Commerce Rightfully Hit US Sales Data With AFA for COO Reliability Concerns, DOJ Says

The Commerce Department's use of adverse facts available when weighing Bosun Tool's country of origin information using a first-in-first-out (FIFO) methodology was justified, Justice Department said in Sept. 13 comments at the Court of International Trade (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 comments on the remand results (see 2108170047), Bosun pushed back on this contention, arguing 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 U.S. replied that it was in fact Bosun's "failure to maintain full and complete records regarding country of origin" that warranted the AFA finding. This argument was originally sustained by CIT since the trade court held that Bosun did not act to the "best of its ability" when it failed to maintain the full and complete records of its relevant data, DOJ argued.

Bosun also argued that if CIT were to sustain Commerce's use of AFA, it should be limited to missing information. 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.

DOJ said "Bosun’s approach would not necessarily result in a less favorable outcome than if Bosun had cooperated fully by maintaining proper country of origin records." The respondent fails to see the impact of the fact that although Commerce has the U.S. price information, the reported country of origin is unreliable, DOJ said. "Although Bosun asserts that Commerce cannot ignore the price information on the record, because of the unreliable country of origin information and the fact that these sales are not necessarily of subject merchandise, the record does not establish that this price information should be considered in Bosun’s margin calculation," the brief said.

Bosun also held that the court should order Commerce to drop intracompany sales from its duty calculations in this instance since the FIFO-identified sales include intra-company sales along with sales to unaffiliated U.S. customers. Including these sales in the U.S. sales information would amount to double-counting, the respondent argued. But, Bousan only raised this issue on remand, which failed to give Commerce enough time to verify or analyze these claims, DOJ said. So, Commerce should reasonably be allowed to apply AFA to all of the FIFO-identified sales.