CIT Tosses Claim Against Lack of On-Site Verification Since It Wasn't Raised Administratively

In a similar case on the use of a questionnaire instead of on-site verification, Vaden ruled that the use of a questionnaire in this way was unacceptable (see 2202030024). The judge ruled that Commerce must either conduct verification, even if virtually, or more fully explain why it didn't conduct even a virtual verification in the face of a request to do so.

The case concerns the antidumping duty investigation on forged steel fluid end blocks from Italy in which Lucchini Mame Forge and Metalcam were tapped as mandatory respondents. During the investigation, Commerce said it was unable to conduct on-site verification due to COVID-19 travel restrictions, instead issuing a questionnaire. Ellwood City challenged the lack of verification at CIT, alongside another similar challenge it filed in a different antidumping proceeding (see 2201200032). The U.S. argued that since Ellwood City failed to raise this question during the investigation, the matter should be tossed.

Oral argument was held in February, during which counsel for the plaintiffs could not show Vaden any specific page in the administrative record where the plaintiffs argued the issue "they now vigorously propound." Instead, Ellwood city argued that Commerce did not treat the information it gathered in a way that the plaintiffs expected. The agency said that had the issue been brought up, it would have addressed it.

Vaden found that this was enough to declare that the issue was not raised administratively and thus should be dismissed. "Ellwood City did not challenge Commerce’s failure to perform an on-site verification during the pendency of the administrative proceeding, much less include the argument in its final brief before the agency as required by regulation," the opinion said. "Instead, it complimented the agency for its verification procedures -- until those procedures resulted in a final determination not to Ellwood City’s liking."

The judge then addressed the question of futility -- whether raising the verification question administratively would have proved futile and thus open up the challenge for judicial review. Vaden said that it is "far from 'obvious that the presentation of [Ellwood City's] arguments to the agency would have been pointless,'" and thus the plaintiffs failed to clear the bar of proving futility. The plaintiffs further argued that the issue could be addressed as a "pure question of law," though the judge again ruled against the plaintiffs.

While the claim starts as a "seemingly simple statutory claim," it quickly "morphs" into a factual one over Commerce's past practice of conducting verification in unusual circumstances, the judge said. "Indeed, Ellwood City’s acceptance of these past 'off-site' practices as 'verification' and suggestion of virtual alternatives confirm the factual rather than purely legal nature of the inquiry," the opinion said. "These are exactly the type of allegations that 'require a factual record of Commerce’s past practice and an assessment of Commerce’s justifications for any departure from that past practice.' No such record exists because Plaintiffs failed to raise their claim before the agency."

The plaintiffs, though, also raised a smattering of other issues in the case which they did raise administratively. In one, Ellwood City said that Metalcam failed to reconcile its product-specific costs of raw materials, internal machining and external machining in its cost database to its financial statements. Commerce said that after analyzing the evidence, it disagreed since product family level standard costs cannot be reconciled to the trial balance or to the internal operating report. Vaden refused to substitute the court's judgment for that of Commerce's, accepting the agency's explanation.

Ellwood City also argued that Commerce erred in using Metalcam's cost reconciliation data since the source document didn't back its previous responses. Commerce again disagreed, and the judge accepted the explanation. The same is true of the plaintiffs' challenge to Commerce's treatment of Ellwood City's concerns over Metalcam's allocation of steel ingot costs to semi-finished inventory. The judge also said that Commerce's positions were justified relating to its reliance on Metalcam's sales data and acceptance of Lucchini's yield losses.

(Ellwood City Forge Co. v. United States, Slip Op. 22-66, CIT #21-00073, dated 06/14/22, Judge Stephen Vaden. Attorneys: Thomas Beline of Cassidy Levy for plaintiffs; Sarah Kramer for defendant U.S. government; Douglas Heffner of Faegre Drinker for defendant-intervenor Metalcam S.P.A.)