Federal Circuit Says Commerce Can Use Total AFA Over CONNUM-Specific Reporting Requirement

"This is a very good decision that confirms Commerce’s authority to reject efforts by respondents to report their data in self-serving ways without sufficient justification," Adam Gordon, counsel for defendant-appellee Mid Continent Steel & Wire, told Trade Law Daily. "This decision is a good reminder to respondents that Commerce’s instructions mean what they say. I expect to see this decision applied in many cases going forward."

The case concerns the 10th administrative review of the antidumping duty order on steel nails from China -- an order put in place in 2008. In the initial investigation, Pioneer received a separate rate, indicating it rebutted the presumption of Chinese government control. In 2013, Commerce conducted the third review of the order, declaring for this review and all future reviews, respondents will be required to report all FOP data on a CONNUM-specific basis.

In the 10th administrative review, Pioneer was tapped as one of three mandatory respondents, marking the first time it was obliged to respond in a review. During the proceeding, Pioneer failed to submit its FOP data on a CONNUM-specific basis, with petitioner Mid Continent contesting the respondent's submissions. Following the review's preliminary determination, Commerce issued Pioneer a supplemental questionnaire, to which the company answered that it had no cost records that would support any other allocation methodology. In the end, Pioneer got hit with the 118.04% total AFA, China-wide rate.

The Court of International Trade upheld this rate, finding that since Commerce's practice of requiring CONNUM-specific reporting had been set since the third review, the respondent should have understood it as the proper method in which to submit its FOP data (see 2106090048).

Pioneer appealed, arguing Commerce's change to the reporting of this data in this way is a legislative rule requiring a notice-and-comment period. Stoll, who wrote the opinion, said a rule does not amend an existing regulation -- a standard that establishes a change as a legislative rule -- merely because it gives "crisper and more detailed lines" than the regulation. Commerce's regulation also says the respondent must explain why its allocation method doesn't cause inaccuracies or distortions. The agency said FOP information submitted in other formats resulted in data that didn't reasonably reflect the subject merchandise's production cost.

"Commerce was therefore entitled to clarify the regulation regarding the data used in performing margin calculations in the third administrative review because it needed data that 'more accurately reflected the costs associated with the production and sale of the subject merchandise,'" Stoll said. Pioneer argued this view is inconsistent with the Tariff Act of 1930, which expresses a preference for relying on a respondent's normal records, and said Commerce failed to find the company's records do not reasonably reflect the production cost. But Commerce did just that, Stoll said. Commerce explained why the need for CONNUM-specific data is "essential for the accurate calculation of costs due to the variations in physical characteristics of the merchandise."

Pioneer further argued against the use of total AFA, urging the appellate court find its use was not backed by substantial evidence. Again, the Federal Circuit sided with the U.S., saying Commerce reasonably found Pioneer failed to cooperate to the best of its ability "by not maintaining adequate records and by not developing a methodology to report product-specific costs." The respondent gave only "short, conclusory statements" as to why it could not reply with the CONNUM-specific reporting requirement.

"Moreover, Commerce’s requests for CONNUM-specific data should not have come as a surprise," the opinion said. "Commerce announced during the third administrative review, nearly seven years prior to the underlying tenth administrative review, that it intended to require that 'all other future respondents for this case report all FOPs data on a CONNUM-specific basis using all product characteristics in subsequent reviews,' explaining that by this stage in the antidumping proceeding, 'documentation and data collection requirements should now be fully understood' by all respondents." At the very least, Pioneer should have explained further why it couldn't comply with this requirement, Stoll said.

The respondent also tried to advance the argument that small variations in the different types of nails doesn't distort the information. The court ruled that in making this argument, "Pioneer bolsters the case against it" since the "best of ability standard" does not condone carelessness. "If a methodology for recordkeeping could have been easily derived, Pioneer cannot argue in good faith that it has acted to the best of its ability," the court said.

(Xi'An Metals & Minerals Import & Export Co. v. U.S. , Fed. Cir. #21-2205, dated 09/23/22, Judges Kimberly Moore, Pauline Newman and Kara Stoll. Attorneys: Joseph Diedrich of Husch Blackwell for plaintiff-appellant Pioneer; Lizbeth Levinson of Fox Rothschild for plaintiff-appellant Building Material Distributors; Robert Kiepura for defendant-appellee U.S. government; Adam Gordon of The Bristol Group for defendant-appellee Mid Continent Steel & Wire)