CAFC Says AFA Rates Can't Be Inaccurate Without 'Particularly Strong Need'
The U.S. Court of Appeals for the Federal Circuit on Jan. 7 clarified the standard Commerce must follow when determining how high it can set a review respondent’s antidumping duty rate based on adverse inferences. Rejecting a "single sentence" justification for an adverse facts available rate Commerce offered in the final results of a review, it held the department may not drastically depart from accuracy without establishing a "particularly strong need to deter noncompliance" based on record evidence showing unreasonable negligence or intentional misconduct.
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CAFC’s holding came in a steel nail petitioner’s appeal of Commerce’s decision to reverse exporter Oman Fasteners' adverse facts available 154.33% AD rate (see 2401160051). The department initially turned to AFA after Oman Fasteners submitted a questionnaire response that was accepted by Commerce’s electronic filing system 16 minutes after the exporter’s deadline (see 2212280043). The Court of International Trade remanded the rate, with Judge M. Miller Baker derisively calling it “the very definition of abuse of discretion” (see 2302280040).
But the appeals court based its own decision not on a finding of abuse of discretion, but by considering whether the department’s estimated antidumping duty rate, with the adverse inference, took accuracy into account.
It then established a set of considerations for the department to look to in determining how far to depart from accuracy when setting an AFA AD rate.
CAFC first explained that there is an “established principle” that Commerce must still consider accuracy when applying an adverse inference, “with any departure limited to what is needed to deter noncompliance with Commerce’s rules and orders."
In Oman Fasteners' case, it said, the department “did not establish a basis for reasonably finding” that the AFA rate “was even remotely close to an accurate amount.” It noted that, in reviews prior to the present one, Oman Fasteners had received AD rates of “0.63%, 0.00%, 0.00%, 0.00%, and 1.65%.” Considering this, the AFA 154.33% rate “stood out as highly implausible as an accurate figure for Oman Fasteners’ dumping margin for the 2020-2021 administrative-review period.”
The court declined to lay out a set of particular circumstances that could allow the imposition of an AD rate significantly higher than reality might reflect.
But it ruled that a “necessary condition” of such a high rate would be the “establishment of a particularly strong need to deter non-compliance, which would have to rest on a particularly serious failure to cooperate.”
It described, as examples, several context-specific factors for Commerce to consider when imposing such a rate: “such common factors as intent, consequences for Commerce’s processes and ability to carry out its statutory mandate, and recidivism.”
In the case of its decision in Oman Fasteners’ review, the department failed to make an adequate showing that the AFA rate’s steep departure from accuracy was warranted, CAFC said.
It noted that Commerce, in its preliminary decision, “devoted just two paragraphs to explaining why it proposed to apply an adverse inference under § 1677e(b).” The first paragraph restated the governing law, and the second stated “simply” that the exporter hadn’t acted “to the best of its ability” because it submitted its response after its deadline and failed “to demonstrate that extraordinary circumstances existed that would warrant” the granting of “an untimely filed extension request,” the court said.
And, in its final decision, the department “included just one sentence on this issue” which stated “only that ‘because Oman Fasteners failed to cooperate by not acting to the best of its ability when it failed to provide information to Commerce within established deadlines, we are applying an adverse inference when selecting from the facts available,’” CAFC said.
The court said that, in actuality, the department “merely declared, in conclusory fashion, that Oman Fasteners’ failure to ‘act to the best of its ability ... greatly inhibited Commerce’s ability to calculate an accurate dumping margin based on the respondent’s own data.’”
This wasn’t enough under the governing standard to support a 154.33% rate because Commerce failed “to address facts relevant to assessing the character of the actions at issue under the governing standard,” CAFC held.
The facts on the record of Oman Fasteners’ case contradicted a finding that the exporter hadn’t cooperated to the best of its ability, it concluded. It explained that Oman Fasteners’ counsel began filing the company’s submission “as far in advance of the deadline as he had found sufficient when making previous filings.” He used the electronic system’s “check file” feature prior to submitting “and got a positive indication that the files would be accepted,” even though, when he actually filed, the submission was rejected. He then “immediately reformatted and began to resubmit the files, and some were accepted before the deadline and the rest were accepted just 16 minutes after the deadline,” it said.
“We have explained that the ‘best of its ability’ standard of § 1677e(b)(1) ‘does not require perfection and recognizes that mistakes sometimes occur,’” CAFC said. “Even considering counsel’s failure to notify Commerce officials of the delay, Commerce has not explained why the evidence here establishes more than the kind of mistake that falls short of failure to cooperate -- or, what is crucial, a serious failure to cooperate that would be necessary (we do not say sufficient) to justify the rate selected.”
Oman Fasteners’ delay wasn’t caused by “intentional conduct,” it said, nor had the company simply failed to provide Commerce the requested information entirely. Nor had the exporter failed to “take reasonable steps to keep and maintain full and complete records,” CAFC said, nor realized well in advance that it couldn’t meet its deadline and still failed to request an extension. Nor had recidivism been found, it noted.
“Here, Commerce got the information 16 minutes after it was due, without having to prompt Oman Fasteners, which was diligently pursuing completion in circumstances that suggest nothing more than failure to build in temporal leeway beyond what had been needed in earlier filings,” it said.
In a second, nonprecedential ruling, CAFC also rejected Oman Fasteners’ own appeal of Commerce’s chosen surrogate during the review, saying the department “provided a discernible and adequate explanation” of its decision.
(Oman Fasteners v. United States, Fed. Cir. # 23-1661, dated 01/07/25; Judges: Kimberly Moore, Alvin Schall and Richard Taranto Attorneys: Michael Huston of Perkins Coie for plaintiff-appellee Oman Fasteners; Adam Gordon of The Bristol Group for defendant-appellant Mid Continent Steel & Wire)