Foshan Shunde Yongjian Housewares & Hardware Co., Ltd. v. United States

2011 CIT 123

• Court: United States Court of International Trade
• Decided: October 12, 2011
• Docket: 10-00059
• Status: Published

Opinion

Court No. 10-00059 Page 2

International, Inc.

Eaton, Judge: Before the court is plaintiffs’ motion for

judgment on the agency record, challenging the Department of

Commerce’s (“Commerce” or the “Department”) final results of the

Fourth Administrative Review of the antidumping duty order on

Floor Standing Metal-Top Ironing Tables and Certain Parts Thereof

from the People’s Republic of China, 75 Fed. Reg. 3, 201 (Dep’t

of Commerce Jan. 20, 2010) (final results of administrative

review) and the accompanying Issues and Decision Memorandum

(“Issues & Dec. Mem.”) (collectively, the “Final Results”) for

the period of review (“POR”) August 1, 2007 through July 31,

2008. See Plaintiff’s Mem. of Pts. & Auths. in Supp. of Pls.’

Mot. J. on the Agency R. (“Pls.’ Mem.) 2.

The court has jurisdiction pursuant to 28 U.S.C. § 1581(c)

(2006). For the reasons set forth herein, the Final Results are

sustained, in part, and this matter is remanded to the Department

for further proceedings.

BACKGROUND

Plaintiff Foshan Shunde Yongjian Housewares & Hardware Co.,

Ltd. (“Foshan Shunde”) is a producer and exporter of ironing

boards from the People’s Republic of China (“PRC”). Plaintiff

Polder, Inc. (“Polder”) is a domestic importer of ironing boards

from the PRC. Ironing boards exported by Foshan Shunde to the Court No. 10-00059 Page 3

United States, and imported by Polder, are covered by the

antidumping order on ironing boards from the PRC. See Notice of

Floor-Standing, Metal-Top Ironing Tables and Certain Parts

Thereof from the PRC, 69 Fed. Reg. 47,868 (Dep’t of Commerce Aug.

6, 2004) (amended final determination of sales at less than fair

value and antidumping duty order) (the “Order”).

On August 1, 2008, Commerce published a notice of

opportunity for interested parties to request a fourth

administrative review of the Order. On August 29, 2008, pursuant

to 19 C.F.R. § 351.213(b)(2) (2011), defendant-intervenor Home

Products International, Inc. (“HPI” or “defendant-intervenor”)

asked for a review of ironing board sales made by Foshan Shunde.

On that same date, Foshun Shunde requested a review of its own

sales.

The Department issued the preliminary results of its

administrative review on September 8, 2009. See Floor-Standing,

Metal-Top Ironing Tables and Certan Parts Thereof from the PRC,

74 Fed. Reg. 46,083 (Dep’t of Commerce Sept. 8, 2009)

(preliminary results of antidumping duty administrative review)

(the “Preliminary Results”). In the Preliminary Results, the

Department found that Foshun Shunde’s “unreliable and

inconsistent” responses to questionnaires concerning the

company’s factors of production and sales data warranted the

application of adverse facts available (“AFA”) to all of the Court No. 10-00059 Page 4

company’s questionnaire responses when determining its dumping

margin.1 Id. at 46,085; 19 U.S.C. § 1677e(b) (2006).

Commerce further found that Foshan Shunde was not entitled

to separate-rate status,2 concluding that “because the Department

determine[d] that Foshan Shunde’s responses [were] unreliable and

inconsistent, . . . Foshan Shunde has not demonstrated that it

operates free from government control.” Preliminary Results, 74

1 The dumping duty margin is “the amount by which the normal price exceeds the export price or constructed export price of the subject merchandise.” 19 U.S.C. § 1677(35)(A). If the price of an item in the home market (normal value) is higher than the price for the same item in the United States (export price), then the dumping margin comparison produces a positive number that indicates dumping has occurred. 2 Whether Foshan Shunde is entitled to separate-rate status is an issue because the company operates in the PRC, which is a non-market economy country. A non-market economy country includes “any foreign country that the administering authority [Commerce] determines does not operate on market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of the merchandise.” 19 U.S.C. § 1677(18)(A); Shandong Huarong Gen. Group Corp. v. United States, 28 CIT 1624, 1625 n.1 (2004) (not reported in the Federal Supplement). “Any determination that a foreign country is a nonmarket economy country shall remain in effect until revoked by the administering authority.” 19 U.S.C. § 1677(18)(C)(i). The PRC has been determined to be a non-market economy country and has been treated as such in all past antidumping investigations. Zhejiang Native Produce & Animal By-Products Imp. & Exp. Corp. v. United States, 27 CIT 1827, 1834 n.14 (2003) (not reported in the Federal Supplement) (citations omitted).

When an exporter operates in a non-market economy country Commerce presumes it to be part of a country-wide entity controlled by that country’s government. If that exporter can establish that it operates free from government control, however, it is entitled to have its own “separate-rate” based on its own factors of production and sales data, or if AFA is applicable, by an acceptable method. Court No. 10-00059 Page 5

Fed. Reg. at 46,085. As it has done here, Commerce commonly

refers to its determination to apply AFA to the totality of a

respondent’s submissions as “total AFA.”3

After receiving comments from plaintiffs and defendant-

intervenor, the Department issued the Final Results on January

20, 2010. In the Final Results, Commerce made no changes to its

Preliminary Results and, thus, applied “total AFA” to Foshan

Shunde’s questionnaire responses, retained its determination that

the company was not entitled to a separate rate, and assigned the

PRC-wide antidumping duty margin of 157.68%. See Final Order, 75

Fed. Reg. at 3,202; Issues & Dec. Mem. at 23-24.

Plaintiffs, by their motion, challenge two aspects of the

Final Results. First, they make a pair of related claims: (1)

that the Department’s determination to apply AFA to Foshan

Shunde’s factors of production and sales data was in error; and

(2) that, should they fail in their effort to have the AFA

determination found unlawful, the Department should be directed

to apply only partial AFA. Second, plaintiffs challenge

Commerce’s denial of separate-rate status to Foshan Shunde, and

3 While the phrase “total AFA” is not referenced in either the statute or the agency's regulations, it can be understood, within the context of this case, as referring to Commerce’s application of the “facts otherwise available” and “adverse inferences” provisions of 19 U.S.C. § 1677e after rejecting as untrustworthy all information submitted by respondents in this review. Court No. 10-00059 Page 6

the resulting assessment of the PRC-wide antidumping rate of

157.68%.

STANDARD OF REVIEW

The standard of review is set forth in 19 U.S.C.

§ 1516a(b)(1)(B)(i), which provides, in relevant part, that the

court “shall hold unlawful any determination, finding, or

conclusion found . . . to be unsupported by substantial evidence

on the record or otherwise not in accordance with law.”

Accordingly, “Commerce’s determinations of fact must be sustained

unless unsupported by substantial evidence in the record and its

legal conclusions must be sustained unless not in accordance with

law.” Norsk Hydro Canada, Inc. v. United States, 472 F.3d 1347,

1357 (Fed. Cir. 2006).

DISCUSSION

I. Commerce’s AFA Determination on Factors of Production and Sales Data

A. Legal Framework for Applying AFA

Commerce is charged with administering the antidumping laws,

which includes carrying out the “overriding purpose of . . .

calculat[ing] dumping margins as accurately as possible.”

Parkdale Int'l v. United States, 475 F.3d 1375, 1380 (Fed. Cir.

2007). The Department generally makes its antidumping

determinations based on the information it solicits and receives Court No. 10-00059 Page 7

from interested parties concerning the normal value and export

price of the subject merchandise.

The Department may, however, rest its determinations on

“facts otherwise available . . . ‘to fill in the gaps’ when

‘Commerce has received less than the full and complete facts

needed to make a determination’” from the respondents. Gerber

Food (Yunnan) Co., Ltd. V. United States, 29 CIT 753, 767, 387 F.

Supp. 2d 1270, 1283 (2005) (“Gerber I”) (quoting Nippon Steel

Corp. v. United States, 337 F.3d 1373, 1381 (Fed. Cir. 2003)).

Pursuant to 19 U.S.C. § 1677e(a):

If--

(1) Necessary information is not available on the record, or

(2) an interested party or any other person–

(A) withholds information that has been requested by the [Department] under this subtitle,

(B) fails to provide such information by the deadlines for submission of the information or in the form and manner requested, subject to subsections (c)(1) and (e) of [19 U.S.C. § 1677m(c)(1) and (e)],

(C) significantly impedes a proceeding under this subtitle, or

(D) provides such information but the information cannot be verified as provided in section 1677m(i) of this title,

the [Department] shall, subject to [19 U.S.C. § 1677m(d)], use the facts otherwise available in reaching the applicable determination . . . .

Pursuant to the language of the statute, Commerce’s authority to Court No. 10-00059 Page 8

apply facts otherwise available is circumscribed by § 1677m(d).

Under § 1677m(d), when Commerce “determines that a response

to a request for information under this subtitle does not comply

with the request,” it must “promptly inform the person submitting

the response of the nature of the deficiency and shall, to the

extent practicable, provide that person with an opportunity to

remedy or explain the deficiency.” If further information is

submitted and “(1) [Commerce] finds that such response is not

satisfactory, or (2) such response is not submitted within the

applicable time limits, then [Commerce] may, subject to [section

1677m(e)], disregard all or part of the original and subsequent

responses.” 19 U.S.C. § 1677m(d).

The Department’s use of facts otherwise available,

therefore, generally requires that Commerce (1) find that the

response to a request for information is deficient; (2) provide,

when practicable, an opportunity to the party submitting the

information to explain or correct the deficiency; and (3)

determine whether such explanation or correction is either

unsatisfactory or untimely. Each of these determinations must be

supported by substantial evidence on the record. See Gerber Food

(Yunnan) Co. v. United States, 31 CIT 921, 931, 491 F. Supp. 2d

1326, 1337 (2007) (“Gerber II”).

Once Commerce determines that the use of facts otherwise

available is warranted, pursuant to § 1677e(b), if the Department Court No. 10-00059 Page 9

further “finds that an interested party has failed to cooperate

by not acting to the best of its ability to comply with a request

for information,” 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). As the Court of

Appeals for the Federal Circuit has explained:

subsection (b) [of § 1677e] permits Commerce to “use an inference that is adverse to the interest of [a respondent] in selecting from among the facts otherwise available,” only if Commerce makes the separate determination that the respondent “has failed to cooperate by not acting to the best of its ability to comply.” The focus of subsection (b) is respondent’s failure to cooperate to the best of its ability, not its failure to provide requested information.

Nippon Steel, 337 F.3d at 1381. Accordingly, Commerce may only

apply AFA if it determines that (1) the use of facts otherwise

available is warranted under §§ 1677e(a) and 1677m, and (2) a

respondent has failed to cooperate to the best of its ability

under § 1677e(b). A respondent fails to act to “the best of its

ability” if it fails to “do the maximum it is able to do.”

Nippon Steel, 337 F.3d at 1382. In selecting an AFA rate, the

Department may rely on secondary information, including “(1) the

petition, (2) a final determination in the investigation under

this subtitle, (3) any previous review under [19 USCS § 1675] or

determination under [19 USCS § 1675b], or (4) any other

information placed on the record.” 19 U.S.C. § 1677e(b). Court No. 10-00059 Page 10

B. Commerce’s Determination to Apply AFA to Foshan Shunde’s Factors of Production and Sales Data in the Final Results

According to Commerce, “[t]hroughout this proceeding, the

Department has been concerned that Foshen Shunde has failed to

provide the most specific calculation of its factors of

production permitted by its accounting and production records.”

Memorandum re Use of Adverse Facts Available, A-570-888 (Dep’t of

Commerce August 31, 2009) (C.R. Doc. 19) (“AFA Memo”) at 2. The

Department was particularly concerned that Foshan Shunde was not

providing complete answers to the questions relating to the

amount of each input used in producing its various models of

ironing boards, and that it did not provide specific information

regarding its use of hot-rolled and cold-rolled steel inputs.

Issues & Dec. Mem. at 19-20.

In response to Commerce’s initial questionnaire, Foshan

Shunde, as it had done in the First Administrative Review,

reported its factors of production inputs using a “weight-based”

methodology. The purpose of the “weight-based” allocation

methodology was to assign manufacturing costs incurred by Foshan

Shunde on a range of subject and non-subject products, including

merchandise such as “ashtrays, ladders, trolleys, racks, trash

cans, sleeve racks and other ironing board accessories.” Issues

& Dec. Mem. at 12. Employing this methodology, Foshan Shunde

simply divided all of its inputs, including rolled steel, by

weight among all of the products it produced, and then multiplied Court No. 10-00059 Page 11

these weights by the cost per kilogram of each input. Thus, this

method provided an estimate of its production costs by product

line, but provided no specific information for each model of

ironing board. Although the Department had accepted this method

of calculating input quantity and cost in the First

Administrative Review, here, it chose to ask more specific

questions. See Issues & Dec. Mem. at 12.

To gather this information, the Department issued multiple

supplemental questionnaires by which it sought to elicit from

Foshan Shunde “information with as much specificity as possible.”

AFA Memo at 2-3; see, e.g., First Supplemental Questionnaire, A-

570-888 (Dep’t of Commerce Feb. 10, 2009) (C.R. Doc. 5) (“First

Supplemental Questionnaire”) 2; Second Supplemental

Questionnaire, A-570-888 (Dep’t of Commerce Apr. 16, 2009)

(“Second Supplemental Questionnaire”) (C.R. Doc. 8) 1-2. When

the answers to the first three supplemental questionnaires did

not produce the sought after information, Commerce issued the

Fourth Supplemental Questionnaire. Finally, in response to

Commerce’s Fourth Supplemental Questionnaire, Foshan Shunde

produced a sample of its production notes. Response of Foshan

Shunde to the Department’s Fourth Supplemental Questionnaire, A-

570-888 (Dep’t of Commerce August 10, 2009) (C.R. Doc. 16)

(“Fourth Supplemental Questionnaire Response”). Commerce

determined that these production notes, at least with respect to Court No. 10-00059 Page 12

the ironing board models for which they were actually supplied,

provided a better indication of the quantity of each input

actually used in manufacturing Foshan Shunde’s merchandise than

the weight-based method had. This is because the production

notes broke the inputs down by part (e.g., wire mesh, left/right

rail) and by material (e.g., plate, tube, wire).

Ultimately, the Department found that full disclosure of the

production notes would have cleared up the uncertainty created by

the weight-based calculation. Issues & Dec. Mem. at 13 (quoting

AFA Memo at 6) (“Foshan Shunde’s ‘production notes’ . . . ‘set

forth model-specific usage rates for each of Foshan Shunde’s

material inputs, including the critical inputs of flat-rolled

steel. With these production notes, Foshan Shunde could have

furnished the Department with more specific costs and factors of

production than that which it provided.’”). Because, in its

view, Foshan Shunde had not produced the notes in a timely

fashion, and had provided only a small sample of its notes in

response to the Fourth Supplemental Questionnaire, the Department

determined that the company had not acted to the best of its

ability in providing this necessary information. AFA Memo at 5-

6; Issues & Dec. Mem. at 20. In reaching this conclusion,

Commerce stated:

The most significant obstacle to accepting Foshan Shunde’s non model specific costs are the ‘production notes’ which Foshan Shunde provided at exhibit 3 of its August 10, 2009 submission [in response to the Fourth Court No. 10-00059 Page 13

Supplemental Questionnaire]. . . . [T]hose production notes set forth model-specific usage rates for each of Foshan Shunde’s material inputs, including the critical inputs of flat-rolled steel. With these production notes, it is apparent that Foshan Shunde could have furnished the Department with more specific costs and factors of production than what it provided.

AFA Memo at 6. Commerce, thus, concluded that the “existence of

such ‘production notes’ undercut the accuracy and reliability of

previous Foshan Shunde submissions,” and “Foshan Shunde’s partial

disclosure of its ‘production notes’ at a late point in this

proceeding constitutes a failure on Foshan Shunde’s part to

cooperate to the best of its ability and as significantly

impeding this proceeding within the meaning of [§ 1677e].”

Issues & Dec. Mem. at 13-14. In other words, according to

Commerce, the production notes show that Foshan Shunde could have

been more specific in its answers to the Department’s

questionnaire at a much earlier stage in the proceedings, but did

not “do the maximum it [was] able to do” to produce them. Nippon

Steel, 337 F.3d at 1382.

Next, while the failure to provide the production notes is

the primary reason for the Department’s determination to apply

AFA to the factors of production information provided by Foshan

Shunde, Commerce had others. In the Final Results, the

Department also found that “Foshan Shunde provided incomplete and

unreliable information concerning . . . its inputs of hot and

cold rolled steel.” Issues & Dec. Mem. at 19. In response to Court No. 10-00059 Page 14

Commerce’s initial questionnaire, Foshan Shunde claimed to use

hot-rolled steel for the legs of the ironing boards and cold-

rolled steel for the tops. Because the surrogate value of hot-

rolled steel is less than that for cold-rolled steel, according

to Commerce, Foshan Shunde had an incentive to report inputs of

the former, which would result in a lower normal value

calculation. See AFA Memo at 2; see also 19 U.S.C. § 1677b(c).

Petitioner HPI, however, provided evidence, in the form of a 1990

report on carbon and alloy steels in the PRC (the “Steel

Report”), that suggested that hot-rolled steel was not available

in the PRC in the size and form required to manufacture ironing

boards. In addition, HPI provided a metallurgical analysis of an

ironing board from the PRC, purchased in the United States (the

“Metallurgical Analysis”), which showed that hot-rolled steel was

not used in their manufacture. Because the Department found that

the Steel Report and the Metallurgical Analysis called the

accuracy of Foshan Shunde’s original questionnaire responses into

question, it requested additional information from the company

concerning the types and quantities of steel purchased for its

specific ironing board models.

When asked for more detail about the steel it used, however,

Foshan Shunde claimed that it could not specify the type and

quantity of steel purchased for different models of ironing

boards because its “customers decide the thickness and type of Court No. 10-00059 Page 15

steel used.” AFA Memo at 6 (quoting Response of Foshan Shunde to

the Department’s Second Supplemental Questionnaire, A-570-888

(Dep’t of Commerce May 1, 2009) (“Second Supplemental

Questionnaire Response”) 2). While not entirely clear, it

appears that the company was claiming that there were no standard

ironing board models, and that the quantity and type of materials

used for each model of ironing board it produced varied with the

specifications of its individual customers. Seemingly, this

response was Foshan Shunde’s effort to convince Commerce that it

was somehow unable to report its own manufacturing inputs because

they were dictated by the ironing board purchasers.

In response to Commerce’s request for samples of the

company’s correspondence with these customers, however, “Foshan

Shunde provided a single photograph which it represented to be

indicative of the correspondence it received from its customers

concerning the steel inputs used in the manufacture of subject

merchandise.” Issues & Dec. Mem. at 13. Upon further inquiry by

the Department, Foshan Shunde “provided portions of customer e-

mails without explaining why it kept those portions and not those

the Department explicitly requested.” Issues & Dec. Mem. at 13.

Moreover, Foshan Shunde produced some product diagrams, but these

omitted information concerning the type of steel used. Nor were

these diagrams translated in their entirety, as required by Court No. 10-00059 Page 16

regulation. See AFA Memo at 3.4

Ultimately, Commerce did not draw any conclusion as to what

type of steel Foshan Shunde used. Rather, it determined that,

because the company’s responses lacked specificity and

credibility, they provided additional evidence that Foshan

Shunde’s factors of production responses should be disregarded

and AFA should be employed.

Plaintiffs contend that Commerce based its determination

that Foshan Shunde failed to cooperate to the best of its ability

by failing to fully report the type of steel it used on the Steel

Report and the Metallurgical Analysis provided by HPI. Pls.’

Mem. 16. For plaintiffs, these documents fail to demonstrate

what type of steel Foshan Shunde used to manufacture ironing

boards because the Steel Report did not take into account that

the Chinese manufacturing sector “has grown and evolved

exponentially since 1990,” and the Metallurgical Analysis was

“conducted on an ironing table which did not identify the ironing

table as manufactured by Foshan Shunde and [was] purchased by

4 Pursuant to 19 C.F.R. § 351.303(e):

A document submitted in a foreign language must be accompanied by an English translation of the entire document or of only pertinent portions, where appropriate, unless the Secretary waives this requirement for an individual document. A party must obtain the Department’s approval for submission of an English translation of only portions of a document prior to submission to the Department. Court No. 10-00059 Page 17

[HPI] seven months after the end of the review period.” Pls.’

Mem. 16-17.

Plaintiffs’ claim that the Department based its

determination on the Steel Report and Metallurgical Analysis,

however, is not supported by the record. With regard to Foshan

Shunde’s questionnaire responses concerning steel inputs, the

Department found:

In analyzing Foshan Shunde’s steel inputs, we have focused primarily upon the reliability of the information submitted by Foshan Shunde rather than upon the [Metallurgical Analysis] submitted by Petitioner or other information concerning the overall state of the steel industry in China. Review of record evidence indicates that there are both (1) significant cost differences between the surrogate values of hot and cold rolled steel and (2) that Foshan Shunde has provided conflicting information concerning the type of steel that it utilizes in production of the subject merchandise.

Issues & Dec. Mem. at 20 (emphasis added). Thus, while the

Metallurgical Analysis and the Steel Report no doubt heightened

the Department’s awareness of possible problems with Foshan

Shunde’s questionnaire responses, it is apparent that the

responses themselves (i.e., incomplete emails, omitted

information concerning steel type, inadequate translation) led to

Commerce’s determination to disregard the factors of production

questionnaire responses. That is, the determination that Foshan

Shunde failed to cooperate to the best of its ability was based

on the company’s failure to provide complete and credible

responses to Commerce’s questionnaires, and took into Court No. 10-00059 Page 18

consideration the significant cost differences between hot- and

cold-rolled steel.

Commerce found further evidence to justify its application

of AFA in Foshan Shunde’s answers to questions relating to the

source of steel wire. In its questionnaire responses, Foshan

Shunde represented that the company made steel rod into the wire

it used in making its ironing boards, rather than purchasing

finished steel wire from outside sources. In the Final Results,

Commerce found that there was conflicting evidence as to the

source of the steel wire and, thus, “Foshan Shunde also withheld

information regarding its source of steel wire, another key

input.” Issues & Dec. Mem. at 14. Plaintiffs contend that,

contrary to Commerce’s findings, “Foshan Shunde’s evidence about

its wire drawing operations is not contradictory.” Pls.’ Mem.

19.

Foshan Shunde initially reported that it internally drew

steel rod into the wire used in the production of subject

merchandise. But, according to Commerce, in the investigation of

Kitchen Appliance Shelves and Racks from the PRC (the “KASR

Investigation”), in which Foshan Shunde’s affiliate Guangdong

Wireking was a respondent, Foshan Shunde’s personnel reported

that it “performed no wire drawing but rather purchased finished

wire from an outside supplier.” AFA Memo at 4; Wireking

Verification Report at Attachment 2 (C.R. Doc. 13). Court No. 10-00059 Page 19

When this apparent contradiction was brought to the

company’s attention by the Department, Foshan Shunde claimed, for

the first time, that it had sold its wire drawing equipment

during the POR. For plaintiffs, the evidence it placed on the

record demonstrates that Foshan Shunde must have had its own wire

drawing equipment because it purchased wire rod that was larger

than the wire used in the manufacture of the subject merchandise.

In addition, plaintiffs insist that two Foshan Shunde employees

operated the wire drawing machinery, and the company provided tax

documents purporting to show that the wire drawing equipment had

been sold. Pls.’ Mem. 19-22.

Despite plaintiffs’ disclosure, the Department asserts that

it did not err in using Foshan Shunde’s responses as evidence

supporting the application of AFA. Issues & Dec. Mem. at 14

(“Foshan Shunde did not report the sale of production equipment

relating to its wire drawing operation until August 13, 2009 and

only then did so after repeated requests from the Department.

Further, on August 27, 2009, at a point still later in the

proceeding, Foshan Shunde provided other supporting documentation

concerning the production and source of its long-wire products. .

. . Foshan Shunde’s failure to disclose this information earlier

in the proceeding has significantly impeded the Department’s

analysis of Foshan Shunde’s long-wire inputs . . . .”); AFA Memo

at 7 (“[I]n its August 10, 2009 submission, Foshan Shunde offered Court No. 10-00059 Page 20

no documentation of the sale or to whom the equipment was sold.

Moreover, there is no mention of the sale of Foshan Shunde’s wire

drawing operation in the KASR verification report. Based on the

foregoing, we preliminarily find Foshan Shunde’s narrative

concerning its [wire drawing] operation to lack credibility.”).

In addition to asserting that the inadequacy of Foshan

Shunde’s factors of production responses supported the use of

AFA, Commerce determined that the sales data provided by Foshan

Shunde was also unreliable. On November 18, 2008, in response to

Commerce’s initial questionnaire, Foshan Shunde indicated that it

“was not affiliated with any producers or exporters of the

subject merchandise during the POR.” See AFA Memo at 7

(citations omitted). The Department required the disclosure of

information relating to the other companies in order to identify

all relevant sales by Foshan Shunde, and to allow the agency to

accurately calculate the U.S. export price of the ironing boards.

Issues & Dec. Mem. 14; see also 19 U.S.C. § 1677a(a) (defining

export price). In the Final Results, however, Commerce

determined that Foshan Shunde provided conflicting information

concerning its affiliation with another company, Shunde Junbang.

The Department found that “the statements made by Foshan

Shunde in this review are inconsistent with the statements made

by Foshan Shunde personnel in the [KASR Investigation]. During

the course of the KASR investigation, [which was virtually Court No. 10-00059 Page 21

simultaneous with this investigation,] Shunde Junbang indicated

that it listed ironing boards on its website and forwarded

customer inquiries to Foshan Shunde.” Issues & Dec. Mem. at 21

(quoting AFA Memo at 7) (citations omitted). In addition,

Commerce found that the product codes for ironing boards listed

on Foshan Shunde’s and Shunde Junbang’s respective web sites were

similar. Accordingly, the Department determined that “the

commonality of product codes between the merchandise sold by

Foshan Shunde and the merchandise sold by Shunde Junbang

indicates the latter may have in fact sold Foshan Shunde

merchandise.” Issues & Dec. Mem. at 21.

Commerce found Foshan Shunde’s explanations of these

findings unconvincing. For example, the company attributed the

similarity in the product codes of its products and those listed

by Shunde Junbang to a uniform similarity in product codes across

the ironing board industry. See AFA Memo at 7 (citing Letter

from Foshan Shunde, dated August 10, 2009 at 3). The Department,

however, found that, based on evidence submitted by defendant-

intervenor, only Foshan Shunde’s and Shunde Junbang’s web sites

bore similar product codes. AFA Memo at 7. In other words,

Commerce determined that the similarity in the product codes for

ironing boards sold on Foshan Shunde’s and Shunde Junbang’s

respective web sites indicated that Shunde Junbang was, in fact,

selling subject merchandise on behalf of Foshan Shunde. Court No. 10-00059 Page 22

Based on these findings, the Department concluded that

“[d]espite the opportunities afforded to the company to clarify

the conflicting accounts played by Shunde Junbang in the sale of

the subject merchandise, significant discrepancies remain between

the account that Foshan Shunde rendered of Shunde Junbang

activities in this proceeding and the account that Foshan Shunde

offered in the [KASR] investigation.” Issues & Dec. Mem. at 21.

Accordingly, Commerce found that Foshan Shunde’s questionnaire

responses concerning its affiliation with Shunde Junbang were

unreliable and, therefore, constituted substantial evidence

supporting the application of AFA to Foshan Shunde’s sales data.

Plaintiffs do not contest the Department’s determination to

apply AFA to its sales data. Rather, they object that, even if

Foshan Shunde’s failure to explain its relationship with Shunde

Junbang “rises to the level of misconduct, the Department is

still not empowered to use total adverse facts available for an

entire investigation on that basis alone.” Pls.’ Mem. 35. As

discussed infra, the Department’s determination to apply AFA to

all of Foshan Shunde’s factors of production and sales data was

reasonable on the record before it.

C. Commerce’s Determination to Apply AFA to Foshan Shunde’s Factors of Production and Sales Data is Sustained

Commerce has some discretion to decide what information it

needs to accurately calculate a respondent’s dumping margin. See Court No. 10-00059 Page 23

Guangdong Chems. Imp. & Exp. Corp. v. United States, 30 CIT 85,

96, 414 F. Supp. 2d 1300, 1310 (2006) (“Commerce is given wide

discretion in the selection of data sources for use in

administrative review.”). The Department makes its decision as

to the information it needs and implements it by requesting such

information through its questionnaires. Respondents have an

obligation to act to the best of their ability to provide the

requested information. See 19 U.S.C. 1677e(b).

In this case, Commerce reasonably determined that the record

was incomplete because Foshan Shunde did not provide adequate

information concerning the quantity of materials and the nature

of the steel actually used in producing the subject merchandise.

Additionally, the company did not timely produce information

relating to the source of its steel wire inputs. This

information was necessary to determine the surrogate values of

these materials in order to calculate the normal value of Foshan

Shunde’s merchandise. Accordingly, the absence of this

information created a gap in the record that warranted the use of

facts otherwise available under 19 U.S.C. § 1677e(a).

Moreover, Commerce’s determination that Foshan Shunde’s

failure to provide this information in a timely fashion supported

the application of AFA was reasonable. First, by withholding the

production notes, Foshan Shunde did not cooperate to the best of

its ability in responding to Commerce’s questionnaires seeking Court No. 10-00059 Page 24

the specifics of its manufacturing inputs. That is, while it may

have been reasonable for Foshan Shunde to reply to the initial

questionnaire using the same methodology it used in the First

Review, it was not reasonable for the company to fail to produce

the production notes in response to the supplemental

questionnaires. See, e.g., First Supplemental Questionnaire,

Sec. D(1) (“For each model of the subject merchandise, separately

detail the grade of steel and dimensions (length, width and

thickness) of every hot-rolled or cold-rolled coil used in the

production process . . . .”); Second Supplemental Questionnaire,

Sec. D(7)(a) (“Provide the source documentation for models

1454TC2-25 and 1454TC1-28 which support the listed standard

weights.”); Third Supplemental Questionnaire, A-570-888 (Dep’t of

Commerce July 27, 2009) (C.R. Doc. 11) Sec. D(4) (“[P]rovide any

and all accounting and production records . . . that establish

the claimed amount of production material for each of the

following inputs for . . . [list of cold- and hot-rolled inputs

of various thicknesses].”). Accordingly, the Department did not

err in concluding that “Foshan Shunde’s partial disclosure of its

‘production notes’ at a late point in this proceeding constitutes

a failure on Foshan Shunde’s part to cooperate to the best of its

ability and as significantly impeding this proceeding.” See

Issues & Dec. Mem. at 14.

This conclusion is further supported by Foshan Shunde’s Court No. 10-00059 Page 25

failure to provide adequate responses to Commerce’s questions

concerning the type of steel used in making the ironing boards.

As noted supra, Commerce consistently asked questions about the

use of hot-rolled and cold-rolled steel in its supplemental

questionnaires. Foshan Shunde insisted that this information was

unavailable because its customers directed the type of steel used

in a particular ironing board model. The company, however, did

not produce any credible evidence to support this claim. AFA

Memo at 6 (“Foshan Shunde failed to provide any correspondence

from its customers to demonstrate that the customer, in fact,

specifie[d] the type of thickness of steel materials used. Also,

in responding to the Department’s [] request for supplemental

information, Foshan Shunde provided no documentation to suggest

that customer correspondence governed its acquisition of steel

inputs.”); see Quingdao Taifa Group Co. v. United States, 33 CIT

__, __, 637 F. Supp. 2d 1231, 1239 (2009) (“A reasonable and

responsible foreign producer would have known that it must keep

and maintain documents such as factory-out slips, production

notices, and production subledgers, and [respondent’s] officials’

efforts to avoid producing the requested documents demonstrates

that Taifa failed to put forth maximum efforts to investigate and

obtain the documents.”). Based on the record, Commerce has

supported with substantial evidence its finding that Foshan

Shunde did not cooperate to the best of its ability to produce Court No. 10-00059 Page 26

evidence demonstrating the type of steel used to make subject

merchandise.

Although not as substantial as the evidence relating to the

production notes and the type of steel used to make the ironing

boards, Foshan Shunde’s problematic questionnaire responses

concerning its source of steel wire also supports the application

of AFA. As an initial matter, Commerce found that purchased wire

was significantly more costly than drawn wire. Next, despite the

company’s representation that it made its own steel wire from

steel rod, evidence from the parallel KASR Investigation

indicated that the wire had been purchased. During verification

in the KASR Investigation, the Department confirmed that Foshan

Shunde had no wire drawing equipment.

The Department, was correct in finding that the company did

not provide a timely explanation for these apparent

inconsistencies. As defendant notes,

Foshan Shunde did not report the sale of production equipment relating to its wire drawing operation until August 13, 2009 [i.e., in response to the Fourth Supplemental Questionnaire] and only then after repeated requests from the Department. Further, on August 27, 2009, at a point still later in the proceeding, Foshan Shunde provided other supporting documentation concerning the production and source of its long-wire production.

Thus, the evidence plaintiffs now point to was not supplied

until after the Department questioned the accuracy of Foshan Court No. 10-00059 Page 27

Shunde’s questionnaire responses, following the contradictory

statements that its employees made during the KASR Investigation.

See Issues & Dec. Mem. at 21 (“Foshan Shunde’s tardiness in

providing documentation concerning the disposition of the wire

production equipment precluded any analysis that the Department

might have undertaken in the Preliminary Results”); AFA Memo at 7

(“As in past submissions, Foshan Shunde indicated in its August

10, 2009 letter that it drew wire during the POR. Yet, when the

Department questioned Foshan Shunde about the observations of the

[KASR Investigation] verification team, Foshan Shunde indicated

that it sold its wire drawing operation in February 2009.

Notwithstanding that it was given four previous opportunities to

describe its production process, Foshan Shunde’s August 10, 2009

submission was the first mention . . . of the sale of its wire

drawing operation.”).

As a result, the Department found that “Foshan Shunde’s

narrative concerning its wire drawing operation [lacked]

credibility.” AFA Memo at 7; Issues & Dec. Mem. at 20-21. When

confronted with this inconsistency, Foshan Shunde ultimately

claimed that it had sold its wire drawing equipment in February

2009. This claim, however, was first advanced on August 10,

2009, after the Department was well along in drafting the

Preliminary Results issued on September 8, 2009. Based on the

sequence of events, and Foshan Shunde’s incentive to report that Court No. 10-00059 Page 28

it made the wire itself, it was reasonable for Commerce to

conclude that Foshan Shunde’s questionnaire responses were

untimely and lacked credibility.

D. The Department’s Rejection of the Weight-Based Methodology Was Proper

In addition to their objections to Commerce’s findings with

respect to Foshan Shunde’s questionnaire response, plaintiffs

insist that Commerce acted unlawfully by refusing to accept the

weighted average calculation used by Foshan Shunde in the First

Administrative Review. For plaintiffs, “this method was good

enough for the Department in [the First Administrative Review] in

which Foshan Shunde participated, . . . [and] Foshan Shunde’s

method of production had not materially changed since [the First

Review] . . . .” Pls.’ Mem. 31. Plainitff, therefore, insists

that “the Department should use the data which Foshan Shunde

calculated using the same method and timely provided to the

Department.” Pls.’ Mem. 31. It is, however, clear that Commerce

had the authority to ask more specific questions about the inputs

that went into manufacturing Foshan Shunde’s ironing boards.

When the Department changes its methodology it “need only

show that its methodology is permissible under the statute and

that it had good reasons for the new methodology.” Huvis Corp.

v. United States, 570 F.3d 1347, 1353 (Fed. Cir. 2009). Here, in

order to calculate a more accurate margin, Commerce requested Court No. 10-00059 Page 29

input information specific to the subject merchandise to obtain a

more accurate valuation of Foshan Shunde’s input costs. See Id.

at 1355 (“Improving accuracy is generally a good reason for a

change in methodology.”). Thus, the Department has supplied a

good reason for changing its methodology, and plaintiffs make no

claim that the more specific questions were not permissible under

the statute.

Morever, Commerce’s decision to apply AFA was based on

Foshan Shunde’s failure to provide information it had in its

possession, i.e., the production notes, the correspondence with

customers, the sale of the wire drawing equipment. Accordingly,

even if Foshan Shunde did have some reasonable expectation that

it was not obligated to maintain specific kinds of input data,

here, Commerce’s decision was based on Foshan Shunde’s failure to

timely and fully produce records the company actually had.

Foshan Shunde’s failure to produce this information in the

Supplemental Questionnaires, therefore, could not be attributable

to reliance on Commerce’s prior use of a different methodology.

Thus, even though the weight based method may have been “good

enough” for the First Administrative Review, Commerce was not

prohibited from attempting to calculate a more accurate dumping

margin by making more specific inquiries.5

5 As noted, under 19 U.S.C. § 1677m(d), Commerce must afford a respondent whose questionnaire responses are deemed (continued...) Court No. 10-00059 Page 30

E. Commerce’s Decision to Apply AFA to All of Foshan Shunde’s Factors of Production and Sales Responses was Supported by Substantial Evidence and Otherwise in Accordance with Law.

In the event that the Department’s decision to apply AFA to

certain of Foshan Shunde’s questionnaire responses is sustained

by the court, plaintiffs argue that Commerce should have applied

AFA to only that portion of its questionnaire responses that were

found wanting. Therefore, plaintiffs challenge the Department’s

determination to reject Foshan Shunde’s factors of production and

sales databases in their entirety in determining the dumping

margin. According to plaintiffs:

[T]he statute does not authorize the Department to use total adverse facts available based solely on its finding that Foshan Shunde submitted unreliable and incomplete documentation in support of its purchases and use of steel inputs, wire-drawing operation, and one disputed affiliation. . . . Under the circumstances of this case, the statute and judicial precedent require that the Department apply partial adverse facts available, if anything, and thereby limit the application of adverse facts available only to information submitted by Foshan Shunde that is missing or otherwise incomplete. It may not reject Foshan Shunde’s factors of production and U.S. sales databases in toto.

Pls.’ Mem. 9.

In other words, for plaintiff, even if Commerce’s

5 (...continued) deficient an opportunity to explain and/or correct the deficiencies before it can apply AFA. Here, the Supplemental Questionnaires afforded Foshan Shunde that opportunity and, therefore, Commerce complied with its obligation under § 1677m(d). Court No. 10-00059 Page 31

determination to apply AFA was lawful with regard to certain

information, the application of AFA should have been limited to

the specific missing information rather than the totality of

Foshan Shunde’s factors of production and sales information.

In defending its decision, defendant argues that:

Commerce reasonably concluded that significant deficiencies and inconsistencies existed in Foshan Shunde’s responses regarding inputs (specifically, the types and amount of steel used in producing ironing tables, and the source of the drawn wire used), as well as the role of an affiliate in the sales of the subject merchandise. The proper valuation of inputs and the accuracy of information regarding sales of the subject merchandise are core issues in determining an anti- dumping duty, and given the general problematic nature of Foshan Shunde’s submissions during the review period, it was well within Commerce’s discretion to determine that partial facts could not be substituted.

Def.’s Mem. 19.

The court finds that the application of AFA to all of Foshan

Shunde’s factors of production and sales information is supported

by substantial evidence and otherwise in accordance with law.

See Gerber II, 31 CIT at 930-931, 491 F. Supp. 2d at 1337 (“When

construed together, §§ 1677e and 1677m afford Commerce recourse

if a party fails to cooperate by filing initial and subsequent

questionnaire responses that are so unsatisfactory as to support

a finding that the party withheld requested information or

significantly impeded the review proceeding by providing those

responses. Nevertheless, when invoking facts otherwise available

under § 1677e(a)(2)(A) or (C), Commerce must support with Court No. 10-00059 Page 32

substantial record evidence its findings that a party withheld

requested information or significantly impeded a proceeding.”).

As set forth above, Commerce found that Foshan Shunde failed

to adequately respond to requests for information concerning its

factors of production. Specifically, plaintiff failed to supply

the production notes until it responded to the Fourth

Supplemental Questionnaire, supplied insufficient information as

to the type of steel used, and gave contradictory accounts

regarding its source of steel wire. In addition to its findings

that Foshan Shunde’s factors of production questionnaire

responses were deficient, Commerce also found that Foshan Shunde

did not act to the best of its ability in providing information

regarding the company’s sales data. Specifically, Commerce found

wanting its answers with respect to its affiliation with Shunde

Junbang.

Based on this history, Commerce determined that “[t]hese

deficiencies render the entirety of Foshan Shunde’s questionnaire

responses an unsuitable basis for calculating a margin.” Issues

& Dec. Mem. at 12. The Department, thus, found that “Foshan

Shunde has withheld information requested by the Department and

has significantly impeded the conduct of this proceeding” and,

therefore, it decided to apply AFA to Foshan Shunde’s entire

factors of production and sales databases. See Issues & Dec.

Mem. at 11. Court No. 10-00059 Page 33

This is not a case where the responses were deficient with

respect to a discrete category of information, such that partial

AFA would be required. See, e.g., Krupp Thyssen Nirosta GMBH v.

United States, 24 CIT 666, 672-673 (2000) (not reported in

Federal Supplement) (“Commerce may find on remand that it is

appropriate to apply partial facts available to fill any gaps in

the sales data it could not successfully verify, but it may not

disregard the sales data absent evidence in the record that the

sales data was fatally tainted by the errors in the computer

program.”). Rather, in light of the “pervasiveness of the

inaccuracies” in Foshan Shunde’s questionnaire responses, and

because “[s]uch information is core, not tangential,” Commerce

acted reasonably in determining that the deficiencies in Foshan

Shunde’s responses were so great that it could not rely on any of

the company’s factors of production or sales information. Since

Hardware, 34 CIT at __, Slip Op. 10-108, at 22; Shanghai Taoen

Int’l Trading Co. v. United States, 29 CIT 189, 199 n.13, 360 F.

Supp. 2d 1339, 1348 n.13 (2005) (“This is not a case of partial

gaps in the record. Commerce determined that Taoen failed to

provide a credible explanation for the inconsistencies between

Customs’ entry documents and Taoen’s questionnaire responses

which concerned the identity of suppliers. Such information is

core, not tangential, and there is little room for substitution

of partial facts. Total facts available is therefore appropriate Court No. 10-00059 Page 34

because Commerce has no reliable factors of production

information with which to calculate Taoen’s antidumping

margin.”); see also Qingdao Taifa, 33 CIT at __, 637 F. Supp. 2d

at 1239-40.

Here, it is apparent that Foshan Shunde’s inadequate and

misleading responses involved a substantial portion of the inputs

that went into making the ironing boards. In addition, Foshan

Shunde’s problematic responses concerning its affiliation with a

related company undermined the reliability of its sales data.

That is, it is clear that Commerce was not in a position to

determine if Foshan Shunde reported all of its sales. As this

Court has previously held, when Commerce determines that

deficiencies and inconsistencies call into question the

credibility of the entirety of a respondent’s questionnaire

responses with regard to its factors of production and sales,

Commerce acts reasonably in applying AFA to the totality of those

responses and determining a rate without regard to the

information contained in the responses. See Since Hardware, 34

CIT at __, Slip Op. 10-108 at 22. Accordingly, the Department’s

application of AFA to all of Foshan Shunde’s factors of

production and sales submissions is sustained.

II. Commerce’s Denial of Separate-Rate Status to Foshan Shunde

A. Legal Framework Court No. 10-00059 Page 35

Where, as here, Commerce conducts an antidumping

investigation or review of products from a non-market economy

country (“NME”) such as the PRC, the Department employs a

presumption of state control. See Huaiyin Foreign Trade Corp. v.

United States, 322 F.3d 1369, 1372 (Fed. Cir. 2003) (“The

Department [has] adopted . . . a presumption that the PRC [i]s a

nonmarket economy ("NME") country pursuant to 19 U.S.C. §

1677(18)(A), requiring companies desiring an individualized

antidumping duty margin to so request and to demonstrate an

absence of state control.”). Based on this presumption, all

producers from the PRC are deemed to be part of one, state-wide

entity and, therefore, unless the presumption is rebutted, they

are all assigned a country-wide antidumping duty rate.

A producer may rebut this presumption by “affirmatively

demonstrat[ing] its entitlement to a separate, company specific

margin.” Sigma Corp. v. United States, 117 F.3d 1401, 1405 (Fed.

Cir. 1997) (citation and quotation omitted). If the presumption

is successfully rebutted, the Department will determine a

company-specific antidumping duty rate.

To demonstrate its entitlement to a separate rate, a

producer must establish that it is independent from the country-

wide entity by demonstrating the absence of both de jure and de

facto government control over its activities. See Peer Bearing

Co.-Changshan v. United States, 32 CIT __, __, 587 F. Supp. 2d Court No. 10-00059 Page 36

1319, 1324 (2008); see also Sparklers from the PRC, 56 Fed. Reg.

20,588, 20,589 (Dep’t of Commerce May 6, 1991). If a producer

fails to rebut the presumption, Commerce will apply the PRC-wide

rate. See Sigma, 117 F.3d at 1405.

B. Commerce’s Denial of Separate-Rate Status to Foshan Shunde is Contrary to Law and Unsupported by Substantial Evidence.

Plaintiffs argue that Commerce erred in applying AFA to deny

Foshan Shunde separate-rate status because “the Department’s

findings as to the need to resort to facts available and the

application of adverse inferences were made with respect to

Foshan Shunde’s factors of production and sales data and not its

responses to inquiries establishing its entitlement to a separate

rate.” Pls.’ Mem. 46. The court agrees.

According to the Department, it denied Foshan Shunde

separate-rate status because

when a respondent in an NME proceeding has failed to cooperate to the best of its ability with respect to all requests for information and has been assigned a margin based on total AFA, established Department practice is to determine that the respondent has failed to demonstrate that it operates free from government control.

Issues & Dec. Mem. at 5. In other words, Commerce relied upon

its past practice to determine that Foshan Shunde’s failure to

cooperate in responding to questionnaires regarding factors of

production and sales necessarily meant that it had failed to Court No. 10-00059 Page 37

rebut the presumption of government control. Issues & Dec. Mem.

at 5 (“Foshan Shunde’s conduct in this review has changed its

status from that of a cooperative respondent to that of a

respondent which we have determined to be uncooperative and to

have impeded the conduct of this proceeding. Thus, through its

actions in this review, Foshan Shunde has called into question

its separate rate status. Indeed because of Foshan Shunde’s own

conduct . . . the Department is unable to ascertain which part,

if any, of Foshan Shunde’s submissions are credible and

reliable.”).

As this Court held in Shandong Huarong Gen. Group Corp. v.

United States, 27 CIT 1568, 1595-96 (2003) (not reported in

Federal Supplement), and subsequently reaffirmed, Commerce may

not deny separate-rate status to a respondent by applying AFA

based solely upon the unreliability of that respondent’s

questionnaire responses regarding its factors of production

and/or sales data. See Qindago Taifa, 33 CIT at __, 637 F. Supp.

2d at 1240-41 (“Because the PRC-wide rate thus presumes

government control, Commerce may not apply the PRC-wide rate as

the AFA rate where AFA is warranted for sales and [factors of

production] data, but the respondent has established independence

from government control”); Since Hardware, 33 CIT at __, Slip Op.

10-108, at 16 (“Commerce has found that [respondent’s] responses

failed to report accurately information, such as prices and Court No. 10-00059 Page 38

country of origin, for inputs purchased in market economy

countries. The Department, however, made no specific finding

that the responses concerning state control were inaccurate.

. . . Consequently, remand is warranted.”); See Shandong

Huarong, 27 CIT at 1594 (“the findings that justified the use of

facts available and a resort to adverse facts available with

respect to the [respondent’s] sales data and factors of

production, cannot be used to accord similar treatment to issues

relating to the [respondent’s] evidence of independence from

state control.”); Gerber I, 29 CIT at 772, 387 F. Supp. 2d at

1287.

Faced with these contrary holdings, Commerce nonetheless

insists that it may rely on its “established practice” to deny

separate-rate status to respondents that fail to cooperate to the

best of their ability. Issues & Dec. Mem. at 5. In doing so,

the defendant seeks to distinguish this case from those cited by

arguing that, “[u]nlike all of those cases, here Commerce made no

determination (preliminary or otherwise) regarding Foshan

Shunde’s entitlement to a separate rate during this review.”

Def.’s Mem. 27. It is, indeed, accurate that in each of the

prior cases rejecting the approach Commerce has taken here there

was a preliminary finding that the respondent had rebutted the

presumption of government control, while in this case, Commerce Court No. 10-00059 Page 39

made no such finding.6 See Qindago Taifa, 33 CIT at __, 637 F.

Supp. 2d at 1241; Since Hardware, 33 CIT at __, Slip Op. 10-108,

at 16; Gerber I, 29 CIT at 771, 387 F. Supp. 2d at 1287; Shandong

Huarong, 27 CIT at 1572. This distinction, however, does not

justify the Department’s use of AFA to deny Foshan Shunde

separate-rate status. Rather, Commerce’s application of AFA to

deny separate-rate status to Foshan Shunde must be remanded

because it is not based on record evidence specific to the

question of whether the company is subject to state control. See

Gerber I, 29 CIT at 772, 387 F. Supp. 2d at 1287 (rejecting the

use of AFA to find government control where “Commerce neither

cited record evidence showing that, nor made a finding of fact

that, either plaintiff was subject to the control of the PRC

government”).

As noted above, the Department may only resort to AFA when

it finds that use of facts otherwise available under 19 U.S.C.

6 Plaintiffs point out that Foshan Shunde had been granted separate-rate status in a prior review under the Order and, thus, argue that “when the Department has assigned a separate rate to a respondent in a prior review, then once the respondent has certified that its status has not changed, it is not necessary for that company to resubmit data supporting a separate rate during subsequent reviews.” Pls.’ Mem. 40. As the Department correctly explained in the Final Results, however, “Foshan Shunde’s claim that it received a separate rate in a prior segment of this proceeding and is therefore entitled to one here” is unavailing because “each segment of the proceeding is separate with separate administrative records.” Issues & Dec. Mem. at 5; see Shandong Huarong Machinery Co. v. United States, 29 CIT 484, 491 (2005) (not reported in Federal Supplement). Court No. 10-00059 Page 40

§ 1677e(a) is permitted, and it determines that a respondent has

failed to cooperate to the best of its ability. In this case,

however, the Department has made no finding that Foshan Shunde’s

questionnaire responses regarding government control were in any

way deficient. In other words, it is not known if there existed

a “gap” in the record concerning Foshan Shunde’s separate rate

status. Because this fact is an antecedent requirement to

Commerce’s application of AFA, it was contrary to law for the

Department to apply AFA to this determination. See Zhejiang

Dunan Hetian Metal Co. v. United States, No. 09-cv-0217, Slip Op.

2010-1367 at 26 (Fed. Cir. June 22, 2011) (“Commerce first must

determine that it is proper to use facts otherwise available

before it may apply an adverse inference.”).

Similarly, there is no finding that Foshan Shunde failed to

act to the best of its ability in responding to the Department’s

separate-rate questionnaires. Indeed, Commerce acknowledges that

its decision to apply AFA in denying Foshan Shunde separate-rate

status was based entirely on its finding that the company failed

to cooperate to the best of its ability in responding to the

Department’s questionnaires regarding its factors of production

and sales. Issues & Dec. Mem. at 5. Accordingly, Commerce’s use

of AFA to deny Foshan Shunde separate-rate status is neither

lawful nor supported by substantial evidence.

In addition, the record indicates that Commerce did not Court No. 10-00059 Page 41

notify Foshan Shunde that its questionnaire responses concerning

government control were deficient, inform it of the nature of any

such deficiency, or provide it with an opportunity to remedy or

explain any such deficiency. Section 1677m(d), however, requires

that Commerce “shall promptly inform” a respondent of any

deficiency in its responses, and “provide that person with an

opportunity to remedy or explain the deficiency.”7 See

Mannesmannrohren-Werke AG & Mannesmann Pipe & Steel Corp. v.

United States, 23 C.I.T. 826, 838, 77 F. Supp. 2d 1302, 1313

(1999) (“[B]efore Commerce may use facts available, [section

1677m(d)] requires that Commerce give a party an opportunity to

remedy or explain deficiencies in its submission.”). Therefore,

Commerce’s reliance on AFA to deny Foshan Shunde separate-rate

status is contrary to law.

CONCLUSION

For the foregoing reasons, the Final Results are sustained

in part and remanded. On remand, the Department is to consider

evidence on the record concerning Foshan Shunde’s independence

7 Although § 1677m(d) only requires that Commerce provide an opportunity to explain any deficiency “when practicable,” there is nothing on the record in this proceeding that would indicate that providing this opportunity to Foshan Shunde was impracticable. To the contrary, the Department never made an initial determination as to whether there was a deficiency in Foshan Shunde’s submissions concerning government control, but rather, presumed a deficiency based on questionnaire responses concerning factors of production and sales price. Court No. 10-00059 Page 42

from state control to determine whether the company is entitled

to separate-rate status based solely on that evidence. In

addition, if it finds that the record is insufficient to make

such a determination, it shall open the record and permit the

plaintiffs to place the needed information on the record. If,

upon remand, Commerce determines that Foshan Shunde is entitled

to separate-rate status, the Department is to determine an

appropriate dumping margin specific to Foshan Shunde, taking into

consideration the Department’s determination, sustained here, to

apply AFA to Foshan Shunde’s factors of production and sales

data.

The remand results shall be due on February 13, 2012;

comments to the remand results shall be due on March 28, 2012;

and replies to such comments shall be due on April 12, 2012.

/s/ Richard K. Eaton Richard K. Eaton

Dated: October 12, 2011 New York, New York