary 	for 	Commerce 	to
understand Simec’s corporate structure and identify all of its affiliated fixed asset owning
companies, see id. at 28, and that Simec’s reporting methodology obscured Simec’s
G&A, depreciation, and fixed asset expenses in a way that prevented Commerce from
18 Plaintiff argues that Commerce’s valuation should have included profit, and accordingly
Commerce should have valued the leases using a market value. 	See Pl.’s Br. at 22–23. 	The
Defendant-Intervenors argue that Commerce is not required to create a “fictitious market” to value
the leases, see Def.-Intervenors’ Resp. Br. at 19–21, and Defendant argues that Plaintiff’s
approach is “unreasonable” because it would have required Commerce to construct a value from
an absence of evidence. See Def.’s Resp. Br. at 16. 	Yet, Commerce does not explain why the
cost experiences of the 	collapsed fixed asset owners are good comparators for the
transactions disregarded rule but not for the major input rule.
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calculating accurate expense ratios.19 	See id. at 28–31. 	Defendant argues that
Commerce’s decision is in accordance with law and supported by substantial evidence
because Simec neither withheld nor failed to produce any information that Commerce
19 Plaintiff argues that Commerce should have applied “total adverse inferences to Simec”
because Simec’s reporting “obscured” the roles of various Simec affiliates involved in the
production of rebar, “distorted and understated fixed asset expenses,” and
See Pl.’s Br. at 26–
31 (citation omitted). 	Further, Plaintiff argues that Simec’s overall approach to responding to
Commerce’s questionnaires led to the omission of the non-collapsed fixed asset owning
companies’ individual financial statements and the leases from the record. See id. at 33.
Parties and Commerce sometimes use the shorthand “adverse facts available” or “AFA”
to refer to Commerce’s reliance on facts otherwise available with an adverse inference to reach
a final determination. 	However, AFA encompasses a two-part inquiry pursuant to which
Commerce must first identify why it needs to rely on facts otherwise available, and second, explain
how a party failed to cooperate to the best of its ability as to warrant the use of an adverse
inference when “selecting among the facts otherwise available.” See 19 U.S.C. § 1677e(a)–(b).
Commerce may, for example, rely on facts otherwise available when the information it requests
is provided out of time or not in the “form or manner requested.” 	19 U.S.C. § 1677e(a)(2)(B).
However, pursuant to 19 U.S.C. § 1677m(d), prior to resorting to facts otherwise available
Commerce must, where practicable, provide the party with an opportunity to remedy or explain
the identified deficiency. If the party’s response or remedy “is not satisfactory” or is submitted out
of time, Commerce may “disregard all or part of the [interested party’s] original and subsequent
responses.” 	See 19 U.S.C. § 1677m(d). 	The phrase “total adverse inferences” or “total AFA”
encompasses a series of steps that Commerce takes to reach the conclusion that all of a party’s
reported information is unreliable or unusable and that as a result of a party’s failure to cooperate
to the best of its ability, it must use an adverse inference in selecting among the facts otherwise
available. Commerce may apply “total facts available” if it determines that none of the information
provided is usable or reliable. See Zhejiang DunAn Hetian Metal Co. v. United States, 652 F.3d
1333, 1348 (Fed. Cir. 2011) (citing Steel Auth. of India, Ltd. v. United States, 25 CIT 482, 485–
89, 149 F. Supp. 2d 921, 926–29 (2001)). Commerce may then apply an adverse inference in
selecting among the facts otherwise available if it determines that a party failed to cooperate to
the best of its ability. See 19 U.S.C. § 1677e(a)–(b). Accordingly, for Commerce to apply a “total
adverse inference,” or “total AFA” it must determine that all of a party’s reported information is
unreliable or unusable, and then determine that as a result of a party’s failure to cooperate to the
best of its ability, it must rely on an adverse inference in selecting among the facts otherwise
available.
Here, Commerce used facts otherwise available to make an adjustment to the reported
fixed overhead expenses to include certain omitted depreciation expenses, but concluded that an
adverse inference was not warranted because Simec complied with Commerce’s requests to the
best of its ability. See Final Decision Memo at 26–27; see also Final Calc. Memo at 2, Attach. I.
Plaintiff’s challenge, however, is not just to specific pieces of information, but is a more global
challenge to the adequacy of Simec’s cooperation and responses throughout the entirety of the
review process. 	Plaintiff alternatively challenges Commerce’s determination not to apply facts
otherwise available with an adverse inference to Simec’s cost reporting. See Pl.’s Br. at 31.
[[
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requested. 	See Def.’s Resp. Br. at 17–23. 	For the reasons that follow, Commerce’s
decision not to apply total facts available to Simec, or facts otherwise available to Simec’s
cost reporting is not supported by substantial evidence, and is remanded to the agency
for further explanation or reconsideration consistent with this opinion.
Under certain circumstances, Commerce may use facts otherwise available. See
19 U.S.C. § 1677e(a). 	Commerce shall use facts otherwise available to reach its final
determination when “necessary information is not available on the record,” a party
“withholds information that has been requested by [Commerce],” fails to provide the
information timely or in the manner requested, “significantly impedes a proceeding,” or
provides information Commerce is unable to verify. See id. However, prior to resorting
to facts otherwise available, Commerce must explain why the information it does have is
insufficient and provide, where practicable, the non-complying party an opportunity to
comply. See 19 U.S.C. § 1677m(d).
In the final determination, Commerce explains that Simec responded “fully and
timely” to “all of the Department’s questionnaires, including answering all questions
related to their corporate structure and identifying all producers of subject merchandise.”
Final Decision Memo at 25 (citation omitted). 	Commerce also explained that Simec’s
reporting methodology reconciled any and all discrepancies caused by reporting on a
plant-based level, as opposed to a company-based level. 	See id. 	Finally, Commerce
explained that even though it agreed that Simec’s reporting of fixed overhead expenses
required use of facts otherwise available to account for certain omitted depreciation
expenses related to fixed assets, application of an adverse inference was not warranted.
See id. at 26–27.
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The court cannot sustain Commerce’s determination not to apply facts otherwise
available because Commerce’s decision assumes that its collapsing analysis and its
application of the transactions disregarded and major input rules are supported by
substantial evidence and in accordance with law. 	Pursuant to 19 U.S.C. § 1677e(a)(1),
Commerce shall apply facts otherwise available if necessary information is missing from
the record. The fact that Commerce received everything it requested does not mean that
information necessary to support Commerce’s final determination was not missing from
the record. 	Commerce’s contention that it was able to reconcile Simec’s costs and
understand Simec’s corporate structure for collapsing purposes, see Final Decision
Memo at 25–26, is based on an unsupported collapsing analysis. See id. at 25–27. As
explained above, Commerce’s decision not to collapse the six fixed asset owning
companies is not in accordance with law and is not supported by substantial evidence.
In deciding not to collapse the six fixed asset owning companies, Commerce did not
evaluate the record in light of the 19 C.F.R. § 351.401(f)(2) criteria. Further, Commerce’s
application of the transactions disregarded and major input rules cannot be sustained on
the record before the court. 	Commerce has not explained why the data it relied upon
constituted a good comparator for the cost experiences of the non-collapsed fixed asset
owning 	companies, 	nor 	has 	it 	explained 	why 	it 	valued 	a 	major 	input 	at 	cost.
Consequently, in concluding that it did not need to resort to facts otherwise available,
Commerce 	assumed 	necessary 	information 	was 	not 	missing 	from 	the 	record.
Commerce’s 	determination 	cannot 	be 	supported 	on 	this 	record, 	and 	is 	therefore
remanded to the agency for further explanation or reconsideration consistent with this
opinion.
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IV. 	Commerce’s Decision Not to Apply Adverse Inferences
Plaintiff argues that Commerce should have applied total adverse inferences to
calculate Simec’s dumping margin, or in the alternative, adverse inferences to Simec’s
cost reporting. See Pl.’s Br. at 31–38. Defendant argues that record evidence does not
indicate that Simec misreported information, was uncooperative, or engaged in tactics
that resulted in necessary information being withheld from Commerce. See Def.’s Resp.
Br. at 17–23. 	For the reasons that follow, the court cannot sustain Commerce’s
determination not to apply adverse inferences and the issue is remanded to the agency
for further explanation or reconsideration consistent with this opinion.
Commerce will apply an adverse inference after deciding that use of facts
otherwise available is warranted. 	See 19 U.S.C. § 1677e(a). 	Pursuant to 19 U.S.C.
§ 1677e(b), Commerce may apply an adverse inference if it “finds that an interested party
has failed to cooperate by not acting to the best of its ability[.]” 	19 U.S.C. § 1677e(b).
“The statute does not provide an express definition of ‘the best of its ability.’” 	Nippon
Steel Corp. v. United States, 337 F.3d 1373, 1382 (Fed. Cir. 2003). However, as Nippon
Steel explained, a respondent acts to “the best of its ability” when it “do[es] the maximum
it is able to do.” Id.
Here, Commerce determined that Simec’s reporting methodology was not evasive,
the costs reported were reconciled, and that it was able to adjust costs for the non-
collapsed fixed asset holding companies pursuant to the transactions disregarded and
major input rules. See Final Decision Memo at 25–27. Consequently, Commerce did not
resort to total facts available to reach its final determination, and specifically determined
that facts otherwise available with an adverse inference should not be used to calculate
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Court No. 17-00184 	Page 21
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either Simec’s dumping margin generally or applied to Simec’s cost reporting. 20 See id.
at 27. However, and as explained above, Commerce’s decision not to use total or partial
facts available is not supported by record evidence. Therefore, the court cannot sustain
Commerce’s determination not to apply adverse inferences. On remand, Commerce may
make a different determination or further explain its determination relying on evidence
available on the record and in a manner supported by the record. Commerce may also
reopen the record and request further information. 	Therefore, the court remands
Commerce’s 	decision 	not 	to 	apply 	adverse 	inferences 	for 	further 	explanation 	or
reconsideration consistent with this opinion.
CONCLUSION
For the foregoing reasons, it is
ORDERED that Commerce’s decision not to collapse the six fixed asset owning
companies is remanded for further explanation or reconsideration consistent with this
opinion; and it is further
ORDERED that Commerce’s application of the transactions disregarded and
major input rules is remanded for further explanation or reconsideration consistent with
this opinion; and it is further
ORDERED that Commerce’s decision not to use total facts available to calculate
Simec’s dumping margin, or facts otherwise available to Simec’s cost reporting is
20 As stated above, Commerce did rely on facts otherwise available with respect to depreciation
costs, but concluded that it would not apply an adverse inference. See Final Decision Memo at
26–27. However, Plaintiff is not challenging Commerce’s decision to not apply AFA solely on the
basis of Commerce needing to make an adjustment to account for certain omitted depreciation
expenses. See Pl.’s Reply Br. at 18. Instead, Plaintiff makes a more global challenge based on
its contention that throughout the review process Simec continually provided deficient responses.
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remanded for further explanation or reconsideration consistent with this opinion; and it is
further
ORDERED 	that 	Commerce’s 	decision 	not 	to 	apply 	adverse 	inferences 	is
remanded for further explanation or reconsideration consistent with this opinion; and it is
further
ORDERED that Commerce shall file its remand redetermination with the court
within 90 days of this date; and it is further
ORDERED that the parties shall have 30 days thereafter to file comments on the
remand redetermination; and it is further
ORDERED that the parties shall have 30 days to file their replies to comments on
the remand redetermination.
/s/ Claire R. Kelly
Claire R. Kelly, Judge
Dated:September 7, 2018
New York, New York
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