Trade Court Sends Back Use of AFA Over Failure to Give AD Respondent Notice of Deficiency

The Commerce Department improperly used adverse facts available on antidumping respondent Saha Thai Steel Pipe Public Co. since the agency failed to notify the respondent about the supposed deficiencies in its submissions, the Court of International Trade ruled in a Dec. 2 opinion. Saha Thai omitted sales of line pipe from its U.S. sales database, claiming that line pipe is not within the antidumping duty order on circular welded carbon steel pipes and tubes from Thailand. Judge Stephen Vaden found that Commerce did not notify the respondent that its sales database was deficient, remanding the use of AFA. If Commerce continues to use AFA on remand, it must ensure that it complies with the notice requirement, the judge ruled.

“Saha Thai is very pleased that the Court of International Trade agreed with their argument that the Commerce Department’s decision to apply adverse facts available was contrary to law," Daniel Porter, counsel for the plaintiff, said in an emailed statement. "Saha Thai looks forward to the Commerce Department’s remand determination without the application of adverse facts available.”

The case concerns the 2018-19 administrative review of the AD order on circular welded carbon steel pipes and tubes from Thailand in which Saha Thai served as the sole mandatory respondent. The exporter has served as a mandatory respondent 13 times for administrative review on this AD order. Throughout the litigation in this case, Saha Thai touted the fact that it has received low or nonexistent dumping margins and has always been cooperative (see 2106160063). This time, it got hit with a 37.55% dumping rate due to its alleged failure to submit U.S. sales of subject merchandise and the results of an Enforce and Protect Act proceeding that found that Saha Thai colluded with Blue Pipe to evade duties by selling standard pipe in the U.S.

Vaden described the facts of the case as being "intertwined with those in a recent scope inquiry case" also brought by Saha Thai. In that matter, the trade court ruled that Commerce properly excluded dual-stenciled pipe from the AD order on circular welded carbon steel pipes and tubes from Thailand (see 2208260024). During the review, Saha Thai did not report its sales of line pipe as part of its U.S. sales database, based on its understanding that line pipe was not subject merchandise. Commerce later asked the respondent to report its subject and non-subject merchandise, finding that dual-stenciled pipe was included in the order.

In the final results of the review, Commerce hit Saha Thai with AFA over the fact that it did not report its U.S. sales of dual-stenciled pipe. The respondent took to the trade court to argue that Commerce failed to notify it of its deficiency in the submission, bringing up the issue for the first time in the final results.

Vaden first held that the issue was properly before the court, despite Commerce's arguments that Saha Thai failed to exhaust its administrative remedies. The judge said Saha Thai had no chance to object since the first instance of AFA came during the final results, the burden lies with Commerce to give notice of a deficiency and not with Saha Thai to object, and the issue is a pure question of law, so the exporter is exempt from the administrative exhaustion requirement. On the lattermost point, the judge said no further agency involvement is needed to consider the question and the court's inquiry into the question neither delays nor expands scarce resources.

"Commerce had an obligation to notify Saha Thai of the alleged deficiencies in its U.S. sales database and provide an opportunity to remedy," Vaden added. "Commerce’s reasoning would require a respondent to object that it did not have proper notice before Commerce has taken any action for which notice might be required. The law requires respondents to be diligent, not clairvoyant.

The judge then dismantled the U.S.'s claim that Saha Thai's data was submitted fraudulently so that it did not need to provide notice of the deficiency. In response to the government's arguments, the respondent said that it told the agency in a footnote what data it was and wasn't providing and that it fully responded to Commerce's questions. A "mistake or misunderstanding" still requires a notice. The judge went through various examples where federal statute and U.S. Court of Appeals for the Federal Circuit precedent have required Commerce to give this notice -- "the same notice and opportunity to cure it has routinely provided to less transparent and less cooperative entities in the past."

"Commerce may refuse to provide notice when it can demonstrate bad faith on the respondent’s part, not merely when it alleges that some information it wanted was not provided," the judge said. "Because Commerce did not find Saha Thai acted fraudulently, Commerce violated § 1677m(d) when it did not provide notice and an opportunity to cure before applying an adverse inference to the facts available."

Commerce said it gave notice in a second supplemental questionnaire, but the evidence does not back this claim, the court held. In the questionnaire, the agency asked Saha Thai to give information about subject and non-subject merchandise sales to two customers -- something the respondent did "satisfactorily." Commerce did not ask for a revised U.S. sales database nor inform the respondent that the agency believed it had previously asked for information it didn't receive. "Yet that information is what Commerce now claims Saha Thai failed to provide," the judge said. As a result, Vaden remanded the case for failure to provide notice, telling the agency that if it wants to continue to use AFA, it must give an "adequate explanation" and "ensure that it properly complies with the notice requirement."

Luke Meisner, counsel for defendant-intervenor Wheatland Tube Co., decried the ruling in an emailed statement. "In October 2018, when Saha Thai saw its dumping margin increase, it engaged in an evasion scheme to avoid paying the higher antidumping duties by shipping dual-stenciled standard pipe to its U.S. customers instead of single-stenciled standard pipe. In the review being challenged at the court, Commerce had properly applied total adverse facts available to Saha Thai based on Saha Thai’s failure to report the dual-stenciled pipe as merchandise that was subject to the duties. If today’s opinion stands, Saha Thai will basically have gotten away scot-free with its illegal evasion scheme. It’s a terrible outcome for the domestic industry and American workers."

(Saha Thai Steel Pipe Public Co. v. United States, Slip Op. 22-134, CIT #21-00049, dated 12/2/22, Judge Stephen Vaden. Attorneys: Daniel Porter of Curtis Mallet-Prevost for plaintiff Saha Thai Steel Pipe Public Co.; Claudia Burke for defendant U.S. government; Luke Meisner for defendant-intervenor Wheatland Tube Co.)