Mid Continent Steel & Wire, Inc. v. United States

Slip Op. 17-05
UNITED STATES COURT OF INTERNATIONAL TRADE
OPINION AND ORDER
[The court remands for Commerce to either change its selection of profit data or provide a more
thorough explanation of its reliance on third-country profit data. Unless the issue is rendered
moot on remand, the court orders Commerce to provide a more thorough explanation for any
determinations concerning the calculation of a profit cap. The court sustains the remainder of the
contested determinations of Commerce.]
Dated: January 26, 2017
Adam Henry Gordon and Ping Gong, The Bristol Group PLLC, of Washington, DC,
argued for plaintiff.
Mikki Cottet, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, D.C., argued for defendant. With her on the brief were
Benjamin C. Mizer, Principle Deputy Assistant Attorney General, Jeanne E. Davidson, Director,
and Patricia M. McCarthy, Assistant Director. Of Counsel on the brief was Lydia C. Pardini,
Office of Chief Counselor for Trade Enforcement and Compliance, U.S. Department of
Commerce, of Washington D.C.
MID CONTINENT STEEL & WIRE, INC.,
Plaintiff,
v.
UNITED STATES,
Defendant,
v.
OMAN FASTENERS, LLC
Defendant-Intervenor.
Before: Richard W. Goldberg, Senior Judge
Consolidated Court No. 15-00214
PUBLIC VERSION
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Michael P. House and David J. Townsend, Perkins Coie LLP, of Washington, D.C.,
argued for defendant-intervenor. With them on the brief was David S. Christy, Jr.
Goldberg, Senior Judge: Plaintiff, Mid Continent Steel & Wire, Inc. (“Mid Continent”),
and Defendant-Intervenor, Oman Fasteners, LLC (“Oman Fasteners”), separately moved for
judgment on the agency record under USCIT Rule 56.2. The court remands for the Department
of Commerce (“Commerce”) to either change its selection of profit data or provide a more
thorough explanation of its reliance on third-country profit data. Unless the issue is rendered
moot on remand, the court orders Commerce to provide a more thorough explanation for any
determinations concerning the calculation of a profit cap. The court sustains the remainder of the
contested determinations of Commerce.
BACKGROUND
In June of 2014, Commerce initiated an antidumping duty investigation on steel nails
from the Sultanate of Oman (“Oman”). Certain Steel Nails From India, the Republic of Korea,
Malaysia, the Sultanate of Oman, Taiwan, the Republic of Turkey, and the Socialist Republic of
Vietnam, 79 Fed. Reg. 36,019 (Dep’t Commerce June 25, 2014) (initiation). Commerce selected
Oman Fasteners as the mandatory respondent. Antidumping Duty Investigation of Certain Nails
from the Sultanate of Oman Resp’t Selection, P.R. 51 (July 29, 2014).
Under 19 U.S.C. § 1673, antidumping duties are “equal to the amount by which the
normal value exceeds the export price (or the constructed export price) for the [subject]
merchandise.” Section 1677a defines “export price” and “constructed export price.” The
“export price” is the price the producer or exporter charges to an “unaffiliated purchaser” either
within or for exportation to the United States. Sometimes, however, the producer sells subject
merchandise to an affiliated purchaser in the United States. The “constructed export price” is the
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price that the affiliated purchaser charges within the United States “to a purchaser not affiliated
with the producer or exporter.”
On December 29, 2014, Commerce issued its preliminary determination of sales at less
than fair value. Certain Steel Nails from the Sultanate of Oman, 79 Fed. Reg. 78,034 (Dep’t
Commerce Dec. 29, 2014) (prelim. determ.) (“Preliminary Determination”) and accompanying
memorandum (“Prelim. Mem.”), P.R. 150 (Dec. 19, 2014). Mid Continent had urged Commerce
to find that Oman Fasteners and its primary U.S. customer are affiliated. However, Commerce’s
Preliminary Determination included a finding that there was no such affiliation. Prelim. Mem.
8–9.
When calculating normal value, Commerce generally equates the home-market price of
subject merchandise with the normal value of subject merchandise. 19 U.S.C. § 1677b(a)(1).
But there are exceptions to this norm. Commerce uses a third-country price as the normal value
if the aggregate quantity of home-market sales of subject merchandise is less than five percent of
U.S. sales of subject merchandise. Id. § 1677b(a)(1)(C)(ii). However, Commerce cannot use
this third-country price if aggregate sales in the third-country amount to less than five percent of
aggregate sales to the U.S. Id. § 1677b(a)(1)(B)(ii)(II). If Commerce cannot use a third-country
price, Commerce then resorts to calculating the constructed value (“CV”) of subject
merchandise. Section 1677b(e) guides Commerce’s calculation of CV. Id. § 1677b(a)(4).
In the course of the investigation, Commerce concluded that Oman Fasteners had an
insufficient volume of both home-market and third-country market sales. Commerce Request for
CV Profit Comments and Information, P.R. 93 (Oct. 17, 2014). As a result, Commerce asked
any interested parties to submit information for use in calculating a constructed value selling
expenses and profit ratio under § 1677b(e). Id. Oman Fastener’s submitted information
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concerning various third parties, reflecting what Oman Fasteners believed to be an appropriate
CV profit rate.
On May 20, 2015 Commerce issued its final determination. Certain Steel Nails from the
Sultanate of Oman, 80 Fed. Reg. 28,972 (Dep’t Commerce May 20, 2015) (final determ.) (“Final
Determination”) and accompanying memorandum (“I&D Mem.”). In its Final Determination,
Commerce declined to use Oman Fastener’s preferred CV profit rate data, opting instead to use
the financial statements of a Thai company, Hitech. I&D Mem. 12. Commerce also affirmed its
earlier finding that no affiliation exists between Oman Fasteners and its U.S. purchaser. Id. at
20. 1
Both Mid Continent and Oman Fasteners challenge the Final Determination. Mid
Continent argues, as it did at the administrative level, that Commerce erred when it found no
affiliation and, thus, declined to calculate a constructed export price for the steel nails. For
reasons discussed below, the court disagrees and sustains Commerce’s finding of no affiliation.
Oman Fasteners argues, as it did at the administrative level, that Commerce erred in
relying on data from Hitech when determining the CV profit rate. Specifically, Oman Fasteners
insists that Commerce erred when it (i) refused to use Oman Fastener’s own home-market sales
of steel nails to calculate the CV profit of the steel nails, (ii) relied on third-country profit data of
comparable products instead of home-market profit data to calculate CV profit, (iii) rejected the
partially translated financial statement of L.S. Industry Co Ltd. (“LSI”), a Thai producer of steel
nails, and refused to allow Oman Fasteners to supplement the record with the fully translated LSI
statement, and (iv) refused to calculate a profit cap on the CV profit rate. For reasons discussed
1 	Commerce issued separately a memorandum specifically addressing the affiliation issue
at greater length. Certain Steel Nails from the Sultanate of Oman: Affiliation Status of Oman
Fasteners, LLC and its U.S. Customer, P.R. 225 (“Affiliation Mem.”) (May 14, 2014).
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below, the court sustains Commerce’s decisions with the exception of its reliance on third-
country profit data of comparable products instead of home-market profit data (point ii), which
the court remands for either further explanation or reconsideration. The court also orders
Commerce to more fully explain any profit cap determinations, unless that issue is rendered
moot on remand.
DISCUSSION
I. 	The Court Sustains Commerce’s Finding of No Affiliation Between Oman
Fasteners and its Largest U.S. Customer.
To support its determination that Oman Fasteners was not affiliated with its largest U.S.
customer, 2 Commerce explained that the customer did not control Oman Fasteners. Affiliation
Mem. 4–6. Mid Continent contests this finding on two grounds. First, Mid Continent claims
that Commerce applied the wrong legal standard for affiliation through control. Rule 56.2 Mot.
for J. Upon the Agency R. of Pl. Mid Continent Steel & Wire, Inc. 19–20, ECF No. 26 (“Mid
Cont. Br.”). According to Mid Continent, the law requires only an “ability to control” and
Commerce incorrectly required that the customer assert actual control over Oman Fasteners. Id.
Second, Mid Continent contends that Commerce’s finding of no affiliation lacked the support of
substantial evidence. Id. at 14. For the reasons set forth below, Mid Continent’s claims are
without merit.
A. Background
In an antidumping investigation, Commerce must determine either an export price or a
constructed export price for the subject merchandise. See 19 U.S.C. § 1677(35). Generally, the
2 	The court will refer to Oman Fasteners’ largest U.S. customer, [[ 	]], as “the
customer” to preserve confidentiality.
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export price is the price of the subject merchandise when sold to an “unaffiliated purchaser in the
United States.” Id. § 1677a(a). When an exporter sells the merchandise to a U.S. purchaser with
which it is affiliated, Commerce typically determines a constructed export price for the
merchandise. Id. § 1677a(a), (b). Mid Continent argues that Oman Fasteners and the customer
are affiliated, making it necessary to construct an export price.
Section 1677(33) defines “affiliated persons” as, in relevant part, “[a]ny person who
controls any other person and such other person.” § 1677(33)(G). Section 1677(33) explains
that “a person shall be considered to control another person if the person is legally or
operationally in a position to exercise restraint or direction over the other person.” The
Statement of Administrative Action accompanying the Uruguay Round Agreements Act
(“SAA”) provides that “[a] company may be in a position to exercise restraint or direction . . .
through corporate or family groupings, franchises or joint venture agreements, debt financing, or
close supplier relationships in which the supplier or buyer becomes reliant upon the other.”
SAA, H.R. Doc. No. 103–316, vol. 1, at 838 (1994). Commerce incorporated this guidance from
the SAA in its regulations, which direct the agency to consider “[c]orporate or family groupings;
franchise or joint venture agreements; debt financing; and close supplier relationships” when
assessing control. 19 C.F.R. 351.102(b)(3). The regulation stipulates that the agency cannot
“find that control exists on the basis of these factors unless the relationship has the potential to
impact decisions concerning the production, pricing, or cost of the subject merchandise or
foreign like product.” Id. In addition, Commerce “will consider the temporal aspect of a
relationship in determining whether control exists; normally, temporary circumstances will not
suffice as evidence of control.” Id.
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On October 28, 2014, Mid Continent made a submission to Commerce arguing that
Oman Fasteners was affiliated with its largest U.S. customer. See Affiliation Analysis, P.R. 116
(Nov. 7, 2014). Commerce “examined all claims submitted by [Mid Continent] related to 1) the
[[ 	]] by Oman Fasteners to [the customer]; 2) [[
]]; 3) Oman Fasteners[’] [[
]] in the financial statements; and 4) Oman Fasteners’ president’s [[
]].” Affiliation Mem. 4–5. Specifically, Oman Fasteners’ sales of
subject merchandise to the customer constituted nearly [[ 	]] of total U.S. sales of
subject. Id. at 5. And the supply agreement includes a [[ 	]] provision under which,
according to Oman Fasteners, “[s]ales orders from [[
]].” Oman Fasteners’ Resp. to Suppl. Section A&C
Questionnaire 7 (“Oman Fast. Resp.”), P.R. 129 (Nov. 21, 2014). Also, in its 2013 financial
statement, Oman Fasteners recognized the [[ 	]] the
customer as a [[ 	]]. Affiliation Mem. 6. Finally, Oman Fasteners’ [[
]]. Affiliation Analysis 11.
Commerce rejected Mid Continent’s argument in both the preliminary and the final
determinations. In its Preliminary Determination, Commerce explained that
[a]fter careful examination of the record evidence, we have determined that Oman
Fasteners is not affiliated with [the customer]. First, neither company shares
common ownership, employees, [or] board members. Second, the fact that [[
]], does not provide [the
customer] control over Oman Fasteners. Nothing on the record indicates that that
the relationship between these two companies is not market driven or the sales are
not at arm's length. Third, [the customer] is not Oman Fasteners’ [[ 	]] customer:
Oman Fasteners sold to [an] additional [[ 	]] during the POI.
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Fourth, [[ 	]] between the two companies, does not substantiate finding
affiliation between the two companies. 	Finally, the president of Oman Fasteners
[[ 	]]. Therefore, for all reason listed above,
we preliminarily do not find that Oman Fasteners is affiliated with [the customer].
Prelim. Mem. 2–3. Commerce restated this reasoning in the Affiliation Memorandum and
included additional reasons for its rejection of Mid Continent’s arguments:
As we stated in the preliminary determination, we do not find that
[[ 	]] warrants finding affiliation. 	Consistent with
[Commerce’s] past decisions, we find that the proportion of sales to one customer
does not constitute enough information to determine a close supplier relationship.
For example in OCTG from Taiwan and TIJID, [we] did not find a “buyer and
seller” affiliated even when “the proportion {of sales transactions} was 100
percent.” 	[Commerce] thoroughly verified the affiliation issue and found no
evidence of control by [the customer]. [Mid Continent] also claims that the prices
charged to [[
]]. [Commerce] has not found that Oman Fasteners [[
]].
Additionally, based on record evidence, we find that prices are based on sales
negotiations and are arm’s length transactions. For example, the record indicates
[[ 	]].
Additionally, record evidence indicates that Oman Fasteners [[
]].
Second, notwithstanding Mid Continent’s argument regarding the [[
]], we disagree that Oman Fasteners [[
]]. During our verification of Oman
Fasteners, we did not find evidence that Oman Fasteners [[
]]. Oman Fasteners ordinarily receives [[
]] and, thus, there is no need to place [[
]]. 	Additionally, during verification we
saw that Oman Fasteners has [[ 	]] customers and observed [[
]]. Further, as Oman Fasteners noted [[
]]. [[
]]. In that proceeding, the Department found no affiliation between
[[ 	]].
Third, [Mid Continent] claims that Oman Fasteners recognizes that [[
]]. 	Oman 	Fasteners’ 	audited 	financial
statements describe [[
]]. We do not find this recognition as an additional factor toward a
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finding of affiliation because typically [[ 	]].
In fact, we find that Oman Fasteners’ listing [[
]], underscores that the relationship between these companies is
market-driven. Finally, record evidence indicates that Oman Fasteners is
[[ 	]] its customer base, which [[
]]. Based on the above record evidence, we continue to find that
Oman Fasteners and [its customer] are not affiliated.
Affiliation Mem. 5–7.
B. Discussion
The court begins with Mid Continent’s assertion that Commerce incorrectly required
evidence of “actual control” even though “the law” requires only the “ability to control.” Mid
Cont. Br. 19. Mid Continent highlights Commerce’s finding that there is no “evidence that
Oman Fasteners [[ 	]].” Id. (citing Affiliation Mem. 6).
According to Mid Continent, such an empirical observation is irrelevant because, “as th[is] court
has recognized, control will be found where one party has the ability to control another, without
requiring such control to have actually been exercised.” Id. 3
But Commerce correctly applied the legal standard governing affiliation by control. Mid
Continent focuses upon Commerce’s statement about the [[
3 	In raising its legal challenge, Mid Continent also cites 19 C.F.R. § 351.102(b)(3) for the
proposition that “[t]he regulation merely requires ‘the potential to impact decisions concerning
the production, pricing, or cost of the subject merchandise or foreign like product.” Mid Cont.
Br. 19. Although Mid Continent correctly states the regulation’s text, that portion of the
regulation does not govern the determination at issue in this case. The regulation provides that
Commerce “will not find that control exists [based on certain factors, including a close supplier
relationship] unless the relationship has the potential to impact decisions concerning the
production, pricing, or cost of the subject merchandise or foreign like product.” 19 C.F.R. §
351.102(b)(3). The court must uphold Commerce’s reasonable interpretations of its regulations,
and Commerce reasonably reads this portion of the regulation to delineate not when control
exists, but rather when it will not exist. As such, the language cited by Mid Continent has no
bearing here, where Commerce first determined that the customer did not control Oman
Fasteners after considering the factors listed in § 351.102(b)(3).
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]], to the exclusion of Commerce’s more fulsome analysis. Moreover, while
Commerce’s statement appears consistent with an actual-control standard, it is also consistent
with an ability-to-control standard. The fact that Oman Fasteners had never faced a production
crunch necessitating the [[ 	]] under the supply agreement is
probative of whether Oman Fasteners might face such a crunch in the future. If there was little
likelihood that the [[ 	]] provision would trigger, then Commerce could reasonably
conclude that the provision did not in fact grant the customer the ability to control Oman
Fasteners. Thus, the court finds that Commerce correctly applied the ability-to-control standard,
and not an actual-control standard. 4
Accordingly, the question now before the court is whether Commerce erred in concluding
that the customer lacked control over Oman Fasteners in light of the statutory standard in 19
U.S.C. § 1677(33)(G) and the regulatory factors in 19 C.F.R. § 351.102(b)(3).
Mid Continent contends that the record, taken as a whole, mandates a finding of
affiliation, and points to a number of pieces of record evidence that support this view. First, Mid
Continent invokes the sheer percentage of Oman Fastener’s U.S. sales that went to this particular
customer, measured both by volume and value. Mid Cont. Br. 14. Mid Continent also highlights
that Oman Fasteners was a [[ 	]] in 2012, which had no nail-production
capability [[ 	]] and which enjoyed its relationship with the
customer at least in part because [[ 	]]. Id. at
15. Second, Mid Continent notes that Oman Fasteners recognized in its own financial statements
that the firm’s reliance on the customer was [[ 	]]. Id. at 18, 20. Third, Mid Continent
4 	The court does not address whether, if the provision ever did trigger, the customer’s
contractual right to have [[ 	]] amounts to the ability to control Oman Fasteners.
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mentions that Oman Fasteners’ [[ 	]]. Id.
at 18. Fourth, Mid Continent stresses that the supply agreement spans a [[ 	]] term and
has been in place since Oman Fasteners’ [[ 	]]. Id. at 18–19. And fifth, Mid Continent
points to the provision of the supply agreement between Oman Fasteners and its customer that
grants [[
]]. Id. at 19–20.
The court finds that Commerce properly weighed the entire record, including those
aspects highlighted by Mid Continent, when considering whether Oman Fasteners and its
customer were affiliated. The court also finds that substantial evidence supports Commerce’s
finding of no affiliation. Addressing the percentage of U.S. sales between Oman Fasteners and
the customer, Commerce stated that “the proportion of sales to one customer does not constitute
enough information to determine a close supplier relationship.” Affiliation Mem. 5. To support
this proposition, Commerce cited previous investigations in which the agency deemed a buyer
and seller unaffiliated even though the seller sold 100 percent of its subject merchandise to the
buyer. Id. (citing TIJID, Inc. v. United States, 29 CIT 307, 366 F. Supp. 2d 1286 (2005) and
Certain Oil Country Tubular Products from Taiwan, 79 Fed. Reg. 41,979 (Dep’t Commerce July
18, 2014) (final determ.)). 5
5 	Mid Continent argues that TIJID is distinguishable. Mid Cont. Br. 17–18. According to
Mid Continent, in TIJID the court upheld Commerce’s finding of no affiliation despite the buyer
purchasing 100 percent of the seller’s subject merchandise because the record contained “no
other evidence of affiliation.” Mid Cont. Br. 17 (citing TIJID, 29 CIT at 322, 366 F. Supp. 2d at
1299). Mid Continent points out that the record here does contain other evidence that could
support a finding of affiliation. Id. Even so, Commerce properly considered this additional
evidence and nevertheless reached the supportable determination that Oman Fasteners was
unaffiliated with the customer.
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Commerce also determined that Oman Fasteners negotiated with the customer at arm’s
length, and cited as evidence negotiations over price between Oman Fasteners and the customer
that, on at least one occasion, [[
]]. Id. at 6. Indeed, Commerce noted that Oman Fasteners’ prices to the customer
for a particular product [[ 	]] other customers for the particular product.
Id. This corroborates the conclusion that the relationship was market-driven, with the customer
lacking the ability to control Oman Fasteners. With regard to the reference to a [[ 	]]
in Oman Fasteners’ financial statements, Commerce reasoned that this “underscores that the
relationship between these companies is market-driven” because “typically [[
]].” Id. Finally, as discussed above, Commerce determined that because the
[[ 	]] provision would not likely trigger, the provision did not in fact grant the
customer the ability to control Oman Fasteners. Id. 6
In sum, Commerce marshalled substantial evidence and a reasoned explanation for its
determination that the customer did not control Oman Fasteners under the statutory standard of §
1677(33)(G), and the regulatory factors of § 351.102(b)(3). Although the evidence that Mid
6 	Mid Continent argues that Commerce undermined this conclusion when it stated that,
because Oman Fasteners “ordinarily receives [[ 	]] .
. . there is no need “to place [[ 	]].”
Mid Cont. Br. 22. According to Mid Continent, “[t]his reasoning is flawed” because, if Oman
Fasteners “ordinarily” receives [[ 	]] that means sometimes the
company does not. Id. In those instances, Mid Continent contends that Oman Fasteners would
be forced to [[ 	]] and would therefore be controlled by the
customer. Id. However, the court finds Commerce’s reasoning to be sound and Mid Continent’s
arguments to be too speculative. The fact that Oman Fasteners might on occasion receive an
[[ 	]] does not necessarily obligate Oman
Fasteners to [[ 	]]. The supply agreement mandates [[ 	]]
only when necessary to [[ 	]]. Oman Fast. Resp.
7. Just because [[ 	]]does not mean this provision would
trigger. And in fact, Commerce found at verification that Oman Fasteners had never had cause
to [[ 	]]. Affiliation Mem. 6.
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Continent emphasizes could cut the other way, Commerce’s citations to arm’s length
negotiations and regular pricing, among other facts, are sufficient to support its determination as
reasonable. The court will not usurp Commerce’s authority by reweighing the evidentiary
record.
II. 	The Court Sustains Commerce’s Decision to Reject Oman Fasteners’ Home
Market Profit Data, but the Court Remands for Either Further Explanation or
Reconsideration of the Selection of Financial Statements.
Oman Fasteners challenges the way that Commerce calculated constructed value (“CV”).
Oman Fasteners first argues that Commerce erred in failing to use Oman Fasteners’ own home
market sales to calculate the CV profit rate. Second, Oman Fasteners argues that, even if
Commerce properly chose to use financial statements from other companies to ascertain the CV
profit rate, Commerce chose the wrong financial statements. Third, Oman Fasteners argues that
Commerce erred in failing to put a ceiling, or “profit cap,” on the CV profit rate.
A. Background
Under 19 U.S.C. § 1677b(a)(1), the normal value of subject merchandise is generally the
home-market price of the merchandise. However, if the aggregate quantity of home-market sales
of the subject merchandise is less than five percent of U.S. sales of the subject merchandise,
Commerce uses a third-country price as the normal value. Id. § 1677b(a)(1)(B)(ii). This third-
country price is also subject to the five-percent threshold, and if that threshold is not met, then
Commerce resorts to CV. Id. § 1677b(a)(4).
19 U.S.C. § 1677b(e) provides that the CV of merchandise is equal to the sum of (1) “the
cost of materials and fabrication or other processing of any kind employed in producing
merchandise,” (2) “the actual amounts incurred and realized by the specific . . . producer being
examined . . . for selling, general, and administrative expenses [(“SG&A”)], and for profits, in
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connection with the production and sale of a foreign like product, in the ordinary course of trade,
for consumption in the foreign country,” and (3) “the cost of all containers and coverings of
whatever nature, and all other [incidental packaging] expenses.” However, if “actual data” on
the second component of CV—the specific producer’s SG&A and profit—are “not available,”
then the statute permits Commerce to use any one of three alternative data sources listed under
(2)(B):
(i) the actual amounts incurred and realized by the specific . . . producer . . . for
selling, general, and administrative expenses, and for profits, in connection with the
production and sale, for consumption in the foreign country, of merchandise that is
in the same general category of products as the subject merchandise,
(ii) the weighted average of the actual amounts incurred and realized by exporters
or producers that are subject to the investigation or review (other than the exporter
or producer described in clause (i)) for selling, general, and administrative
expenses, and for profits, in connection with the production and sale of a foreign
like product, in the ordinary course of trade, for consumption in the foreign country,
or
(iii) the amounts incurred and realized for selling, general, and administrative
expenses, and for profits, based on any other reasonable method, except that the
amount allowed for profit may not exceed the amount normally realized by
exporters or producers (other than the exporter or producer described in clause (i))
in connection with the sale, for consumption in the foreign country, of merchandise
that is in the same general category of products as the subject merchandise.
The SAA explains that the statute “does not establish a hierarchy or preference among these
alternative methods.” SAA 840. The SAA further provides that “no one approach is appropriate
for use in all cases,” and that “the selection of an alternative will be made on a case-by-case
basis, and will depend, to an extent, on available data.” Id.
Commerce concluded that it could not determine a normal value for the subject
merchandise because Oman Fasteners “did not have a viable home or third-country market
during the POI.” I&D Mem. 12–13. Instead, Commerce calculated the CV of the merchandise.
Commerce explained that the lack of a viable home or third-country market precluded the agency
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from calculating CV profit “using the preferred method under [19 US.C. § 1677b(e)(2)(A)], i.e.,
based on the respondent’s own home market or third country sales made in the ordinary course
of trade.” 7 Id. at 13. Specifically, Commerce found that “because Oman Fasteners did not have
a viable home or third-country market, its volume of home market sales during the POI is too
insignificant to reflect a meaningful home market profit rate.” Id.
Turning to the alternative profit sources listed in 19 U.S.C. § 1677b(e)(2)(B), Commerce
again cited Oman Fasteners’ lack of home-market sales as the reason it could not use the first
alternative, Oman Fasteners’ profit for comparable merchandise. Id. at 13–14. Commerce also
rejected the second alternative, profit for other exporters or producers subject to the investigation,
“because Oman Fasteners is the only respondent in this proceeding.” 	Id. at 14. 	Accordingly,
Commerce made use of the third alternative, deriving a profit figure using “any other reasonable
method.” Id.
For its “reasonable method,” Commerce elected to use the profit rate listed in another
producer’s financial statements. To identify a specific producer and statement, Commerce
applied four criteria that the agency announced in prior investigations:
[(]1) the similarity of the potential surrogate companies’ business operations and
products to the respondent’s business operations and products; [(]2) the extent to
which the financial data of the surrogate company reflects sales in the home market
and does not reflect sales to the United States; . . . [(]3) the contemporaneity of the
data to the POI . . . [; and (4)] the extent to which the customer base of the surrogate
company and the respondent are similar (e.g., original equipment manufacturers
versus retailers).
Id. (citing Pure Magnesium from Israel, 66 Fed. Reg. 49,349 (Dep’t Commerce Sept. 27, 2001)
(final determ.)). The record included several statements from which Commerce could choose:
7 	Commerce’s reasoning applied to SG&A as well. But because no party appeals
Commerce’s calculation of SG&A, the court addresses only profit.
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[(]1) the 2013 financial statements of Al Jazeera, an Omani producer of steel bars
and pipes; [(]2) the 2012 financial statements of Larsen & Toubro, an Omani
construction conglomerate; [(]3) the 2013 financial statements for two Omani
producers of corrugated cartons; [(]4) the 2012 financial statements of Hitech, a
Thai producer of screws and rivets; [(]5) the 2012 financial statements of LSI, a
Thai producer of nails; [(]6) the financial statements for the fiscal year ending
March 31, 2014, of Sundram, an Indian producer of auto parts and fasteners; and
[(]7) the 2013 financial statements of Chun Yu and Sumeeko, two Taiwanese
producers of screws and fasteners.
Id.
Commerce eliminated the statements from Omani firms Al Jazeera and Larsen & Toubro,
as well as the Omani corrugated-carton producers, because none of the companies produced
merchandise comparable to the subject merchandise, steel nails. Id. at 15. Commerce
acknowledged that generally it “would prefer to use the financial statements of a producer of
steel nails that primarily produces and sells steel nails in Oman,” but noted that “such
information is not available on the record of this proceeding.” Id.
Turning to third-country financial statements, Commerce discarded the statements of
Sundram, a producer of various automotive products, finding that Sundram’s products were also
not sufficiently comparable. Id. at 16. Commerce also excluded the financial statements of LSI,
Chun Yu, and Sumeeko, each of which was only “partially translated.” Id. Commerce cited “an
established practice of not considering financial statements unless they are completely
translated.” Id. Commerce explained that “[t]ypically, the footnotes and disclosures included in
a company’s financial statements” are “deemed vital to the users of those financial statements”
and that “we equate leaving any footnotes or disclosures untranslated to omitting them
completely, [because] . . . they are unavailable for either [Commerce] or the parties to a
proceeding to review or comment on.” Id.
Oman Fasteners disputed the rejection of the LSI statements. Oman Fasteners asserted
that Commerce should accept the LSI statements because Commerce had accepted the statements
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in a separate proceeding. Oman Fasteners’ Case Br. 29, P.R. 191 (March 11, 2015). Oman
Fasteners also argued that, while it admittedly attempted to provide Commerce with fully
translated LSI statements only after the relevant deadlines had passed, Commerce should have
nevertheless accepted the translated statements. Id at 35. Commerce dismissed both arguments.
I&D Mem. 17. Commerce characterized its decision to accept the partially translated statements
in a separate proceeding as a “mistake” that it was not bound to repeat, and it insisted that its
submission deadlines were firm. Id.
Commerce was then left with only the statements of Hitech, a Thai producer of screws
and rivets. Id. at 18. Commerce found Hitech’s “screws and other fasteners” to be comparable
to Oman Fasteners’ merchandise. Id. Commerce therefore characterized the Hitech statements
as “the only useable financial statements of a producer of merchandise identical or comparable to
subject merchandise available on the record” and used the statements to calculate Oman
Fasteners’ CV profit. Id.
Finally, Commerce considered whether, because it was calculating profit under 19 U.S.C.
§ 1677b(e)(2)(B)(iii), the agency was required to calculate what is referred to as a “profit cap.”
Id. Profit calculated pursuant to § 1677b(e)(2)(B)(iii) “may not exceed the amount normally
realized by exporters or producers . . . in connection with the sale, for consumption in the foreign
country, of merchandise that is in the same general category of products as the subject
merchandise.” However, Commerce explained that, when the record lacks facts substantiating a
profit cap, the SAA authorizes Commerce to calculate profit on the basis of “facts available.”
I&D Mem. 18–19 (citing SAA 841); see also 19 U.S.C. § 1677e(a) (allowing Commerce to
reach determinations using “facts otherwise available” in certain situations, including when
“necessary information is not available on the record”). Because Commerce determined that the
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record in this case lacked the necessary data, it declined to apply a profit cap for Oman
Fasteners’ constructed-value profit.
B. Commerce Acted in Compliance with the Law and With the Support of Substantial
Evidence When it Refused to Use Oman Fastener’s Home-Market Sales to Calculate
the CV Profit.
Under 19 U.S.C. § 1677b(e)(2)(A), Commerce must use “the actual amounts . . . realized
by the specific . . . producer . . . for profits, in connection with the production and sale of a
foreign like product, in the ordinary course of trade, for consumption in the foreign country.”
Commerce can resort to using the alternatives listed in section 1677b(e)(2)(B), as it did here,
only if such “actual data are not available.” Oman Fasteners’ argues that Commerce was
obligated to calculate Oman Fasteners’ CV profit using actual profit data from its home-market
sales of the subject merchandise. Br. of Pl. Oman Fasteners, LLC in Supp. of Pl.’s Mot. for J.
Upon the Agency R. 11, ECF No. 29 (“Oman Fast. Br.”). But Commerce decided that, due to
the “extremely low volume” of those home-market sales, they “do not constitute a proper basis
for CV profit.” I&D Mem. 14. The court sustains Commerce’s decision to reject the home-
market data because the rejection stemmed from Commerce’s reasonable interpretation and
application of an ambiguous statute.
Oman Fasteners argues that the words “not available” in the statute unambiguously
require Commerce to use home-market profit data when such data exist, regardless of the relative
or absolute significance of the sales the data reflects. Oman Fast. Br. 13. But Oman Fasteners’
argument ignores other language in the statute that is ambiguous. Specifically, section
1677b(e)(2)(A) instructs Commerce to use actual profit data pertaining to a “foreign like
product” sold “in the ordinary course of trade.” The statute defines “ordinary course of trade” as
“the conditions and practices which, for a reasonable time prior to the export of the subject
merchandise, have been normal in the trade under consideration with respect to merchandise of
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the same class or kind.” 19 U.S.C. § 1677(15). Imprecise terms like “reasonable” and “normal”
create ambiguity as to what exactly constitutes the “ordinary course of trade.” By extension, it is
unclear when home-market profit data is “available” for the “foreign like product” sold “in the
ordinary course of trade.” 8
Because the statute is ambiguous, Commerce is entitled to a reasonable interpretation.
Commerce interprets the statute to render actual home-market profit data “unavailable” if the
producer’s “volume of home market sales during the POI is too insignificant to reflect a
meaningful home market profit rate.” I&D Mem. 13. This interpretation comports with the
statutory scheme, namely, that the record must provide Commerce with enough information to
determine whether sales were made under “conditions and practices which, for a reasonable time
prior to the export of the subject merchandise, have been normal in the trade,” i.e., made in the
“ordinary course of trade.” If the record does not in fact support such a determination, then the
proffered “actual” home-market sales data cannot be said to comply with § 1677b(e)(2)(A), and
Commerce is correct to move on to the alternatives listed in § 1677b(e)(2)(B). This
interpretation of the ambiguous statute, which aligns with the SAA, see supra note 8, is
reasonable. 9
8 	Oman Fasteners also cites the SAA which, like the statute, instructs Commerce to base
profit on “actual data.” See Oman Fast. Br. 14 (citing SAA 841). However, the SAA also
provides that, in calculating CV profit under § 1677b(e)(2)(A), “Commerce may ignore sales that
it disregards as a basis for normal value” under § 1677b(a)(1). SAA 839. As discussed above,
Commerce appropriately rejected Oman Fastener’s home-market sales as a basis for calculating
normal value under § 1677b(a)(1) because the sales comprised less than five percent of U.S.
sales. Accordingly, under the SAA, Commerce may ignore these home-market sales, or consider
them “unavailable,” when calculating CV profit under § 1677b(e).
9 	Oman Fasteners argues that Commerce did not find that its sales were outside the
ordinary course of trade. Oman Fast. Br. 14. However, in the court’s view, the final results
indicate such a finding.
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Furthermore, Commerce reasonably applied the ambiguous statute. As stated above, in
calculating normal value, section 1677b(a)(1)(C) considers home-market sales nonviable if the
sales constitute less than five percent of the aggregate quantity of sales to the U.S. Record
evidence confirms that Oman Fasteners’ home sales constituted [[ 	]] of the company’s
U.S. sales by volume, and [[ 	]] by value. See Oman Fasteners' CV Profit Submission Ex.
CV-1, P.R. 82 (Oct. 6, 2014). Commerce considered these sales nonviable under section
1677b(a)(1)(C), leading Commerce to deem home-market sales unsuitable for use in calculating
CV profit under section 1677b(e)(2)(A). Prelim. Mem. 2. The meager proportion of home-
market sales is substantial evidence supporting Commerce’s finding of a lack of viability. 10
In summary, Commerce (1) reasonably interpreted the statute to consider nonviable
home-market sales “unavailable,” (2) concluded with the support of substantial evidence that
Oman Fasteners’ home-market sales were nonviable, and therefore, (3) correctly refused to use
Oman Fasteners’ home-market sales to calculate CV profit and (4) correctly turned to the three
alternative methods for calculating CV profit listed under § 1677b(e)(2)(B).
C. The Court Remands for Commerce to Provide a More Thorough Explanation of its
Reliance on Third-Country Profit Data Rather than Home-Market Profit Data.
Oman Fasteners argues that, “[i]n relying on a third-country producer, to the exclusion of
all else, Commerce unlawfully ignored probative record evidence of the profit realized by
producers in Oman, the foreign country under investigation, contrary to the statute’s requirement
that CV profit be representative of a respondent’s experience in the home market,” such that
“Commerce’s decision was contrary to the statute and unsupported by substantial record
evidence.” Oman Fast. Br. 16. Because it does appear that Commerce deviated from its prior
10 	The court does not address whether there is more to the standard for viability, specifically
whether the application of metrics besides sales quantity could lead to a finding of nonviability.
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practice without any explanation, the court remands for Commerce to either (1) change its
selection of profit data or (2) provide more explanation of its decision to rely on third-country
data.
As explained above, Commerce properly concluded that it could not rely on Oman
Fastener’s home-market profit data for sales of the subject merchandise pursuant to 19 U.S.C. §
1677b(e)(2)(A) and correctly proceeded to the alternative methods listed in § 1677b(e)(2)(B).
Oman Fasteners argues that its home-market profit rate on sales of steel nails is the best
data available for calculating CV profit pursuant to the first alternative method, 19 U.S.C. §
1677b(e)(2)(B)(i). Oman Fast. Br. 23. But Commerce rejected option (i) because it did “not find
it reasonable to base CV profit and selling expenses on [Oman Fasteners’] extremely low volume
of home market sales in this case[, as] . . . such sales are not significant enough to represent a
meaningful home market profit rate.” I&D Mem. 14. Commerce rejected option (ii) “because
Oman Fasteners is the only respondent in this proceeding.” Id. Thus, Commerce chose option
(iii), which allowed Commerce to use “any other reasonable method” to calculate CV profit. Id.
Four criteria, established in prior investigations, constituted Commerce’s “reasonable
method” of selecting financial statements for CV profit:
[(]1) the similarity of the potential surrogate companies’ business operations and
products to the respondent’s business operations and products; [(]2) the extent to
which the financial data of the surrogate company reflects sales in the home market
and does not reflect sales to the United States; . . . [(]3) the contemporaneity of the
data to the POI . . . [; and (4)] the extent to which the customer base of the surrogate
company and the respondent are similar (e.g., original equipment manufacturers
versus retailers).
Id. (citing Pure Magnesium from Israel, 66 Fed. Reg. 49,349).
Commerce applied these criteria to its list of potential financial statements. Commerce
conceded that it “would prefer to use the financial statements of a producer of steel nails that
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primarily produces and sells steel nails in Oman.” Id. at 15. However, “because none of the
Omani companies on the record can reasonably be considered to produce or sell merchandise
identical or comparable to subject merchandise [i.e. steel nails], [Commerce] excluded those
companies from consideration as a data source for the calculation of CV profit and selling
expenses.” Id. Accordingly, Commerce discarded the statements of Al Jazeera, an Omani
producer and seller of “pipes, hollow sections and bar mill products using hot-rolled coils and
billets” because “[s]uch products . . . bear no relation to the production of steel nails using drawn
wire. These products are produced using completely different equipment than steel nails . . . and
are used by customers in completely different applications (e.g., large scale infrastructure
projects versus the fastening of wood in the building of homes).” Id. Commerce also rejected
the financial statements of another Omani company, Larsen & Toubro, because the company
“execut[es] construction projects related to the oil and gas industries.” Id. Instead, Commerce
chose the financial statements of Hitech, a company that neither produces steel nails nor has any
production or sales in Oman, the home-market. I&D Mem. 14–16.
Oman Fasteners argues that Commerce violated its prior practice and “unlawfully
ignored the statutory and regulatory preference for home market profit experience when it used
the profit rate of a third-country producer with no connection to Oman.” Oman Fast. Br. 16.
Oman Fasteners insists that “the statute and this Court’s decisions make clear that any of the
alternatives applied pursuant to [§ 1677b(e)(2)(B)] must be representative of the respondent’s
home market profit experience.” Id. at 16–17. Accordingly, “Commerce’s resort to the profit
rate of a third-country producer (Hitech) that neither produced the foreign like product nor had
any connection whatsoever to Oman, and Commerce’s simultaneous disregard of probative
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record evidence of the profit rates realized by home market producers on their sales in Oman,
violated the statute’s requirements and was unlawful.” Id. at 17.
This argument raises legitimate concerns. “The goal in calculating CV profit is to
approximate the home market profit experience of the respondents.” Husteel Co., Ltd., v. United
States, 39 CIT 	, 	, 98 F. Supp. 3d 1315, 1349 (2015). “Commerce’s task [is] to estimate,
reasonably and fairly, a profit rate that [the respondent] would have realized from sales in its
home market.” Thai I-Mei Frozen Foods Co. v. United States, 32 CIT 865, 883, 572 F. Supp. 2d
1353, 1368 (2008); see also Thai I-Mei Frozen Foods Co. v. United States, 616 F.3d 1300, 1307
(Fed. Cir. 2010) (explaining that “the alternative methods outlined in [§ 1677b(e)(2)(B)] all
‘mimic’ the methodology of [§ 1677b(e)(2)(A)] by giving alternatives to that attempt to track its
requirements”).
In accordance with this goal, there are many instances of proceedings where Commerce
chose to rely on home-market data rather than third-country data to calculate CV profit. See
Oman Fast. Br. 19–22 (citing, among other proceedings, Bottom Mount Combination
Refrigerator-Freezers from Mexico, 77 Fed. Reg. 17,422 (Dep’t Commerce March 26, 2012)
(final determ.) and Electrolytic Manganese Dioxide from Australia, 73 Fed. Reg. 47,586 (Dep’t
Commerce Aug. 14, 2008) (final determ.)). 11 But it appears that there is no instance of
Commerce ever successfully using exclusively third-country profit data of merely comparable
merchandise under § 1677b(e)(2)(B)(iii), as it did here. Thus, Commerce departed from its prior
11 	For example, in Certain Steel Nails from the United Arab Emirates, Commerce
calculated CV profit on steel nails. 77 Fed. Reg. 17,029 (Dep’t Commerce March 23, 2012)
(final determ.) and accompanying I&D Mem. at cmt. 6. Contrary to its method here, Commerce
first excluded the financial statements of companies outside the United Arab Emirates, the home
market, because Commerce “disagree[d] that the profit experience of these [third-country]
companies reflect[ed] the profit experience for a UAE company.” Id.
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practice when it prioritized third-country data from a producer of comparable merchandise over
home-market data. Commerce failed to explain this departure. Admittedly, Commerce
explained that the Omani companies did not produce identical or comparable merchandise.
Commerce also explained that Hitech produced comparable merchandise. But this does not
adequately explain why third-country data of comparable merchandise better represents Omani
sales of steel nails than home-market sales data from Omani steel producers. The court remands
for Commerce to either provide more explanation or to change its selection of financial
statements.
D. The Court Sustains Both Commerce’s Rejection of the LSI Financial Statement and
Commerce’s Refusal to Allow Oman Fasteners to Supplement the Record Following
the Deadline for Submitting Factual Information.
October 31, 2014 was the deadline for submitting factual information on CV profit. I&D
Mem. 17. Oman Fasteners timely submitted the partially translated financial statement of LSI, a
Thai producer of steel nails. Oman Fasteners’ Submission of Factual Info. Ex. SCV-6 (“Oman
Fast. Submission”), P.R. 110–112 (Oct. 31, 2014). On February 12, 2015, after learning that
Commerce intended to reject the LSI statement due to its incomplete translation, Oman Fasteners
sought to submit a complete translation of the LSI statement. Oman Fasteners’ Request to
Permit New Factual Info., P.R. 176–177 (Feb. 12, 2015). Commerce deemed the submission
untimely and, on that basis, rejected the translated LSI statement. Commerce Letter to Oman
Fasteners Rejecting New Factual Info., P.R. 178 (Feb. 13, 2015). Oman Fasteners again
requested leave to submit the LSI statement, but Commerce did not respond. Oman Fasteners’
Revised Request to Permit New Factual Info., P.R. 180 (Feb. 18, 2015).
As discussed above, Commerce discarded the financial statement of LSI because the
statement was only partially translated. The LSI statement reflected a profit rate of 2.08 percent
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on sales of steel nails. Oman Fast. Submission Attach. 9. Commerce eventually chose the
Hitech statements, which resulted in a CV profit rate of 19.74 percent. See Prelim. Mem. 5; see
also Oman Fasteners’ Case Br. 48. This profit rate was significantly higher than the profit rates
of the home-market companies on the record. See Oman Fasteners’ Case Br. Ex. 1.
Oman Fasteners disputes Commerce’s treatment of the LSI statement. First, Oman
Fasteners argues that Commerce erred in rejecting the partially translated LSI statement.
Second, Oman Fasteners insists that Commerce abused its discretion when barring the
submission of the fully translated LSI statement. The court disagrees on both counts.
1. 	Commerce Acted Reasonably in Rejecting the LSI Statement.
To support its contention that Commerce erred in rejecting the partially translated LSI
statement, Oman Fasteners cites two previous proceedings involving steel nails. Oman Fast. Br.
33 (citing Certain Steel Nails from the People's Republic of China, 79 Fed. Reg. 19,316 (Dep’t
Commerce Apr. 8, 2014) (final results) and accompanying I&D Mem. (“China Nails AR4”) and
Certain Steel Nails from the People's Republic of China, 80 Fed. Reg. 18,816 (Dep’t Commerce
Apr. 8, 2015) (final results) and accompanying I&D Mem. (“China Nails AR5”)). In those two
proceedings, Commerce rejected the same Hitech statement that it accepted here, and it accepted
the same partially translated LSI statement that it rejected here. Commerce rejected the Hitech
statements in the previous proceedings because Hitech produces merely comparable
merchandise, and it accepted the LSI statement in the previous proceedings because LSI
produces identical merchandise. See, e.g., China Nails AR4 at cmt. 2. Oman Fasteners
highlights that Commerce “previously determined, when faced with the identical financial
statement and company records of LSI and Hitech that are on the record here, that ‘Hitech’s
financial statements are not the best information on the record.’” Oman Fast. Br. 33 (quoting
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China Nails AR4 at cmt. 2). Oman Fasteners characterizes Commerce’s previous stance as a
“consistent” determination that the partially translated LSI statement is “the most probative third-
country source to determine profit ratios for producers of steel nails, the subject merchandise.”
Id. at 34. Thus, Oman Fasteners maintains that Commerce violated an established practice.
“‘An action . . . becomes an ‘agency practice’ when a uniform and established procedure
exists that would lead a party, in the absence of notification of change, reasonably to expect
adherence to the established practice or procedure.” Ranchers-Cattlemen Action Legal Found. v.
United States, 23 CIT 861, 884–85, 74 F. Supp. 2d 1353, 1374 (1999). Oman Fasteners points to
only two proceedings, but this court has previously held that “two prior determinations are not
enough to constitute an agency practice that is binding on Commerce.” Shandong Huarong
Mach. Co. v. United States, 30 CIT 1269, 1293 n.23, 435 F. Supp. 2d 1261, 1282 n.23 (2006).
Consequently, Oman Fasteners failed to demonstrate an established practice that Commerce
violated. Further, Commerce provided a reasonable and persuasive explanation for the
difference in treatment, stating that the “use of partially translated financial statements in China
Nails AR4 was contrary to our established practice. . . . The Department is not obligated to accept
an incorrect methodology and perpetuate a mistake because it was accepted in a previous
proceeding.” I&D Mem. 17. Moreover, even if Commerce has a practice regarding the
treatment of the LSI statement—an unlikely event given the fact-intensive nature of the issue—
Commerce persuasively argues that it also has at least as prevalent a practice of refusing to use
partial translations of financial statements. See id. at 16 n.63. Thus, it is unlikely that Oman
Fasteners reasonably expected adherence to an “established practice” of always preferring to use
incomplete translations of a specific company’s financial statements.
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Nevertheless, Oman Fasteners argues that, rather than summarily disregard the partially-
translated LSI statement, Commerce “must compare the probative value of a partially translated
statement with the deficiencies of other potential financial statements before concluding that the
partially translated statement should be disregarded.” Oman Fast. Br. 36 (citing CP Kelco US,
Inc. v. United States, Slip Op. 15-27, 2015 WL 1544714, at *7 (CIT Mar. 31, 2015)). Thus,
Oman Fasteners maintains that Commerce lacked the support of substantial evidence when it
prioritized the fully translated Hitech statement, which covered merely comparable merchandise,
over the partially translated LSI statement, which covered identical subject merchandise. Id.
But Oman Fasteners excluded critical portions of CP Kelco. The court recognized that
Commerce has “a past practice of rejecting those statements that are missing [vital] information.”
CP Kelco, 2015 WL 1544714, at *8 n.7 (citation omitted). For example, “Commerce has often
deemed financial statements to be unusable when they are missing all or many accounting
notes.” Id. (listing proceedings where this occurred). See also Def.’s Resp. in Opp’n to Pl.’s
Mot. for J. Upon the Agency R. 34 n.8, ECF No. 43 (“Gov’t Br.”) (listing proceedings where
Commerce refused to use partially translated statements). In CP Kelco, however, substantial
evidence did not support a finding that the statements at issue were in fact missing vital
information. See CP Kelco, 2015 WL 1544714, at *6. The court found that the extent of the
untranslated portions of the statements at issue was “two paragraphs at the bottom of accounting
note twelve, concerning depreciation of assets” and that “[a]ccounting note twelve nonetheless
contained a fully translated depreciation schedule.” Id. On these facts, the court held that
Commerce was required to compare and contrast the merits and deficiencies of each of the
available statements on the record.
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In stark contrast here, Commerce found that “for LSI, the audit report was left
untranslated, as well as several financial statements and all footnotes with the exception of a note
related to income taxes.” I&D Mem. 16. This is substantial evidence in support of Commerce’s
finding that the LSI statement lacked vital information, “preclud[ing] the Department from fully
evaluating the appropriateness of the financial information set forth in these financial
statements.” Id. For that reason, Commerce had no obligation to compare the LSI statement to
the Hitech statements, as Oman Fasteners argues. Commerce therefore acted reasonably and in
accordance with prior practice when it discarded the LSI statement.
2. 	Commerce Did Not Err in Precluding Oman Fasteners from Adding to the Record after
the Submission Deadline.
Oman Fasteners argues that “Commerce’s refusal to accept a fully translated LSI
statement on the record was an abuse of discretion and contrary to law.” Oman Fast. Br. 38.
Oman Fasteners explains that, at the time it provided the timely submission of the partially
translated LSI statement, Commerce “had already expressly relied upon the identical partially
translated 2012 LSI statement as a proper basis for the calculation of profit in at least two prior
and concurrent proceedings on steel nails.” Id. Oman Fasteners insists that because “Commerce
provided no notice to Oman Fasteners prior to the factual information deadline,” Commerce
“denied Oman Fasteners a fair opportunity to respond to a significant change in Commerce’s
position.” Id. at 41–42. Because Commerce, in the China Nails proceedings, permitted the
parties to provide complete translations of the LSI statement after the deadline for submitting CV
profit information, Oman Fasteners argues that “Commerce’s disparate and unequal treatment of
parties in the same circumstances in two different proceedings was arbitrary and an abuse of
discretion.” Id. at 42.
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This Court reviews whether Commerce properly excluded evidence as untimely under the
abuse of discretion standard. See Artisan Mfg. Corp. v. United States, 38 CIT __, __, 978 F.
Supp. 2d 1334, 1344 (2014). “Thus, while deferring to Commerce’s necessary discretion to set
and enforce its deadlines, the court will review on a case-by-case basis whether the interests of
accuracy and fairness outweigh the burden placed on the Department and the interest in finality.”
Grobest & I-Mei Indus. (Vietnam) Co. v. United States, 36 CIT __, __, 815 F. Supp. 2d 1342,
1365 (2012).
Commerce provided the following explanation for its decision to preclude the submission
of the fully translated LSI statement:
Oman Fasteners was afforded ample opportunity to file fully translated LSI
financial statements on the record of this proceeding within the deadlines
specified by the Department’s regulations. The Department established a
deadline of October 31, 2014, for all parties to submit CV profit and selling
expense information. Oman Fasteners itself acknowledged this deadline in a
letter to the Department, as it specifically cited to it as a reason to reject factual
information regarding CV profit and selling expenses submitted by the Petitioner
after the deadline. Further, under the Department’s regulations, all parties were
permitted to file new factual information up to 30 days prior to the preliminary
determination (in this case, November 17, 2014) provided that they explained
why that information did not meet the definition of the information provided in
response to the Department’s specific request for CV profit information. Oman
Fasteners failed to timely submit fully translated financial statements within either
of these deadlines even though evidence on the record indicates that it had access
to a full translation of the LSI financial statements well before the established
deadlines. It was not until February 12, 2015, several months after the deadline
for CV profit and selling expense information, that Oman Fasteners attempted to
file a fully translated version of the LSI financial statements. As such, the
Department rejected the submission as untimely.
I&D Mem. 17.
The court finds that Commerce did not abuse its discretion in denying Oman Fasteners’
request to supplement the record. Oman Fasteners claims that it relied on Commerce’s alleged
established practice of accepting partially translated LSI statements. Reply Br. of Pl. Oman
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Fasteners, LLC in Supp. of Pl.’s Mot. for J. on the Agency R. (“Oman Fast. Reply Br.”) 17.
However, as established above, Commerce has no practice of always accepting partially
translated LSI statements, which makes any reliance on this ostensible practice by Oman
Fasteners unreasonable. On the contrary, Commerce’s regulations provided ample notice to
Oman Fasteners that submitting partial translations may result in the rejection of the statements.
Under 19 C.F.R. § 351.303(e),
[a] document submitted in a foreign language must be accompanied by an English
translation of the entire document or of only pertinent portions, where
appropriate, unless the Secretary waives this requirement for an individual
document. A party must obtain the Department’s approval for submission of an
English translation of only portions of a document prior to submission to the
Department.
Oman Fasteners never sought permission before submitting partial translations. Oman Fasteners
could have submitted a fully translated LSI statement but chose not to do so within the deadline.
Commerce did not abuse its discretion by enforcing its clear deadlines in a manner that, contrary
to Oman Fastener’s claims, violated no established practice. Consequently, the court finds that
Commerce acted reasonably.
E. If the Profit Cap Issue Remains Disputed on Remand, Commerce Must Provide a
More Thorough Explanation for its Determination.
As explained above, Commerce calculated the CV profit under 19 U.S.C. §
1677b(e)(2)(B)(iii), which allows Commerce to calculate CV profit using “any other reasonable
method.” However, the statute specifies that “the amount allowed for profit may not exceed the
amount normally realized by exporters or producers (other than [Oman Fasteners] . . . ) in
connection with the sale, for consumption in the foreign country, of merchandise that is in the
same general category of products as the subject merchandise.” Id. This is called a “profit cap.”
The profit cap “serves to prevent the various possible calculation methods from yielding
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anomalous results that stray beyond the amount normally realized from sales of merchandise in
the same general category.” Atar S.R.L. v. United States, 730 F.3d 1320, 1327 (Fed. Cir. 2013)
(quoting another source).
Commerce declined to calculate and apply a profit cap, explaining that
the SAA makes clear that the Department may calculate CV profit without a
profit cap, particularly, as is the case here, where there is no viable domestic
market in the exporting country for merchandise that is in the same general
category of products as the subject merchandise. In numerous previous cases, the
Department calculated CV profit under section [19 U.S.C. § 1677b(e)(2)(B)(iii)]
of the Act without quantifying the profit cap, as facts available. The legislative
history indicates that Congress recognized that there may be instances where, due
to a lack of data, the Department would need to use facts available and calculate a
CV profit rate pursuant to section (iii) of the Act without quantifying a profit cap.
With respect to this provision of the statute, Congress intended the profit cap to
be: (1) based on home market sales information of the same general category of
products as the subject merchandise, (2) non-aberrational to the industry under
consideration (i.e., “the amount normally realized”), and (3) not based on the data
of the respondent for which the Department is calculating CV. Accordingly, we
have examined the available data in this case and conclude that there is no
information that would meet these standards. As such, we are unable to calculate
the profit normally realized by producers other than Oman Fasteners in
connection with domestic market sales of merchandise in the same general
category as the subject merchandise. Consequently, in accordance with the
statute, we have not quantified a profit cap in applying the statutory alternative to
determine CV profit for Oman Fasteners.
I&D Mem. 18–19 (citations omitted). Commerce also cites prior proceedings in which, as here,
it calculated CV profit under § 1677b(e)(2)(B)(iii) without quantifying the profit cap. Id. at 19
n.79. 12
12 	Stainless Steel Plate in Coils from Belgium, 77 Fed. Reg. 73,013 (Dep’t Commerce Dec.
7, 2012) (final results) and accompanying I&D Mem. at cmt. 3; Certain Lined Paper Products
from India, 76 Fed. Reg. 10,876 (Dept. Commerce Feb. 28, 2011) (final results) and
accompanying I&D Mem. at cmt. 3; Bottom Mount Combination Refrigerator-Freezers from
Mexico, 77 Fed. Reg. 17,422 (Dep’t Commerce March 26, 2010) (final determ.) and
accompanying I&D Mem. at cmt. 26.
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Oman Fasteners argues that “[t]he statute provides no exception that permits Commerce
to ignore the calculation of a profit cap, even where Commerce believes there is no suitable
home market profit data.” Oman Fast. Br. 44. Oman Fasteners insists that the Hitech financial
statements yielded an anomalous CV profit rate and that substantial record evidence warranted a
cap on that figure. Id. at 46.
Because the court is remanding Commerce’s choice of the Hitech financial statements
over home-market information, see supra Part II(C), the profit cap issue may be rendered moot.
If on remand Commerce selects financial statements yielding a CV profit figure within a range
that Oman Fasteners finds appropriate, the profit cap issue may be resolved. If however the issue
remains disputed between the parties, then Commerce must provide a more thorough explanation
for its determination, in accordance with the below guidance.
While Commerce is correct that, under certain circumstances, it may decline to calculate
a profit cap, it may do so only when it offers a thorough explanation as to why the available data
prevents such a calculation. See Husteel Co. v. United States, 39 CIT __, __, 98 F. Supp. 3d
1315, 1348 (2015). This court has reasoned that if CV profit may be selected using “facts
available” under § 1677b(e)(2)(iii), then “it would seem a ‘facts available’ profit cap may also be
used.” Geum Poong Corp. v. United States, 25 CIT 1089, 1097, 163 F. Supp. 2d 669, 679
(2001). Therefore, “[w]here the record lacks data on profit normally realized by other companies
on sales of the same general category of products, Commerce still must attempt to comply with
the profit cap requirement through the use of facts otherwise available.” Atar S.R.L. v. United
States, 34 CIT 465, 469, 703 F. Supp. 2d 1359, 1364 (2010). In sum, this court has made clear
that the profit cap is a statutory requirement that cannot be lightly cast aside.
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Here, Commerce expounded on the legal framework applicable to profit caps, but its
discussion of the record is limited to the statement that “we have examined the available data in
this case and . . . . we are unable to calculate the profit normally realized by producers other than
Oman Fasteners in connection with domestic market sales of merchandise in the same general
category as the subject merchandise.” I&D Mem. 19. As Oman Fasteners points out, this court
has held that terse explanations, nearly identical to the one provided by Commerce here, are
insufficient. See Oman Fast. Br. 44 (citing Husteel, 39 CIT at __, 98 F. Supp. 3d at 1349).
Indeed, Commerce’s explanation only establishes that “necessary information is not available on
the record” such that Commerce “shall . . . use the facts otherwise available in reaching the
applicable determination.” See 19 § U.S.C. 1677e(a)(1). But Commerce’s explanation does not
account for its decision to not make use of “facts otherwise available” in order to ensure that the
selected CV profit data does not “yield[ ] anomalous results that stray beyond the amount
normally realized from sales of merchandise in the same general category.” Atar S.R.L. v.
United States, 730 F.3d 1320, 1327 (Fed. Cir. 2013) (citation omitted). A thorough explanation
seems especially appropriate here, where the chosen CV profit is several multiples larger than
the other profit figures on the record. Accordingly, should the profit cap issue remain disputed
on remand, Commerce must provide a more fulsome explanation of its determination.
CONCLUSION
The court remands for further explanation or modification of Commerce’s decision to
rely on third-country profit data rather than home-market profit data. Unless the issue is
rendered moot, the court orders Commerce to provide a more thorough explanation for any
determinations concerning the profit cap. The court sustains Commerce on all other issues.
Accordingly, it is hereby,
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ORDERED that the final determination of Commerce, published as Certain Steel Nails
from the Sultanate of Oman, 80 Fed. Reg. 28,972 (Dep’t Commerce May 20, 2015) (final
determ.) is hereby REMANDED to Commerce for reconsideration in accordance with this
Opinion and Order; it is further
ORDERED that Plaintiff’s Motion for Judgment on the Agency Record Under USCIT
Rule 56.2 is DENIED; it is further
ORDERED that Defendant-Intervenor’s Motion for Judgment on the Agency Record
Under USCIT Rule 56.2 is GRANTED in part and DENIED in part in accordance with this
Opinion and Order; it is further
ORDERED that Commerce shall issue a redetermination (“Remand Redetermination”)
in accordance with this Opinion and Order that is in all respects supported by substantial
evidence and in accordance with law; it is further
ORDERED that Commerce shall modify or further explain its decision to rely on third-
country profit data rather than home-market profit data; it is further
ORDERED that Commerce shall provide a thorough explanation of any profit cap
determinations, should that issue remain disputed between the parties; it is further
ORDERED that Commerce shall have ninety (90) days from the date of this Opinion and
Order in which to file its Remand Redetermination, which shall comply with all directives in this
Opinion and Order; that the Plaintiff and Defendant-Intervenors shall have thirty (30) days from
the filing of the Remand Redetermination to file comments thereon; and that the Defendant shall
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have thirty (30) days from the filing of Plaintiff’s and Defendant-Intervenors’ comments to file
comments.
/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge
Dated: January 26, 2017
New York, New York
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