CAFC Judges Sow Doubt Over Bid to Exclude AFA From AD Average Rate

Judges at the U.S. Court of Appeals for the Federal Circuit, namely Chief Judge Kimberly Moore, expressed doubt over exporter Shanxi Hairui Trade Co.'s argument that the Commerce Department should have excluded an adverse facts available rate when calculating the all-others rate in the relevant administrative review. Moore said at a May 3 oral argument that she thought Commerce articulated its decision on "sound, clear, rational bases" especially given the "gamesmanship" going on the sampling process (Shanxi Hairui Trade Co. v. United States, Fed. Cir. #21-2067).

The case concerns the administrative review of the antidumping duty order on steel nails from China in which three mandatory respondents were selected. Shanxi, however, received the all-other respondents rate, which was calculated using an average of the three respondents' rates. One respondent, though, received a full AFA rate, which the appellant now argues should be excluded from the all-others rate calculation per the letter of the law.

In its opening brief, Shanxi argued that the statute requires that the AFA rate not be used in the calculation of the separate rate and that even without such statutory language, "substantial evidence and logic" precludes such an approach. This argument was then subject to the Federal Circuit judges' scrutiny at the May 3 oral argument. The first hole to appear in the appellant's argument concerned the fact that the statute only mentions excluding AFA, zero and de minimis rates from the separate rate calculation for AD investigations, not reviews.

"My take on this is that the statute is absolutely silent as to whether to apply a similar exception for de minimis, zero and AFA rates to administrative reviews," Moore said. "The statute speaks to investigations. There's good and sound logic in saying, 'Why limit it to investigations? Why not include administrative reviews?' And in fact it looks like Commerce has in other cases said it will apply that same concept to administrative reviews.

"But in this case, we have an actual Federal Register publication by Commerce where it made the decision to do something different with regard to sampling methodology. It articulated quite sound, clear, rational bases for why they were doing that, including the fact that there was a lot of gamesmanship going on in this process, where people were having themselves excluded for the purpose of thereby driving the rates down, so Commerce thought that sampling methodology -- it made a facutal, rational, emperically based determination in the sampling methodology that they should include AFA rates."

Stephen Brophy, counsel for Shanxi, was then asked why this position is not entitled to Chevron deference. He responded by saying that the position still needs to be backed by substantial evidence. Moore then said that Brophy was pivoting, to which Brophy laughed. The exchange concluded with Moore asking if he thinks that zero and de minimis rates should also be excluded. Brophy said that he wouldn't go that far.

Moore then shut down the line of question and turned to Sosun Bae of DOJ. "Is he right?" the judge asked. "You have to exclude the AFAs but you have to include the de minimis and the zeros? How does that make any darn sense?" Bae said that it doesn't and that Commerce would've had to include AFA, de minimis and zero rates, but that there was no indication that Commerce would not have included zero or de minimis rates had they been part of the sample and that the litigants would most likely not even be there if Commerce had included such rates.