CIT Upholds Use of Neutral FA, AFA in 33rd and 34th AD Reviews on Roller Bearings

In both decisions, Vaden also sustained Commerce's "practice of excluding" additional revenue Tainai collected in connection with its payment of Section 301 duties from the company's U.S. price.

The trade court previously remanded the 33rd review after initially finding that Commerce failed to justify its use of partial AFA given that Tainai was a cooperative party (see 2309140023). In the review, the respondent's unaffiliated suppliers failed to submit certain factors of production information, leading to the use of partial AFA.

On remand, Commerce said it can't conclude on the present record whether Tainai had enough control over its suppliers to induce their cooperation, using partial neutral facts available to fill the gaps in the record. The agency said it was troubled with the court's past opinion, raising concerns that it would need to get data exclusively in the non-cooperative suppliers' possession to comply with the court's instructions to examine the respondent's control over its suppliers. The agency said this "creates an unworkable standard."

In response, Vaden said he didn't require an "all-or-nothing" approach, noting that Commerce could have "analyzed the data for each supplier individually and determined which suppliers Tainai could control and which suppliers it could not.” Instead of doing so, Commerce "threw up its hands" and just used neutral facts available, the court said.

The court said the record in the 33rd review raised questions "about how aggressively Tainai sought to gain the cooperation of its unaffiliated suppliers." However, the court refrained from making factual or analytical findings for the agency in the 33rd review.

Commerce took the hint in the 34th review, finding that despite the suppliers' continued failure to submit requested information, Tainai failed to act to the best of its ability in getting the suppliers to turn in the data. The agency found that Tainai "delayed sending Commerce's requests to its suppliers for more than a month" -- a move that "falls well short" of the standard to put forth a maximum effort to provide the agency with complete answers, the court said.

In the suit on the 33rd review, Tainai then said Commerce failed to pick neutral facts to fill the gaps. The agency calculated a surrogate value for each component by valuing the materials used to make the component, then adding amounts to those values for processing and profit as opposed to using the price Tainai paid its suppliers for the parts. Vaden said the respondent didn't cite any authority for "why Commerce’s determination is impermissible," instead only generally claiming that the agency should adjust its methodology to reflect Tainai's business model.

Instead, the U.S. Court of Appeals for the Federal Circuit has said that when Congress tells the agency to measure pricing behavior and execute its duties in a given way, "Commerce need not examine the economic or commercial reality of the parties specifically, or of the industry more generally, in some broader sense," Vaden echoed.

Vaden additionally said Commerce's AFA rate of 36.03% in the 34th review isn't unduly punitive, contrasting the mark with the 538.79% figure the company originally got in the 33rd review. The judge said the rate is a proper balance of "accuracy with an incentive for future cooperation."

In both reviews, Tainai also challenged Commerce's decision to exclude the additional revenue the respondent collected in connection with its Section 301 duties from the company's U.S. price. In all, Tainai noted three situations in which it bills its customers this additional amount: where Tainai sent one invoice with a single price that included the actual Section 301 duties and the additional revenue, where the exporter sent one itemized invoice that included the additional amount as a line item and where the company sent two invoices, one for the cost of the goods and one for the Section 301 duties and additional revenue.

Commerce explained on remand in the 33rd review that since Section 301 duties are "incidental to bringing subject merchandise from the exporting country into the U.S." and the law requires adjusting U.S. price by U.S. import duties, charges related to the Section 301 duties shouldn't be included in the U.S. price. Tainai argued in response that the additional amounts should be accounted for as price adjustments. Commerce said accounting for the additional amounts as price adjustments "would contradict the regulation’s purpose, which is to 'account for any changes to the actual starting price of the subject merchandise.'"

Vaden agreed, finding that these additional amounts are "incidental to transporting the merchandise into the United States." As such, the amounts were appropriately considered to be "movement-related revenue attributable to movement services incidental to transporting the subject merchandise," the decision said. "It is, in essence, a handling fee."

Commerce tailored its approach to adjusting the exporter's U.S. price on remand based on how Tainai charged its customers, the court noted. When Tainai used the "all-inclusive" invoice, Commerce didn't exclude the additional revenue from the company's U.S. price, but where Tainai had a line item or separate invoice for the amounts, the agency excluded them from the U.S. price. The effect of this approach is that Commerce treats the additional revenue "based on how Tainai characterizes the additional revenue charged," the court said.

The only additional issue Vaden addressed in the suit on the 34th review concerned Tainai's request for a by-product offset. Vaden quickly dispatched with the claim, finding that the company's "argument is insufficient as a matter of law." The respondent failed to carry its burden to establish the need for the offset claim, since it didn't document the "quantity of scrap produced" during the review period and just equated total scrap sold with total scrap produced.

(Shanghai Tainai Bearing Co. v. United States, Slip Op. 24-142, CIT Consol. # 22-00038, dated 12/18/24; Judge: Stephen Vaden; Attorneys: David Craven of Craven Trade Law LLC for plaintiffs and consolidated plaintiffs led by Shanghai Tainai Bearing Co.; Geoffrey Long for defendant U.S. government)

(Shanghai Tainai Bearing Co. v. United States, Slip Op. 24-143, CIT # 23-00020, dated 12/18/24; Judge: Stephen Vaden; Attorneys: David Craven of Craven Trade Law LLC for plaintiffs Shanghai Tainai Bearing Co. and C&U Americas LLC; John Kenkel of International Trade Law Counselors PLLC for plaintiff-intervenor Zhejiang Jingli Bearing Technology Co.; Geoffrey Long for defendant U.S. government)