AD Respondent Fights AFA Finding for Country of Origin Reliability Concerns After CAFC Opinion

August 18, 2021 by Jacob Kopnick|Litigation

The Commerce Department's remand results following an opinion from the U.S. Court of Appeals for the Federal Circuit over an antidumping duty administrative review should be remanded yet again, mandatory respondent Bosun Tools Co. said in comments at the Court of International Trade. Commerce should have applied neutral facts available instead of adverse facts available when weighing Bosun's country of origin information using a first-in-first-out (FIFO) methodology, Bosun said. Even if this use of AFA is sustained, it should be limited to missing information and not applied to the U.S. sales prices for reported-FIFO sales, as Commerce did, Bosun suggested (Diamond Sawblades Manufacturers' Coalition v. United States, CIT #17-00167).

The case, brought by the Diamond Sawblades Manufacturers' Coalition, stems from the sixth administrative review of the antidumping duty order on diamond sawblades from China. In the review, it was discovered that Bosun exported diamond sawblades from China and Thailand to its U.S. affiliates. However, the exporter did not maintain a record of the country of origin of each sawblade. Instead, Bosun identified the country of origin using three alternative sales identification methods, which included the particular product code, the unit price and the FIFO methodology for remaining goods. Commerce originally took the exporter at their word and found these unconventional COO tracking methods acceptable.

Following the initial litigation in CIT, Commerce reversed its position, applying AFA for Bosun's failure to keep track of the COO for the sawblades and hitting the exporter with an 82.05% AD duty rate. The Federal Circuit, however, said there "appears to be no basis for Commerce to disregard the Bosun-supplied origin information for the sales to unaffiliated U.S. customers during the [period of review (POR)] for which Bosun did not assign the country of origin using its FIFO methodology." The appeals court then remanded the first redetermination from the CIT case.

In response, Commerce reversed course on the application of AFA for Bosun's sales in which the exporter kept track of the COO using the product code and unit price (see 2107140053). The agency maintained the application of AFA, however, on sales in which the FIFO methodology was employed. Such an adverse inference is warranted, Commerce said, since Bosun "failed to maintain full and complete records regarding country of origin, despite its apparent ability to do so, and despite its familiarity with Commerce proceedings and awareness of the need for distinguishing the country of origin of its merchandise for export."

In its Aug. 12 comments, Bosun pushed back on this contention, holding that AFA should be used to induce cooperation and "not as a hammer to dissuade or punish cooperation." Seeing as Bosun cooperated completely, it should be absolved from AFA liability, the company said. The application of AFA should not "disproportionately focus on what the respondent could have done better before the administrative review. If Commerce limited its assessment to recordkeeping in a respondent’s normal business before the administrative review, then no respondents who are aware of a difficulty in recordkeeping would cooperate, because no matter what effort such respondent put forth, it will only receive AFA regardless," the comments explained.

Even if CIT is to sustain Commerce's use of AFA, it should be limited to missing information, Bosun argued. When it applied AFA, Commerce treated all U.S. sales that went through the FIFO process as Chinese blades and applied the 82.05% AFA rate to these blades. Bosun contends that this practice is untenable since the only missing data is that of the origin of the FIFO-inferenced sales.

Instead, "Sales price information of FIFO sales that were reported in Bosun’s section C database must be used for normal margin calculations like the rest of the reported U.S. sales (i.e., the non-FIFO sales determined through Bosun’s first two steps of the origin identification method)," Bosun suggested. "For reported-FIFO sales that were fully included in Bosun’s section C database and treated as Chinese-origin blades, Commerce simply has no legal basis not to rely on those U.S. sales to assign a calculated dumping margin because the sales price information is on the record and uncontested."

CIT also should order Commerce to nix intracompany sales from its duty calculations, Bosun pleaded. The FIFO-identified sales include intra-company sales along with sales to unaffiliated U.S. customers, the respondent said. As such, Commerce has no basis to include the intra-company numbers in its U.S. sales information as this would amount to double counting, Bosun said. Commerce countered that it was not aware of the intra-company sales until the remand comments, but Bosun pointed out that the agency did verify the entire FIFO methodology in the original review and failed to come up with an issue with the methodology's reliability.