Shandong Dongfang Bayley Wood Co. v. United States

375 F.Supp.3d 1339

SHANDONG DONGFANG BAYLEY WOOD CO., LTD., Plaintiff,

v. UNITED STATES, Defendant,andCoalition for Fair Trade of Hardwood Plywood, Defendant-Intervenor.

Slip Op. 19-45

Court No. 18-00020

United States Court of International Trade.

Dated: April 12, 2019

Gregory S. Menegaz, Alexandra H. Salzman, J. Kevin Horgan, deKieffer & Horgan, PLLC, of Washington, D.C., for Plaintiff Shandong Dongfang Bayley Wood Co., Ltd. John J. Kenkel also appeared.

Sonia M. Orfield, Trial Attorney, and Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for Defendant United States. With them on the brief were Joseph H. Hunt, Assistant Attorney General, and Jeanne E. Davidson, Director. Of counsel on the brief was Jessica R. DiPietro, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, D.C.

Timothy C. Brightbill, Elizabeth S. Lee, Stephanie M. Bell and Usha Neelakantan, Wiley Rein, LLP, of Washington, D.C., for Defendant-Intervenor Coalition for Fair Trade of Hardwood Plywood. Adam M. Teslik, Cynthia C. Galvez, Derick G. Holt, Jeffrey O. Frank, Laura El-Sabaawi, Maureen E. Thorson and Tessa V. Capeloto also appeared.

Choe-Groves, Judge:

Before the court is a Rule 56.2 motion for judgment on the agency record filed by Plaintiff Shandong Dongfang Bayley Wood Co., Ltd. ("Plaintiff" or "Bayley"). Bayley contests the U.S. Department of Commerce's ("Commerce" or "Department") final determination in the countervailing duty investigation of certain hardwood plywood products from the People's Republic of China ("China"), in which the Department found that countervailable subsidies are being provided to producers and exporters of the subject merchandise. See Countervailing Duty Investigation of Certain Hardwood Plywood Products From the People's Republic of China, 82 Fed. Reg. 53,473 (Dep't Commerce Nov. 16, 2017) (final affirmative determination and final affirmative critical circumstances determination, in part) ("Final Determination"); see also Dep't Commerce, Issue and Decision Memorandum for the Final CVD Determination, PD 618, bar code 3640091-01 (Nov. 13, 2017) ("Final IDM"). For the foregoing reasons, the court sustains Commerce's final determination in full.

ISSUES PRESENTED

This case presents the following issues:

1. Whether Commerce's determination to apply facts available with an adverse inference ("adverse facts available or AFA") to Bayley is supported by substantial evidence;

2. Whether Commerce's determination not to verify certain submissions is in accordance with the law; and

3. Whether Commerce's determination to disregard Plaintiff's submitted information is in accordance with the law and not arbitrary and capricious.

PROCEDURAL HISTORY

Commerce initiated a countervailing duty investigation on hardwood plywood products from China on December 8, 2016, at the request of Petitioner Coalition for Fair Trade in Hardwood Plywood ("Coalition" or "Petitioner"). See Certain Hardwood Plywood Products From the People's Republic of China, 81 Fed. Reg. 91,131 (Dep't Commerce Dec. 16, 2016) (initiation of countervailing duty investigation). The period of investigation was from January 1, 2015 through December 31, 2015. See id. at 91,132. Commerce selected Bayley and Linyi Sanfortune Wood Co., Ltd. as mandatory respondents. See Dep't Commerce, Decision Memorandum for the Preliminary CVD Determination at 2, PD 404, bar code 3564577-01 (Apr. 19, 2017) ("Prelim. IDM").

Commerce issued initial questionnaires to Bayley and the Government of China on January 17, 2017. Id. Bayley filed its affiliation questionnaire response on January 31, 2017. Id.; see Bayley Affiliation Qre Resp., PD 162, bar code 3540296-01 (Feb. 1, 2017). In this response, Bayley revealed its affiliation with Companies A, B, and C.¹ See Prelim. IDM at 2, 4. Bayley also reported that it was partially-owned by Person A and majority-owned by Person B, a husband and wife. Id. at 24. Bayley submitted its full response to the initial questionnaire on March 2, 2017. Id. at 2–3. Commerce issued a supplemental questionnaire for Companies A, B, and C on March 8, 2017. Id. at 3. Bayley submitted a section III response for Companies A, B, and C on March 28, 2017. Id. at 4. In this response, Bayley revealed an affiliation with Company D, which was wholly-owned by Person C, the father of Person B and father-in-law of Person A. Id. at 4, 24–25. Commerce issued a second supplemental questionnaire for Company D on April 3, 2017. Id. at 4. Bayley submitted a section III response for Company D on April 10, 2017. Id. Petitioner submitted comments to Bayley's initial questionnaire response on March 20, 2017, asserting that Bayley was affiliated with another company, Shelter Forest International Acquisition, Inc. ("Shelter" or "SFIA"). Id. at 27. Bayley responded to Petitioner's comments and denied its affiliation with Shelter on April 3, 2017. See id. at 4.

Commerce published its preliminary determination on April 25, 2017. See Certain Hardwood Plywood Products from the People's Republic of China, 82 Fed. Reg. 19,022 (Dep't Commerce Apr. 25, 2017) (preliminary affirmative countervailing duty determination, preliminary affirmative critical circumstances determination, in part, and alignment of final determination with final antidumping duty determination) ("Preliminary Determination"). Commerce determined preliminarily that application of AFA was warranted based on Bayley's failure to disclose all affiliates, and assigned Bayley a subsidy rate of 111.09%. See id. at 19,023 ; see also Prelim. IDM at 24–31.

Commerce published its final determination on November 16, 2017. See Final Determination. Commerce continued to apply AFA to Bayley in its final determination and assigned Bayley a subsidy rate of 194.90%. See id. at 53,474 –75; see also Final IDM at 24.

Bayley initiated an action in this court on February 27, 2018. See Summons, Feb. 2, 2018, ECF No. 1., Compl., Feb. 27, 2018, ECF No. 8. Bayley filed a Rule 56.2 motion for judgment on the agency record on August 3, 2018. See Pl. Shandong Dongfang Bayley Wood Co., Ltd.'s Mot. J. Agency R., Aug. 3, 2018, ECF No. 20 ; see also Pl. Shandong Dongfang Bayley Wood Co., Ltd.'s Rule 56.2 Mem. Supp. Mot. J. Agency R., Aug. 3, 2018, ECF No. 20-1 ("Pl. Br."). Defendant and Petitioner filed response briefs on October 2 and 3, 2018. See Def.'s Mem. Opp'n Pl.'s Rule 56.2 Mot. J. Agency R., Oct. 2, 2018, ECF No. 25 ; Resp. Br. Def.-Intervenor Coalition for Fair Trade in Hardwood Plywood, Oct. 3, 2018, ECF No. 27. Bayley filed a reply brief on November 5, 2018. See Pl. Shandong Dongfang Bayley Wood Co., Ltd. Reply Br., Nov. 5, 2018, ECF No. 30.

JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction pursuant to Section 516A(a)(2)(B)(i) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(i) (2012), and 28 U.S.C. § 1581(c). The court shall hold unlawful any determination, finding, or conclusion found to be unsupported by substantial evidence on the record, or otherwise not in accordance with the law. 19 U.S.C. § 1516a(b)(1)(B)(i).

The court will uphold Commerce's determinations unless they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Id. § 1516a(b)(1)(B)(ii). An agency acted in an arbitrary and capricious manner if it "entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." Motor Vehicle Mfrs. Ass'n. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) ; see also Al. Aircraft Indus., Inc. v. United States, 586 F.3d 1372, 1375 (Fed. Cir. 2009).

ANALYSIS

I. Commerce's Application of AFA

Section 776 of the Tariff Act provides that if "necessary information is not available on the record" or if a respondent "fails to provide such information by the deadlines for submission of the information or in the form and manner requested," then the agency shall "use the facts otherwise available in reaching" its determination. 19 U.S.C. § 1677e(a)(1), (a)(2)(B). If the Department finds further that "an interested party has failed to cooperate by not acting to the best of its ability to comply with a request for information" from the agency, then the Department "may use an inference that is adverse to the interests of that party in selecting from among the facts otherwise available." Id. § 1677e(b)(1)(A). The U.S. Court of Appeals for the Federal Circuit has interpreted these two subsections to have different purposes. See Mueller Comercial de Mexico, S. de R.L. De C.V. v. United States, 753 F.3d 1227, 1232 (Fed. Cir. 2014). Subsection (a) applies "whether or not any party has failed to cooperate fully with the agency in its inquiry." Id. (citing Zhejiang DunAn Hetian Metal Co. v. United States, 652 F.3d 1333, 1346 (Fed. Cir. 2011) ). On the other hand, subsection (b) applies only when the Department makes a separate determination that the respondent failed to cooperate "by not acting to the best of its ability." Id. (quoting Zhejiang DunAn Hetian Metal Co., 652 F.3d at 1346 ).

When determining whether a respondent has complied to the "best of its ability," Commerce "assess[es] whether [a] respondent has put forth its maximum effort to provide Commerce with full and complete answers to all inquiries in an investigation." Nippon Steel v. United States, 337 F.3d 1373, 1382 (Fed. Cir. 2003). This finding requires both an objective and subjective showing. Id. Commerce must determine objectively "that a reasonable and responsible importer would have known that the requested information was required to be kept and maintained under the applicable statutes, rules, and regulations." Id. (citing Ta Chen Stainless Steel Pipe, Inc. v....