Dezhou Hualude Hardware Products Co., Ltd. v. United States

Slip Op. 21-38
UNITED STATES COURT OF INTERNATIONAL TRADE
SHANXI HAIRUI TRADE CO., LTD., SHANXI
PIOONER HARDWARE INDUSTRIAL CO., LTD.,
SHANXI YUCI BROAD WIRE PRODUCTS CO., LTD.,
Plaintiffs,
and
DEZHOU HUALUDE HARDWARE
PRODUCTS CO., LTD.,
Consolidated Plaintiff,
and
XI’AN METALS & MINERALS IMPORT &
EXPORT CO., LTD.,
Plaintiff-Intervenor,
v.
UNITED STATES,
Defendant,
and
MID CONTINENT STEEL & WIRE, INC.,
Defendant-Intervenor.
Before: Leo M. Gordon, Judge
Consol. Court No. 19-00072
OPINION
Dated: April 7, 2021
[Commerce’s Final Results sustained.]
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Jeffrey S. Neeley and Stephen W. Brophy, Husch Blackwell, LLP of Washington,
DC for Plaintiffs Shanxi Hairui Trade Co., Ltd., Shanxi Pioneer Hardware Industrial Co.,
Ltd. and Shanxi Yuci Broad Wire Products Co., Ltd.
Lizbeth R. Levinson, Ronald M. Wisla, and Brittney R. Powell, Fox Rothschild LLP
of Washington, DC for Plaintiff Dezhou Hualude Hardware Products Co., Ltd.
Gregory S. Menegaz, J. Kevin Horgan, and Alexandra H. Salzman, deKieffer &
Horgan, PLLC of Washington, DC for Plaintiff-Intervenor Xi’an Metals & Minerals Import
& Export Co., Ltd.
Sosun 	Bae, 	Trial 	Attorney, 	Commercial 	Litigation 	Branch, 	Civil 	Division,
U.S. Department of Justice of Washington, DC for Defendant United States. With her on
the brief were Brian M. Boynton, Acting Assistant Attorney General, Jeanne E. Davidson,
Director, Patricia McCarthy, Assistant Director. Of counsel on the brief was Ayat Mujais,
Attorney, 	Office 	of 	the 	Chief 	Counsel 	for 	Trade 	Enforcement 	& 	Compliance,
U.S. Department of Commerce of Washington, DC.
Adam H. Gordon and Ping Gong, The Bristol Group PLLC of Washington, DC for
Defendant-Intervenor Mid Continent Steel & Wire, Inc.
Gordon, Judge: This action involves the final results of an administrative review
conducted by the U.S. Department of Commerce (“Commerce”) of the antidumping (“AD”)
order (“Order”) on certain steel nails from the People’s Republic of China (“PRC”). 	See
Certain Steel Nails from the People’s Republic of China, 84 Fed. Reg. 24,751 (Dep’t of
Commerce May 29, 2019) (amend. final results admin. review) (“Final Results”); see also
Issues and Decision Memorandum (Dep’t of Commerce Apr. 17, 2019), available at
https://enforcement.trade.gov/frn/summary/prc/2019-08273-1.pdf (last visited this date)
(“Decision Memorandum”).
Before the court are motions for judgment on the agency record under USCIT
Rule 56.2 filed by Plaintiffs Shanxi Hairui Trade Co., Ltd., Shanxi Pioneer Hardware
Industrial Co., Ltd., Shanxi Yuci Broad Wire Products Co., Ltd. (collectively, “Shanxi”),
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Dezhou 	Hualude 	Hardware 	Products 	Co., 	Ltd. 	(“Dezhou 	Hualude”), 	and 	Plaintiff-
Intervenor Xi’an Metals & Minerals Import & Export Co., Ltd. (“Xi’an Metals”). 	See
Shanxi’s Mot. for J. on the Agency R., ECF No. 31 (“Shanxi Br.”); Dezhou Hualude’s Mot.
for J. on the Agency R., ECF No. 35 (“Dezhou Br.”); Xi’an Metals’ Mot. for J. on the Agency
R., ECF No. 36 (“Xi’an Br.”); see also Def.’s Resp. Opp. Pl.’s Mot. for J. on the Agency
R., ECF No. 38 (“Def.’s Resp.”); Def.-Intervenor Mid Continent Steel & Wire, Inc.’s Resp.
to Pl.’s Mot. for J. on the Agency R., ECF No. 41 (“Def.-Intervenor’s Resp.); Shanxi’s
Reply in Supp. of Mot. for J. on the Agency R., ECF No. 45 (“Shanxi Reply”); Dezhou
Hualude’s Reply in Supp. of Mot. for J. on the Agency R., ECF No. 46 (“Dezhou Reply”);
Xi’an Metals’ Reply in Supp. of Mot. for J. on the Agency R., ECF No. 49 (“Xi’an Reply”). 1
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) (2018) 2 , and 28 U.S.C. § 1581(c) (2018).
For the reasons set forth below, the court sustains the Final Results.
I. 	Standard of Review
The court sustains Commerce’s “determinations, findings, or conclusions” unless
they are “unsupported by substantial evidence on the record, or otherwise not in
accordance with law.” 	19 U.S.C § 1516a(b)(1)(B)(i). 	More specifically, when reviewing
agency determinations, findings or conclusions for substantial evidence, the court
assesses whether the agency action is reasonable given the record as a whole.
1 All citations to parties’ briefs and the agency record are to their confidential versions
unless otherwise noted.
2 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2018 edition.
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Nippon Steel 	Corp 	v. 	United 	States, 	458 	F.3d 	1345, 	1350–51 	(Fed. 	Cir. 	2006).
Substantial evidence has been described as “such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.” 	DuPont Teijin Films USA v.
United States, 407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v.
NLRB, 305 U.S. 197, 229 (1938)). 	Substantial evidence has also been described as
“something 	less 	than 	the 	weight 	of 	evidence, 	and 	the 	possibility 	of 	drawing 	two
inconsistent conclusions from the evidence does not prevent an administrative agency’s
findings from being supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n,
383 U.S. 607, 620 (1966). 	Fundamentally, though, “substantial evidence” is best
understood as a word formula connoting a reasonableness review. 3 Charles H. Koch, Jr.,
Administrative Law and Practice § 9.24[1] (3d ed. 2021). Therefore, when addressing a
substantial evidence issue raised by a party, the court analyzes whether the challenged
agency action “was reasonable given the circumstances presented by the whole record.”
8A West’s Fed. Forms, National Courts § 3.6 (5th ed. 2020).
Separately, the two-step framework provided in Chevron, U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837, 842–45 (1984), governs judicial review of
Commerce’s interpretation of the Tariff Act. See United States v. Eurodif S.A., 555 U.S.
305, 316 (2009) (An agency’s “interpretation governs in the absence of unambiguous
statutory language to the contrary or unreasonable resolution of language that is
ambiguous.”).
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II. 	Discussion
A. Application of AFA to Dezhou Hualude
During the verification process for Dezhou Hualude’s supplier, Tianjin Lingyu,
Commerce observed the presence of certain boxes of steel nails labeled “Made in
Thailand” at Tianjin Lingyu’s plant. Decision Memorandum at 20. Commerce found this
to be evidence of fraudulent transshipment activity aimed at the circumvention of the
Order, stating:
we 	observed 	and 	photographed 	empty 	boxes 	ready 	for
packaging and sealed boxes ready for shipping which were
labeled as certain types of steel nails. The boxes were
designated 	for 	importation 	into 	the 	United 	States
(i.e., identified as certain types of nails, in English, under the
brands of two U.S. companies). The boxes were labeled
“Made in Thailand.” … Because the aforementioned nails
were indeed produced by Tianjin Lingyu but falsely labeled as
Thai origin at its Chinese factory, we find that this is evidence
of fraudulent transshipment activity, and calls into question
the 	veracity, 	completeness, 	and 	accuracy 	of 	all 	of 	the
information provided by Tianjin Lingyu.
Id. 	Commerce further found that Dezhou Hualude “could or should have been aware”
of Tianjin Lingyu’s fraudulent activities, and that by failing to deter such behavior on the
part Tianjin Lingyu, Dezhou Hualude had significantly impeded the current proceeding
pursuant to 19 U.S.C. § 1677e(a)(2)(C). 	Id. 	Consequently, Commerce applied partial
AFA for all nails sold by Dezhou Hualude that were sourced from Tianjin Lingyu. Id.
Both Dezhou Hualude and Xi’an Metals contend that Commerce’s decision to
apply partial AFA to Dezhou Hualude on the basis of Commerce’s discovery of boxes
labeled 	“Made 	in 	Thailand” 	on 	the 	premises 	of 	Dezhou 	Hualude’s 	supplier 	was
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unreasonable. 	See Dezhou Br. at 10 (“[T]he record does not contain any evidence
whatsoever that Tianjin Lingyu was involved in the alleged fraud or that these boxes were
linked in any manner to Dezhou Hualude.”); see also Xi’an Br. at 4. 	Dezhou Hualude
argues that the record shows that “Tianjin Lingyu was not responsible for the packaging
and that it [sic] employees and management did not speak English,” suggesting that
Tianjin Lingyu should not be held responsible for any mislabeling in English. Dezhou Br.
at 10. 	Xi’an Metals notes that “[Commerce] found no discrepancies with Tianjin Lingyu
books and records with respect to the costs of production.” Xi’an Br. at 4. Additionally,
Dezhou 	Hualude 	contends 	that 	Commerce’s 	determination 	that 	Dezhou 	Hualude
impeded the investigation because it could or should have been aware of Tianjin’s fraud
is unreasonable, maintaining that “there would be no justification under the antidumping
statute or other doctrine of law for holding Dezhou Hualude liable for its supplier’s fraud.”
Dezhou Br. at 10. Dezhou Hualude also argues that it was unreasonable for Commerce
to attribute its observations of Tianjin Lingyu’s plant to “Dezhou Hualude’s sales data or
Tianjin Lingyu’s production data” because these observations were made outside of the
applicable period of review. Id. at 11.
The Government maintains that Commerce’s determination that Tianjin Lingyu
was engaged in a fraudulent transshipment scheme during the period of review was
reasonable and lawful. 	Def.’s Resp. at 8. 	In conducting its verification process,
Commerce discovered physical evidence indicative of fraudulent transshipment, namely,
the 	boxes 	labeled 	“Made 	in 	Thailand” 	at 	Tianjin 	Lingyu’s 	plant. 	See 	Decision
Memorandum at 21. 	In view of evidence clearly consistent with a fraudulent scheme,
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Plaintiffs’ arguments regarding the supposedly inadvertent nature of Tianjin Lingyu’s
conduct and reference to certain linguistic gaps are unavailing. 	The existence of
mislabeled boxes indicating their origin in another country not subject to the Order justifies
Commerce’s conclusion that Tianjin Lingyu is engaged in a fraudulent transshipment
scheme. Further, Tianjin Lingyu’s employees’ purported inability to read English does not
excuse participation in a fraudulent transshipment scheme. Given that Commerce found
that the evidence on the record indicated that Tianjin Lingyu was involved with a
fraudulent transshipment scheme, the court agrees that it was reasonable for Commerce
to doubt the “veracity, completeness, and accuracy of all of the information provided by
Tianjin Lingyu.” 	See Decision Memorandum at 21. 	Commerce explained that it “takes
seriously its role in preventing fraud and evasion on its proceedings, and cannot rely on
information from parties who take part in such activities.” Id.
Dezhou Hualude notes that Commerce’s observations at the “Tianjin Lingyu
verification plant tour occurred outside the current period of review [(“POR”)] of August 1,
2016 through July 31, 2017,” and argues that Commerce’s finding of fraud could not be
reasonably attributed to “Dezhou Hualude’s sales data or Tianjin Lingyu’s production data
during the POR.” Dezhou Br. at 11. Dezhou Hualude, however, fails to demonstrate that
Commerce’s conclusion that Tianjin Lingyu’s fraudulent activity occurred during the POR
was 	unreasonable. 	First, 	verifications 	take 	place 	outside 	the 	POR 	due 	to 	the
retrospective nature of Commerce’s administrative reviews, meaning that the agency
conducts reviews of entries of subject merchandise after that merchandise is imported
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into the United States. See 19 C.F.R. 351.212(a). By Dezhou Hualude’s rationale, issues
discovered during verification could never be relied upon during administrative reviews.
Second, while Dezhou Hualude emphasizes the fact that the boxes were found
outside the POR as support for the inference that any fraudulent scheme occurred outside
the POR as well, Dezhou Hualude fails to establish that such conclusion is the one and
only reasonable inference. 	The Government notes that Dezhou Hualude’s argument
ignores the fact that “[a]lthough the labels on the boxes did not provide a date of sale,
Commerce observed several boxes that appeared to have been sitting in the plant for a
substantial amount of time, which led Commerce to believe that Tianjin Lingyu sold these
falsely labeled boxes during the period of review.” 	Def.’s Resp. at 6 (citing Verification
Report Addendum, CD 3 261). Given that Plaintiffs have failed to demonstrate that it was
unreasonable for Commerce to infer that Tianjin Lingyu engaged in fraudulent activity
during the POR, the court sustains Commerce’s finding. 	See Tianjin Wanhua Co. v.
United States, 41 CIT ___, ___, 253 F. Supp. 3d 1318, 1328 (2017) (emphasizing that
claimants challenging Commerce's determinations that choose among various options
must demonstrate that their position is the “one and only reasonable” option on the
record); Mitsubishi Heavy Indus. Ltd. v. United States, 275 F.3d 1056, 1062 (Fed. Cir.
2001) (“‘[T]he possibility of drawing two inconsistent conclusions from the evidence does
not prevent an administrative agency’s finding from being supported by substantial
evidence.’” (quoting Consolidated Edison, Co. v. NLRB, 305 U.S. 197, 229, (1938))).
3 “CD” refers to a document contained in the confidential administrative record.
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The more challenging question is whether it was reasonable for Commerce to
apply AFA to Dezhou Hualude. 	Commerce found no record evidence indicating that
Dezhou Hualude was in receipt of goods mislabeled as a part of Tianjin Lingyu’s
fraudulent transshipment activities. 	See Decision Memorandum at 21 (“[W]e… did not
find any link between Dezhou Hualude and the U.S. companies identified on the
fraudulently marked boxes of nails.”). Nor did Commerce point to any portion of the record
demonstrating 	that 	Dezhou 	Hualude 	was 	aware 	of 	Tianjin 	Lingyu’s 	fraudulent
transshipment activities. 	The Government explained that Commerce has a practice of
“attributing an unaffiliated party’s failure to cooperate to the respondent and drawing an
adverse inference when the respondent is in a position to induce the unaffiliated party.”
Def.’s Resp. at 9. Consistent with this practice, Commerce determined that applying AFA
to Dezhou Hualude based on Tianjin Lingyu’s fraud was reasonable given Dezhou
Hualude’s 	status 	as 	“a 	significant 	customer” 	of 	Tianjin 	Lingyu. 	See 	Decision
Memorandum at 21.
Having found that Dezhou Hualude was a “significant customer” of Tianjin Lingyu,
Commerce determined that Dezhou Hualude was (1) aware or constructively aware of
Tianjin’s 	fraudulent 	transshipment 	scheme 	and 	(2) 	capable 	of 	inducing 	Tianjin’s
compliance. Id. While Dezhou Hualude emphasizes that there was no information in the
record that it was aware of Tianjin Lingyu’s engagement in any fraud, Dezhou Br. at 12-13,
the court cannot conclude that it was unreasonable for Commerce to apply AFA to
Dezhou Hualude given the totality of the record. 	Commerce found that the relationship
between Dezhou Hualude and Tianjin Lingyu was so significant that the agency could
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conclude that Dezhou Hualude should be reasonably held to account for its significant
customer/supplier 	relationship 	with 	Tianjin 	Lingyu 	and, 	thereby, 	Tianjin 	Lingyu’s
fraudulent activity. Decision Memorandum at 20. Specifically, Commerce explained:
Dezhou Hualude’s sales of subject merchandise during the
POR account for a significant portion of Tianjin Lingyu’s total
production quantity during the POR. Similarly, Tianjin Lingyu
is the supplier of a substantial portion of Dezhou Hualude’s
sales of subject merchandise during the POR. 	Therefore,
Dezhou Hualude is not only a significant customer of Tianjin
Lingyu, but Tianjin Lingyu is a supplier of a substantial portion
of Dezhou Hualude’s sales of subject merchandise. 	As a
result, we find that Dezhou Hualude could, or should, have
been 	aware 	of 	Tianjin 	Lingyu’s 	fraudulent 	transshipment
activity, and therefore induced Tianjin Lingyu’s cooperation by
refusing to do business with Tianjin Lingyu. 	Further, we find
that Tianjin Lingyu would not be sufficiently deterred from its
fraudulent conduct if its customer (i.e., Dezhou Hualude) was
unaffected by Tianjin Liangyu’s non-cooperation.
Id. at 21. 	The Government argues that Commerce maintains the authority to apply
adverse inferences to a respondent who was situated such that they could have deterred
fraudulent conduct by an unaffiliated party. 	See Decision Memorandum at 21 n.105
(citing Mueller Comercial de Mexico, S. de R.L. De C.V. v. United States, 753 F.3d 1227,
1233 (Fed. Cir. 2014)); Def.’s Br. at 9. 	In Mueller, the U.S. Court of Appeals for the
Federal Circuit (“Federal Circuit”) noted that:
Mueller had an existing relationship with supplier Ternium.
Therefore, 	Mueller 	could 	potentially 	have 	refused 	to 	do
business with Ternium in the future as a tactic to force
Ternium to cooperate… if the cooperating entity has no
control 	over 	the 	non-cooperating 	suppliers, 	a 	resulting
adverse inference is potentially unfair to the cooperating
party.
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Id. at 1235. As in Mueller, here Commerce found that Dezhou Hualude and Tianjin Lingyu
had a significant customer/supplier relationship such that Dezhou Hualude could have
potentially refused to do business with Tianjin Lingyu as a tactic to induce Tianjin Lingyu
to desist from its participation in a fraudulent transshipment scheme. 	Cf. Mueller,
753 F.3d at 1233. 	However, Dezhou Hualude did not take such steps, therefore,
Commerce’s decision to rely on partial AFA with respect to Dezhou Hualude was
reasonable. 	At the same time, under the circumstances, Commerce determined that
“total AFA is not appropriate because we have no evidence that the issues identified
above have impacted Dezhou Hualude’s sales of subject merchandise produced by other
suppliers.” Decision Memorandum at 22.
Dezhou Hualude highlights that various concerns about the respondents’ behavior
and particular circumstances raised in Mueller are not present here. See Dezhou Reply
at 3–7 (distinguishing the scenario in Mueller, where “uncooperative supplier could avoid
its own AFA rate and funnel its sales though the cooperative mandatory respondent that
was subject to a lower duty deposit rate,” from circumstances in this matter). 	Dezhou
Hualude argues that Commerce’s determination here lacks “an inducement or a deterrent
impact on Tianjin Lingyu” that would justify the application of application of AFA to Dezhou
Hualude as a cooperative party. 	Id. at 7. 	Dezhou Hualude, however, omits the key
consideration for Commerce’s decision to apply AFA here, namely, Dezhou Hualude was
a significant customer of a supplier engaged in a fraudulent transshipment scheme
involving subject merchandise.
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As Commerce explained, it maintained “serious concerns with Tianjin Lingyu’s
actions (i.e., producing fraudulently marked boxes of nails and providing contradictory
and inaccurate information at verification), which not only reflect a failure to cooperate
that warrants application of an adverse inference, but also raise serious concerns
regarding attempts to undermine the administrative process.” 	Decision Memorandum
at 22. Commerce thus concluded that it “takes such issues seriously, and … intend[s] to
share with CBP evidence gathered in the course of our proceedings. In addition, [the
agency] will continue to look into this matter further in any future proceeding involving
Tianjin Lingyu.” 	Id. 	In Mueller, the court stated that “[t]o the extent that Commerce
chooses 	to 	rely 	on 	inducement/evasion 	considerations, 	its 	approach 	must 	be
reasonable[,]” 	and 	the 	court 	clarified 	that 	it 	did 	not 	“decide 	whether 	relying 	on
inducement/evasion rationales to calculate Mueller's rate would be reasonable in the
circumstances of this case.” Mueller, 753 F.3d at 1236. Here, Commerce concluded that
its discovery of evidence of a fraudulent transshipment scheme justified the use of partial
AFA as to Dezhou Hualude so that it had an incentive to take steps to either induce Tianjin
Lingyu to cease its fraudulent activities or cease using Tianjin Lingyu as a supplier. Based
on the record, the court concludes that Commerce reasonably determined that Dezhou
Hualude “could or should reasonably have been aware” of Tianjin Lingyu’s fraud and
further that Dezhou Hualude should have exercised its influence to induce Tianjin Lingyu
to desist from any fraudulent activity. See Decision Memorandum at 21. Accordingly, the
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court sustains as reasonable Commerce’s finding that Dezhou Hualude impeded the
investigation and its consequent determination to apply partial AFA. 4
B. Calculation of Sample Rate for Cooperative Non-Selected Respondents
“If it is not practicable [for Commerce] to make individual weighted average
dumping 	margin 	determinations” 	for 	each 	exporter 	or 	producer 	“involved 	in 	the
investigation or review”, 19 U.S.C. § 1677f-1(c)(2) authorizes Commerce to limit its
examination of respondents to either (A) a statistically valid sample of respondents; or
(B) respondents accounting for the largest volume of the subject merchandise under
review. 	19 	U.S.C. 	§ 	1677f-1(c)(2). 	Commerce’s 	general 	practice 	during
AD administrative reviews is to select respondents pursuant to § 1677f-1(c)(2)(B). 	See
Decision Memorandum at 7; see also Sample Methodology Notice, 78 Fed. Reg. 65,963,
65,964 (“Sample Methodology”). 	When Commerce selects respondents pursuant to
§ 1677f-1(c)(2)(B), Commerce’s practice has been to look to 19 U.S.C. § 1673d(c)(5) for
guidance when calculating the separate rate for respondents not examined in an
administrative review (the “separate rate” or “sample rate”), even though § 1673d(c)(5)
4 Since the court sustains Commerce’s application of partial AFA on this basis, Dezhou
Hualude’s remaining arguments challenging Commerce’s analysis of its factors of
production for water coating and the agency’s refusal to incorporate Tianjin Lingyu’s minor
corrections to FOP’s at verification are rejected as moot. See Dezhou Br. at 13–16, 16-17;
Decision Memorandum at 23 & 27 (“Since we are applying partial AFA for Dezhou
Hualude’s sales of subject merchandise produced by Tianjin Lingyu, we find this issue
moot and will not address it…. 	With respect to Tianjin Lingyu’s revised FOP database,
as discussed above in Comment 4, because we are not relying on Tianjin Lingyu’s
information for these final results and instead applying partial facts available to these
sales, we are not accepting these minor corrections.”).
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expressly applies to investigations (as opposed to administrative reviews). 5 See Decision
Memorandum at 10; see also 19 U.S.C. § 1673d(c)(5)(A) (“For purposes of this
subsection and section 1673b(d) of this title, the estimated all-others rate shall be an
amount equal to the weighted average of the estimated weighted average dumping
margins established for exporters and producers individually investigated, excluding any
zero and de minimis margins, and any margins determined entirely under section 1677e
of this title.”).
In 2013, Commerce adopted a new practice to normally select respondents
pursuant 	to 	§ 	1677f-1(c)(2)(A) 	under 	certain 	conditions. 	Specifically, 	Commerce
explained that it would proceed under § 1677f-1(c)(2)(A), rather than § 1677f-1(c)(2)(B)
when the following conditions are met:
(1) There is a request by an interested party for the use of
sampling to select respondents; (2) the Department has the
resources to examine individually at least three companies for
the segment; (3) the largest three companies (or more if the
Department intends to select more than three respondents)
by import volume of the subject merchandise under review
account for normally no more than 50 percent of total volume;
and (4) information obtained by or provided to the Department
provides a reasonable basis to believe or suspect that the
average export prices and/or dumping margins for the largest
exporters 	differ 	from 	such 	information 	that 	would 	be
associated with the remaining exporters.
5 The statute also explicitly applies only to market economy proceedings, see Decision
Memorandum at 10, but Commerce has adopted it in non-market economy proceedings
as well. See Yangzhou Bestpak Gifts & Crafts Co. v. United States, 716 F.3d 1370, 1374
(Fed. Cir. 2013). 	Beyond mentioning that the express text of the statute only covers
market economy proceedings, Commerce has not provided any rationale for why the
calculation of the separate rate should be any different in light of the non-market economy
context here. See generally Decision Memorandum.
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Sample Methodology, 78 Fed. Reg. at 65,964–65; see also Decision Memorandum at 8.
Commerce explained that it was adopting this policy change due to the concern that since
smaller 	exporters 	would 	not 	be 	selected 	for 	individual 	examination 	under
§ 1677f-1(c)(2)(B), they “may decide to lower their prices as they recognize that their
pricing behavior will not affect the AD rates assigned to them.” See Sample Methodology,
78 Fed. Reg. at 65,964; Decision Memorandum at 7–8. 	Commerce further stated that
under the new practice it would, on a case-by-case basis, include all determined rates,
including those based entirely on AFA, in the separate rate calculated for non-selected
respondents. 	See 	Sample 	Methodology, 	78 	Fed. 	Reg. 	at 	65,968–69; 	Decision
Memorandum at 10, 12–13.
In the Final Results, Commerce determined that it would select mandatory
respondents for the review pursuant to 19 U.S.C. § 1677f-1(c)(2)(A) in accordance with
its new practice. 	Decision Memorandum at 9 (“In short, we determined that given the
large disparity between Stanley’s calculated margins and the margins assigned to the
other respondents in the past eight administrative reviews, this raised the exact same
evasion concern that was expressed in the Sampling Methodology Notice. 	Therefore,
in light of these concerns, we appropriately relied on a statistically valid sample to select
respondents 	in 	this 	review.”). 	Commerce 	determined 	that 	it 	was 	not 	bound 	by
§ 1673d(c)(5) because administrative reviews are conducted pursuant to 19 U.S.C.
§ 1677f-1(c)(2). Id. at 10, 12. 	Commerce stated that there is no statute that addresses
the establishment of a rate to be applied to individual companies not selected for
examination in an administrative review conducted pursuant to 19 U.S.C. § 1677f-1(c)(2).
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Id. at 10. Despite this broad statement, Commerce acknowledged that “in administrative
reviews involving non-market economy countries, where Commerce does not employ
sampling as discussed below, Commerce’s practice has been to look to section 735(c)(5)
of the Act, which provides instructions for calculating the all-others rate in investigations,
for guidance when calculating the separate rate for respondents not examined in an
administrative review.” Id.
Commerce explained that it found § 1673d(c)(5) to be inapplicable in this
proceeding 	as 	“Commerce 	has 	selected 	respondents 	through 	sampling 	under
section 777A(c)(2)(A) of the Act, as opposed to relying on the largest producers/exporters
under section 777A(c)(2)(B) of the Act.” 	Id. at 11. 	Commerce noted that “[w]hile there
are situations when it is not appropriate to include AFA or zero/de minimis rates in the
rate to be applied to companies whose entries are not individually examined, Commerce’s
determination on whether to include or exclude these rates in this case is based on
Commerce’s method of respondent selection through sampling and the fact that this is an
administrative review and not an investigation.” Id. Commerce concluded “that excluding
AFA rates from the sample rate would give respondents the ability to manipulate the all
others rate,” and that “including AFA rates in the sample rate” is important “to maintain
the validity of the sample.” Id. Consequently, Commerce included the AFA rate assigned
to Shandong Dinglong, a mandatory respondent that “received a rate based on AFA
based on its withdrawal from the review,” in its calculation of the sample rate in the Final
Results. See id. at 10, 12–13.
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Commerce noted that its authority to exercise discretion in calculating the sample
rate was affirmed by this Court when challenged in two prior cases. 	See Decision
Memorandum at 10 n.43, 11, & 12 n.51 (citing Asociacion Colombiana de Exportadores
de Flores v. United States, 13 CIT 13, 704 F. Supp. 1114 (1989), aff’d, 901 F.2d 1089
(Fed. Cir. 1990), and Laizhou Auto Brake Equip. Co. v. United States, 32 CIT 711 (2008)).
In Asociacion, the court considered Commerce’s use of sampling and noted that
Commerce was justified in including “in its all other rate best information rates for
companies selected for the sample who did not respond to questionnaires.” Asociacion,
13 CIT at 21 n.11, 704 F. Supp. at 1121 n.11. 	The court explained that “[i]n a random
sampling situation, to exclude such non-responding companies from the all other rate
would undermine the overall methodology. This case is distinguishable from non-random
sampling cases on this point.” Id.
In 	Laizhou, 	Commerce 	conducted 	an 	administrative 	review 	by 	selecting
respondents pursuant to 19 U.S.C. § 1677f-1(c)(2)(A), and included in its calculation of
the sample rate all individually investigated respondents, including two de minimis rates
and one rate based on AFA. 	Laizhou, 32 CIT at 713–14, 724. 	The court affirmed
Commerce’s inclusion of an AFA rate in the sample rate calculation, explaining that
because administrative reviews conducted pursuant to § 1677f-1(c)(2)(A) require that a
statistically valid pool of respondents be selected for calculating the rate for non-selected
respondents, 	Commerce 	may 	compute 	“a 	statistically 	valid 	sample 	rate 	that 	is
representative of the population as a whole” that “include[s] the margins determined for
all selected respondents, even if that sample rate happens to be composed in part on a
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Consol. Court No. 19-00072 	Page 18
respondent’s rate which is based on adverse facts available.” 	See Laizhou, 32 CIT
at 723–24. The court rejected plaintiffs’ argument in Laizhou that Commerce’s approach
“punishes fully cooperative parties by assigning them a rate unfairly inflated by the
non-cooperation of another party,” reasoning that a “sample rate by its nature cannot
meet the precision of an individualized rate as to any given party.” 	Laizhou, 32 CIT at
724 (internal quotations omitted). 	The court further noted that “companies that would
otherwise have received an individualized rate lower than the sample rate will in a sense
be punished while those that would otherwise have received a higher rate will benefit.
This element is an inherent and accepted part of any sample.” Id.
Shanxi and Xi’an Metals (“separate rate Plaintiffs”) now challenge Commerce’s
sample rate calculation methodology in the Final Results. 	While the separate rate
Plaintiffs concede that Asociacion and Laizhou appear to support the lawfulness of
Commerce’s sample rate calculation in the final results, the separate rate Plaintiffs
“respectively request that the Court consider these opinions in light of the law, and the
facts of this case,” arguing that “[a]n important issue appears not to have been addressed
in these cases, specifically, whether Commerce’s methodology was consistent with the
express requirements of the statute.” Shanxi Br. at 5. The separate rate Plaintiffs further
note that subsequent decisions have called into question “the reasonableness of this
methodology, as applied to this appeal.” Id.
The separate rate Plaintiffs argue that 19 U.S.C. § 1677f-1(c)(2) does not address
how to calculate the sample rate, and that Commerce’s interpretation of § 1677f-1(c)(2)
(and its refusal to apply § 1673d(c)(5) in this context) creates an unreasonable distinction
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that runs contrary to the statutory scheme as a whole. See Xi’an Br. at 6 (“This statutory
scheme also makes no distinction between selecting mandatory respondents using a
volume or sampling methodology.”); Shanxi Reply at 2–3 (arguing that Commerce’s
interpretation “ignores the rules of statutory interpretation which provide that a statute
must be read as a whole.”). 	They maintain that § 1677f-1(c)(2) merely establishes the
methods 	that 	Commerce 	may 	choose 	from 	in 	selecting 	respondents 	for 	both
administrative reviews and initial investigations, and that regardless of the respondent
selection method, the separate rate calculation methodology is controlled by § 1673d.
See Shanxi Br. 5–8. 	Therefore, the separate rate Plaintiffs contend that Commerce’s
inclusion of Shandong Dinglong’s AFA rate in the sample rate of the Final Results was
unlawful as Commerce’s methodology violated the limitations of § 1673d(c)(5). 	See id.
(citing § 1673d(c)(5) and Statement of Administrative Action accompanying the Uruguay
Round Agreements Act, H.R. Doc. No. 103-316, vol. 1 at 873).
While the separate rate Plaintiffs first argue that “the plain language of the statute”
dictates a ruling in its favor, their proposed statutory interpretation would have the court
ignore the introductory clause of § 1673(c)(5)(A), which limits the requirements of that
provision to investigations. See Shanxi Br. at 7; 19 U.S.C. § 1673(c)(5)(A); see also Xi’an
Br. at 6–7. Contrary to the separate rate Plaintiffs’ contentions, the statute is silent as to
the 	precise 	question 	of 	how 	Commerce 	should 	calculate 	the 	separate 	rate 	in
administrative reviews, and the court must consider whether Commerce’s interpretation
and application of the statute here is reasonable. 	See Chevron, 467 U.S. at 842–43
(“When a court reviews an agency’s construction of the statute which it administers, it is
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Consol. Court No. 19-00072 	Page 20
confronted with two questions. 	First, always, is the question whether Congress has
directly spoken to the precise question at issue. If the intent of Congress is clear, that is
the end of the matter; for the court, as well as the agency, must give effect to the
unambiguously expressed intent of Congress. …. if the statute is silent or ambiguous with
respect to the specific issue, the question for the court is whether the agency’s answer is
based on a permissible construction of the statute.”).
Commerce explained that its interpretation of the proper sample rate calculation
methodology under § 1677f-1(c)(2)(A) was reasonable because “excluding AFA rates
from the sample rate would give respondents the ability to manipulate the all others rate,”
and that “including AFA rates in the sample rate” is important “to maintain the validity of
the sample.” Id. at 11. Commerce noted that “the underlying methodology in a random
sampling context creates an expectation that the dumping behavior of the selected firms
is representative of the population as a whole,” which Commerce maintains “is not present
when 	respondents 	are 	selected 	based 	on 	the 	largest 	volume,” 	pursuant 	to
§ 1677f-1(c)(2)(B). Id. Commerce further noted that its selected methodology reflected
its concerns about rate manipulation by non-selected respondents in this proceeding.
Specifically, Commerce stated:
Commerce finds that it is appropriate in this review to include
all rates to address concerns that the average export prices
and/or dumping margins for the largest exporter (i.e., Stanley)
differs 	from 	the 	remaining 	exporters, 	and 	to 	include
companies under review with relatively small import volumes
that 	have 	effectively 	been 	excluded 	from 	individual
examination. 	Prior to our use of sampling, these companies
maintained a “free-pass” by successfully obtaining a separate
rate that would be based solely, or largely, on Stanley’s
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Consol. Court No. 19-00072 	Page 21
margin. 	Further, 	our 	experience 	in 	this 	proceeding, 	as
outlined above, is that when we selected additional mandatory
respondents, these companies either stopped cooperating
after selection as a mandatory respondent, or would be found
dumping at margins much higher than Stanley’s margin.
Decision Memorandum at 13. 	Given these concerns about the expected behavior of
non-selected respondents, and particularly because of the specific enforcement concerns
identified over the course of the proceeding, Commerce concluded:
Therefore, our use of sampling, and our decision to maintain
all three rates, including an AFA rate, in the sample rate, is
consistent 	with 	the 	evasion 	concerns 	expressed 	in 	the
Sampling 	Methodology 	Notice 	and 	our 	specific 	evasion
concerns regarding the large disparity between Stanley’s
calculated margins and the margins assigned to the other
respondents in the past eight administrative reviews. Indeed,
the fact that one of the three mandatory respondents in this
review provided a separate rate response, then withdrew from
participation after it was selected as a mandatory respondent
based on sampling, is reflective of our experience of the non-
Stanley respondents in the history of this proceeding, as
outlined above. 	This further demonstrates that the inclusion
of the company’s AFA rate in the sample rate is indicative of
the population as a whole.
Id.
As mentioned above, Commerce supported its rationale by relying on Laizhou and
Asociacion, which affirmed Commerce’s inclusion of AFA rates in the sample rate. See
id. at 11–12. 	Shanxi argues that Laizhou and Asociacion were decided prior to the
decision by the Federal Circuit in Albemarle Corp. v. United States, 821 F.3d 1345 (Fed.
Cir. 2016). 	The separate rate Plaintiffs maintain that Albemarle held that § 1673d(c)(5)
applies equally in the context of administrative reviews as it does to investigations. Shanxi
Br. at 3–4 (quoting Albemarle, 821 F.3d at 1352–53). 	In Albemarle, Commerce
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conducted an administrative review and selected respondents pursuant to 19 U.S.C.
§ 1677f-1(c)(2)(B). 	See 821 F.3d at 1348, 1353. 	The two individually examined
respondents were assigned de minimis margins. Id. at 1349. Commerce proceeded to
calculate separate rates for the non-selected respondents “based on the margins it had
assigned them during the previous review period.” 	Id. 	The Federal Circuit noted that
even though Commerce was conducting an administrative review, Commerce could not
reasonably avoid the rate calculation method established in 19 U.S.C. § 1673d(c)(5),
as Commerce itself had found that § 1673d applied in the underlying proceeding. See id.
at 1351–53. 	Therefore, since the individually examined respondents were assigned
de minimis margins, the rate Commerce applied to non-selected respondents should be
calculated pursuant to the “expected method” in § 1673d(c)(5)(B). See id. (“the expected
method to calculate the separate rate in such circumstances is to average the individually
examined respondents’ de minimis margins.”). 	The court rejected Commerce’s attempt
to bypass the “expected method” § 1673d(c)(5)(B), noting that Commerce’s argument
that there was no evidence demonstrating that the “separate rate respondents engaged
in pricing behavior similar to the [mandatory respondents]” was “backwards.” 	See id.
at 1353. 	The court clarified that in order for Commerce to deviate from the statute’s
expected method, the burden was on Commerce to “find based on substantial evidence
that there is a reasonable basis for concluding that the separate respondents’ dumping is
different.” Id.
Although separate rate Plaintiffs here cite language in Albemarle that appears to
support their preferred interpretation of 19 U.S.C. § 1677f-1(c)(2), their reliance on
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Consol. Court No. 19-00072 	Page 23
Albemarle is misplaced. See Shanxi Br. at 3–4; Xi’an Br. at 6. In Albemarle, Commerce
determined that § 1673d(c)(5) applied in the underlying proceeding, but Commerce failed
to provide a reasonable basis for deviating from that provision’s terms. 	See id.
at 1352-53. 	Here, Commerce rejected the applicability of 19 U.S.C. § 1673d(c)(5)(A),
stating that its separate rate calculation is solely based on the terms of § 1677f-1(c)(2)(A).
See Decision Memorandum at 11–12. 	Accordingly, the decision in Albemarle is not
outcome-determinative with respect to separate rate Plaintiffs’ challenges presented in
this matter.
The separate rate Plaintiffs also argue that Commerce lacks discretion to include
AFA rates when calculating the sample rate during administrative reviews conducted
pursuant to 19 U.S.C. § 1677f-1(c)(2)(A). Shanxi Reply at 4; see also Shanxi Br. at 7–8.
This argument is unpersuasive. 	The express prohibition on the inclusion of AFA rates
found in § 1673d(c)(5)(A) for calculating the all-others rate in investigations is not found
in any statutory provision covering administrative reviews. Congress, therefore, through
omission, left Commerce with discretion of how to handle AFA rates when calculating the
all-others rate in administrative reviews. 	And here, separate rate Plaintiffs omit any
mention of Commerce’s reasonable exercise of that discretion through its explanation that
its rate calculation methodology was predicated on its “evasion concerns expressed in
the Sampling Methodology Notice and our specific evasion concerns regarding the large
disparity between Stanley’s calculated margins and the margins assigned to the other
respondents in the past eight administrative reviews.” 	Decision Memorandum at 13.
Commerce further emphasized “that one of the three mandatory respondents in this
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Consol. Court No. 19-00072 	Page 24
review provided a separate rate response, then withdrew from participation after it was
selected as a mandatory respondent based on sampling, is reflective of our experience
of the non-Stanley respondents in the history of this proceeding.” Id.
19 U.S.C. § 1677f-1(c)(2)(A) authorizes Commerce to employ a statistically valid
sampling method when choosing respondents to investigate, but does not instruct
Commerce as to how to reach a statistically valid result in calculating the sample rate, the
purpose of having a statistically valid sample in the first place. 	See Laizhou, 32 CIT
at 713–14, 724. 	In light of the silence of § 1677f-1(c)(2) on the matter, separate rate
Plaintiffs’ argument that § 1673d(c)(5) should control Commerce’s rate calculation
methodology has some intuitive merit; however, the court cannot conclude that Congress
intended to narrowly limit Commerce’s rate calculation authority in such a manner,
especially given the threat of evasion that Commerce identified in the underlying
proceeding.
The separate rate Plaintiffs argue in the alternative that “[e]ven if the Court
determines that Commerce’s methodology is not contrary to the express terms of the
statute, the methodology is unreasonable.” 	Shanxi Br. at 9. 	Separate rate Plaintiffs
state that “[w]hile the courts have held that Commerce is theoretically allowed to average
a de minimis rate and an AFA rate to determine the margin for cooperative non-mandatory
respondents when the statutory exception is applicable, the courts have consistently
found the methodology unreasonable in practice.” 	Id. 	Commerce determined that it is
necessary to include AFA rates in calculating the sample rate in order “to maintain the
validity of the sample.” 	Decision Memorandum at 11. 	Commerce explained that
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Consol. Court No. 19-00072 	Page 25
“because a random sampling procedure was used, Commerce reasonably estimated,
in accordance with statistical sampling principles, that other exporters in the population
might also have received these rates, had the non-selected firms been individually
examined,” and concluded that exclusion of AFA rates would undermine the sample being
“indicative of the population as a whole.” Id. at 12.
Separate rate Plaintiffs cite to other decisions that held Commerce’s separate rate
calculation methodology to be unreasonable due to the inclusion of AFA rates in the
calculation. 	See Shanxi Br. at 9 (citing Yangzhou Bestpak Gifts & Crafts Co. v. United
States, 716 F.3d 1370 (Fed. Cir. 2013) and Baroque Timber Indus. (Zhongshan) Co. v.
United States, 38 CIT ___, ___, 971 F. Supp. 2d 1333, 1342 (2014)). 	Separate rate
Plaintiffs’ 	reliance 	on 	these 	decisions 	is 	also 	misplaced 	as 	they 	did 	not 	involve
Commerce’s 	use 	of 	the 	sampling 	methodology 	under 	§ 	1677f-1(c)(2)(A). 	Here,
Commerce determined that the inclusion of the results of AFA-rate respondents is
necessary “to maintain the validity of the sample.” See Decision Memorandum at 11–13.
Separate rate Plaintiffs maintain that “there is no basis to impute any measure of
AFA” to Plaintiffs “just because one company declined to respond to the Department’s
request for information.” Shanxi Br. at 10. Further, the separate rate Plaintiffs argue that
Commerce’s reason for including AFA rates, specifically when selecting respondents via
sampling pursuant to § 1677f-1(c)(2)(A), ignores the fact that Commerce’s alternate
selection method (based on volume under § 1677f-1(c)(2)(B)) assumes that the largest
volume 	exporters 	“will 	be 	representative 	of 	all 	other 	companies 	not 	selected 	for
examination.” 	Id. (citing Albemarle, 821 F.3d at 1353). 	Therefore, the separate rate
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Plaintiffs contend that Commerce cannot reasonably justify including AFA rates in the
sampling context solely to ensure “representativeness.” See id. at 10–11.
Administrative reviews conducted pursuant to 19 U.S.C. § 1677f-1(c)(2)(B) are
assumed to be representative of all other companies not selected for examination. See
Albemarle, 821 F.3d at 1353 (“The very fact that the statute contemplates using data from
the largest volume exporters suggests an assumption that those data can be viewed as
representative of all exporters.”). 	19 U.S.C. § 1677f-1(c)(2)(A) requires that Commerce
use a statistically valid sample of individually investigated respondents when calculating
an 	average 	rate 	for 	non-selected 	respondents. 	Pursuant 	to 	§ 	1677f-1(c)(2)(A),
Commerce is obligated to ensure that the sampling process it uses results in a selection
that is representative of non-selected respondents. 	See 19 U.S.C. § 1677f-1(c)(2)(A);
see also Laizhou, 32 CIT at 724 (“Suffice it to say that the point of requiring selection from
a statistically valid pool of respondents is to arrive at a statistically valid dumping rate.”);
Decision Memorandum at 11 (“the underlying methodology in a random sampling context
creates an expectation that the dumping behavior of the selected firms is representative
of the population as a whole.”). 	Therefore, the volume-based selection of respondents
under § 1677f-1(c)(2)(B) and Commerce’s practice of applying the rate calculation
method of § 1673d(c)(5)(A) are distinguishable from the scenario presented here, where
Commerce has determined that under § 1677f-1(c)(2)(A) it may include AFA rates in the
sample rate calculation on a case-by-case basis.
The separate rate Plaintiffs’ argument also ignores the history of the previous eight
administrative 	reviews 	in 	which 	other 	selected 	respondents 	were 	non-responsive.
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See Decision Memorandum at 13; see also Def.-Intervenor’s Resp. at 14–15. Commerce
explained that “[i]n determining to base respondent selection on sampling, we found that
the information provided by the petitioner (i.e., company margins from previous segments
of the proceedings) provided a reasonable basis to believe or suspect that the average
dumping margins for the exporter who has consistently been examined as one of the
largest exporters in each review (Stanley) differ from dumping margins that would be
associated with the remaining exporters.” Decision Memorandum at 9. Commerce also
noted:
in each of the eight administrative reviews under this order,
Stanley has consistently been one of the largest exporters,
and 	has 	been 	selected 	as 	a 	mandatory 	respondent. 	In
addition, 	Stanley 	has 	consistently 	been 	a 	cooperative
respondent, and its average calculated weighted-average
dumping 	margin 	over 	the 	previous 	eight 	administrative
reviews is 7.02 percent. 	In contrast, in each of the eight
administrative 	reviews, 	the 	other 	mandatory 	respondents
either obtained a much higher calculated margin, did not
qualify for a separate rate, or were otherwise non-cooperative
and received a margin based on total [AFA]. … the average
margin for respondents other than Stanley, including non-
calculated margins, is 106.77 percent. Even when we do not
include those non-calculated margins, the average margin for
respondents other than Stanley is 105.71 percent. Moreover,
throughout the history of the proceeding, the China-wide rate,
assigned 	to 	those 	respondents 	who 	have 	failed 	to
demonstrate their independence from the China-wide entity,
has remained 118.04 percent.
Id. Accordingly, Commerce concluded by determining that “our use of sampling, and our
decision to maintain all three rates, including an AFA rate, in the sample rate, is consistent
with the evasion concerns expressed in the Sampling Methodology Notice and our
specific evasion concerns regarding the large disparity between Stanley’s calculated
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Consol. Court No. 19-00072 	Page 28
margins 	and 	the 	margins 	assigned 	to 	the 	other 	respondents 	in 	the 	past 	eight
administrative reviews.” 	Id. at 13. 	Given Commerce’s findings as to the potential for
evasion in this proceeding, the court cannot conclude that Commerce acted unreasonably
by determining that this pattern of non-responsiveness by smaller respondents randomly
selected for review was representative of the likely behavior of non-selected respondents.
Therefore, 	the 	court 	sustains 	as 	reasonable 	Commerce’s 	sample 	rate 	calculation
methodology in the Final Results.
III. 	Conclusion
For the foregoing reasons, the court sustains the Final Results. 	Judgment will
enter accordingly.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: April 7, 2021
New York, New York
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