Hiep Thanh Seafood Joint Stock Company v. United States

Slip Op. 10-125
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Leo M. Gordon, Judge
Consol. Court No. 09-00270
[Administrative review results remanded.]
Dated: November 5, 2010
Mayer Brown LLP (Matthew J. McConkey, Jeffrey C. Lowe) for Plaintiff Hiep Thanh
Seafood Joint Stock Company.
Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, Franklin E.
White, 	Jr., 	Assistant 	Director, 	Commercial 	Litigation 	Branch, 	Civil 	Division, 	U.S.
Department of Justice (Richard P. Schroeder) for Defendant United States.
Akin, Gump, Strauss, Hauer & Feld, LLP (Valerie A. Slater, Jarrod M. Goldfeder,
Nicole M. D’Avanzo, Natalya D. Dobrowolsky) for Defendant-Intervenors Catfish Farmers
of America, America's Catch, Consolidated Catfish Companies, LLC, d/b/a Country
Select Fish, Delta Pride Catfish Inc., Harvest Select Catfish Inc., Heartland Catfish
Company, Pride of the Pond, Simmons Farm Raised Catfish, Inc., and Southern Pride
Catfish Company, LLC.
OPINION
Gordon, Judge: This action involves a new shipper review conducted by the U.S.
Department of Commerce (“Commerce”) of the antidumping duty order covering certain
frozen fish fillets from the Socialist Republic of Vietnam. See Certain Frozen Fish Fillets
from the Socialist Republic of Vietnam, 74 Fed. Reg. 29,473 (Dep’t of Commerce June
22, 2009) (final results third new shipper reviews), as amended, Certain Frozen Fish
Fillets from the Socialist Republic of Vietnam, 74 Fed. Reg. 37,188 (Dep't of Commerce
HIEP THANH SEAFOOD JOINT STOCK CO.,
Plaintiff,
v.
UNITED STATES,
Defendant.
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July 28, 2009) (amended final results admin. review) (“Final Results”); see also Issues
and Decision Memorandum for Certain Frozen Fish Fillets from the Socialist Republic of
Vietnam, 	A-552-801 	(June 	15, 	2009) 	(“Decision 	Memorandum”), 	available 	at
http://ia.ita.doc.gov/frn/summary/vietnam/E9-14607-1.pdf (last visited Nov. 5, 2010).
Before the court is the motion for judgment on the agency record filed by Hiep
Thanh Seafood Joint Stock Co. (“Hiep Thanh”). 	Hiep Thanh challenges Commerce’s
inclusion within Hiep Thanh’s U.S. sales database certain sales (1) that Hiep Thanh
allegedly believed had an ultimate destination of Mexico, (2) that Hiep Thanh knew would
be shipped through the United States, and (3) that did not in fact arrive in Mexico, but
were instead entered for consumption in the United States. 	The court has jurisdiction
pursuant to Section 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended, 19 U.S.C. §
1516a(a)(2)(B)(iii) (2006), 1 and 28 U.S.C. § 1581(c) (2006).
Background
In early 2008 Hiep Thanh requested an administrative review as a new shipper of
frozen fish fillets to the United States. 	Request for a New Shipper Review (Feb. 25,
2008), PD 1. 2 Hiep Thanh claimed that it had exported and entered one shipment of
subject merchandise during the appropriate period for a new shipper review and provided
Commerce supporting documentation for that shipment. 	Id. at 1. 	Commerce sent Hiep
Thanh a deficiency letter advising Hiep Thanh that a review of United States Customs and
1 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2006 edition.
2 “PD__” refers to a document contained in the public administrative record. 	“CD__”
refers to a document contained in the confidential administrative record.
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Border Protection (“Customs”) data indicated that Hiep Thanh had additional entries
during the period of review. 	Deficiency Letter (Feb. 28, 2008), PD 3 at 1. 	Commerce
requested that Hiep Thanh provide an explanation for the discrepancy. 	Id. 	In response,
Hiep 	Thanh 	stated, 	among 	other 	things, 	that 	“it 	had 	no 	knowledge 	of 	any 	U.S.
consumption entries in addition to the one presented in the new shipper request.” 	Resp.
to Deficiency Letter at 2 (Mar. 3, 2008), PD 7; see also Supp. to New Shipper Review
Request (Mar. 14, 2008), PD 9.
Commerce thereafter initiated a new shipper review for Hiep Thanh. 	In response
to Commerce’s request for the details of Hiep Thanh’s United States sales, Hiep Thanh
asserted that it had “directly sold some product to a U.S. customer [Company 2] during
the [period of review, but] to Hiep Thanh’s knowledge, all of that product was imported
into Mexico and not the United States.” 	Sec. A Resp. at 18 (item 4(j)) (May 5, 2008), PD
17. 	Similarly, for United States sales data, Hiep Thanh reported only the sales
associated with the single entry upon which it had requested the new shipper review and
did not provide any information for the additional entries Commerce had found in
Customs data. 	See Sec. C Resp. at 3 & Exhs. 2 & 3 (May 21, 2008), CD 8; PD 27.
In response to another questionnaire, Hiep Thanh indicated that it had made nine
sales to Company 2; that the merchandise subject to these sales “was not imported into
the United States;” and that merchandise “imported into Mexico is not subject to the
antidumping case and thus [it] would be inappropriate to include them in the Section C
database.” 	Hiep Thanh’s 2nd Supp. Quest. Resp. at 2 (Oct. 15, 2008), CD 25; PD 60.
The shipping documents provided by Hiep Thanh indicated that Hiep Thanh shipped the
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merchandise subject to these nine sales to the United States. 	Id. at Exhibit 2, Sale Nos.
1 through 9. 	The lab analysis and sanitary certifications for each sale indicate a final
destination in Mexico. 	Id.
In the Final Results Commerce included in Hiep Thanh’s United States sales
database the sales to Company 2 that entered the United States for consumption. 	See
Decision Memorandum at 17.
Standard of Review
When reviewing Commerce’s antidumping determinations under 19 U.S.C. §
1516a(a)(2)(B)(iii) and 28 U.S.C. § 1581(c), the U.S. Court of International Trade sustains
Commerce‘s “determinations, findings, or conclusions” unless they are “unsupported by
substantial evidence on the record, or otherwise not in accordance with law.” 	19 U.S.C.
§ 1516a(b)(1)(B)(i). 	More specifically, when reviewing agency determinations, findings,
or conclusions for substantial evidence, the court assesses whether the agency action is
reasonable given the record as a whole. 	Nippon Steel Corp. v. United States, 458 F.3d
1345, 1350-51 (Fed. Cir. 2006). 	Substantial evidence has been described as “such
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.” Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938). 	Substantial
evidence has also been described as “something less than the weight of the evidence,
and the possibility of drawing two inconsistent conclusions from the evidence does not
prevent 	an 	administrative 	agency's 	finding 	from 	being 	supported 	by 	substantial
evidence.” Consolo v. Fed. Mar. Comm'n, 383 U.S. 607, 620 (1966). Fundamentally,
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though, 	“substantial 	evidence” 	is 	best 	understood 	as 	a 	word 	formula 	connoting
reasonableness review. 	3 Charles H. Koch, Jr., Administrative Law and Practice §
10.3[1] (2d. ed. 2009). 	Therefore, when addressing a substantial evidence issue raised
by a party, the court analyzes whether the challenged agency action “was reasonable
given the circumstances presented by the whole record.” Edward D. Re, Bernard J. Babb,
and Susan M. Koplin, 8 West's Fed. Forms, National Courts § 13342 (2d ed. 2009).
Separately, the two-step framework provided in Chevron, U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837, 842-45 (1984), governs judicial review of
Commerce's interpretation of the antidumping statute. Dupont Teijin Films USA, LP v.
United States, 407 F.3d 1211, 1215 (Fed. Cir. 2005); Agro Dutch Indus. Ltd. v. United
States, 508 F.3d 1024, 1030 (Fed. Cir. 2007). 	“[S]tatutory interpretations articulated by
Commerce during its antidumping proceedings are entitled to judicial deference under
Chevron.” Pesquera Mares Australes Ltda. v. United States, 266 F.3d 1372, 1382 (Fed.
Cir. 2001); see also Wheatland Tube Co. v. United States, 495 F.3d 1355, 1359 (Fed. Cir.
2007) (“[W]e 	determine 	whether 	Commerce's 	statutory 	interpretation 	is 	entitled 	to
deference pursuant to Chevron.”).
Discussion
Commerce explained its decision to include Hiep Thanh’s sales to Company 2 as
follows:
Similar to our conclusion in Comment 4 above, we find that only
those sales that entered the United States for consumption during the POR
should be included in the margin calculation, specifically only type 3 entries.
Based on documents generated in the course of the negotiation and sales
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process, indicating a U.S. destination, Hiep Thanh knew or should have
known that the goods in question were destined for the United States at the
time of the sale. Thus, such sales should be reported to the Department in
accordance 	with 	section 	772(a) 	of 	the 	Act. 	The 	Department 	placed
information on the record that definitively shows that certain sales to
Company 2 entered the United States for consumption i.e., on November 4,
2009, the Department placed import data collected by CBP on the record
that demonstrated that these sales were entered for consumption. See
Memorandum to the File from Tom Futtner, Customs Unit, to James C.
Doyle, Director Office 9, dated November 3, 2008, Request for U.S. Entry
Documents—Certain Frozen Fish Fillets from the Socialist Republic of
Vietnam (A-552-801). Based on the CBP data, the Department requested
Hiep Thanh to report these sales in its U.S. sales database. Consequently,
for these final results, based on CBP data and Hiep Thanh’s updated U.S.
sales database, we will include these sales in the margin calculation. This
determination is also consistent with Magnesium from Russia because we
have evidence on the record that certain sales to Company 2 entered for
consumption and that Hiep Thanh knew or should have known that these
sales were destined for the United States. However, we will not include
sales in the margin calculation where we do not have evidence that they
were entered for consumption or were not type 3 entries.
Decision Memorandum at 17.
It is undisputed that Hiep Thanh manufactured and sold subject merchandise that
entered the United States for consumption during the period of review. 	Dumping liability
for those sales must reside somewhere. 	The question is whether Hiep Thanh or some
other party in its sales distribution channel should bear liability. 	For Hiep Thanh the nine
sales in question do not belong in its U.S. sales database because, according to Hiep
Thanh, 19 U.S.C. § 1677a(a) assigns liability to the first party in the chain of distribution
that sells subject merchandise with actual or constructive knowledge that the sale is to an
unaffiliated purchaser for exportation to the United States. 	Hiep Thanh contends that it
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lacked the requisite knowledge for the sales in question. 	Hiep Thanh does not attempt to
explain who should bear responsibility for the sales.
Hiep Thanh focuses its argument on a straightforward substantial evidence
challenge to Commerce’s finding from the Final Results that Hiep Thanh knew or should
have known its merchandise was “destined for the United States.” 	Pl.’s Mem. of Law in
Supp. of Mot. for J. upon Agency R. at 8. 	Hiep Thanh argues that the record evidence
overwhelmingly supports its contention that it only knew its merchandise had an ultimate
destination in Mexico, and that no reasonable fact finder could conclude that Hiep Thanh
knew or should have known that the United States was the ultimate destination. 	Id. at
8-10.
Hiep Thanh’s argument assumes that Commerce analyzed whether Hiep Thanh
knew or should have known that the merchandise was ultimately destined for the United
States as a consumption entry. 	Id. at 7. 	It is certainly possible that Commerce
performed such an analysis. 	There is, however, another possible interpretation of the
Final Results, one in which Commerce may have applied a slightly different standard to
address the sales in issue that did not depend on Hiep Thanh’s knowledge of the
“ultimate 	destination” 	of 	the 	merchandise, 	but 	rather 	Hiep 	Thanh’s 	more 	limited
knowledge that the merchandise was destined in some form for the United States (as a
transshipment) coupled with actual consumption entries that Hiep Thanh may not have
known about.
In 	other 	words, 	when 	Commerce 	determined 	that 	Hiep 	Thanh 	knew 	its
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merchandise was “destined for the United States,” Decision Memorandum 	at 17,
Commerce may have simply been referring to the undisputed fact that Hiep Thanh
actually knew the merchandise was going to be shipped to the United States. 	With that
more limited finding, Commerce may then have chosen, as a matter of gap-filling,
policy-making discretion, to place the onus on a manufacturer like Hiep Thanh to
affirmatively demonstrate that the subject merchandise has, in fact, made it to the ultimate
destination and is not entered for consumption in the United States. 	If the manufacturer
cannot make that proffer, and the merchandise enters the U.S. for consumption as
happened here, then Commerce may have decided to include those sales within the
manufacturer’s 	U.S. 	sales 	database 	regardless 	of 	the 	manufacturer’s 	actual 	or
constructive knowledge of the ultimate destination of the merchandise. 	In the Final
Results Commerce appeared to find dispositive the fact that Hiep Thanh’s sales were
entered for consumption. 	See id. (“The Department placed information on the record
that definitively shows that certain sales to Company 2 entered the United States for
consumption … . 	This determination is also consistent with Magnesium from Russia
because we have evidence on the record that certain sales to Company 2 entered for
consumption … . 	However, we will not include sales in the margin calculation where we
do not have evidence that they were entered for consumption … .”). 	At the same time,
Commerce devoted little if any effort on the topic of what Hiep Thanh knew or should have
known about the sales, limiting its analysis and conclusion to one sentence: “Based on
documents generated in the course of the negotiation and sales process, indicating a
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U.S. destination, Hiep Thanh knew or should have known that the goods in question were
destined for the United States at the time of the sale.” 	Id.
The point though is that the court cannot conduct substantial evidence review of
Commerce’s 	finding 	that 	Hiep 	Thanh 	knew 	or 	should 	of 	known 	that 	the 	subject
merchandise was “destined for the United States” until Commerce clarifies which
standard it applied when it affixed liability for the sales to Hiep Thanh. 	The court will
therefore remand this matter to Commerce to provide a further explanation. 	Depending
on the outcome, the issue may evolve from a single substantial evidence question
addressing one specific finding to one that implicates the Chevron framework as
Commerce applies (or interprets) the antidumping statute to address the sales in
question.
The court notes that Defendant’s brief posits three post hoc justifications for
Commerce’s action that Commerce did not articulate in the Final Results. 	First,
Defendant makes a Chevron step one argument that Hiep Thanh’s sales were made to
an unaffiliated purchaser and shipped to the United States, placing those sales squarely
within the statute’s definition of U.S. price as “the price at which the subject merchandise
is first sold … to an unaffiliated purchaser for exportation to the United States … . ” 	19
U.S.C. § 1677a(a). 	Def.’s Resp. to Pl.’s R. 56.2 Mot. for J. upon Agency R. at 7-8.
Second, Defendant explains (in what appears to be a Chevron step two analysis)
that 	Commerce’s 	“knowledge 	test” 	was 	formulated 	by 	Commerce 	to 	identify 	the
cross-border price discriminator in a given sales transaction. 	Id. at 9-10 (citing 19 U.S.C.
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§1677a(a) and Wonderful Chem. Indus., Ltd. v. United States, 27 CIT 411, 416, 259 F.
Supp. 2d 1273, 1279 (2003)). 	Third, Defendant then argues (again in what appears to
be a Chevron step two analysis) that inclusion of Hiep Thanh’s sales within the margin
calculation is necessary to serve as some sort of anti-fraud device to prevent parties from
manipulating margin calculations by doctoring sales documentation to indicate that a sale
was transiting through the United States with some other ultimate destination. 	Id. at 11.
Importantly, Commerce made no mention of the above three justifications in the
Final Results. 	The court “may not affirm on a basis containing any element of
discretion—including discretion to find facts and interpret statutory ambiguities—that is
not the basis the agency used, since that would remove the discretionary judgment from
the agency to the court.” 	ICC v. Bhd. of Locomotive Eng’rs, 482 U.S. 270, 283 (1987);
see also SEC v. Chenery Corp., 332 U.S. 194, 196–97 (1947) (“ … a reviewing court, in
dealing with a determination or judgment which an administrative agency alone is
authorized to make, must judge the propriety of such action solely by the grounds invoked
by the agency.”); Burlington Truck Lines v. United States, 371 U.S. 156, 168–69
(1962) (“The courts may not accept … counsel's post hoc rationalizations for agency
action; … an agency's discretionary order [must] be upheld, if at all, on the same basis
articulated in the order by the agency itself.”); Timken Co. v. United States, 894 F.2d 385,
389 (1990) (“The first mention of these justifications appears in Commerce's appeal brief
before the CIT. ‘[A]gency action cannot be sustained on post hoc rationalizations supplied
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during judicial review.’”)(quoting Tabor v. Joint Bd. for Enrollment of Actuaries, 566 F.2d
705, 709–710 (D.C. Cir. 1977)).
If Commerce believes that counsel’s proposed justifications for its action are
legitimate, then the agency needs to formally adopt them, and possibly amplify or revise
them against whatever countervailing considerations and arguments Hiep Thanh raises
in its comments during remand. 	The court can then, if applicable, (1) review under the
Chevron framework Commerce’s interpretation and application of the antidumping
statute to formulate standards or criteria to affix liability for the disputed sales, and/or (2)
perform substantial evidence (reasonableness) review of (a) Commerce’s fact finding and
conclusions 	about 	Hiep 	Thanh’s 	sales, 	and/or 	(b) 	Commerce’s 	adherence 	to 	its
announced standards or criteria.
CONCLUSION
For the foregoing reasons the court cannot sustain the Commerce’s Final Results.
Accordingly, it is hereby
ORDERED that this action is remanded to Commerce to further explain its
decision to include the disputed sales within Hiep Thanh’s U.S. sales database; it is
further
ORDERED that Commerce shall file its remand results on or before January 12,
2011; and it is further
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ORDERED that, if applicable, the parties shall file a proposed scheduling order
with page limits for comments on the remand results no later than seven days after
Commerce files its remand results with the court.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Date: November 5, 2010
New York, New York
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