CIT Tosses Challenge to Lack of On-Site Verification Given Failure to Exhaust Administrative Remedies

Antidumping petitioner Ellwood City Co. failed to preserve its objection to the Commerce Department's use of a questionnaire in light of on-site verification by not exhausting administrative remedies, the Court of International Trade ruled in a Nov. 8 opinion. Judge Stephen Vaden said Ellwood City had many chances to object to the verification methodology in the AD investigation, but it never did. However, the case was remanded to Commerce over defendant-intervenor and AD respondent BGH Edelstahl Siegen's challenge to Commerce's use of a particular market situation adjustment to the sales-below-cost test.

The case challenges elements of Commerce's final determination in the antidumping duty investigation of forged steel fluid end blocks from Germany. The plaintiffs are challenging Commerce's decision to use a questionnaire instead of on-site or even virtual verification due to COVID-19 travel restrictions. The agency is contesting this claim in the trade court, arguing, among other things, that the court should toss claims it should have explored virtual verification since they were not raised administratively (see 2112230065).

Vaden agreed with Commerce, finding that the petitioner failed to exhaust its administrative remedies. The judge issued a similar ruling on Nov. 8 in another case also brought by Ellwood (see 2211080059). "Ellwood City had many opportunities to object to the verification methodology Commerce suggested; however, neither in its post-preliminary comments on verification, nor in its seventy-one-page case brief, nor in its hearing with Commerce officials did Ellwood City object," the judge said. An objection to the verification procedure "is nowhere to be found in the administrative record -- even when it was clear that Commerce would not be ​​​​​​conducting an 'on-site' verification."

Ellwood City argued that the exhaustion doctrine does not apply in its case due to two exceptions. The first says the issue need not have been raised administratively if it would have been futile to bring it up. Ellwood City said Commerce's actions in a similar case, Bonney Forge v. U.S., shows that bringing up this question administratively would have been futile: in that case, the U.S. said the respondent's effort to raise the issue with 63 days left in the proceeding was "far too late" (see 2207080028). Vaden ruled that "at best," Bonney Forge gives Ellwood City some "post hoc confidence that" if it objected at the last minute, Commerce "would have refused to change course. But this is insufficient: 'The mere fact that an adverse decision may have been likely does not excuse a party from a statutory or regulatory requirement that it exhaust administrative remedies.'"

The plaintiffs cited as the second exception that the verification question is purely one of the law, so Commerce didn't need to weigh in. "Ellwood City’s verification argument implicates factual inquiries into Commerce’s past practice and the logistics of verification; accordingly, the pure question-of-law exception does not apply," the brief said.

Ellwood City further challenged Commerce's verification results and its use of BGH's cost database, pointing to two errors made by the respondent in answering the verification questionnaire. Commerce, and Vaden, found these errors to be "minor clerical errors," and not worthy of a remand given that they did not impact that AD margin.

BGH, though, challenged Commerce's decision to make a PMS adjustment to the sales-below-cost test -- a move the Federal Circuit rejected (see 2112100039). Given this precedential opinion, the trade court sent back Commerce's adjustment, which the government didn't oppose. BGH also criticized Commerce's allegedly illegal use of "zeroing" across multiple products in its differential pricing analysis -- used to identify masked dumping. After masked dumping has been identified, Commerce can use an average-to-transaction comparison to derive the AD margin. While using this comparison, the agency can zero out iterations that produce a negative dumping margin. The Federal Circuit said this was appropriate.

The defendant-intervenor argued at CIT, however, that zeroing negative dumping margins across different control numbers is illegal. Vaden disagreed. "It is well settled that zeroing is permissible when Commerce applies the average-to-transaction method; and similarly, the other elements of the differential pricing analysis have been upheld by the Federal Circuit," the judge said.

(Ellwood City Forge Co. v. U.S., Slip Op. 22-122, CIT Consol. #21-00077, dated 11/08/22, Judge Stephen Vaden. Attorneys: Myles Getlan of Cassidy Levy for plaintiffs; Sarah Kramer for defendant U.S. government; James Horgan of deKieffer & Horgan for defendant-intervenor BGH Edelstahl Siegen)