CAFC Rules Against AFA for Cooperating AD Respondent; Dissent Warns of ‘Grave Consequences’

No Individual Respondents Left for ITA to Calculate Separate Rates

In the AD investigation of HEDP from China, the ITA selected two mandatory respondents, Wujin Water and Kewei. Two other companies, Jiangsu Jinghai and Wujin Fine Chemical, also obtained separate rate status but were not individually reviewed. A fifth company, BWA, was not selected as a respondent because it refused to publicly disclose its supplier, even though it did submit some data to the ITA.

In the final determination, Wujin Water received a de minimis AD rate. Kewei was assigned an AFA rate of 72.42 percent, taken from the petition, for alleged failure to cooperate. Left without an individually reviewed respondent with an above de minimis, but non-AFA rate, the ITA assigned Jiangsu Jinghai and Wujin Fine Chemical an AD rate based on the simple average of the de minimis and AFA rates for the individually reviewed companies, or 36.21 percent.

In 2009, Jiangsu Jinghai and Wujin Fine Chemical challenged the final determination at the Court of International Trade, on the basis that the ITA was punishing the two fully cooperative respondents by using an AFA rate without finding a lack of cooperation. On remand, the ITA decided not to use Kewei’s AFA rate for the separate rate respondents. Instead, it calculated a new AD rate of 30.94 percent, based on Wujin Water’s normal value data and U.S. price data obtained from non-cooperating respondent BWA. This “hypothetical AFA rate,” as CAFC termed it, was not directly applied to any respondent. It was only used to calculate the separate rate respondents’ AD rates. After taking a simple average of the “hypothetical AFA rate” and Wujin Water’s de minimis rate, the ITA assigned Jiangsu Jinghai and Wujin Fine Chemical an AD rate of 15.47 percent. Using any U.S. sales data other than BWA’s would have resulted in a de minimis rate for the separate rate respondents, CAFC said. CIT affirmed in August 2010.

‘Hypothetical Separate Rate’ Improperly Punished Cooperating Company

On appeal, Jiangsu Jinghai argued that the ITA (1) improperly expanded the scope of the CIT remand order by modifying the U.S. price component of the company’s AD rate; and (2) acted arbitrarily when applying AFA to a cooperating respondent. On the first point, CAFC said recalculating the U.S. price component was within the scope of the remand order. Although the remand did not specifically direct the ITA to examine U.S. price, nothing in the order limited the ITA either, CAFC said. The ITA’s reexamination of the AFA rate used in calculating Jiangsu Jinghai’s separate rate “necessarily involved reconsideration of the underlying variables,” CAFC said.

But by calculating a “hypothetical AFA rate” that only affected cooperating respondents, the ITA acted arbitrarily, CAFC said. The only reason for choosing the BWA data on U.S. price was to obtain a non-de minimis rate for Jiangsu Jinghai, said CAFC. In the ITA’s own words, this was done because a zero or de minimis AD rate “would not be sufficiently adverse as to effectuate the purpose of the facts available rule to induce respondents to provide the [ITA] with complete and accurate information.” Deterrence wasn’t a relevant concern, because the AFA rate only impacted cooperating respondents, CAFC said. The ITA "cherry-picked the single data point that would have the most adviser effect possible on cooperating voluntary respondents, in a situation where there was no need or justification for deterrence,” CAFC said. The appeals court reversed this part of CIT’s judgment, and remanded to the ITA for the agency to reconsider its approach to calculating Jiangsu Jinghai’s separate rate.

Majority Opinion Carries ‘Grave Consequences,’ says Dissenting Reyna

“The errors advanced by [the] majority opinion portend grave consequences in the application of the U.S. antidumping statutes,” said Judge Reyna in his dissent. “In particular, the majority opinion creates a new AFA standard for cooperating respondents whose data is incomplete and inaccurate,” he said. Reyna said he majority only saw one side of the “AFA deterrence coin” in its decision -- that AFA rates are intended to compel participation. AFA rates also have the effect of ensuring that cooperating respondents with insufficient data are not undeservedly awarded de minimis or zero AD rates, he said.

The use of an AFA rate wasn’t even appealed by Jiangsu Jinghai, Reyna said. Instead, the company was only challenging the use of BWA’s U.S. price data, and had conceded the ITA’s methodology. By framing Jiangsu Jinghai’s appeal as a challenge of the ITA’s methodology, rather than the data, the majority may have caused Jiangsu Jinghai to win the battle, but lose the war, Reyna said. The company now stands to receive a higher AD rate on recalculation, rather than the zero or de minimis rate it was going to receive had CAFC simply said it couldn’t cherry-pick BWA’s data.

Finally, said Reyna, the majority applied the wrong standard of review. Rather than applying the “substantial evidence” standard, which would have given the ITA appropriate deference, the majority applied the “arbitrary and capricious” standard, thereby disturbing “well supported findings of fact with its own view on how the case should have resulted.”

(Changshou Wujin Fine Chemical Factory Co., Ltd. v. U.S., appeal no. 2011-1080, dated 12/17/12, Judge Dyk on majority, Reyna dissenting)

(Attorneys: David Craven of Riggle and Crafen for plaintiff-appellant Jiangsu Jianghai; Antonia Soares for defendant U.S. government; Jeffrey Levin of Mondial Trade Compliance Services & Solutions for defendant-appellee Compass Chemical International, LLC)