Trade Court Tells Commerce to Clearly State Statutory Basis for Invoking AFA in AD Review

Judge Claire Kelly instructed Commerce to invoke the specific statutory provision on which it relies on remand -- either 19 U.S.C. 1677e(a) or (b) -- and explain either how the use of AFA promotes accuracy or how Garg Tube failed to respond to the best of its ability. The judge also rejected Garg Tube's challenge to Commerce's use of the Cohen's d test to root out "masked" dumping due to the company's failure to raise the issue administratively.

In the review, Commerce hit Garg Tube with an AFA rate due to an unaffiliated supplier's failure to cooperate with the agency. The court noted that Commerce can use Section 1677e(b) to use an adverse inference against a party when it separately finds that the party has "failed to cooperate to the best of its ability."

Kelly also said the U.S. Court of Appeals for the Federal Circuit held in Mueller Comercial de Mexico v. U.S. that Commerce can use Section 1677e(a) to use an adverse inference when doing so will "yield an accurate rate, promote cooperation, and thwart duty evasion."

Commerce used an adverse inference against Garg Tube in the review without explicitly stating whether it was invoking Section 1677e(a) or (b), though the agency cited to Mueller but used the wording of Section 1677e(b). The U.S. said it's "reasonably discernible that Commerce applied Section 1677(b) to both Garg and its suppliers" since Garg Tube failed to act to the best of its ability since it didn't "serve as a strong inducement for the suppliers in question to cooperate."

Kelly said that she "cannot agree" since it's "unclear whether this statement indicates that Commerce applied Section 1677e(b) against the unaffiliated supplier, against Garg, or whether Commerce here acted" under Section 1677e(a).

To the extent the agency relies on 1677e(b), "Commerce must also further support its determination," the judge noted. The government said that Garg was on notice from the prior AD review that its suppliers would have to submit information, citing both the review's preliminary and final decisions in backing this claim. Kelly said that neither decision "claims that Garg should have been aware that they needed to compel its unaffiliated supplier to submit the information as a condition of conducting business."

The preliminary and final decisions center on the "degree of efforts made by Garg to compel supplier cooperation." In all, "Commerce never offered the grounds supplied by the Defendant to justify its determination in either the preliminary or the final results," the opinion said.

The government's reliance on 1677e(a) didn't fare any better, since the agency "must address the factors invoked by Mueller," including how using AFA will get a more accurate rate or prevent duty evasion. Commerce failed to do this in the review, since "Mueller specifically explains that an adverse inference based upon an inducement rationale where the respondent lacks control over the supplier is potentially unfair."

On remand, the judge told Commerce to "explicitly invoke the statutory provision on which it relies," then subsequently issue a decision under that provision related to Garg Tube.

Garg Tube also challenged Commerce's use of the Cohen's d test to detect masked dumping, though the company's claims were thwarted due to its failure to raise the issue administratively. Kelly ruled that none of the exceptions to requiring administrative exhaustion applied.

While the exporter said any Cohen's d challenge would have been futile prior to the Federal Circuit's decision in Stupp Corp. v. U.S. calling the use of the test into question, Kelly said that the fact that "Garg believed Commerce would reject its argument is insufficient to fall within the bounds of the exception." The judge added that this issue is not a "pure question of law," since it "involves whether Commerce's methodology under the statute is reasonable, which necessarily involves a mix question of law and fact requiring further involvement by the agency."

Ned Marshak, counsel for Garg Tube, said in an email that he agrees "with Judge Kelly that Commerce’s reliance on partial AFA was not supported by substantial evidence and hope that Commerce will follow that decision on remand by calculating Garg’s dumping margin without resort to AFA."

(Garg Tube Export v. United States, Slip Op. 24-41, CIT # 21-00169, dated 04/08/24; Judge: Claire Kelly; Attorneys: Ned Marshak of Grunfeld Desiderio for plaintiff Garg Tube Export; Robert Kiepura for defendant U.S. government; Alan Price of Wiley Rein for defendant-intervenor Nucor Tubular Produts)