CAFC Judges Question Use of AFA Rate for All Other Respondents in AD Review on Taiwanese Nails

Judges on the U.S. Court of Appeals for the Federal Circuit questioned the Commerce Department's decision to pull forward a 78% adverse facts available rate from a prior antidumping duty review in the 2018-19 AD review on steel nails from Taiwan, but not the lower rate for the non-individually examined respondents (PrimeSource Building Products v. U.S., Fed. Cir. # 22-2128).

During an April 3 oral argument, Judge Timothy Dyk acknowledged that the agency can pull the rate forward and even suggested that possibly the exporters that received the non-individually examined rate "should've anticipated that this was a possibility," but he said that "the difficulty" he had was that Commerce then didn't pull forward the non-individually examined respondents' rate from the same review, "which was 35%."

Dyk said there seems to be "a real question as to whether it's reasonable to pull forward the 78% rate but not the all-others rate that was used contemporaneously in that same proceeding." He added that a confounding variable is the lack of contemporaneous evidence surrounding the use of AFA as the non-individually examined respondents rate, which would show that it's reasonable to apply the AFA rate on all other respondents.

In response, DOJ attorney Sosun Bae said that Commerce had "no cause" for pulling forward the non-individually examined respondents' rate, since use of the "expected method" for setting the all-others rate in this review was proper. The expected method involves weight averaging zero, de minimis and AFA rates given to the mandatory respondents.

In the 2018-19 review at issue, Commerce picked Bonuts Hardware Logistics Co. and Create Trading Co. as the mandatory respondents, though Bonuts didn't respond to the agency's questionnaires and Create said it didn't have any U.S. sales. Create was dropped for Pro-Team Coil, which said it wouldn't participate. Both respondents were hit with an AFA rate from a prior review, and the non-selected respondents' rate was set by weight-averaging the AFA rates.

The non-selected respondents challenged their rate as not representative of their dumping margins. The Court of International Trade sustained Commerce's actions in the review, ruling that the expected method was properly employed (see 2206170040).

At the Federal Circuit, Bryan Cenko, counsel to importer PrimeSource Building Products, and Kelly Slater, counsel for a host of Taiwanese steel nail exporters, maligned Commerce's alleged failure to find that the non-selected respondents' rate was reasonably reflective of the companies' dumping rates.

Judge Kara Stoll questioned the plaintiffs' arguments, expressing concern about whether it's "appropriate for an appellate court to look at what is the more appropriate way to determine the expected rate?" The judge said she's "just having a hard time with the way you're arguing this in the sense that, we're reviewing this for substantial evidence," though she asked if there's a better way to review the decision. Stoll also questioned the exporters' failure to submit data that would show that using the 78% rate as the non-selected respondents' rate was "unreasoanble," noting that the companies only relied on the individual exemption rates from past proceedings.

Where Stoll put pressure on the exporters, Dyk continued to question DOJ on Commerce's basis for using the 78% AFA rate for the all-others rate. In also seeking to defend this rate, Adam Gordon, counsel for petitioner Mid Continent Steel & Wire, said that the basis for the rate was the actual record in the review. One respondent, Bonuts, never responded, while the other respondent, Pro-Team Coil, said it wasn't going to participate.

"There you have complete justification because you have a complete failure to cooperate," Gordon said. The point of AFA is to "induce cooperation," the attorney argued, noting that this objective is important given that the record here is "littered with noncooperative respondents -- probably more than I've seen in my career."

Gordon added that "Commerce followed the law" in using the expected method and hitting both respondents with AFA. He said that exporter Liang Chyuan Industrial Co. only showed up to contest the non-selected respondents' rate "after realizing what was at risk," and it failed to do what it should have done in order to put information on the record to contest its rate. "Every review stands on its own record," Gordon claimed. "This is a very straightforward case, in my opinion. You had two AFA rates and as the statute requires and as the [Statement of Administrative Action] requires, they average those margins. If they'd done anything different, it would have been unlawful."