Trade Court Sends Back Use of Facts Available Over Treatment of Certain Parts as Out of Scope

The Court of International Trade in a May 10 opinion made public May 17 sustained parts and sent back parts of the Commerce Department's remand results in the administrative review of the antidumping duty order on large power transformers from South Korea. In the opinion, Judge Mark Barnett remanded Commerce's use of adverse facts available over plaintiff Hyundai Electric & Energy Systems' (HEES's) reporting of certain parts as not being in the scope of the order. The judge also upheld the use of AFA relating to Hyundai's reporting of service-related revenue and the completeness of its U.S. sales database.

In the review, Commerce said that Hyundai withheld essential service-related revenue information and failed to cooperate to the best of its ability, requiring the use of AFA. In response, Hyundai said that Hyundai USA was no longer its affiliate, meaning the "identity of its affiliates" had changed between reviews. Nevertheless, Hyundai continued to treat Hyundai USA as an affiliate since there were other grounds on which Commerce could find an affiliation. Commerce continue to ask Hyundai to separately report its service-related revenues and not to bundle them if those revenues are reflected on sales documents.

In its responses, Hyundai continued to say that it was no longer affiliated with Hyundai USA, but it still gave service-related revenue documents between it and Hyundai USA, claiming they were "intercompany, internal communications." At verification, Commerce said multiple types of documents related to the sales process had not been placed on the record. Hyundai said they were internal communications. So, the agency hit the respondent with AFA.

This contention was upheld by Barnett. It is undisputed that certain information was left off the record. Since Hyundai was not affiliated with Hyundai USA, it needed to give documents of service-related revenue allocation between the two companies. "However, because HEES decided to report its U.S. sales in the same manner as it had in prior administrative reviews, despite acknowledging the change in ownership and affiliation status, HEES did not submit the necessary service-related revenue documentation between HEES and Hyundai USA," Barnett said. As such, AFA was warranted.

The judge further ruled that Commerce gave proper notice of this reporting requirement. "As a respondent, HEES had the burden to build the record of the proceeding," the judge said. "HEES was not entitled to maintain that it was no longer affiliated with Hyundai USA yet seek to assign blame to Commerce when HEES did not report its sales consistent with HEES’s position."

Barnett also upheld Commerce's use of AFA over the completeness of Hyundai's U.S. sales database. In the review, Commerce picked a sale of large power transformers not included in the database to test the completeness of the database. Hyundai said the selected sale was actually conducted between Hyundai USA on behalf of Hyundai Power Transformers and was for an Alabama-made power transformer. Commerce hit Hyundai with AFA over the respondent's inability to document that the production of the transformer was transferred from South Korea to the U.S.

The judge upheld this use of AFA. Barnett ruled that while the evidence does not show that the transformer was made in South Korea, it does not prove that it was made in Alabama either. As such, the use of AFA was warranted since more forthcoming responses should have been made, the judge said.

An element of Commerce's facts available use was remanded, though, concerning the reporting of certain unnamed parts as being not in scope. In the review, Commerce requested a detailed list of all in and out of scope merchandise included in each South Korean sale. Hyundai then designated certain contested parts as not within the order's scope. In response, the agency used facts available.

Barnett ruled that, "While Commerce cursorily notes that 'it will treat parts and components as subject or non-subject merchandise based on the language in the scope of the order,' it did not directly address HEES’s interpretation of the scope of the order and application of the interpretation to HEES’s reporting of sales." The judge further commented that there's not enough evidence to back Commerce's position that Hyundai inconsistently classified the parts.

"As the court understands the issue, in simpler terms, the distinction HEES draws is similar to the difference between a switch on a lamp and a switch on a circuit breaker," the opinion said. "Both parts are referred to as switches and flipping either switch off would turn off the lamp; nevertheless, the switch on the circuit breaker would not reasonably be considered part of the lamp, as it controls not only the flow of electricity to the lamp, but also controls the flow of electricity throughout the circuit."

(Hyundai Electric & Energy Systems Co. v. United States, Slip Op. 22-42, CIT #20-00108, dated 05/10/22, Judge Market Barnett. Attorneys: Ron Kendler of White & Case for plaintiff Hyundai; Kelly Krystyniak for defendant U.S. government; Melissa Brewer of Kelley Drye for defendant-intervenors Hitachi Energy USA and Prolec-GE Waukesha)