The Navigator Company, S.A. v. United States

Slip Op. 19-146
UNITED STATES COURT OF INTERNATIONAL TRADE
THE NAVIGATOR COMPANY, S.A.,
Plaintiff,
PACKAGING CORPORATION OF
AMERICA, ET AL.,
Consolidated Plaintiffs,
and
DOMTAR CORPORATION,
Plaintiff-Intervenor,
v.
UNITED STATES,
Defendant,
and
PACKAGING CORPORATION OF
AMERICA, ET AL.,
Defendant-Intervenors.
Before: Mark A. Barnett, Judge
Consol. Court No. 18-00192
OPINION AND ORDER
[Remanding the final results and amended final results of the first administrative review
of the antidumping duty order on certain uncoated paper from Portugal for
reconsideration of the brokerage and handling charge selected as facts available and
the decision to make an adverse inference in that selection.]
Dated: November 22, 2019
Jonathan M. Zielinski, Cassidy Levy Kent (USA) LLP, of Washington, DC, argued for
Plaintiff/Defendant-Intervenor The Navigator Company, S.A. With him on the brief were
Thomas M. Beline and James E. Ransdell.
PUBLIC VERSION
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Geert De Prest, Schagrin Associates, of Washington, DC, argued for
Plaintiff/Defendant-Intervenor Packaging Corporation of America, et al. With him on the
brief were Terence P. Stewart, William A. Fennell, and Lane S. Hurewitz, Stewart and
Stewart, of Washington, DC.
Stephen J. Orava and Daniel L. Schneiderman, King & Spalding LLP, of Washington,
DC, for Plaintiff-Intervenor Domtar Corporation.
Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of Washington, DC, argued for Defendant United States.
With her on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E.
Davidson, Director, Tara K. Hogan, Assistant Director, and Michael D. Snyder, Trial
Attorney. Of counsel was Mykhaylo A. Gryzlov and Brendan Saslow, Attorney, Office of
the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of
Commerce, of Washington, DC.
Barnett, Judge: This consolidated action is before the court on two motions for
judgment on the agency record challenging the final results and amended final results of
the U.S. Department of Commerce’s (“Commerce” or the “agency”) first administrative
review of the antidumping duty order on certain uncoated paper from Portugal.1 See
Certain Uncoated Paper From Portugal, 83 Fed. Reg. 39,982 (Dep’t Commerce Aug.
13, 2018) (final results of antidumping duty admin. review; 2015–2017) (“Final Results”),
ECF No. 33-2, and accompanying Issues and Decision Mem., A-471-807 (Aug. 6, 2018)
(“I&D Mem.”), ECF No. 33-3; Certain Uncoated Paper From Portugal, 83 Fed. Reg.
52,810 (Dep’t Commerce Oct. 18, 2018) ([am.] final results of antidumping duty admin.
review; 2015–2017) (“Amended Final Results”), ECF No. 33-1, and accompanying
Confidential Ministerial Error Mem. (Oct. 9, 2018) (“Min. Error Mem.”), ECF No. 65-1.
1 The administrative record for this case is divided into a Public Administrative Record
(“PR”), ECF No. 33-4, and a Confidential Administrative Record (“CR”), ECF No. 33-5,
20-3. Parties submitted joint appendices containing record documents cited in their
briefs. See Public J.A. (“PJA”), ECF No. 73; Confidential J.A. (“CJA”), ECF No. 74. The
court references the confidential version of the relevant record documents, unless
otherwise specified.
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Consolidated Plaintiffs, Packaging Corporation of America and United Steel,
Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service
Workers International Union, AFL-CIO, CLC (“USW”), and Plaintiff-Intervenor Domtar
Corporation (collectively, “Petitioners”) challenge Commerce’s decision to amend the
Final Results to correct an alleged ministerial error. Specifically, Petitioners argue that
in adopting the Amended Final Results, Commerce: (1) departed from its practice of
using data initially rejected as unreliable when selecting the facts available with an
adverse inference, (2) altered the substance of the Final Results rather than correcting
a ministerial error, and (3) chose an insufficiently adverse value for Navigator’s U.S.
brokerage expenses. See Rule 56.2 Mot. of Consol. Pls.’ Packaging Corp. of America
and USW and Pl.-Int. Domtar Corp. for J. on the Agency R., ECF No. 47, and
Confidential Mem. of Law in Supp. of Rule 56.2 Mot. of Consol. Pls. Packaging Corp. of
America and USW and Pl.-Int. Domtar Corp. for J. on the Agency R. (“Pet’rs’ Mem.”),
ECF No. 48.
Plaintiff, The Navigator Company, S.A. (“Navigator”), challenges the Final
Results, arguing that: (1) there is no gap in the record which would allow Commerce to
resort to facts available pursuant to 19 U.S.C. § 1677e(a); (2) Commerce failed to
comply with the requirements of 19 U.S.C. § 1677m(d) by not providing Navigator with
sufficient opportunity to explain any deficiencies in its response; and (3) Commerce had
no basis for making an adverse inference pursuant to 19 U.S.C. § 1677e(b). The
Navigator Company’s Mot. for J. on the Agency R. (“Navigator’s Mot.”), ECF No. 50,
and Mem. of Points of Law and Fact in Supp. of the Rule 56.2 Mot. for J. on the Agency
R. filed by Pl., The Navigator Company (“Navigator’s Mem.”), ECF No. 50.
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For the reasons discussed below, the court remands the Final Results and
Amended Final Results for Commerce to reconsider its use of an adverse inference and
selection of facts available for Navigator’s allocated U.S. brokerage and handling
expenses.
JURISDICTION AND STANDARD O F REVIEW
The court has jurisdiction pursuant to section 516A(a)(2)(B)(iii) of the Tariff Act of
1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2012), 2 and 28 U.S.C. § 1581(c).
The court will uphold an agency determination that is supported by substantial evidence
and otherwise in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i).
BACKGROUND
On March 3, 2016, Commerce published an antidumping duty order on uncoated
paper from Portugal. Certain Uncoated Paper From Australia, Brazil, Indonesia, the
People’s Republic of China, and Portugal, 81 Fed. Reg. 11,174 (Dep’t Commerce Mar.
3, 2016) (am. final affirmative antidumping determinations and antidumping duty
orders). On March 31, 2017, Navigator requested an administrative review of its
imports for the period of review (“POR”) of August 26, 2015 through February 28, 2017
(“POR”). Req. for Admin. Review of Antidumping Duty Order (Mar. 31, 2017), PR 1,
2 All citations to the Tariff Act of 1930, as amended, are to Title 19 of the U.S. Code,
and references to the U.S. Code are generally to the 2012 edition. However, the Trade
Preferences Extension Act (“TPEA”), Pub. L. No. 114–27, § 502, 129 Stat. 362, 383–84
(2015), made several amendments to the antidumping and countervailing duty laws.
Section 502 of the TPEA amended 19 U.S.C. § 1677e. See TPEA § 502. The TPEA
amendments affect all antidumping duty determinations made on or after August 6,
2015. See Dates of Application of Amendments to the Antidumping and Countervailing
Duty Laws Made by the Trade Preferences Extension Act of 2015, 80 Fed. Reg. 46,793
(Dep’t Commerce Aug. 6, 2015). Accordingly, all references to 19 U.S.C. § 1677e are
to the amended version of the statute.
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PJA Tab 1 . Commerce initiated this review on May 9, 2017. Initiation of Antidumping
and Countervailing Duty Admin. Reviews, 82 Fed. Reg. 21,513 (Dep’t Commerce May
9, 2017). Commerce published the preliminary results of review on April 6, 2018,
preliminarily calculating a zero percent dumping margin for Navigator. Uncoated Paper
From Portugal, 83 Fed. Reg. 14,844 (Dep’t Commerce Apr. 6, 2018) (prelim. results of
antidumping duty admin. review; 2015–2017) (“Preliminary Results”).
On August 13, 2018, Commerce published the Final Results, pursuant to which
the agency found that certain U.S. brokerage and handling expenses, as reported by
Navigator, were anomalous and effectively increased the net price for U.S. sales of
subject merchandise during the POR. See Final Results, 83 Fed. Reg. at 39,983; I&D
Mem. at 6–8. Commerce explained that Navigator “reported U.S. brokerage and
handling in two fields, USBROKU and USBROK2U, where the amounts reported in
USBROKU were actual expenses and the amounts reported in USBROK2U were
allocated.” I&D Mem. at 7 & n.36 (citation omitted). Regarding the allocated expenses
reported in USBROK2U (or “allocated brokerage expenses”), Commerce found that
Navigator “failed to cooperate to the best of its ability because it failed to provide the
necessary information demonstrating that its allocation methodology . . . [did] not cause
inaccuracies or distortions.” Id. at 8. Commerce selected the highest reported allocated
brokerage expense as adverse facts available (“AFA”) for Navigator’s allocated
brokerage and handling expenses. Id. at 8 & n.43 (citing Final Results Analysis Mem.
for The Navigator Company, S.A. (Aug. 6, 2018) (“Navigator Final Analysis Mem.”), CR
310, CJA Tab 8). In the Final Results, Navigator’s weighted-average dumping margin
increased to 37.34 percent. 83 Fed. Reg. at 39,983.
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Also on August 13, 2018, Navigator timely submitted a ministerial error allegation
in which it argued, in relevant part, that Commerce made a ministerial error when it
selected the highest allocated brokerage expense to use as partial AFA “because it
mathematically resulted in a larger brokerage expense than Commerce otherwise found
to be a reliable total brokerage expense” and resulted in an unrealistically high total
brokerage expense. Ministerial Error Allegation (Aug. 13, 2018) at 8, CR 320, CJA Tab
9.
On August 27, 2018, Navigator initiated this action challenging the Final Results.
Summons, ECF No. 1; Compl., ECF No. 6. After consultation with interested parties,
Commerce requested leave to consider Navigator’s ministerial error allegations. Def.’s
Consent Mot. for Leave to Consider Ministerial Error Allegation and, if Necessary, to
Publish Am. Final Results or Correction Notice, ECF No. 13. The court granted such
leave on September 7, 2018. Order (Sept. 7, 2018), ECF No. 14.
On October 9, 2018, Commerce issued a memorandum addressing the alleged
ministerial errors. Min. Error Mem.; see also Amended Final Results, 83 Fed. Reg.
52,810. Commerce agreed that it had made a ministerial error by selecting Navigator’s
highest allocated brokerage expense as adverse facts available and, instead, selected
the highest transaction specific U.S. brokerage expense (reported in USBROKU) to
replace Navigator’s allocated brokerage expense. Min. Error Mem. at 6, 7. This
change reduced Navigator’s weighted-average dumping margin from 37.34 to 1.75
percent. Id. at 6; Am. Final Determinations Calculations for The Navigator Company,
S.A. (Oct. 9, 2018) (“Amended Calc. Mem.”) at 2, CR 323, CJA Tab 12.
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Commerce issued its Amended Final Results on October 18, 2018. Amended
Final Results, 83 Fed. Reg. at 52,810. On October 22, 2018, Consolidated Plaintiffs
initiated a separate action challenging the Amended Final Results. Packaging
Corporation of America, et al. v. United States, et al., No. 1:18-cv-00217, Summons,
ECF No. 1, Compl., ECF No. 7 (CIT Oct. 22, 2018). On November 1, 2018, the court
consolidated the actions under lead court number 18-00192. Docket Order, ECF No.
34.
DISCUSSION
While Navigator challenges Commerce’s determination to use adverse facts
available and its selection of adverse facts available in the Final Results, subsequent to
the issuance of the Amended Final Results, Navigator has stated that it would waive its
right to pursue its challenge if Petitioners do not prevail in their challenge to the
Amended Final Results. See Navigator’s Mot. at 3. In light of the contingent nature of
Navigator’s challenge, the court will first consider Petitioners’ challenge to the Amended
Final Results.
I. Petitioners’ Challenges to the Amended Final Results
A. Legal Framework
Pursuant to 19 U.S.C. § 1675(h), Commerce is authorized to correct ministerial
errors in its final determinations and required to establish procedures for correction of
such errors.3 See also Zenith Elecs. Corp. v. United States, 884 F.2d 556, 560 (Fed.
3 Section 1675(h) provides:
The administering authority shall establish procedures for the correction
of ministerial errors in final determinations within a reasonable time
after the determinations are issued under this section. Such procedures
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Cir. 1989) (“A number of cases have recognized the authority of an administrative
agency to correct inadvertent, ministerial errors.” (collecting cases)). Both statute and
regulation define “ministerial error” as “an error in addition, subtraction, or other
arithmetic function, clerical error resulting from inaccurate copying, duplication, or the
like, and any other type of unintentional error which the [agency] considers ministerial.”
19 U.S.C. § 1675(h); cf. 19 C.F.R. § 351.224(f). “Clerical errors are by their nature not
errors in judgment but mere inadvertencies.” NTN Bearing Corp. v. United States, 74
F.3d 1204, 1208 (Fed. Cir. 1995); see also SGL Carbon LLC v. United States, 36 CIT
264, 275 , 819 F. Supp. 2d 1352, 1363 (2012) (finding that ministerial errors are not
those “resulting from ill-considered judgment or wayward discretion”) (citation omitted).
This court has repeatedly recognized the existence of a legal distinction between
ministerial and non-ministerial errors. 4
“Commerce is given fairly broad discretion to determine which types of
unintentional error to regard as ministerial.” CEMEX, S.A. v. United States, 19 CIT 587,
593 (1995) (citing 19 U.S.C. § 1675(h)). However, Commerce’s determination is not
without limits and is subject to judicial review. See Alloy Piping Prod., Inc. v. Kanzen
Tetsu Sdn. Bhd., 334 F.3d 1284, 1292 (Fed. Cir. 2003) (noting that Commerce has
shall ensure opportunity for interested parties to present their views
regarding any such errors.
19 U.S.C. § 1675(h)
4 See, e.g., Peer Bearing Co. v. United States, 23 CIT 454, 458, 57 F. Supp. 2d 1200,
1204 (1999) (“[T]he allegation of faulty judgment inherently falls outside the purview of a
ministerial error.”); Shinhan Diamond Indus. Co., Ltd. v. United States, 34 CIT 227, 231
(2010) (“[A] ministerial error ‘encompasses only errors mechanical in nature, apparent
on the record, and not involving an error of substantive judgment,’ or includes only
‘mindless and mechanistic mistakes [and] minor shifting of facts.’”) (citation omitted)
(second alteration in original).
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discretion to determine when an alleged error is ministerial, but Commerce’s
determinations thereto are “subject to judicial review”); Hor Liang Indus. Corp. v. United
States, 42 CIT ___, ___, 337 F. Supp. 3d 1310, 1321 (2018) (same).
B. Commerce’s Determinations
As stated above, for the Final Results, Commerce selected the highest reported
allocated brokerage expense reported in USBROK2U as AFA. 5 See I&D Mem. at 8.
Commerce explained that Navigator’s transaction specific brokerage expenses were not
appropriate to use as AFA for Navigator’s allocated brokerage expenses because
“these observations with transaction specific . . . [expenses] represent a [limited] portion
of [Navigator’s] total . . . observations and are not sold pursuant to the same sales
process as those observations with an allocated U.S. brokerage and handling expense
reported.”6 Navigator Final Analysis Mem. at 6. For that reason, Commerce found that
those observations for which Navigator reported actual expenses were not
representative of the sales for which Navigator allocated its expenses. Id.
In the Ministerial Error Memorandum, Commerce stated that it had erred in using
Navigator’s highest allocated brokerage expenses as AFA because the agency had
5 Specifically, Commerce selected [[ 	]] U.S. dollars per kilogram as adverse facts
available to use for allocated brokerage expenses. Navigator Final Analysis Mem. at 6.
6 In its section C questionnaire response, Navigator explained that “[t]he expenses
reported in field USBROKU are direct in nature and apply to [[
]]” Navigator’s Sec. C Questionnaire Resp. (June
15, 2017) (“Navigator CQR”) at 33, PR 25, CR 22, 28, 29, 44, CJA Tab 2. For
expenses reported in USBROK2U, “[[ 	]] and, [thus], the
traceability is lost.” Id. at 34. Accordingly, for sales reported in USBROK2U, Navigator
allocated its brokerage expenses “based on the total quantity of individual product
codes purchased by individual customers.” Id.
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found that information to be unreliable. Min. Error Mem. at 6 & n.33 (referring to its
finding that Navigator had failed to show that its allocation methodology did “not cause
inaccuracies or distortions”) (quoting I&D Mem. at 8). Commerce stated that it did “not
know the full universe of inaccuracies or distortions associated with [the highest
allocated brokerage] expense,” and its selection of that value as AFA was, therefore, an
“unintentional ministerial error.” Id. at 6. To correct this error, Commerce selected
Navigator’s highest transaction specific expense as AFA.7 Id.
C. Parties’ Contentions
Petitioners contend that Commerce’s decision to change its choice of AFA value
in the Amended Final Results was not the correction of a ministerial error, but a
substantive change that exceeded the scope of the court’s Order granting permission to
consider the ministerial error allegation. Pet’rs’ Mem. at 19-20.
The Government contends that Commerce corrected a ministerial error because
it initially selected Navigator’s highest reported allocated brokerage expense as AFA,
after it had determined that the allocated data provided by Navigator was unreliable.
Confidential Def.’s Opp’n to Pl.’s Mot. for J. Upon the Agency R. (“Gov’t’s Resp.”), at 16,
ECF No. 57. The Government argues that Commerce has broad discretion to
determine what type of errors qualify as “ministerial.” Id. at 20.
Navigator supports the Government’s contention that Commerce acted within its
discretion by treating its selection of the AFA value as a ministerial error. Confidential
The Navigator Company’s Resp. in. Opp’n To Consol. Pls.’ and Pl.-Int.’s Mot. for J. on
7 Specifically, Commerce selected [[ 	]] U.S. dollars per kilogram in the Amended
Final Results to use as adverse facts available for allocated brokerage expenses in
USBROK2U. Amended Calc. Mem. at 3.
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the Agency R. (“Navigator’s Resp.”) at 6–11, ECF No. 61. Navigator points to the
legislative history of 19 U.S.C. § 1675(h) to show that Congress intended to grant
Commerce a wide degree of discretion in deciding which types of errors are
“ministerial.” Id. at 7–8.
D. Commerce Made a Substantive Modification to the Final Results
Commerce has broad, but not unbounded, discretion to determine which types of
errors are ministerial. See, e.g., Hor Liang Indus., 337 F. Supp. 3d at 1321; SGL
Carbon, 36 CIT at 273, 819 F. Supp. 2d at 1362. In this case, Commerce exceeded its
authority when it claimed to correct a ministerial error when revising its selection of AFA
for the allocated brokerage. Ministerial errors “are by their nature not errors in judgment
but merely inadvertencies.” NTN Bearing, 74 F.3d at 1207.
The Government cites several cases supporting Commerce’s discretion to
identify and correct ministerial errors, including Peer Bearing , 23 CIT 454, 57 F. Supp.
2d 1200. See Gov’t’s Resp. at 20. While Commerce does have significant discretion,
the facts underlying Peer Bearing support the conclusion that Commerce exceeded its
discretion here. 8 In Peer Bearing, the court held that Commerce made a ministerial
error when it “accidentally used an unskilled labor rate of 46.6 Rupees per hour and a
8 Navigator errs in suggesting that the court must give Chevron deference to
Commerce’s ministerial error finding. Navigator’s Resp. at 7–8 (citing Chevron, 467
U.S. at 842–43); see also id. at 10 (“Commerce’s Amended Final Results set forth a
reasonable construction of the statute . . . .”). Whether Commerce corrected a
ministerial error does not concern the agency’s legal interpretation of the statute it
administers. Cf. Chevron, 467 U.S. at 842–43. The Parties do not dispute the proper
meaning of the term “ministerial error” or that it does not include errors of judgment.
See Gov’t’s Resp. at 16; cf. Navigator’s Resp. at 9. Rather, the issue before the court is
whether Commerce’s identification of the error as ministerial comported with the
uncontroverted statutory and regulatory definition and that finding is not subject to
Chevron deference.
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skilled labor rate of 25.42 Rupees per hour instead of the reverse.” 23 CIT at 456, 57 F.
Supp. 2d at 1202–03. The court then granted the Government’s request for a remand
to correct the “inadvertent reversal of the skilled and unskilled labor rates in its
calculations.” Id. at 456, 57 F. Supp. 2d at 1203 (emphasis added).
In contrast, here, Commerce did not inadvertently utilize one value when it
intended to use another. In the Final Analysis Memorandum for Navigator, Commerce
provided a reasoned explanation as to why it rejected the use of the transaction specific
brokerage expenses as AFA. Navigator Final Analysis Mem. at 5–6. Commerce
explained that those transaction specific expenses represented a “[limited] portion of
Navigator’s observations.” Id. at 6. Commerce further explained that those
observations were not sold pursuant to the same “sales process as those observations
with allocated U.S. brokerage and handling reported.” Id. Commerce concluded that
the transaction specific expenses were not “representative to be considered as a plug
for Navigator’s allocated U.S. brokerage and handling expenses.” Id. Thus,
Commerce’s selection of AFA for the Final Results was the result of its reasoning and
consideration of Navigator’s reporting methodology. To the extent this was error, it was
not a “ministerial” error. See QVD Food Co., Ltd v. United States, 34 CIT 1166, 1179–
80, 721 F. Supp. 2d 1311, 1322 (2010), aff’d 658 F.3d 1318 (Fed. Cir. 2011) (plaintiff
was wrong to assert that Commerce could make changes to its deliberate treatment of
certain expenses in its calculations pursuant to the agency’s authority to correct
ministerial errors).
The court notes that other avenues were available to the Government if
Commerce wished to revisit its selection of AFA in the Final Results. As explained in
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SKF USA v. United States, 254 F.3d 1022, 1029 (Fed. Cir. 2001), Commerce may,
among other things, request a remand, without confessing error, in order to reconsider
its position on an issue. Id. Such a remand would be appropriate if the agency’s
concern is “substantial and legitimate,” but “may be refused if the agency’s request is
frivolous or in bad faith.” Id. As in the case of a request for remand to consider a
ministerial error allegation, SKF-type requests for remand are often granted in order to
conserve judicial and other resources so that the Government is defending, and the
plaintiff is challenging, the agency’s discretion as purposefully exercised by the agency.
Whether the remand request is based on the consideration of a ministerial error
or is based on an agency desire to reconsider its position is not merely an exercise in
semantics. In the case of a remand to reconsider its position, Commerce may adopt a
new line of reasoning not previously adopted (or perhaps even previously rejected),
provided that the choice accords with law and is based on substantial evidence on the
record. Cf. SKF, 254 F.3d at 1029 (“[Commerce] may request a remand because it
believes that its original decision is incorrect on the merits and wishes to change the
result.”). In the case of a remand to consider a ministerial error allegation and
subsequent identification of a ministerial error, however, the agency’s substantive
reasoning as provided in the original determination should continue to support the
amended determination. When distinct reasoning is necessary to support the amended
determination, it is less likely that the error was ministerial in nature. Cf. QVD Food Co.,
34 CIT at 1178–79, 721 F. Supp. 2d at 1322.
This conundrum is precisely where Commerce placed itself with its Amended
Final Results. Commerce claimed to have inadvertently used one value instead of
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another in its Final Results, see Ministerial Error Mem. at 7; however, the reasoning
supplied in those Final Results addressed why the initially rejected value is an
inappropriate choice as AFA. Even if the court were inclined to disregard the
“ministerial error” label used to justify the amended choice of AFA, the court could not
affirm the agency’s selection of the transaction specific brokerage expense because the
only substantive reasoning before the court is in the original Final Results, explaining
why the transaction specific value is an inappropriate choice for AFA.
Therefore, the court must remand the Amended Final Results for reconsideration
by Commerce in accordance with this opinion. Because the court is remanding the
Amended Final Results, the court need not consider Petitioners’ other reasons for
objecting to Commerce’s choice of AFA in the Amended Final Results.
II. Navigator’s Challenges to the Final Results
A. Legal Framework
When “necessary information is not available on the record,” or an interested
party “withholds information” requested by Commerce,” “fails to provide” requested
information by the submission deadlines, “significantly impedes a proceeding,” or
provides information that cannot be verified pursuant to 19 U.S.C. § 1677m(i),
Commerce “shall . . . use the facts otherwise available.” 19 U.S.C. § 1677e(a).
Commerce’s authority to use the facts otherwise available is subject to 19 U.S.C.
§ 1677m(d). Id. Pursuant to § 1677m(d), if Commerce determines that a respondent
has not complied with a request for information, it must promptly inform that respondent
of the nature of the deficiency and, to the extent practicable in light of statutory
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deadlines, provide that respondent “an opportunity to remedy or explain the deficiency.”
Id.
If Commerce determines that the 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.” 19 U.S.C. § 1677e(b). “Compliance with the ‘best of its ability’
standard is determined by assessing whether a respondent has put forth its maximum
effort to provide Commerce with full and complete answers to all inquiries in an
investigation.” Nippon Steel Corp. v. United States, 337 F.3d 1373, 1382 (Fed. Cir.
2003).
B. Commerce’s Determination
Commerce’s initial questionnaire to Navigator explained that the agency would
“accept allocated price adjustments and expenses only if [Navigator] [could]
demonstrate that the allocation is calculated on as specific a basis as is feasible (e.g.,
on a customer-specific basis, product-specific basis, and/or monthly-specific basis, etc.)
and is not unreasonably distortive.” Req. for Information (The Navigator Company S.A.)
(May 9, 2017) at G-9, PR 3, PJA Tab 3. Commerce requested that, in doing so,
Navigator “provide a complete explanation of: (1) how the price adjustments or
expenses are recorded in [Navigator’s] records; (2) why [Navigator] cannot report the
price adjustment or expense on a more specific basis using [its] records; and (3) why
[Navigator’s] allocation methodology does not cause inaccuracies or distortions.” Id.9
9 Pursuant to Commerce’s regulations, “[a]ny party seeking to report an expense or a
price adjustment on an allocated basis must demonstrate to the [agency’s] satisfaction
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Commerce further directed Navigator to provide “the allocation formula and supporting
worksheets.” Id.
As previously noted, in its section C questionnaire response, Navigator reported
certain per-unit brokerage and handling expenses incurred in the United States on an
allocated basis. Navigator CQR at 33–34. In a supplemental questionnaire, Commerce
asked Navigator to explain these reported expenses, particularly with regard to the
number of transactions for which the allocated expense was negative. 10 Navigator’s
Suppl. Sec. C Questionnaire Resp. (Sept. 20, 2017) (“Navigator Suppl. CQR”), at 52,
CR 142, 146, 171-177, CJA Tab 4. Navigator explained that the “negative expenses
are the result of the allocation methodology” owing to the fact that there were “situations
during the POR in which adjustments were made from previous months, effectively
lowering the cost.” Id. Navigator further reported that “all costs accounted for during
the POR pertaining to subject merchandise [had] been captured and reported.” Id. at
52–53. Navigator provided a sample calculation and screenshot “indicating the source
of the negative expense.” Id. at 53.
Commerce further inquired whether the negative expenses represent revenues
or credits and, if so, for Navigator to explain why they were not separately reported. Id.
Commerce also asked Navigator to confirm that the revenues or credits were
associated with POR sales of subject merchandise and to explain why it is appropriate
that the allocation is calculated on as specific a basis as is feasible, and must explain
why the allocation methodology used does not cause inaccuracies or distortions.” 19
C.F.R. § 351.401(g)(2).
10 Certain terms were bracketed and protected as business proprietary information
during the administrative proceeding but released publicly in Navigator’s moving brief.
Such terms are included here without brackets as appropriate.
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to include them in Navigator’s allocated brokerage expense. Id. Navigator responded
that “[t]he negative expenses . . . are not revenues or credits but rather the result of
expense adjustments from previous months.” Id.
In its administrative case brief, Petitioners raised concerns regarding Navigator’s
allocated U.S. brokerage expenses and urged Commerce to reject the information and
select the highest allocated expense as AFA. Pet’rs’ Case Br. and Hr’g Req. (May 7,
2018) at 3–9, CR 307, CJA Tab 6. In the Final Results, Commerce agreed with
Petitioners and determined to use AFA because of Navigator’s failure “to demonstrate
that its allocation methodology for its U.S. brokerage and handling expenses is not
distortive.” Navigator Final Analysis Mem. at 5; see also I&D Mem. at 7–8.
Commerce found that the expenses for some of the sales “are associated with
sales outside of the POR.” I&D Mem. at 7; see also Ministerial Error Mem. at 5. 11 Thus,
because Navigator included adjustments made during the POR related to non-POR
sales, Commerce found Navigator’s allocation to be distortive meriting an adverse
inference when selecting from among the facts available to use as Navigator’s allocated
brokerage expenses. Id.
C. Parties’ Contentions
Navigator raises three challenges to Commerce’s application of AFA to its
allocated brokerage expenses. First, Navigator contends that there was no gap in the
administrative record which Commerce could fill with AFA pursuant to 19 U.S.C.
11 In the Ministerial Error Memorandum, Commerce explained that “Navigator reported
[[ 	]] transactions with negative U.S. brokerage and handling expenses in the first
month of the POR,” which “necessarily must be associated with sales that occurred
outside the POR.” Ministerial Error Mem. at 4–5.
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§ 1677e(a). Navigator’s Mem. at 14–18. Because Navigator’s total brokerage
expenses reported in USBROK2U tie to its accounting system, which in turn ties to its
audited financial statements, Navigator argues that its data was verifiable Id. at 14–15.
Second, Navigator contends that Commerce failed to provide adequate
notification of any deficiencies in its questionnaire responses pursuant to 19 U.S.C.
§ 1677m(d). Id. at 18–21. Navigator argues that Commerce asked for further
explanation of certain brokerage expenses only if those values represented revenues or
credits, to which Navigator responded that they did not. Id. at 18.
Third, Navigator contends that Commerce’s decision to apply an adverse
inference was improper because Navigator cooperated to the best of its ability and fully
answered the questions Commerce asked. Id. at 21–23; The Navigator Company’s
Reply to Def.’s and Def.-Ints.’ Opp’n to The Navigator Company’s Mot. for J. Upon the
Agency R. (“Navigator’s Reply”), at 4–5, ECF No. 70. Navigator contends that, at most,
Commerce should have used facts otherwise available without an adverse inference.
Navigator’s Mem. at 22.
The Government asserts that Navigator failed to demonstrate that its allocation
methodology did not cause inaccuracies or distortions pursuant to 19 C.F.R.
§ 351.401(g)(1), and, therefore, a gap existed in the record to be filled with facts
otherwise available. Gov’t’s Resp. at 7–14. The Government further contends that,
pursuant to 19 U.S.C. § 1677m(d), Commerce provided an opportunity for Navigator to
demonstrate the accuracy of its methodology through a supplemental questionnaire,
and Navigator again failed to address Commerce’s concerns. Id. at 11–12. Because
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Navigator failed to address this deficiency, the Government argues that Navigator failed
to cooperate to the best of its ability pursuant to 19 U.S.C. § 1677e(b). Id. at 14.
Petitioners support the Government’s arguments in favor of using AFA for
Navigator’s allocated brokerage expenses. Confidential Resp. Br. of Packaging Corp.
of America, USW, and Domtar Corp. (“Pet’rs’ Resp.”) at 1, ECF No. 59. However,
Petitioners also contend that Navigator does not allocate brokerage expenses on a
month-to-month basis, and has not demonstrated that these expenses are tied verifiably
to its accounting system. Id. at 3–5.
D. Commerce Correctly Resorted to Facts Available, However, Its Use of an
Adverse Inference Was Unjustified
1. Navigator’s Reporting Methodology
Substantial evidence supports Commerce’s determination to resort to facts
available to fill a gap in the record. Navigator’s argument confuses the issue of
cooperation, discussed below, with the standard for using allocated data, which is
provided in 19 C.F.R. § 351.401(g)(2). That regulation requires that Navigator
demonstrate to Commerce’s satisfaction that its allocation methodology does not cause
inaccuracies or distortions. 19 C.F.R. § 351.401(g)(2). Here, Commerce reasonably
found, based on Navigator’s submissions, that Navigator’s methodology included
adjustments related to non-POR sales and, therefore, caused inaccuracies or
distortions. See I&D Mem. at 8.
In fact, Navigator now appears to concede that its allocation methodology could
cause some distortions in its allocated reporting both at the beginning and end of the
period of review:
Indeed, while Commerce’s Issues and Decision Memorandum isolates allocated
brokerage expenses for the first month of the POR and asserts they are [[
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Consol. Court No. 18-00192 	Page 20
]], allocated brokerage expenses for the final month of the POR could have
been [[ 	]], given that [[ 	]] could be accounted for
after the POR had closed.
Navigator’s Mem. at 22 (emphasis added). This explanation confirms Commerce’s
conclusion that adjustments for non-POR sales are being included in and impacting
Navigator’s calculation of U.S. brokerage expenses. See I&D Mem. at 8. Navigator
clearly indicates that the allocated brokerage expenses in the first month [[ 	]]
the actual expense because of adjustments relating to pre-POR expenses and in the
last month of the POR, the allocation may [[ 	]] the actual expense because of
adjustments made after the POR. These facts are consistent with the administrative
record and Commerce’s factual findings based on that record: Navigator’s allocation
methodology both includes some adjustments associated with non-POR expenses and
excludes some adjustments made after the POR.12 Navigator Suppl. CQR at 52–53.
Thus, substantial evidence supports Commerce’s decision to resort to facts available to
determine Navigator’s allocated brokerage expenses.
2. Relevance of U.S.C. § 1677m(d)
Navigator argues that Commerce’s use of the phrase revenues or credits in
question 40(e) of the supplemental section C questionnaire “was a clear directive to
provide further explanation only if the answer to Commerce’s [initial] question was that
the negative expenses were revenues or credits,” and, thus, Commerce failed to
provide Navigator with the opportunity to explain or remedy any deficiency regarding the
possibility that its negative expenses were related to non-POR sales. Navigator’s Mem.
12 Navigator argues that there is no evidence that its allocation methodology causes
inaccuracies or distortions. See Navigator’s Reply at 10. However, 19 C.F.R.
§ 351.401(g)(2) places the burden on respondents to demonstrate that their
methodologies do not cause distortions or inaccuracies, not the other way around.
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at 20. According to Navigator, had Commerce instead referred to the negative
expenses as “apparently anomalous expenses” as it did later in the Issues and Decision
Memorandum, Navigator would have been required to provide additional explanation.
Id. (citing I&D Mem. at 7).
As the respondent, Navigator had the burden to provide “all of the requested
information and create an adequate record.” ABB Inc. v. United States, 42 CIT ___,
___, 355 F. Supp. 3d 1206, 1222 (2018), recons. den., 43 CIT ___, ___, 375 F. Supp.
3d 1348 (2019) (collecting cases). Moreover, as just discussed, the regulations
expressly require Navigator, when reporting an expense on an allocated basis, to
demonstrate that the allocation does not cause inaccuracies or distortions. 19 C.F.R.
§ 351.401(g)(2). Navigator failed to do so.
Commerce asked Navigator multiple follow-up questions. Those questions
addressed Navigator’s reporting of allocated brokerage expenses, sought a detailed
narrative description of how the expense was calculated, and requested an explanation
why numerous observations included negative expenses and an identification of the
types of services represented by the negative expenses. These questions were in
addition to the one question in which Commerce asked about the possibility of those
expenses representing revenues or credits. See Navigator Suppl. CQR at 52–53.
Read in context, it is clear that Commerce was providing Navigator with an opportunity
to explain further the basis for reporting this allocated expense, particularly with respect
to the many observations involving negative expenses. In any case, Commerce’s
conclusion that Navigator’s allocation of brokerage expenses was distortive was based
on Navigator’s data, as reported, including the indications that the allocations were
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related to pre-POR sales and excluded post-POR adjustments. In light of both the
regulatory burden on Navigator to establish that its allocations are non-distortive and
Commerce’s supplemental questionnaire addressing Navigator’s reporting of this
expense, Commerce has met its statutory burden to provide Navigator with an
opportunity to remedy its explanation of this allocated expense. See 19 U.S.C.
§ 1677m(d).
3. Commerce’s Use of an Adverse Inference
If Commerce determines that a party “has failed to cooperate by not acting to the
best of its ability to comply with a request for information,” it “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). Whether a party has complied to the “best of its
ability” depends on whether “a respondent has put forth its maximum effort to provide
Commerce with full and complete answers to all inquiries in an investigation.” Nippon
Steel, 337 F.3d at 1382.
Commerce made an adverse inference in this case because it determined that
Navigator “failed to provide the necessary information demonstrating that its allocation
methodology for U.S. brokerage and handling expenses does not cause inaccuracies or
distortions.” I&D Mem. at 8. While Commerce took issue with Navigator’s responses to
the supplemental questionnaire, id. at 7–8, it did not identify any lack of cooperation by
Navigator. Rather, the agency applied AFA because Navigator’s submissions failed to
demonstrate that its allocation methodology was not distortive. Id. at 8; see also
Navigator Final Analysis Mem. at 5. In other words, Commerce’s stated basis for
making an adverse inference was the very same basis that justified Commerce’s use of
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the facts available—that Navigator failed to establish that its allocation was non-
distortive. 13 Such a failure to demonstrate non-distortion by an otherwise active
participant in the proceeding, by itself, does not support the use of an adverse
inference. See Nippon Steel, 337 F.3d at 1381–82 (finding that section 19 U.S.C. §
1677e does not focus on a party’s failure to provide requested information but a party’s
failure to cooperate to the best of its ability); Nat’l Nail Corp. v. United States, 45 CIT
___, ___, 390 F. Supp. 3d 1356, 1373 (2019) (“An adverse inference, on the other
hand, may only be drawn where the reason underlying the absence of necessary
information was the respondent’s failure to cooperate to the best of its ability, that is,
where the respondent failed to do the maximum it [was] able to do.”) (alteration in
original) (citation and internal quotation marks omitted).
Here, Commerce was able to analyze Navigator’s questionnaire responses and
determined that the allocated expenses, as reported, were, in fact, distortive. I&D Mem.
at 8; Navigator Final Analysis Mem. at 5. Navigator’s responses were not incomplete,
and Navigator did not withhold information. While Commerce’s findings permitted it to
disregard the allocated data and turn to the facts otherwise available, see 19 C.F.R.
§ 351.401(g)(2), more is required for the agency to use adverse facts available.
Therefore, Commerce’s use of an adverse inference is not supported by substantial
evidence. On remand, Commerce must either select a neutral value to use as facts
13 Commerce’s conflation of the requirements for facts available and adverse facts
available is reflected in the Government’s response brief, in which it argues that
Navigator failed to cooperate to the best of its ability “[b]ecause necessary information
was not on the record, in the form of actual U.S. brokerage and handling expenses for
the entries reported as allocated, and because Navigator failed to provide the requested
information.” Gov’t’s Resp. at 9 (emphasis added).
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available or provide an explanation addressing how Navigator failed to act to the best of
its ability that is distinct from Commerce’s basis for using facts available.
CONCLUSION AND O RDER
In accordance with the foregoing, it is hereby:
ORDERED that Commerce’s Final Results and Amended Final Results are
remanded to Commerce; and it is further
ORDERED that, on remand, Commerce shall reconsider both its selection of the
value used as Navigator’s allocated brokerage expense and its decision to use an
adverse inference in making that selection, consistent with this opinion; and it is further
ORDERED that Commerce shall file its remand results on or before February 20,
2020; and it is further
ORDERED that subsequent proceedings shall be governed by USCIT Rule
56.2(h); and it is further
ORDERED that any comments or responsive comments must not exceed 5,000
words.
/s/ 	Mark A. Barnett
Mark A. Barnett, Judge
Dated: November 22, 2019
New York, New York
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