Federal Circuit affirms China-wide rate assigned to uncooperative respondent

News & Insights
Jun 26, 2013

On Monday, the Federal Circuit issued AMS Assocs. v. United States affirming the Department of Commerce’s assignment of a 91.73% rate to Zibo Aifudi Plastic Packaging (“Aifudi”) in an administrative review of the antidumping duty order on laminated woven sacks from China.  This China-wide rate was calculated for assignment to companies that had not established independence from control by the Chinese government.  At issue was whether Commerce could assign this rate when it preliminarily found that Aifudi was eligible for a rate separate from that of the China-wide entity but Aifudi subsequently ceased participating in the review.

Aifudi initially cooperated with Commerce and was assigned a 64.28% separate rate in the preliminary results.  However, Aifudi thereafter withdrew from the review and removed its confidential information from the record.  Commerce in the final results reversed its finding that Aifudi was separate from China because it was unable to verify the supporting information once Aifudi withdrew from the review.  Aifudi’s U.S. affiliate AMS challenged and the CIT affirmed.  In an opinion authored by Judge Taranto, the Federal Circuit’s newest jurist, Commerce was again found to have acted properly.

The decision endorses Commerce’s longstanding presumption of government control in nonmarket economy (“NME”) proceedings.  In affirming Commerce’s similar assignment of the China-wide rate in an investigation of oil country tubular goods (“OCTG”) from China last year, CIT Chief Judge Pogueobserved that “the reasonableness of presuming, without any affirmative evidence, that all modern Chinese companies are wholly controlled by the Chinese government, such that any inquiry into their individual pricing behavior is completely meaningless, appears open to question.”  Yet the Federal Circuit did not appear concerned in any way with Commerce’s continuing to employ this presumption, notwithstanding any market elements that may be developing in the Chinese economy. The key holding of AMS is that uncooperative respondents cannot dictate what aspects of the record that Commerce must rely upon.  AMS argued that Commerce could and must conclude from the remaining public record that Aifudi was separate from China.  The Federal Circuit disagreed: “the absence of verifiable information that would be necessary for Aifudi to carry its burden made any other Aifudi-submitted information immaterial to the point in dispute.  At least in these circumstances, Commerce committed no legal error in disregarding all of Aifudi’s remaining information.”

AMS confirms that Commerce may apply the NME-wide rate to uncooperative respondents, regardless of whether record evidence could support an alternate conclusion.  Commerce therefore has powerful mechanism to counter and deter the lack of cooperation in NME proceedings.  Such obstructionism can take the form of withdrawal, as with Aifudi, or material misrepresentation as in the OCTG case.  The Federal Circuit validation comes at a time when Commerce needs available approaches to combat instances of import fraud being documented with alarming frequency.  Indeed, this week five individuals were indicted for transshipping Chinese aluminum extrusions through Malaysia to evade antidumping and countervailing duties.