Xiping Opeck Food Co., Ltd. v. United States

Slip Op. 14-142
UNITED STATES COURT OF INTERNATIONAL TRADE
____________________________________
:
XIPING OPECK FOOD CO., LTD., 	:
:
Plaintiff, 	:
:
v. 	:
: 	Before: Richard K. Eaton, Senior Judge
UNITED STATES, 	:
: 	Court No. 12-00112
Defendant, 	:
:
and 	:
: 	PUBLIC VERSION
CRAWFISH PROCESSORS ALLIANCE, 	:
:
Defendant-Intervenor. 	:
____________________________________:
OPINION and ORDER
[United States Department of Commerce’s Final Results are remanded.]
Dated: December 11, 2014
Yingchao Xiao, Lee & Xiao, of San Marino, CA, argued for plaintiff.
Antonia R. Soares, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, D.C., argued for defendant. With her on the brief were
Stuart F. Delery, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director,
and Patricia M. McCarthy, Assistant Director. Of counsel on the brief was Rebecca Cantu,
Attorney, International Office of Chief Counsel for Import Administration, U.S. Department of
Commerce, of Washington, D.C.
John C. Steinberger, Adduci, Mastriani & Schaumberg, LLP of Washington, D.C.,
argued for defendant-intervenor. With him on the brief was Will E. Leonard.
EATON, Senior Judge: This matter is before the court on plaintiff Xiping Opeck
Food Co., Ltd.’s (“Xiping” or “plaintiff”) motion for judgment on the agency record pursuant to
USCIT Rule 56.2. By its motion, Xiping, an exporter of freshwater crawfish tail meat from the
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People’s Republic of China (“PRC”), challenges the United States Department of Commerce’s
(“Commerce” or the “Department”) Final Results in the 2009–2010 administrative review of the
antidumping duty order on crawfish tail meat from the PRC. Freshwater Crawfish Tail Meat
From the PRC, 77 Fed. Reg. 21,529, 21,529 (Dep’t of Commerce Apr. 10, 2012) (final results of
antidumping duty administrative review and rescission of review in part), and accompanying
Issues and Decision Memorandum (“Issues & Dec. Mem.”) (collectively, “Final Results”). In
the Final Results, Commerce determined a rate of 70.12 percent for plaintiff’s crawfish tail meat
based on the application of adverse facts available (“AFA”). Issues & Dec. Mem. at 4.
Defendant United States (“defendant”) opposes plaintiff’s motion and asks that
Commerce’s Final Results be sustained. See Def.’s Resp. in Opp’n to Pl.’s Rule 56.2 Mot. for J.
upon the Agency R. (ECF Dkt. No. 34) (“Def.’s Br.”). Defendant-intervenor, the Crawfish
Processors Alliance (“Crawfish Processors Alliance” or “defendant-intervenor”), a trade
association composed of members that manufacture, produce, or sell freshwater crawfish tail
meat in the United States, joins in opposition to plaintiff’s motion. See Br. of Def.-int., the
Crawfish Processors Alliance, in Opp’n to Pl.’s Rule 56.2 Mot. for J. upon the Agency R. (ECF
Dkt. No. 37); Consent Mot. of the Crawfish Processors Alliance to Intervene as of Right as Def.-
int. ¶ 6 (ECF Dkt. No. 14). For the reasons set forth below, Commerce’s Final Results are
remanded.
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BACKGROUND
On September 15, 1997, the Department issued an antidumping duty order on crawfish
tail meat from the PRC. 1 Freshwater Crawfish Tail Meat From the PRC, 62 Fed. Reg. 48,218
(Dep’t of Commerce, Sept. 15, 1997) (notice of amendment to final determination of sales at less
than fair value and antidumping duty order) (the “Order”). On October 28, 2010, following the
receipt of a petition filed by the Crawfish Processors Alliance, the Department initiated an
administrative review of the Order for the period of review (“POR”) of September 1, 2009
through August 31, 2010. See Initiation of Antidumping and Countervailing Duty
Administrative Reviews, 75 Fed. Reg. 66,349, 66,350 (Dep’t of Commerce Oct. 28, 2010).
After initially selecting Xiping and Yancheng Hi-King Agriculture Developing Co., Ltd. (“Hi-
King”) for individual examination, the Department rescinded the review with respect to Hi-King,
leaving Xiping as the sole mandatory respondent. 2 See Freshwater Crawfish Tail Meat From the
PRC, 76 Fed. Reg. 10,879, 10,879–80 (Dep’t of Commerce Feb. 28, 2011) (rescission of
antidumping duty administrative review in part).
1 The merchandise subject to the antidumping duty order is described as
freshwater crawfish tail meat, in all its forms (whether washed or with fat on,
whether purged or un-purged), grades, and sizes; whether frozen, fresh, or chilled;
and regardless of how it is packed, preserved, or prepared. 	Excluded from the
scope of the order are live crawfish and other whole crawfish, whether boiled,
frozen, fresh, or chilled. 	Also excluded are saltwater crawfish of any type, and
parts thereof.
Final Results, 77 Fed. Reg. at 21,529–30.
2 The review of Hi-King was rescinded by Commerce pursuant to 19 C.F.R. §
351.213(d)(1), after the Crawfish Processors Alliance sent the Department a notice of withdrawal
of its request for a review of the company. Freshwater Crawfish Tail Meat From the PRC, 76
Fed. Reg. 10,879, 10,880 (Dep’t of Commerce Feb. 28, 2011) (rescission of antidumping duty
administrative review in part).
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During the course of the review, the Crawfish Processors Alliance submitted a letter to
the Department alleging that Xiping was involved in middleman dumping 3 during the POR.
Letter from John C. Steinberger, Counsel for the Crawfish Processors Alliance, to The
Honorable Gary Locke, Secretary of Commerce, U.S. Department of Commerce at 2, CD 27
(June 6, 2011), ECF Dkt. No. 21 (“Middleman Dumping Allegation Letter”). In support of its
middleman dumping allegation, defendant-intervenor referred to evidence of Xiping’s sales to
the importer of record, GB Imports & Exports, Inc. (“GBIE”), and of GBIE’s subsequent sales to
its customer, Company A, 4 a foreign entity. 5 See Middleman Dumping Allegation Letter at 2, 3,
6. Defendant-intervenor claimed that the sales between Xiping and GBIE, and the sales between
GBIE and Company A, were conducted at artificially inflated prices. See Middleman Dumping
Allegation Letter at 6. Further, according to defendant-intervenor, Company A resold Xiping’s
merchandise to U.S. wholesalers at prices below Company A’s artificially inflated acquisition
cost. See Middleman Dumping Allegation Letter at 6. Thus, defendant-intervenor maintained
that Company A sold Xiping’s merchandise to U.S. wholesalers at dumped prices.
Following the receipt of comments concerning the middleman dumping allegation,
Commerce determined that, although a middleman dumping analysis was not warranted, “an
3 Middleman dumping, in a nonmarket economy context, is normally thought of as
below-cost sales into the United States by a reseller of a respondent producer’s merchandise,
rather than by the respondent producer itself. See S. R EP . NO. 96-249, at 94 (1979), reprinted in
1979 U.S.C.C.A.N. 381, 480. As shall be seen, although the Department used information from
defendant-intervenor’s Middleman Dumping Allegation Letter, it did not pursue a middleman
dumping investigation.
4 [[ 	]] identity is being withheld because Xiping’s
customer, GBIE, claimed business-proprietary treatment for this information. Issues & Dec.
Mem. at 2 n.2. All references to this company hereinafter will be to “Company A.”
5 Company A is a [[ 	]] entity.
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inquiry into [Company A’s] selling practices” was. Mem. from Laurie Parkhill, Office Director,
for Christian Marsh, Deputy Assistant Secretary for Antidumping and Countervailing Duty
Operations at 6, CD 12 (Sept. 30, 2011), ECF Dkt. No. 21 (“Transactions Mem.”). In reaching
this conclusion, Commerce stated “that [Company A] plays a central, but as yet unexplained,
role in the U.S. pricing associated with entries of crawfish tail meat subject to this review” and
that Company A “appears to be an exporter that has made, or has participated in making, the first
sales to unaffiliated U.S. purchasers.” 6 Transactions Mem. at 15–16.
On October 7, 2011, after “receiv[ing] a complete response to the antidumping
questionnaire from Xiping,” Commerce published its Preliminary Results, calculating a
weighted-average dumping margin of zero percent for Xiping. Preliminary Results Freshwater
Crawfish Tail Meat From the PRC, 76 Fed. Reg. 62,349, 62,349, 62,351, 62,355 (Dep’t of
Commerce Oct. 7, 2011) (of antidumping duty administrative review and intent to rescind review
in part) (“Preliminary Results”). Thus, Commerce preliminarily determined that Xiping’s sales
6 The Department made this finding based on the following observations: (1)
“GBIE’s purchases from Xiping . . . were simultaneous with its re-sales to” Company A; (2)
“GBIE resold crawfish tail meat to a third country (i.e., [[ 	]])”; (3) “GBIE transferred
the title to goods only days after importation”; and (4) “GBIE admits . . . that [Company A]
agreed to purchase crawfish tail meat from GBIE prior to the date of importation into the United
States.” Transactions Mem. at 14–15. Based on the foregoing, Commerce reasoned that,
“[g]iven the [[ 	]] from the time of GBIE’s importation and entry of such goods
into the United States and the timing of [Company A’s] taking title to goods, it [was] highly
likely that [Company A] agreed to resell goods back to the United States prior to the time of
importation.” Transactions Mem. at 15. The Department explained further that “the totality of
circumstances surrounding [Xiping’s] U.S. sales to GBIE and GBIE’s re-sales to [Company A]
in [[ 	]] call[ed] into question the commercial viability associated with the
transactions between Xiping . . . and GBIE in the context of a dumping analysis.” Transactions
Mem. at 15.
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had not been made below normal value, 7 and therefore that its merchandise had not been
dumped.
Nonetheless, based on the observations in its Transactions Memorandum, Commerce sent
multiple nonmarket economy 8 questionnaires to Xiping and its importer, GBIE, which both
companies fully answered. In addition, the Department twice sent Company A nonmarket
economy questionnaires seeking to learn whether it was an “entity properly subject to a dumping
inquiry as an exporter of subject merchandise and ultimately responsible for the pricing of entries
of crawfish tail meat into the United States.” See Mem. from Susan H. Kuhbach, Office
Director, for Paul Piquado, Assistant Secretary for Import Administration at 2, CD 20 (Feb. 13,
2012), ECF Dkt. No. 21 (“AFA Mem.”). Company A responded to both of Commerce’s
requests with letters stating that it was not an exporter of crawfish tail meat because its purchases
and sales were made after the merchandise had entered the United States and, as a result,
7 “A dumping margin is the difference between the normal value . . . of
merchandise and the price for sale in the United States.” Qingdao Taifa Grp. Co. v. United
States, 35 CIT __, __ n.1, 780 F. Supp. 2d 1342, 1345 n.1 (2011) (citing 19 U.S.C. §§
1673e(a)(1), 1677(35)). In nonmarket economy “reviews, Commerce determines normal value
by using the ‘best available information’ from the surrogate country to value the factors of
production.” DuPont Teijin Films v. United States, 37 CIT __, __, 896 F. Supp. 2d 1302, 1310
(2013) (quoting 19 U.S.C. § 1677b(c)(1)). The “export price or constructed export price is the
price that the merchandise is sold for in the United States.” Qingdao, 35 CIT at __ n.1, 780 F.
Supp. 2d at 1345 n.1 (citing 19 U.S.C. § 1677a(a)–(b)).
8 A nonmarket economy country is “any foreign country that [Commerce]
determines does not operate on market principles of cost or pricing structures, so that sales of
merchandise in such country do not reflect the fair value of the merchandise.” 19 U.S.C. §
1677(18)(A). Because the Department considers the PRC “to be a nonmarket economy country,
Commerce generally considers information on sales in [the PRC] and financial information
obtained from Chinese producers to be unreliable for determining . . . the normal value of the
subject merchandise.” Shanghai Foreign Trade Enters. Co. v. United States, 28 CIT 480, 481,
318 F. Supp. 2d 1339, 1341 (2004). Thus, where, as here, the subject merchandise is exported
from the PRC, the Department is instructed by the statute to “determine the normal value of the
subject merchandise on the basis of the value of the factors of production utilized in producing
the merchandise . . . in a market economy country or countries.” 19 U.S.C. § 1677b(c)(1).
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Company A was not an “interested party” under the statute. AFA Mem. at 2. In other words,
Company A insisted that, despite its status as a foreign company, its purchases and sales of the
crawfish tail meat took place within the borders of the United States, and thus it neither produced
nor exported Xiping’s product, and therefore was not required to respond to the Department’s
nonmarket economy questionnaires.
Following the receipt of the questionnaire responses, the Department produced a Post-
Preliminary Analysis Memorandum. See AFA Mem. In this memorandum, the Department
found, based on Company A’s lack of cooperation, that “the limited information provided by
Xiping . . . c[ould not] serve as a reliable basis for reaching an accurate dumping determination
with respect to Xiping.” AFA Mem. at 4 (citing 19 U.S.C. § 1677m(e)(3)). Furthermore,
Commerce determined that Company A was an exporter and “interested party by virtue of its
involvement in the relevant U.S. sales and pricing of the entries under review” and that Company
A’s failure to cooperate with the review warranted use of an adverse inference 9 with respect to
the facts used to determine an antidumping margin for Xiping. See AFA Mem. at 5–6; 19 U.S.C.
§ 1677e(b).
Importantly, in reaching its conclusion, Commerce found (1) that Xiping and GBIE fully
cooperated with the review, (2) no affiliation among any of Xiping, GBIE, Company A, or the
U.S. wholesalers, and (3) no collusion among any of the participants in the transactions. See
AFA Mem. at 6; Transactions Mem. at 5–6, 12.
9 As will be discussed in greater detail below, as an adverse inference, the
Department calculated Xiping’s dumping margin using, as the export price, the lowest assumed
price charged by Company A to its U.S. customers for the subject merchandise during the POR,
and, as normal value, Company A’s highest acquisition cost during the POR of the subject
merchandise obtained from GBIE. AFA Mem. at 7; Issues & Dec. Mem. at 4.
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In the Final Results, Commerce confirmed its findings and determined a rate of 70.12
percent to Xiping’s merchandise that had been calculated in the Post-Preliminary Analysis
Memorandum using AFA. See Final Results, 77 Fed. Reg. at 21,531.
STANDARD OF REVIEW
“The court shall hold unlawful any determination, finding, or conclusion found . . . to be
unsupported by substantial evidence on the record, or otherwise not in accordance with law.” 19
U.S.C. § 1516a(b)(1)(B)(i).
DISCUSSION
I. 	T HE CRAWFISH PROCESSORS ALLIANCE ’S MIDDLEMAN DUMPING ALLEGATION
In its Middleman Dumping Allegation Letter, the Crawfish Processors Alliance described
a chain of transactions from Xiping to the U.S. wholesalers, and asked Commerce to initiate a
middleman dumping investigation of Xiping, GBIE, and Company A. See Middleman Dumping
Allegation Letter at 2. Defendant-intervenor claimed, in its submission, that Xiping’s U.S. sales
were made consecutively through two middlemen: first to GBIE, which acted as the importer of
record, and second, to Company A, which purchased Xiping’s product from GBIE. Middleman
Dumping Allegation Letter at 6. Defendant-intervenor further alleged that Company A then
resold Xiping’s merchandise to U.S. wholesalers, which then sold the crawfish tail meat to
retailers in the United States. Middleman Dumping Allegation Letter at 6. To make its case,
defendant-intervenor claimed that indirect U.S. pricing data and direct cost data demonstrated
that a substantial portion of Company A’s sales of Xiping’s crawfish tail meat in the United
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States were made at prices substantially below Company A’s cost of acquisition. Middleman
Dumping Allegation Letter at 13; Transactions Mem. at 3.
The manner by which defendant-intervenor constructed the acquisition costs and sales
prices on which it based its middleman dumping allegation requires some explanation. First,
defendant-intervenor sought to ascertain a cost for the crawfish tail meat bought by Company A.
To establish this cost, the defendant-intervenor relied on invoices for eight sales of Xiping’s
crawfish tail meat that GBIE sold to Company A during the POR. Middleman Dumping
Allegation Letter at 7, 18. Using these invoices, defendant-intervenor then calculated a
weighted-average acquisition cost of the merchandise for Company A. 10 Middleman Dumping
Allegation Letter at 7.
Second, defendant-intervenor constructed an export price (U.S. sales price) based on the
prices offered by the U.S. wholesalers of the crawfish tail meat to their retailers. See Middleman
Dumping Allegation Letter at 10. Because defendant-intervenor was unable to determine
Company A’s resale prices of the crawfish tail meat to the U.S. wholesalers directly, it “relied on
prices offered by four different U.S. wholesalers . . . of subject merchandise” 11 that appeared to
be “produced by Xiping[,] . . . as indirect evidence of the prices charged by” Company A, to
calculate a wholesale market price. 12 Transactions Mem. at 3; Middleman Dumping Allegation
10 The Crawfish Processors Alliance calculated a weighted-average acquisition cost
of [[ 	]] per kilogram during the POR. Middleman Dumping Allegation Letter at 7.
11 The price offers were from Propax (Int’l) Inc., Fishline Seafoods Inc., Corrigan
Trading Corp., and Ocean Harvest Wholesale, Inc. Middleman Dumping Allegation Letter at 10,
24.
12 Using a simple average of the price offers from the four U.S. wholesalers to
prospective retailers, the Crawfish Processors Alliance calculated a U.S. wholesale market price
of $11.28 per kilogram during the POR. See Middleman Dumping Allegation Letter at 12, 22.
(footnote continued)
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Letter at 10. That is, defendant-intervenor reasoned that the wholesalers would necessarily have
paid Company A no more than the price at which they were offering to sell the merchandise to
their retailers.
Having constructed the amount that the wholesalers were charging their retailers, for
what it believed was Xiping’s crawfish tail meat, defendant-intervenor calculated a claimed
dumping margin for Company A. 13 See Middleman Dumping Allegation Letter at 12–13. This
calculation was made by subtracting the average of the U.S. wholesale price offers of the four
wholesalers, from Company A’s weighted average acquisition cost of Xiping’s subject
merchandise from GBIE. Middleman Dumping Allegation Letter 10, 12–13. Thus, defendant-
intervenor used the claimed amount for which the U.S. wholesalers were offering to sell Xiping’s
crawfish tail meat to the U.S. retailers as Company A’s export price (U.S. price), and then
subtracted that amount from Company A’s acquisition price, which was used as normal value.
As a result, defendant-intervenor maintained that Company A, as a middleman, was dumping
Xiping’s crawfish tail meat.
Although it could be asserted that the wholesalers’ acquisition price from Company A
would logically be less than the price they offered to their retailers, defendant-intervenor used a
simple average of the offered prices as the price that the wholesalers paid Company A for the
crawfish tail meat. Thus, using the wholesalers’ offering prices as the export price (U.S. price),
and Company A’s acquisition costs from GBIE as normal value, the Crawfish Processors
In its answers to Commerce’s questionnaires, GBIE provided thirty-four invoices for sales of
crawfish tail meat to Company A that demonstrated that it sold the merchandise to Company A
at prices between [[ 	]] per kilogram and [[ 	]] per kilogram. See AFA Mem. at 7,
10.
13 The Crawfish Processors Alliance calculated an average dumping margin for
Company A of [[ 	]] percent. Middleman Dumping Allegation Letter at 12.
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Alliance alleged that Company A was making a substantial portion of its sales of Xiping’s
merchandise to U.S. wholesalers at prices significantly below its acquisition costs from GBIE. 14
Notably, the Crawfish Processors Alliance relied on an affidavit from a competing U.S.
wholesaler 15 to identify the four U.S. wholesalers that it claimed bought Xiping’s crawfish tail
meat from Company A. 16 See Middleman Dumping Allegation Letter at 24. In other words,
defendant-intervenor used an affidavit to demonstrate that Company A was selling Xiping’s
crawfish tail meat to four named U.S. wholesalers.
II. 	COMMERCE ’S DETERMINATIONS
As an initial matter, it is clear that once it had the Middleman Dumping Allegation Letter,
Commerce was reasonable in seeking more information about the chain of transactions by which
Xiping’s crawfish tail meat was sold into the United States. Indeed, it is difficult to see these
14 The Crawfish Processors Alliance alleged that Company A was selling Xiping’s
crawfish tail meat, on average, [[ 	]] percent below its acquisition cost from GBIE. See
Middleman Dumping Allegation Letter at 12.
15 The affidavit was from [[
]], which sold subject merchandise supplied by [[ 	]]. Middleman
Dumping Allegation Letter at 24. U.S. Customs and Border Protection data demonstrated that
during the POR [[ 	]] percent of entries of subject merchandise into the United States were
from two exporters, Xiping and [[ 	]]. Transactions Mem. at 6. Thus, if the product did
not belong to [[ 	]], the Crawfish Processors Alliance reasoned that it must have been
Xiping’s crawfish tail meat. [[
]].
16 [[ 	]] of Xiping’s U.S. sales during the POR were made to GBIE, and [[ 	]]
of GBIE’s sales during the POR were made to Company A. Middleman Dumping Allegation
Letter at 11. Thus, the Crawfish Processors Alliance claimed that, because “all of these U.S.
resellers were handling Xiping[’s] . . . merchandise, and since [[
]].
Middleman Dumping Allegation Letter at 11.
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transactions as anything other than an attempt to make it appear that Xiping’s merchandise
entered the country based on invoices that did not accurately reflect the true relationship between
normal value and export price. Here, the question is largely whether the Department determined
an antidumping duty rate for plaintiff’s merchandise based on record evidence and based on the
law.
Although the Department declined to initiate a middleman dumping inquiry, it
nevertheless endeavored to determine “whether Company A and/or Xiping [was] the entity
properly subject to a dumping inquiry as an exporter of subject merchandise and ultimately
responsible for the pricing of entries of crawfish tail meat into the United States.” Issues & Dec.
Mem. at 2 (citing Preliminary Results, 76 Fed. Reg. at 62,350). Commerce, thus, issued the
nonmarket economy questionnaires that resulted in Company A’s assertion that it was not an
“interested party” because its purchases and sales of crawfish tail meat were made within the
territory of the United States. Issues & Dec. Mem. at 2–3.
Notwithstanding this position, Commerce determined that Company A was an interested
party that had “significantly impeded the proceeding because it did not provide any of the
information which [the Department] determined to be critical and necessary for the completion
of an administrative review of the entries and sales made by Xiping.” Issues & Dec. Mem. at 3
(citing AFA Mem. at 3); 19 U.S.C. § 1677e(a)(2)(C). Based on Company A’s impeding of the
review by refusing to answer the questionnaires, Commerce determined that it lacked U.S. sales
and pricing information needed to calculate a margin for Xiping. AFA Mem. at 5. Thus,
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Commerce “found it necessary,” pursuant to 19 U.S.C. § 1677e(a), 17 to use “facts otherwise
available” to calculate the dumping margin for Xiping. Issues & Dec. Mem. at 3.
Moreover, Commerce determined that Company A, as an interested party, “failed to
cooperate by not acting to the best of its ability to comply with a request for information by the
Department.” AFA Mem. at 5 (“This failure to provide the U.S. sales and pricing information,
which we determined to be relevant in the Preliminary Results in calculating a dumping margin
for Xiping . . . in this review, indicates a lack of cooperation on the part of [Company A] to
comply with our requests for information.”). As a result of this failure to cooperate by Company
A, the Department “found that an adverse inference [was] warranted in determining a dumping
margin for Xiping.” Issues & Dec. Mem. at 3–4, 12–13 (citing AFA Mem. at 5–6) (“While it is
Company A that has failed to cooperate by not acting to the best of its ability with the
Department’s request for cooperation with respect to the appropriate U.S. sales price, the lack of
cooperation reasonably results in the application of an adverse inference applicable to the
calculation of the dumping margin for the sales and entries made by Xiping . . . with Company
A . . . in this review.”); see 19 U.S.C. § 1677e(b).
Even though Xiping itself had fully cooperated in the review, the Department determined
that it was reasonable to apply AFA to the facts used to assign its “rate because the record
evidence establishes that Xiping . . . shipped all subject merchandise that Company A sold to the
United States” during the POR and based on Xiping’s assumed knowledge of Company A’s
17 The Department is directed to “use the facts otherwise available in reaching the
applicable determination” where “an interested party or any other person . . . significantly
impedes a proceeding.” 19 U.S.C. § 1677e(a)(2)(C).
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dumping of the merchandise. 18 Issues & Dec. Mem. at 13. As to assumed knowledge,
Commerce found that Xiping must have known of the below-acquisition-price sales of its
merchandise because it was “reasonable to assume that a company whose market share was such
that it ‘determined’ market prices would be well aware of the prices at which wholesalers were
offering its subject merchandise [to retailers], and would thus be aware that wholesalers’ prices
were significantly lower than the selling price [to GBIE that] it reported to the Department.”
Issues & Dec. Mem. at 13 (citing Transactions Mem. at 8–9). Put another way, for Commerce,
because Xiping (1) knew how much GBIE paid for the crawfish tail meat, (2) “would have had
reason to know” that Company A was selling its merchandise, and (3) could be charged with
knowledge that the sales price offers by the U.S. wholesalers were below its sales price to GBIE,
AFA could be applied both to the U.S. sales price and to normal value when assigning a
dumping margin to Xiping. See Issues & Dec. Mem. at 12–13. Although Commerce claims that
Xiping had or should have had knowledge that its crawfish tail meat was being dumped in the
18 The Department reasoned that, because of Xiping’s “admitted presence and
knowledge of the market, it would have had reason to know that its shipments of subject
merchandise were ultimately being sold at less than GBIE’s buyer’s acquisition cost to
unaffiliated U.S. purchasers.” Issues & Dec. Mem. at 13. For instance, Xiping “claim[ed] that
its sales prices determine what the market prices are and that its dominance means that it in
effect sets the prevailing prices of the market.” Issues & Dec. Mem. at 13 (citation omitted)
(internal quotation marks omitted). Indeed, Customs data indicated that [[ 	]] percent of all
entries of subject merchandise during the POR were from two exporters, Xiping and [[
]]. Transactions Mem. at 6. Commerce also found that Xiping’s “prices increased drastically
from the last POR and [[ 	]],” and “at the same
time, Xiping’s sales quantity also increased drastically from the last POR.” Transactions Mem.
at 6. Specifically, “Xiping’s prices increased by [[ 	]] percent from the last POR and increased
by [[ 	]] percent more than an increase in its competitors’ prices.” Transactions Mem. at 6. In
addition, “Xiping’s sales quantity increased by [[ 	]] percent from [the] last POR and
increased by [[ 	]] percent more than an increase in its competitors’ sales quantity.”
Transactions Mem. at 6.
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United States by Company A, the Department does not explain the significance of this finding,
or why this claimed knowledge, on the part of Xiping, was material to its determination.
In order to determine a dumping margin for Xiping, Commerce used much of the method
employed by defendant-intervenor in its Middleman Dumping Allegation Letter to determine an
export price using facts available. 19 In addition, however, relying on the findings above, the
Department applied AFA. Thus, it “rel[ied] on record evidence for the lowest prices charged by
[Company A] in the Unite[d] States” to reach an export price. AFA Mem. at 7 (emphasis
added); 19 U.S.C. § 1677e(c). To find this lowest price, the Department calculated a simple
average for each size of crawfish tail meat, and then, as an adverse inference, selected the lowest
average price. See Transactions Mem. at 8; AFA Mem. at 7.
Although Xiping had fully answered the Department’s questionnaires, and despite having
calculated normal value based on its factors of production in the Preliminary Results, the
Department applied AFA to reach normal value for Xiping’s merchandise. Therefore, for
normal value, the Department used, as facts available, Company A’s acquisition costs as reported
by GBIE. “The acquisition costs represent GBIE’s sales prices of Xiping[’s] . . . product to
[Company A] throughout the POR.” AFA Mem. at 7. Again, the Department applied AFA.
Rather than selecting a weighted average price paid by Company A for Xiping’s merchandise
that it purchased from GBIE, the Department applied an adverse inference and “used [Company
A’s] highest acquisition cost during the POR based on [the Department’s] examination of all the
prices that GBIE invoiced for crawfish tail meat to” Company A. AFA Mem. at 7. After
19 As noted, defendant-intervenor used the offering prices of the U.S. wholesalers to
U.S. retailers to find an assumed amount that Company A charged the wholesalers.
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subtracting this claimed export price (U.S. price) from the claimed normal value, the Department
derived a dumping rate of 70.12 percent for Xiping. AFA Mem. at 7.
III. 	APPLICATION OF AFA TO XIPING
Here, the primary question is whether Commerce is permitted, under 19 U.S.C. §
1677e(b), to draw adverse inferences with respect to the facts used to determine the cost of the
acquisition or production (normal value) and export price (U.S. sales price) of a cooperating
party’s (i.e., Xiping) subject merchandise, based on the behavior of a non-cooperating,
unaffiliated entity (i.e., Company A). In answering this question in the affirmative, the
Department made a number of findings.
A. Company A as an “Interested Party”
First, Commerce found that Company A was an interested party under the antidumping
laws. The statute, in relevant part, defines an “interested party” as “a foreign manufacturer,
producer, or exporter, or the United States importer, of subject merchandise.” 20 19 U.S.C. §
1677(9)(A) (emphasis added). The statute and Commerce’s regulations, however, are silent as to
the definition of the term “exporter.” Because there is no relevant definition of the term
“exporter,” the court must determine whether Commerce’s construction of the term is in
accordance with law.
When reviewing Commerce’s construction of the trade statute, this Court is directed by
the two-step framework set forth by Chevron. Fine Furniture (Shanghai) Ltd. v. United States,
20 “Subject merchandise” is defined as “the class or kind of merchandise that is
within the scope of an investigation, a review, a suspension agreement, an order[,] . . . or a
finding.” 19 U.S.C. § 1677(25).
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748 F.3d 1365, 1369 (Fed. Cir. 2014) (citing Chevron, U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984)). The first step requires a determination as to whether
Congress’s intent under the statute is clear. Chevron, 467 U.S. at 842–43. If clear, the court
“must give effect to the unambiguously expressed intent of Congress. If, however, the court
determines Congress has not directly addressed the precise question at issue,” i.e., “the statute is
silent or ambiguous with respect to the specific issue, the question for the court is whether the
agency’s answer is based on a permissible construction of the statute.” Id. (footnotes omitted).
Further, under United States v. Mead, Commerce’s construction of a statute need not be found in
a formal regulation adopted after notice-and-comment to receive deference. See United States v.
Mead Corp., 533 U.S. 218, 230–31 (2001). Thus, “administrative implementation of a particular
statutory provision qualifies for Chevron deference when it appears that Congress delegated
authority to the agency generally to make rules carrying the force of law, and that the agency
interpretation claiming deference was promulgated in the exercise of that authority.” Id. at 226–
27.
Although undefined by statute or regulation, to “export” is ordinarily thought of as “to
transport (merchandise) from one country to another in the course of trade.” B LACK’S LAW
D ICTIONARY 700 (10th ed. 2014). Indeed, it is this activity that has traditionally been the focus
of entities that have been found to be exporters under the antidumping laws. See, e.g., Michaels
Stores, Inc. v. United States, 766 F.3d 1388, 1390–91 (Fed. Cir. 2014); Mueller Comercial de
Mexico, S. de R.L. de C.V. v. United States, 753 F.3d 1227, 1229 (Fed. Cir. 2014); Jacobi
Carbons AB v. United States, 38 CIT __, __ & n.1, 992 F. Supp. 2d 1360, 1362–63 & n.1 (2014).
Thus, under its ordinary meaning, an exporter is not thought of as a company that takes title to
the merchandise after the goods have already entered the United States and cleared Customs.
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The statute itself provides only that an “interested party” is, inter alia, “a foreign
manufacturer, producer, or exporter, or the United States importer, of subject merchandise.” 19
U.S.C. § 1677(9)(A) (emphasis added). The statute provides no further explanation as to the
type of entity that qualifies as an exporter. That is, it is unclear, based on the plain language of
the statute, that it was the intent of Congress to find, as an exporter under the unfair trade laws,
an entity that takes title to goods after importation into the United States. Therefore, it is the
court’s task to determine, under Chevron’s second step, whether Commerce’s construction of the
term to encompass Company A is reasonable. See Chevron, 467 U.S. at 843.
Here, Company A acquired title to Xiping’s merchandise after the goods had already
entered the United States and cleared Customs by GBIE, the importer. Under Commerce’s
construction of the statute, however, Company A is an exporter of the merchandise, despite the
goods having already been exported to the United States by the producer, Xiping, and imported
by GBIE. Commerce insists that Company A was an exporter because it was “a foreign entity
acting as a price discriminator in selling to the U.S. market.” Issues & Dec. Mem. at 6. That is,
for the Department, Company A was an exporter, and thus, an interested party under the statute,
because it was “in a position to set the U.S. price [(export price)] of subject merchandise that
enter[ed] into the United States.” Issues & Dec. Mem. at 5. Commerce based its determination
on the unusual timing of the sales from Xiping to GBIE, and resales from GBIE to Company
A, 21 which made it “highly likely that [Company A] agreed to resell goods back to the United
States prior to the time of importation.” Transactions Mem. at 14–15. Moreover, for Commerce,
21 Specifically, the Department found that “GBIE’s purchases from Xiping . . . were
simultaneous with its re-sales to” Company A, that “GBIE resold crawfish tail meat to a third
country (i.e., [[ 	]]), and” that “GBIE transferred the title to goods only days after
importation.” Transactions Mem. 14–15.
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it was immaterial that the subject merchandise was in the United States when Company A
bought it. See Issues & Dec. Mem. at 6 (“Whether the subject merchandise is physically located
in the United States when Company A makes the sale does not determine Company A’s status as
an exporter for antidumping purposes.”).
By statute, each “determination by Commerce must include ‘an explanation of the basis
for its determination.’” See NMB Sing. Ltd. v. United States, 557 F.3d 1316, 1320 (Fed. Cir.
2009) (quoting 19 U.S.C. 1677f(i)(3)(A)). Thus, “[w]here the Department has reached important
conclusions that are not fully explained with reference to record evidence [and relevant statutes
or regulations], remand is appropriate for Commerce to ‘explain its rationale . . . such that a court
may follow and review its line of analysis, its reasonable assumptions, and other relevant
considerations.’” Since Hardware (Guangzhou) Co. v. United States, 37 CIT __, __, Slip Op.
13-71, at 15 (2013) (alteration in original) (quoting Clearon Corp. v. United States, 35 CIT __,
__, Slip Op. 11-142, at 27–28 (2011) (internal quotation marks omitted)).
It does not appear that the Department has adequately explained how its interpretation of
the term exporter is a permissible construction of the statute. See Am. Tobacco Co. v. Patterson,
456 U.S. 63, 68 (1982) (“As in all cases involving statutory construction, [a court’s] starting
point must be the language employed by Congress, and [the court] assume[s] that the legislative
purpose is expressed by the ordinary meaning of the words used.” (citations omitted) (internal
quotation marks omitted)). Here, the Department found that it was “faced with unique and
complex facts surrounding the U.S. sales in this administrative review” because “the sequence of
transactions at issue d[id] not follow the more typical, simple scenario of a single sale,
accompanied by shipment, from a foreign producer/exporter to its unaffiliated U.S. customer.”
Issues & Dec. Mem. at 8. Commerce further found that “the sales in this case ha[d] been
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structured as a series of back-to-back transactions between a foreign exporter/producer, a U.S.
importer, a second foreign entity and, ultimately, a U.S. buyer.” Issues & Dec. Mem. at 9.
While this explanation provides the reason the Department believes that the transactions deserve
to be captured by the antidumping laws, it fails to say with specificity, just how it is that
Company A can be said to be an exporter. That is, it has failed to explain how being a “price
discriminator” alone makes an entity an exporter when the plain meaning of the word requires
more, i.e., not just price setting, but movement of goods.
As to why Company A was the “price discriminator” and thus an exporter, the
Department explained that “[t]he presumption built into the law and [Commerce’s] practice is
that the locus of dumping will be found in the first sale of subject merchandise to an unaffiliated
party where the seller knows the merchandise is destined for the United States.” Issues & Dec.
Mem. at 9. For Commerce, “[t]his idea underlies the definitions of export price and constructed
export price in the statute.” Issues & Dec. Mem. at 9 (citing 19 U.S.C. § 1677a(a), (b)). This
locus, however, appears to be the sale by Xiping to GBIE. Thus, when Commerce says that “the
statute anticipates that the first entity—whether the producer or an exporter—who has
knowledge that the sale is destined for the United States is the entity whose price setting
behavior will control dumping,” the transaction described is that from Xiping to GBIE, not from
Company A to the U.S. wholesalers. Issues & Dec. Mem. at 9 (citing USEC Inc. v. United
States, 27 CIT 489, 497 n.9, 259 F. Supp. 2d 1310, 1318 n.9 (2003); Parkdale Int’l v. United
States, 30 CIT 551, 557, 429 F. Supp. 2d 1324, 1330 (2006)). Again, this explanation falls short.
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Apparently, in recognition of the problem presented by the sale from Xiping to GBIE, the
Department seems to have found that the crawfish tail meat was exported 22 to the U.S. twice:
[A]lthough the subject merchandise is shipped and enters the United States only
once, there are two sales from two separate foreign entities attributable to each
entry prior to the sale to an unaffiliated U.S. purchaser, with an intervening
transaction with a U.S. importer (Xiping . . . to GBIE and Company A to U.S.
purchasers), each of which is arguably a reviewable sale.
Issues & Dec. Mem. at 10 (footnote omitted). Although “[t]he statute and the regulations do not
directly speak to this fact pattern,” because Commerce “‘has been vested with authority to
administer the antidumping laws in accordance with the legislative intent’ and, thus, ‘has a
certain amount of discretion [to act] . . . with the purpose in mind of preventing the intentional
evasion or circumvention of the antidumping duty law’” and “associate dumping with the party
or parties responsible for it,” the Department determined that Company A’s sales to U.S.
wholesalers were “the appropriate basis for U.S. price, in order to calculate an accurate dumping
margin.” Issues & Dec. Mem. at 10 (alterations in original) (citations omitted) (quoting Tung
Mung Dev. Co. v. United States, 26 CIT 969, 979, 219 F. Supp. 2d 1333, 1343 (2002)).
Therefore, Commerce concluded that Company A was an exporter and thus an interested party
because it was the “price discriminator” for the second sale, i.e., the sale of the merchandise from
Company A to the U.S. wholesalers.
While the Department has succeeded in explaining its purpose in finding the transactions
to be violations (i.e., “preventing the intentional evasion or circumvention of the antidumping
duty law”), it has failed to supply an adequate explanation for its finding that Company A is an
exporter and thus, qualifies as an interested party under the statute. See 19 U.S.C. § 1677(9)(A).
22 It is, of course, the case that the Department reviews sales made into the United
States, not domestic sales. See 19 U.S.C. §§ 1673, 1677a, 1677b.
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Although it may be that the “price discriminator” or “foreign entity . . . in a position to set the
U.S. price” at importation can be found to be an exporter, under the facts of this case, Commerce
appears to have omitted several steps needed before Company A can be found to be an exporter
of the subject merchandise. Issues & Dec. Mem. at 5.
First, the Department must explain how its view that there were “arguably” two
reviewable sales complies with the law. See Issues & Dec. Mem. at 10. That is, if the sale from
Xiping to GBIE could be reviewed as the sale of subject merchandise into the United States, it is
unclear how the sale of the same merchandise from Company A to the U.S. wholesalers can also
be reviewable. As part of its explanation, the Department must state clearly how Company A is
the “price discriminator” when Xiping appears to be the “first entity” that “has knowledge that
the sale [of its goods] is destined for the United States” and they are “the entity whose price
setting behavior will control dumping.” See Issues & Dec. Mem. at 9.
Relatedly, the Department must explain its finding that, when determining that an entity
is an exporter, “[w]hether the subject merchandise is physically located in the United States
when Company A makes the sale does not determine Company A’s status as an exporter for
antidumping purposes.” Issues & Dec. Mem. at 6. Entry of subject merchandise from a foreign
country into the United States is the very subject of the antidumping statute. See 19 U.S.C. §
1673 (“If . . . (1) the administering authority determines that a class or kind of foreign
merchandise is being, or is likely to be, sold in the United States at less than its fair value, and
(2) the Commission determines that . . . (A) an industry in the United States . . . (i) is materially
injured, or (ii) is threatened with material injury, or (B) the establishment of an industry in the
United States is materially retarded, by reason of imports of that merchandise or by reason of
sales (or the likelihood of sales) of that merchandise for importation, then there shall be imposed
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upon such merchandise an antidumping duty, in addition to any other duty imposed, in an
amount equal to the amount by which the normal value exceeds the export price (or the
constructed export price) for the merchandise.”). Accordingly, the Department must explain
how Company A can be said to have “exported” merchandise that was in the United States when
it took ownership. Thus, while it may be that finding Company A to be an exporter and thus an
interested party, results from “a permissible construction of the statute,” the Department has yet
to demonstrate that this is the case.
Finally, the Department has not supported with substantial evidence its factual finding
that the sales from Company A to the U.S. wholesalers of Xiping’s product occurred prior to the
date of importation of the merchandise or that such an agreement was in place prior to the
importation of Xiping’s goods. This factual finding is important if Company A is to be found to
be an interested party under Commerce’s construction of the antidumping laws. While
Commerce states that, “[g]iven the . . . [proximity] from the time of GBIE’s importation and
entry of such goods into the United States and the timing of [Company A’s] taking title to goods,
it is highly likely that [Company A] agreed to resell goods back to the United States prior to the
time of importation,” it has failed to cite evidence on the record to support this assertion. See
Transactions Mem. at 15. Here, the statute places an emphasis on the price determination being
agreed upon prior to importation. See 19 U.S.C. § 1677a(a) (“The term ‘export price’ means the
price at which the subject merchandise is first sold (or agreed to be sold) before the date of
importation by the producer or exporter of the subject merchandise outside of the United States
to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to
the United States . . . .” (emphasis added)). The Department relies heavily on the notion that
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Company A was the “price discriminator.” Absent any real evidence that the price was agreed to
prior to importation, it is hard to see how this could be the case.
The court is mindful that it is because of Company A’s noncompliance with Commerce’s
nonmarket economy questionnaires that the Department lacks the necessary information to
determine the timing that the agreements between Company A and its U.S. wholesale buyers
were entered into. Nevertheless, this does not relieve the Department of its obligation to support
with substantial evidence its decision to find Company A to be an exporter and thus an interested
party. Nor does the suspicious nature of the transactions relieve Commerce of its responsibility
to demonstrate that its finding, that Company A is an interested party, is in accordance with law.
B. Legal Framework for Applying AFA
Commerce is charged with the “overriding purpose of . . . calculat[ing] dumping margins
as accurately as possible.” Parkdale Int’l v. United States, 475 F.3d 1375, 1380 (Fed. Cir. 2007).
Although “[t]he Department generally makes its antidumping determinations based on the
information it solicits and receives from interested parties concerning the normal value and
export price of the subject merchandise,” it may, pursuant to 19 U.S.C. § 1677e(a), use “‘facts
otherwise available . . . to fill in the gaps when Commerce has received less than the full and
complete facts needed to make a determination’ from the respondents.” 23 Foshan Shunde
23 The statute, which authorizes Commerce to use facts otherwise available, reads as
follows:
If—
(1) necessary information is not available on the record, or
(2) an interested party or any other person—
(A) withholds information that has been requested by the [Department] under
this subtitle,
(footnote continued)
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Yongjian Housewares & Hardware Co. v. United States, 35 CIT __, __, Slip Op. 11-123, at 6–7
(2011) (alteration in original) (quoting Gerber Food (Yunnan) Co. v. United States, 29 CIT 753,
767, 387 F. Supp. 2d 1270, 1283 (2005)) (internal quotation marks omitted). Thus, “Commerce
shall fill in the gaps with ‘facts otherwise available’” if any respondent significantly impedes the
Department’s ability to conduct a proceeding. See Nippon Steel Corp. v. United States, 337 F.3d
1373, 1381 (Fed. Cir. 2003); AMS Assocs., Inc. v. United States, 719 F.3d 1376, 1378, 1379–80
(Fed. Cir. 2013).
Once Commerce finds that the use of facts otherwise available is warranted under 19
U.S.C. § 1677e(a), if it finds further “that an interested party has failed to cooperate by not acting
to the best of its ability to comply with a request for information,” the Department “may use an
inference that is adverse to the interests of that party in selecting from among the facts otherwise
available.” 19 U.S.C. § 1677e(b). Thus, although sometimes conflated by Courts, to use facts
available and draw an adverse inference with respect to certain of those facts requires Commerce
to make two separate decisions.
C. Application of AFA to a Cooperating Party
Xiping objects to Commerce’s use of AFA to calculate its dumping rate based on
Company A’s failure to cooperate. It contends that, under the statute, AFA can only be applied
(B) fails to provide such information by the deadlines for submission of the
information or in the form and manner requested, subject to subsections
(c)(1) and (e) of section 1677m of this title,
(C) significantly impedes a proceeding under this subtitle, or
(D) provides such information but the information cannot be verified as
provided in section 1677m(i) of this title,
the [Department] shall, subject to section 1677m(d) of this title, use the facts
otherwise available in reaching the applicable determination under this subtitle.
19 U.S.C. § 1677e(a) (emphasis added).
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against an uncooperative party, and, while Company A may not have cooperated, Xiping itself
was found to have fully cooperated in the review. 24 See Br. in Supp. of Pl.’s Rule 56.2 Mot. for
J. upon the Agency R. 10–11 (ECF Dkt. No. 26).
Even if Company A is an interested party for purposes of the unfair trade laws, the
question remains as to whether the Department’s finding that Company A significantly impeded
the proceeding, may result in the application of AFA to the facts relating to Xiping’s rate. That
is, 19 U.S.C. § 1677e(b) provides that the Department may apply AFA to the facts used to find
an antidumping duty rate for an uncooperative, interested party. See 19 U.S.C. § 1677e(b) (“If
[Commerce] finds that an interested party has failed to cooperate by not acting to the best of its
ability to comply with a request for information[, Commerce] . . . may use an inference that is
adverse to the interests of that party in selecting from among the facts otherwise available.”
(emphasis added)). Thus, in most cases, AFA is applied to the facts relating to the dumping
margin of a party that does not cooperate. Here, however, Commerce has found Xiping itself to
be cooperative.
While not the usual case, recently, the Federal Circuit has found that, under certain
circumstances, Commerce may apply adverse inferences in such a way that they extend to
instances when doing so has “collateral effects” on a cooperating respondent. In Mueller
24 In the Preliminary Results, Commerce determined that it “received a complete
response to the antidumping questionnaire from Xiping.” Preliminary Results, 76 Fed. Reg. at
62,351. Thus, Commerce preliminarily relied on the factors of production data submitted by
Xiping to calculate normal value. Preliminary Results, 76 Fed. Reg. at 62,353. In its Final
Results, the Department continued to maintain that Xiping fully cooperated in the review. See
Issues & Dec. Mem. at 12–13 (“While it is Company A that has failed to cooperate by not acting
to the best of its ability with the Department’s request for cooperation with respect to the
appropriate U.S. sales price, the lack of cooperation reasonably results in the application of an
adverse inference applicable to the calculation of the dumping margin for the sales and entries
made by Xiping . . . with Company A, in this review.”).
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Comercial de Mexico, S. de R.L. de C.V. v. United States, the Court held that Commerce is not
prohibited “from drawing adverse inferences against a non-cooperating party that have collateral
consequences for a cooperating party.” Mueller, 753 F.3d at 1236. In Mueller, an exporter
under review purchased its merchandise from two suppliers, one of which would not provide
data requested by Commerce. 25 Id. at 1230. As a consequence of this supplier’s failure to
cooperate, cost of production data needed to calculate the normal value of the subject
merchandise sold by the exporter was absent from the record. See id. Because the Department
lacked necessary cost data, Commerce used facts otherwise available to calculate the exporter’s
dumping margin. Id.
Further, despite the exporter having fully cooperated with Commerce’s review, the
Department applied an adverse inference to the facts it used to calculate the uncooperative
supplier’s costs of production. See id. Specifically, Commerce applied an adverse inference to
the production costs of the goods that the exporter acquired from the uncooperative supplier. See
id. This adverse inference resulted in a higher normal value for the cooperative respondent’s
merchandise, and therefore, a higher dumping margin for that respondent. Id. at 1232.
In upholding the Department’s practice in that instance, the Federal Circuit explained
that, if a cooperating party was in a position to induce a non-cooperating party to supply needed
information and failed to do so, AFA could be used to determine the cooperating party’s rate. Id.
at 1236. The Federal Circuit reasoned that, if a cooperating party is in a position where it “could
and should . . . induce[ another company’s] cooperation by refusing to do business with” it, AFA
25 The uncooperative supplier was reviewed by the Department, but “opted not to
participate in its own margin calculation.” Mueller, 753 F.3d at 1229. As a consequence,
Commerce applied an adverse inference to determine the uncooperative supplier’s dumping
margin. Id.
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can be used “as part of a margin determination for a cooperating party[,] . . . as long as the
application of those policies is reasonable on the particular facts and the predominant interest in
accuracy is properly taken into account as well.” Id. at 1233. The Court cautioned, however,
that, where “the cooperating entity has no control over the non-cooperating suppliers, a resulting
adverse inference is potentially unfair to the cooperating party.” Id. at 1235 (citing SKF USA
Inc. v. United States, 630 F.3d 1365, 1375 (Fed. Cir. 2011)). In other words, because a primary
interest of the statute is to prevent the evasion of antidumping duties, the “theory of inducement”
may supply the rationale for using AFA-derived facts to determine the margin for a cooperating
respondent. As a result, where a cooperating respondent is in a position to induce a non-
cooperating party to comply with Commerce’s requests for information during a review, and has
failed to do so, the Department may be justified in applying an adverse inference to calculate the
cooperating party’s antidumping duty rate. 26
Moreover, even though, here, Commerce found that Company A was an exporter, it did
not determine an antidumping duty rate for Company A because it found that “the record
evidence establishe[d] that Xiping . . . shipped all subject merchandise that Company A sold to
the United States.” Issues & Dec. Mem. at 13. Also, the Department stated that, “because the
26 The Federal Circuit’s opinion in Fine Furniture (Shanghai) Ltd. v. United States
is not inapposite to the court’s conclusions. See Fine Furniture (Shanghai) Ltd. v. United States,
748 F.3d 1365 (Fed. Cir. 2014). Fine Furniture was a countervailing duty case, not a dumping
case. Thus, Commerce’s purpose was to determine if the company’s product was being
subsidized. The PRC government refused to answer questionnaires relating to the cost of
electricity that it supplied. The Federal Circuit confirmed the use of AFA to encourage the PRC
government to cooperate in future investigations and because the plaintiff could be presumed to
have taken advantage of the subsidized electricity from the PRC government. See Fine
Furniture, 748 F.3d at 1373 (“In the present case, Fine Furniture is a company within the country
of China, benefitting directly from subsidies the government of China may be providing, even if
not intending to use such subsidy for anticompetitive purposes. Therefore, a remedy that
collaterally reaches Fine Furniture has the potential to encourage the government of China to
cooperate so as not to hurt its overall industry.”).
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identity of Company A [was] not apparent in any entry documentation, there [was] no practical
reason to establish a rate that [was] associated with any entity other than Xiping.” Issues & Dec.
Mem. at 13. Nonetheless, the Department found it appropriate to apply AFA to Xiping.
This use of AFA, however, runs afoul of the Federal Circuit’s reasoning in Changzhou
Wujin Fine Chemical Factory Co. v. United States, where Commerce used AFA to determine a
cooperating respondent’s rate based on the behavior of non-cooperating companies even though
the parties were also found to be unrelated, unaffiliated companies. See Changzhou Wujin Fine
Chem. Factory Co. v. United States, 701 F.3d 1367, 1375–76 (Fed. Cir. 2012). The Federal
Circuit, however, found that the use of AFA to construct a rate for a cooperating party was
improper where the use of adverse inferences had no impact on the parties that had failed to
cooperate. “Although the hypothetical AFA rate was not directly applied to a cooperating
respondent, cooperating respondents were the only entities impacted by the recalculated rate.”
Id. at 1378. In other words, for the Court, because the claimed use of AFA had no impact on the
uncooperative parties, the Department was prohibited from drawing adverse inferences in
assigning an AFA rate to companies found to have fully cooperated. See id. at 1379. “The
hypothetical AFA rate Commerce generated on remand was an ‘AFA rate’ in name only: its sole
purpose was to serve as a value in the recalculation of the separate rate. The hypothetical AFA
rate was not assigned to any individually investigated entity, and only affected cooperating
respondents.” Id. at 1375–76. Here, as in Changzhou, the non-cooperating party, Company A,
suffered no adverse consequences from its failure to cooperate, and as to Company A, AFA was
applied in “name only.” In other words, the only entity impacted by the calculated rate was the
cooperating respondent, Xiping.
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D. The Department’s Determination to Apply AFA to Xiping Lacks Sufficient
Explanation
In the present review, Commerce found that it lacked sufficient information to calculate a
dumping margin for Xiping. The Department reached this conclusion after finding that there
were two reviewable sales and that Company A’s refusal to answer the questionnaires prevented
it from learning U.S. sales and pricing information for the second sale, i.e., the sale from
Company A to the U.S. wholesalers. As a result, Commerce applied “facts otherwise available”
under subsection (a) of the statute to find the export price (U.S. price) for Xiping’s merchandise.
See 19 U.S.C. § 1677e(a) (stating that “facts otherwise available” is used when “necessary
information is not available on the record”).
As facts available, Commerce chose the price calculated by defendant-intervenor based
on the offering prices by the wholesalers to the retailers. The Department determined further,
however, that, as a result of Company A’s refusal to cooperate, an adverse inference was
warranted under section 1677e(b), not to determine an antidumping rate for Company A, but to
calculate Xiping’s dumping margin. See 19 U.S.C. § 1677e(b). In doing so, the Department
applied an adverse inference to calculate Xiping’s export price (U.S. price) by selecting the
lowest price available on the record for the inferred amount charged by Company A to U.S.
wholesalers for Xiping’s crawfish tail meat. See AFA Mem. at 7. In addition, the Department
applied an adverse inference as part of its normal value calculation, relying on Company A’s
highest acquisition cost, based on the GBIE invoices for Xiping’s crawfish tail meat sold to
Company A. AFA Mem. at 7. Thus, the Department used facts available and applied adverse
facts available when determining both Xiping’s export price and normal value. The court finds
Commerce’s explanation for its authority to apply an AFA rate to both to be insufficient.
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1. 	Export Price
Commerce determined that, as a result of Company A’s failure to cooperate, “an adverse
inference [was] warranted in determining a dumping margin for Xiping.” Issues & Dec. Mem. at
3–4. Given Commerce’s express finding, however, that Xiping was a fully cooperative party in
this review, the Department’s basis for calculating a dumping margin for Xiping exclusively
based on AFA is unclear to the court.
Commerce concluded that none of Xiping, GBIE, or Company A were related
companies. Nor was there a finding that Xiping was in a position to induce Company A’s
cooperation. In addition, Commerce did not use AFA to calculate a rate for Company A.
Although the Federal Circuit has made clear that, under section 1677e(b), Commerce may
“draw[ an] adverse inference[] against a non-cooperating party that ha[s] collateral consequences
for a cooperating party,” when the cooperating party is in a position to induce the non-
cooperating party to supply information, Commerce has cited to no record evidence indicating
that Xiping could have induced Company A to cooperate. See Mueller, 753 F.3d at 1236; 19
U.S.C. § 1677e(b). Also, Commerce did not apply AFA to non-cooperating Company A, but
only to cooperating Xiping. Commerce, however, has thus not provided an explanation for its
actions that takes current case law into account.
Rather, Commerce’s entire explanation is that, because of Xiping’s “admitted presence
and knowledge of the market, it would have had reason to know that its shipments of subject
merchandise were ultimately being sold at less than GBIE’s buyer’s acquisition cost to
unaffiliated U.S. purchasers,” and that Xiping would have been “aware that wholesalers’ prices
were significantly lower than the selling price it reported to the Department.” Issues & Dec.
Mem. at 13 (citing Transactions Mem. at 8–9). According to Commerce, this is so “because the
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record evidence establishe[d] that Xiping . . . shipped all subject merchandise that Company A
sold to the United States.” Issues & Dec. Mem. at 13. Thus, Commerce concludes that,
“because [Company A] did not cooperate by acting to the best of its availability, . . . an adverse
inference [was] warranted in determining a dumping margin for Xiping.” AFA Mem. at 6
(emphasis added).
Commerce, however, cites no statute, regulation, or case law permitting the application of
AFA based on imputed knowledge. Nor does it give a complete explanation for why such
knowledge, even if lawfully imputed, would result in the application of AFA. The Department
is, of course, correct that the purpose of the antidumping laws is to stop dumping. The statute
itself, however, must be used as the means to do so and the statute relies both on the policy cited
by Commerce and on the methods it authorizes. If, on remand, the Department continues to
employ the imputation of knowledge to justify the use of AFA to calculate Xiping’s export price,
it must complete its thought and explain why knowledge of the marketplace is sufficient for the
application of AFA to the facts.
In addition, in light of the Federal Circuit’s decision in Mueller, the Department is to
fully explain, what, if any, relevance Mueller has to the calculation of Xiping’s dumping margin.
That is, Commerce is to explain the relevance of Mueller’s “inducement/evasion considerations,”
which might permit the application of AFA to a cooperating party in the context of the facts of
this case. See Mueller, 753 F.3d at 1236. Finally, the Department must address the reasoning in
Changzhou, and why it is permitted, here, to determine a rate for a cooperating party (Xiping),
using AFA, that has no impact on the party that failed to cooperate in the review (Company A).
See Changzhou, 701 F.3d at 1378.
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Thus, on remand, the Department must clarify its legal basis for calculating an AFA rate
for Xiping, a party it found to have cooperated fully with Commerce’s investigation. See GPX
Int’l Tire Corp. v. United States, 37 CIT __, __, 942 F. Supp. 2d 1343, 1359 (2013) (“Typically,
Commerce cannot rely on an unaffiliated party’s failure to cooperate to justify the application of
an AFA rate unless the exporter under investigation also is found responsible for the behavior in
some way.” (citations omitted)).
2. 	Normal Value
The application of AFA to the facts used to determine the normal value of Xiping’s
merchandise requires even more explanation. In the Preliminary Results, Commerce used its
factors of production methodology 27 to calculate Xiping’s normal value. Preliminary Results, 76
Fed. Reg. at 62,353. In doing so, the Department relied on the factors of production data
reported by Xiping for the POR and then priced these factors using publicly available data from
27 As noted, because the Department considers the PRC to be a nonmarket economy
country, sales and financial information obtained from Chinese producers are generally found by
Commerce to be unreliable for determining the normal value of the subject merchandise.
Shanghai Foreign Trade, 28 CIT at 481, 318 F. Supp. 2d at 1341. Thus, Commerce employs its
factors of production methodology
to determine the normal value of exported merchandise by pricing the factors of
production used to produce the merchandise. 	Commerce does so by using
surrogate data from “one or more market economy countries that are—(A) at a
level of economic development comparable to that of the [exporter’s] country,
and (B) significant producers of comparable merchandise” and then “add[ing] an
amount for general expenses and profit plus the cost of containers, coverings, and
other expenses.”
Xinjiamei Furniture (Zhangzhou) Co. v. United States, 37 CIT __, __ n.2, Slip Op. 13-30, at 3
n.2 (2013) (alterations in original) (quoting 19 U.S.C. § 1677b(c)(1), (4)(A)–(B)).
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India, Spain, and Indonesia. 28 See Preliminary Results, 76 Fed. Reg. at 62,351. This is, of
course, the method authorized by Congress. See 19 U.S.C. § 1677b(a).
In the Final Results, however, having previously determined in its Post-Preliminary
Analysis Memorandum that the record demonstrated that Xiping’s sales to GBIE were not based
on normal commercial considerations, the Department declined to use Xiping’s factors of
production information to calculate normal value. Issues & Dec. Mem. at 12 (“We also disagree
with Xiping . . . that we should use its information in our final results. . . . [T]he record evidence
demonstrates that the sales from Xiping . . . to GBIE are not based on normal commercial
considerations.” (citations omitted)). Specifically, the Department determined that Xiping’s
sales of crawfish tail meat to GBIE were “not based on normal commercial considerations” for
the following reasons: (1) Xiping had failed to “provide a reasonable explanation for the factors
accounting for the drastic increases in its U.S. prices and quantities in relation to the last POR
and in relation to its competitors”; (2) Xiping had failed to “explain the wide gap between its
U.S. prices and the average prevailing U.S. market prices at the wholesale level”; (3) Xiping and
GBIE had failed to “identify the specific sources of information that both parties considered in
their negotiations in gauging the prevailing U.S. market prices involving large quantities of
subject merchandise”; “(4) [t]he exclusivity of the commercial relationship between Xiping . . .
and GBIE and between GBIE and Company A”; “(5) GBIE did not demonstrate any reason for
its incorporation beyond acting as an importer of record for Xiping[’s] . . . shipments or how
28 Although, in the Preliminary Results, India was selected as the primary surrogate
country, the Department lacked Indian data to value whole crawfish and the crawfish shell by-
product. Preliminary Results, 76 Fed. Reg. at 62,351. Commerce therefore used Spain and
Indonesia to value these inputs because they were found to be the only two countries with
available information on the record to value whole crawfish and the crawfish shell by-product.
See Preliminary Results, 76 Fed. Reg. at 62,351.
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GBIE’s activities amounted to a meaningful or active commercial role in the U.S. market”; “(6)
Xiping[’s] . . . U.S. sales did not enter the stream of commerce in the United States because
GBIE’s purchases from Xiping . . . were back-to-back with its re-sales to Company A, GBIE
resold crawfish tail meat to a third-country entity, and GBIE transferred title of the subject
merchandise to Company A only days after importation”; and “(7) [t]he high likelihood that
Company A agreed to resell subject merchandise back to the United States prior to importation,
given Company A’s agreement to purchase subject merchandise from GBIE well prior to the
date of importation into the United States.” Issues & Dec. Mem. at 11–12 (citing Transactions
Mem. at 6, 8, 13, 14, 15; AFA Mem. at 3–4). Thus, having “evaluat[ed] the nature of the
transactions under review,” the Department “concluded that it was appropriate to initiate an
inquiry of Company A because it ‘appear[ed] to be an exporter that ha[d] made, or ha[d]
participated in making, the first sales to unaffiliated U.S. purchasers.’” Issues & Dec. Mem. at
12 (quoting Transactions Mem. at 15–16).
Having established the questionable nature of the transactions, the Department then
decided to construct a normal value for Xiping’s crawfish tail meat. Thus, rather than rely on
Xiping’s factors of production information to calculate normal value, the Department relied on
Company A’s acquisition costs of subject merchandise from GBIE. See AFA Mem. at 7. These
costs were derived from GBIE’s answers to the Department’s questionnaires. See AFA Mem. at
7 (“With respect to normal value, we relied on [Company A’s] acquisition costs. The acquisition
costs represent GBIE’s sales prices of Xiping[’s] . . . product to [Company A] throughout the
POR.”). The Department then applied AFA to these costs. See AFA Mem. at 7 (“Specifically,
as AFA, we used [Company A’s] highest acquisition cost during the POR based on our
examination of all the prices that GBIE invoiced for crawfish tail meat to [Company A]. Record
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evidence contains 34 sample invoices that we requested and obtained from GBIE.” (citations
omitted)).
The Department thus took the sales prices to GBIE that would usually be used to
establish the export price (U.S. price) and instead used these costs rather than Xiping’s
production costs as the basis for finding normal value. It then used AFA to justify using the
highest of these costs as Xiping’s normal value. The Department’s decision to apply AFA to the
determination of Xiping’s normal value is completely unexplained.
Because nonmarket economy countries do “not operate on market principles of cost or
pricing structures, so that sales of merchandise in such countr[ies] do not reflect the fair value of
the merchandise,” where, as here, merchandise is exported from a nonmarket economy country,
the Department is directed by statute to “determine the normal value of the subject merchandise
on the basis of the value of the factors of production utilized in producing the merchandise.” 19
U.S.C. § 1677(18)(A); 19 U.S.C. § 1677b(c)(1). Xiping asks the court to direct Commerce to
use the factors of production methodology that it employed in the Preliminary Results to
calculate Xiping’s normal value. See Pl.’s Rule 56.2 Mot. for J. upon the Agency R. 1 (ECF
Dkt. No. 26) (“Plaintiff . . . respectfully moves for judgment upon the agency record and for an
order remanding to [Commerce the Final Results], with instructions to calculate an antidumping
duty rate for [p]laintiff based upon the reported sales and factors of production data rather than
through the application of any adverse facts available.”).
The court finds that Commerce has not provided a sufficient explanation (or indeed any
explanation at all) for not determining Xiping’s normal value based on its factors of production.
Indeed, even if it is ultimately found that AFA can be properly applied to the facts of Company
A’s U.S. pricing, a complete explanation for using anything other than the factors of production
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Court No. 12-00112 	37
to determine Xiping’s normal value is needed. In supplying its explanation, the Department
must keep in mind that, even if Company A is found to be an interested party, no one withheld
information as to the costs of production and no interested party failed to cooperate with a
request for information relating to the costs of production. Thus, Commerce has failed to explain
the use of facts available, let alone AFA. This Court has repeatedly held that, absent a specific
finding that reported information by a respondent is inaccurate or deficient, Commerce’s
decision to ignore that information as part of its determination renders its conclusion
unsupported by substantial evidence. See, e.g., Yantai Xinke Steel Structure Co. v. United States,
36 CIT __, __, Slip. Op. 12-95, at 27 (2012); Since Hardware (Guangzhou) Co. v. United States,
34 CIT __, __, Slip Op. 10-108, at 15–16 (2010).
Because of the odd structure of the transaction, the Department’s suspicions about the
bona fides of the behavior of the entities involved are fully justified. 	There appears to be no
other explanation for these gyrations than to avoid a finding of dumping. Indeed, the defendant-
intervenor seems to have made out a good case that the transaction amounted to middleman
dumping. Thus, on remand, if the Department wishes, it may pursue a middleman dumping
investigation as part of its determination to capture the dumping of Xiping’s merchandise in the
United States. In any event, Commerce must clearly explain how the transactions violated the
statute and how the remedy it seeks to use is grounded in the law and the facts.
CONCLUSION and ORDER
Based on the foregoing, it is hereby
ORDERED that the Department’s Final Results are REMANDED; it is further
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ORDERED that, on remand, Commerce issue a redetermination that complies in all
respects with this Opinion and Order, is based on determinations that are supported by
substantial record evidence, and is in all respects in accordance with law; it is further
ORDERED that the Department explain how its construction of the word exporter as a
“price discriminator” is a proper construction of the statute; it is further
ORDERED that the Department explain clearly how Company A is the “price
discriminator” of Xiping’s merchandise when it is Xiping that appears to be the “first entity” that
“has knowledge that the sale [of its goods] is destined for the United States” and “is the entity
whose price setting behavior will control dumping”; it is further
ORDERED that Commerce fully explain its determination that there were two
reviewable sales (i.e., from Xiping to GBIE and from Company A to U.S. wholesalers), and how
this complies with the law; it is further
ORDERED that, should the Department continue to proceed as though Company A is an
exporter for purposes of 19 U.S.C. § 1677(9)(A), it must fully explain how this determination
complies with the law, given that Company A took ownership to the merchandise and
subsequently sold it to U.S. wholesalers after the goods had already entered the United States
and cleared Customs; it is further
ORDERED that Commerce support its determination, that “it is highly likely that
[Company A] agreed to resell goods back to the United States prior to the time of importation,”
with substantial evidence; it is further
ORDERED that the Department fully explain the relevance of its findings that, given
Xiping’s “admitted presence and knowledge of the market, it would have had reason to know
that its shipments of subject merchandise were ultimately being sold at less than GBIE’s buyer’s
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Court No. 12-00112 	39
acquisition cost to unaffiliated U.S. purchasers,” and that Xiping would have been “aware that
wholesalers’ prices were significantly lower than the selling price it reported to the Department,”
and why Xiping’s knowledge of the marketplace is sufficient for the application of AFA; it is
further
ORDERED that Commerce explain the relevance, if any, of the Federal Circuit’s
“inducement/evasion considerations” to its determination to assign an AFA rate to Xiping, a
party found to have fully cooperated in this review; it is further
ORDERED that the Department address the Federal Circuit’s reasoning that a rate may
not be determined for a cooperating party using AFA where the calculated rate has no impact on
the entity that failed to cooperate; it is further
ORDERED that the Department fully explain its determination to assign an AFA rate to
Xiping, a party it found to have fully cooperated in this review, based on Company A’s
noncompliance; it is further
ORDERED that Commerce fully explain why it is permitted by law and the facts of this
case to treat Company A’s sales price to U.S. wholesalers as the export price (U.S. price); it is
further
ORDERED that Commerce fully explain its determination to use Company A’s
acquisition costs (or GBIE’s sales price of Xiping’s product) rather than base Xiping’s normal
value on the value of its factors of production as used in the Preliminary Results, and why it is
permitted by law to ignore Xiping’s reported factors of production information; it is further
ORDERED that, if the Department wishes, it may pursue a middleman dumping
investigation as part of its determination; it is further
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ORDERED that Commerce may reopen the record to solicit any information it
determines to be necessary to make its determination; and it is further
ORDERED that the remand results shall be due on March 11, 2015; comments to the
remand results shall be due thirty (30) days following filing of the remand results; and replies to
such comments shall be due fifteen (15) days following filing of the comments.
Dated: 	December 11, 2014
New York, New York
/s/ Richard K. Eaton
Richard K. Eaton
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