CAFC Upholds Use of AFA on Nail Exporter and Use of Petition to Set Margin

Judges Alan Lourie, Timothy Dyk and Kara Stoll said Unicatch failed to act to the best of its ability in failing to correct the reconciliation information, which the company itself doesn't dispute was "incomplete." The court also held that Commerce permissibly used the 78.17% petition rate as the AFA rate for Unicatch since two sales from the other respondent in the revidew, Pro-Team Coil Nail Enterprise, exceeded the 78.17% mark.

In the review, Commerce originally picked Pro-Team and Bonuts Hardware Logistics Co. as mandatory respondents. Bonuts said it wouldn't participate, claiming that it's not representative of the other exporters. Commerce continued to treat Bonuts as a mandatory respondent, though it also then tapped Unicatch as another mandatory respondent.

The agency asked Unicatch for clarification on its cost reconciliation in a supplemental questionnaire, to which the respondent said it identified a clerical error in the "amount reported for its cost of sales." The respondent resubmitted this information and gave additional information to show that its per-unit costs reconcile to its constructed value costs.

Commerce issued another supplemental questionnaire, asking Unicatch to revise its data to ensure it starts with the cost of sales per its audited financial statements and ends with the total cost of manufacturing "as per the submitted cost database" and explain each reconciling item. Unicatch submitted a sheet that started with the cost of sales from its financial statments and ended with its review period cost of production for subject and non-subject goods. Commerce issued a third questionnaire, only asking about sales Unicatch made to an affiliated U.S. buyer.

The agency hit Unicatch with AFA for incomplete data -- a point even the respondent doesn't contest. The exporter instead said it didn't fail to act to the best of its ability since Commerce should have advised the company that failure to complete the reconciliation would lead to AFA. The respondent said that if the agency had done so, it would have easily made the fix.

Stoll, the author of the opinion, said the "best of its ability" standard assumes familiarity with the rules, regulations and risk of AFA, and in fact, "Commerce did provide Unicatch with warnings in its first and second supplemental questionnaires." She said "the burden of creating the record lies with interested parties like Unicatch, not Commerce." Due to the "importance of the information requested," not even a gap-filling alternative from the petitioner could save Unicatch, the court held.

Unicatch also contested the validity of the 78.17% rate itself, which Commerce found to be valid after identifying that two of Pro-Team's sales exceeded this dumping rate. The respondent claimed the fact that just two sales out of over 12,000 exceeded the petition rate can't stand as a valid basis to use the petition rate. The court disagreed, finding that two sales "can corroborate the petition rate." So long as the data is "corroborated," Commerce can choose what sources it will rely on "to support an adverse inference."

The court also sustained the 35.3% all-others rate, which was set via the "expected method" by averaging Pro-Team's zero rate and Unicatch's AFA rate. Stoll said the companies challenging the rate failed to show that it's unreasonable, since Commerce is "permitted to use corroborated data from the petition" and the agency "limited its examination to exporters or producers accounting for the largest volume of the subject merchandise during the review period."

While the companies claimed that the 35.3% rate is "aberrational" compared with rates for cooperative respondents in other reviews, Stoll said the court "need not consider other review periods here because contemporaneous data show that the rates of the period under review, including the AFA rate, were reasonable.” Also, Commerce said Bonuts' claims that it wasn't a representative respondent weren't sufficient to scrap the exporter's AFA rate. Stoll said the court "cannot say that was unreasonable."

(Pro-Team Coil Nail Enterprise v. United States, Fed. Cir. # 22-2241, dated 08/15/24; Judges: Alan Lourie, Timothy Dyk and Kara Stoll; Attorneys: Ned Marshak of Grunfeld Desiderio for plaintiffs-appellants led by Unicatch Industrial Co.; Sosun Bae for defendant-appellee U.S. government; Adam Gordon of The Bristol Group for defendant-appellee Mid Continent Steel & Wire)