[Federal Register Volume 65, Number 9 (Thursday, January 13, 2000)]
[Notices]
[Pages 2116-2139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-872]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-583-816]
Certain Stainless Steel Butt-Weld Pipe Fittings From Taiwan;
Final Results of Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Administrative Review.
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SUMMARY: On May 15, 1997, the Department of Commerce (the Department)
published in the Federal Register the preliminary results of the 1992-
1994 administrative review of the antidumping duty order on certain
stainless steel butt-weld pipe fittings (pipe fittings) from Taiwan (A-
583-816). This review covers one manufacturer/exporter of the subject
merchandise during the period December 23, 1992 through May 31, 1994.
We gave interested parties an opportunity to comment on the
preliminary results. Based upon our analysis of the comments received
we have not changed the results from those presented in our preliminary
results of review.
EFFECTIVE DATE: January 13, 2000.
FOR FURTHER INFORMATION CONTACT: Robert James at (202) 482-5222,
Antidumping and Countervailing Duty Enforcement Group III, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue NW, Washington, DC 20230.
APPLICABLE STATUTE AND REGULATIONS: Unless otherwise indicated, all
citations to the Tariff Act of 1930, as amended (the Tariff Act) and to
the Department's regulations are in reference to the
[[Page 2117]]
provisions as they existed on December 31, 1994.
SUPPLEMENTARY INFORMATION:
Background
On June 16, 1993, the Department published in the Federal Register
the antidumping duty order on pipe fittings from Taiwan (58 FR 33250).
On June 7, 1994, the Department published the notice of ``Opportunity
to Request Administrative Review'' for the period December 23, 1992
through May 31, 1994 (59 FR 29411). In accordance with 19 CFR
353.22(a)(1), respondent Ta Chen Stainless Pipe Co., Ltd. (Ta Chen)
requested that we conduct a review of its sales for this period. On
July 15, 1994, we published in the Federal Register a notice of
initiation of an antidumping duty administrative review covering the
period December 23, 1992 through May 31, 1994.
We published the preliminary results of this review in the Federal
Register on May 15, 1997 (Certain Stainless Steel Butt-Weld Pipe
Fittings From Taiwan; Notice of Preliminary Results of Administrative
Review, 62 FR 26773 (Preliminary Results)). Ta Chen filed a case brief
on September 3, 1997; petitioner, the Flowline Division of Markovitz
Enterprises Inc., submitted its rebuttal brief on September 11, 1997.
The Department held a hearing on October 21, 1997.
The Department has now completed this review in accordance with
section 751 of the Tariff Act.
Scope of the Review
The products subject to this antidumping duty order are certain
stainless steel butt-weld pipe fittings, whether finished or
unfinished, under 14 inches inside diameter.
Certain stainless steel butt-weld pipe fittings (pipe fittings) are
used to connect pipe sections in piping systems where conditions
require welded connections. The subject merchandise is used where one
or more of the following conditions is a factor: (1) Corrosion of the
piping system will occur if material other than stainless steel is
used; (2) Contamination of the material in the system by the system
itself must be prevented; (3) High temperatures are present; (4)
Extreme low temperatures are present; (5) High pressures are contained
within the system.
Pipe fittings come in a variety of shapes, with the following five
shapes the most basic: ``elbows,'' ``tees,'' ``reducers,'' ``stub
ends,'' and ``caps.'' The edges of finished pipe fittings are beveled.
Threaded, grooved, and bolted fittings are excluded from this
antidumping duty order. The pipe fittings subject to this order are
classifiable under subheading 7307.23.00 of the Harmonized Tariff
Schedule of the United States (HTS).
Although the HTS subheading is provided for convenience and Customs
purposes, our written description of the scope of this order remains
dispositive.
The period for this review is December 23, 1992 through May 31,
1994. This review covers one manufacturer/exporter, Ta Chen, and its
wholly-owned U.S. subsidiary, Ta Chen International (TCI)
(collectively, Ta Chen).
Analysis of Comments Received
Due to the number of individual and company names and the
importance of the timing of events in this review, that history is
summarized briefly here. Furthermore, Ta Chen filed a single case brief
covering this review as well as the 1992-1993 and 1993-1994
administrative reviews of certain welded stainless steel pipe
(stainless pipe) from Taiwan. Therefore, a coherent response to Ta
Chen's arguments in the instant review necessarily entails references
to actions taken by petitioners in the stainless pipe case. The
comments that follow concern our application of adverse best
information available (BIA) as the basis for Ta Chen's margins in the
preliminary results of this review. Our decision to resort to BIA
resulted from Ta Chen's dealings with two US customers, referred to in
the Preliminary Results as ``Company A'' and ``Company B'' to protect
their identities. Ta Chen has since entered the names of these
customers into the public record of this review and we here identify
them by name: Company A is San Shing Hardware Works, USA (San Shing),
and Company B is Sun Stainless, Inc. (Sun). San Shing and Sun were both
established by current or former managers and officers of Ta Chen, were
staffed entirely by current or former Ta Chen employees, and
distributed only Ta Chen products in the United States. According to Ta
Chen, prior to June 1992 (the date of the preliminary determination in
the less-than-fair-value (LTFV) investigation of stainless pipe) Ta
Chen had sold pipe and pipe fittings from the US inventory of its
wholly-owned subsidiary, TCI. In June 1992 TCI and San Shing (a US
company established in 1988 by the president of a Taiwanese firm, San
Shing Hardware Works, Ltd.) allegedly signed an agreement whereby San
Shing would purchase all of TCI's existing US inventory and would
replace TCI as the principal distributor of Ta Chen pipe and pipe
fittings in the United States. San Shing also committed itself to
purchasing substantial dollar values of Ta Chen products from TCI over
the next two years, and rented its business location from the president
of Ta Chen and TCI, Robert Shieh. Ta Chen claims it took these measures
to avoid the burden of reporting exporter's sales price (ESP) sales to
the Department. Operating under a number of ``doing business as'' (dba)
names including, inter alia, Sun Stainless, Inc., Anderson Alloys, and
Wholesale Alloys, San Shing accounted for well over eighty percent of
Ta Chen's US sales of pipe fittings during the 1992--1994 period of
review.
According to Ta Chen, in September 1993 a member of Ta Chen's board
of directors, Frank McLane, incorporated a new entity, also called Sun
Stainless, Inc. This new Sun purchased all of San Shing's assets,
including inventory, and assumed all of San Shing's obligations
regarding its lease of space from Ta Chen's president, purchase
commitments, credit arrangements, etc. One month later, in October
1993, Mr. McLane allegedly sold all of his Ta Chen stock, resigned as
an officer of Ta Chen, and severed all ties with the firm, devoting his
full energies from that time forward to the new Sun.
On July 18, 1994, petitioners in the companion case on stainless
pipe first called the Department's attention to San Shing's existence,
and named six of an eventual eight dba parties all claimed by Ta Chen
as unrelated US customers. Ta Chen responded on July 28, 1994, claiming
that San Shing, as a newcomer to the US stainless steel pipe fittings
market, had adopted the names of prior Ta Chen customers as dba names.
This submission failed to note the two additional dba names also used
by San Shing, but not included in the stainless pipe petitioners' July
18 allegations. On August 3, 1994, sixteen days after petitioners in
the stainless pipe case first called attention to its existence, the
corporate charter of San Shing USA, Ta Chen's chosen replacement as the
master distributor of its pipe and pipe fittings, was dissolved.
On September 19, 1994, Ta Chen filed its initial questionnaire
response in the 1992-1994 review. San Shing, which accounted for over
four-fifths of Ta Chen's US sales in this review, was not mentioned
anywhere in this 303-page response.
The Department conducted a thorough verification of Ta Chen's home
market submissions in the 1992-1993 review of stainless pipe in October
1994. Department officials then traveled to TCI's headquarters in Long
Beach, California to verify Ta Chen's US sales
[[Page 2118]]
submissions in the pipe case. Aside from minor corrections, the
resulting verification reports noted no major discrepancies and
repeated Ta Chen's account of San Shing's and Sun's histories without
further comment. See Ta Chen's February 7, 1997 submission, placing the
relevant portions of the Department's November 6, 1996 verification
reports on the record in this review.
On July 12, 1995, petitioners in the stainless pipe case renewed
their allegations that Ta Chen, San Shing, and Sun were related
parties, and appended reports by Dun & Bradstreet (D&B) and a foreign
market researcher indicating that Sun Stainless had actually been
founded by Frank McLane and W. Kendall (Ken) Mayes, TCI's sales
manager, in May of 1992, not September 1993, as claimed by Ta
Chen.1 Ta Chen's rebuttal of August 2, 1995 included
affidavits from Mr. Mayes and a Taiwanese employee of Ta Chen denying
the July 12 allegations. See Letter of Ablondi, Foster, Sobin &
Davidow, August 2, 1995 (Case A-583-815).
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\1\ With the permission of petitioners in the stainless pipe
case, on February 24, 1997, the Department incorporated this Dun &
Bradstreet report and an accompanying affidavit into the record of
this review.
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Over a year later, on November 12, 1996, Ta Chen filed a
supplemental response 2 in the third (1994-1995) review of
stainless pipe which disclosed for the first time that Ta Chen (i) Had
authority to sign checks issued by San Shing, its dbas, and Frank
McLane's Sun, (ii) Had physical custody of these parties' check-signing
stamps, (iii) Controlled San Shing's and Sun's assets and had pledged
these as collateral for a loan obtained on behalf of TCI, (iv) Enjoyed
full-time and unfettered computer access to San Shing's and Sun's
computerized accounting records, and (v) Shared sales and clerical
personnel with San Shing and Sun. See Preliminary Results for a further
description of these ties. The Department elicited further details
concerning these connections in additional questionnaires; Ta Chen
incorporated the relevant portions of its responses into the record of
this review on February 7, 1997. Based on the totality of evidence
before the Department, in the Preliminary Results we concluded that Ta
Chen was related to San Shing and Sun within the meaning of section
771(13) of the Tariff Act. The Department also determined that Ta Chen
had significantly impeded this review through its incomplete and
inconsistent accounts of the events in the relevant period and that Ta
Chen's behavior warranted application of first-tier, uncooperative BIA.
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\2\ Ta Chen submitted relevant portions of this response into
the record of this review on December 13, 1996 and again on January
2, 1997.
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Comment 1: Related Party as Defined by Statute and Practice
Ta Chen insists that San Shing USA and Sun 3 were not
related parties as defined by the Tariff Act in force at the time of
all of Ta Chen's sales to these customers during the first period of
review (POR). First, Ta Chen notes that under the 1994 statute, section
771(13) of the Tariff Act defines an ``exporter'' as including ``the
person by whom or for whose account the merchandise is imported into
the United States, if--
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\3\ Although Ta Chen refers to San Shing and Sun Stainless, Inc.
collectively as ``Sun,'' for clarity the Department has not done so.
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* * * * *
(B) Such person owns or controls, directly or indirectly,
through stock ownership or control or otherwise, any interest in the
business of the exporter, manufacturer, or producer;
(C) The exporter, manufacturer, or producer owns or controls,
directly or indirectly, through stock ownership or control or
otherwise, any interest in the business conducted by such person.
Ta Chen's September 3, 1997 Case Brief (Case Brief) at 7, quoting
section 771(13) of the Tariff Act (Ta Chen's emphasis omitted).
Under this statutory framework, Ta Chen argues, the ``exporter''
can only include the parties ``by whom or for whose account the
merchandise is imported.'' According to Ta Chen, because Ta Chen first
sold the subject merchandise to its US subsidiary TCI, which took legal
title to the pipe fittings, incurred all seller's risks of non-payment,
acted as the importer of record for all these transactions, and
``entered the importation into its financial inventory,'' TCI, not San
Shing or Sun, was ``the person by whom, or for whose account,'' the
merchandise was imported. Case Brief at 9. Therefore, section 771(13)
of the Tariff Act never reaches the issue of whether or not TCI
subsequently resold the subject merchandise to a related party such as
San Shing or Sun. Any such transactions, in Ta Chen's view, would be
irrelevant under the statute, citing Certain Small Business Telephone
Systems from the Republic of Korea, 54 FR 53141, 53151 (December 27,
1989) (Small Business Telephones). In that case, Ta Chen submits, the
Department concluded that the respondent's related US customer was
``neither the importer nor the person for whose account the merchandise
is imported;'' therefore, the sales transactions between the
respondent's US subsidiary and the related US customer did not
constitute ``related party'' transactions, as defined by the
antidumping statute. Id. at 9, quoting Small Business Telephones. That
the sales at issue in Small Business Telephones represented ESP
transactions from the US affiliate's warehouse, as opposed to what Ta
Chen characterizes as purchase price (PP) transactions ``facilitated''
by its US subsidiary TCI does not, Ta Chen argues, make any difference.
Further, Ta Chen maintains that the Department's preliminary
determination that Ta Chen is related to San Shing and to Sun because
it controlled these entities is contrary to the plain language of the
statute. Section 771 of the Tariff Act, Ta Chen submits, only defines
two parties as related if one party ``owns or controls, directly or
indirectly, through stock ownership or control or otherwise, any
interest in the business of the other.'' Case Brief at 11, quoting
section 771 of the Tariff Act (Ta Chen's emphasis). This ``interest,''
Ta Chen insists, is defined both in case law and Departmental practice
as involving equity ownership of at least five percent of the stock of
the related party. Ta Chen avers that the Department's Preliminary
Results in this review have read the phrase ``any interest'' out of the
statute. According to Ta Chen, ``[i]t is an elementary principle of
statutory construction that a portion of a statute should not be
rendered a nullity.'' Id., quoting Asociacion Colombiana de
Exportadores de Flores v. United States (Asocoflores), 717 F. Supp.
847, 851 (CIT 1989). Ta Chen interprets the Department's Preliminary
Results as stating essentially that because Ta Chen exercised
``control'' over San Shing and Sun, Ta Chen thereby controlled ``an
interest in'' San Shing and Sun; such a reading, Ta Chen argues,
renders the relevant statutory language meaningless and redundant. Case
Brief at 12. Compounding the Department's error, Ta Chen continues, is
that while recognizing the ``any interest'' requirement of section
771(13)(B) and (C) of the Tariff Act, the Department nonetheless failed
to define ``any interest'' in its Preliminary Results. In Ta Chen's
view, this failure to define ``any interest'' as applied in this
review, especially in light of past practice defining ``any interest''
as entailing five percent or more equity ownership, places the burden
upon the respondent to divine the meaning of the undefined. Further,
this ``abdication'' by the Department effectively precludes judicial
review, as the reviewing court
[[Page 2119]]
would also be hobbled by this same failure to define the relevant
terms.
Ta Chen suggests that, had Congress intended to include a control
test in the definition of related parties under section 771, it would
have done so. Instead, Ta Chen maintains, Congress chose to define two
parties as related to one another not when one controlled the other
but, rather, when one controlled ``any interest'' in the other. This
distinction is critical, Ta Chen asserts, because Congress did include
a simple control test at sections 773(d) and (e) of the Tariff Act (the
``Special Rules'' for, respectively, Certain Multinational Corporations
and disregarding related-party transfer prices for major inputs in the
calculation of constructed value). ``Where the Congress includes
language in one provision of a statute, but not in another, it is
assumed that the Congress did so for a purpose. * * * [T]he difference
in statutory language must be recognized.'' Case Brief at 14, citing
Rusello v. United States, 464 US 16, 23 (1983), and United States v.
Wong Kim Bo, 472 F. 2d. 720, 722 (5th Cir. 1972). According to Ta Chen,
Congress never intended that ``control any interest'' would be
synonymous with ``control'' where, as here, neither entity owns or
controls equity in the other. This reading, Ta Chen maintains, is
supported by the legislative history underlying the relevant statutory
provisions. Ta Chen, citing Nacco Materials Handling Group v. United
States, Slip Op. 97-99 (CIT July 15, 1997) (Nacco Materials), notes
that the Senate Report accompanying the Antidumping Act of 1921 (the
1921 Act), progenitor of the Tariff Act, defined ``exporter'' as
including the importer when ``the latter is financially interested in
the former, or vice versa, whether through agency, stock control,
resort to organization of subsidiary corporation, or otherwise.'' Case
Brief at 15, quoting from S. Rep. No. 67-16, at 13 (April 28, 1921).
One party's being ``financially interested'' in another, Ta Chen
submits, is different from that party ``controlling'' another. Id.
Ta Chen argues that the Preliminary Results not only ignore the
plain statutory language but also conflict with the common dictionary
meaning of the term ``interest'' as entailing equity ownership of a
share, right, or title in a business or property. Id. at 16. The
Department, Ta Chen avers, embraced this definition when it stated that
its policy is to find parties related only where the ownership interest
of one party in the other meets the five percent threshold. See, e.g.,
Final Determination of Sales at Less Than Fair Value; Certain Forged
Steel Crankshafts From Japan (Crankshafts), 52 FR 36984 (October 2,
1987).
According to Ta Chen, that this interpretation (i.e., the reference
to at least five-percent equity ownership) survived two major revisions
to the antidumping law underscores Congress's approval of that
interpretation. Ta Chen notes that both the 1984 Trade Act and the
Omnibus Trade and Competitiveness Act of 1988 left intact the statutory
language of section 771(13) and its reliance on equity ownership.
``Congress's amendment or re-enactment of the statutory scheme without
overruling or clarifying the [administering] agency's interpretation is
considered as approval of the agency interpretation.'' Case Brief at
20, quoting Casey v. C.I.R., 830 F. 2d 1092, 1095 (10th Cir. 1987).
Ta Chen further argues that the Department's interpretation of
section 771(13) of the Tariff Act in the Preliminary Results could lead
to absurd results, asserting that under this standard, ``any control,
no matter how inconsequential, would make the parties related,''
including ``any clerical assistance, any forwarding of orders to a
customer, any attempt to insure payment, any security interest, any
informational exchanges, any movement of an employee from one company
to another, etc.'' Case Brief at 18. And, having created one absurdity
by reading ``any interest'' out of the statute, Ta Chen asserts, the
Department creates another absurdity by altering the statutory
definition of ``controls * * * any interest'' into ``controls a
substantial interest.'' Id., citing the Preliminary Results at 26778
(Ta Chen's emphasis). Ta Chen argues that this attempt to rescue the
Preliminary Results from absurdities founders on the Department's long-
established practice that a party's five percent equity interest in
another makes them related for purposes of the statute; ``[five]
percent is not a substantial or significant control interest.'' Id. at
19.
Ta Chen points to the amendments to the Tariff Act effected by the
Uruguay Round Agreements Act (URAA) as further confirmation that
control did not define related parties under the pre-URAA Tariff Act
governing this administrative review. According to Ta Chen, the
Statement of Administrative Action (SAA) accompanying the URAA supports
Ta Chen's contention that the URAA fundamentally altered the prior
definition of related parties by adding a control test as a means for
finding parties affiliated. For example, the SAA states that
``including control in the definition of `affiliated' will permit a
more sophisticated analysis which better reflects the realities of the
marketplace.'' Case Brief at 21 and 22 (quoting the SAA at 78).
Further, Ta Chen argues, the Senate report notes that the URAA added
the factor of control in determining whether two parties are
affiliated. Id. That Congress felt compelled to amend the Tariff Act to
include specifically the indicium of control, Ta Chen avers,
demonstrates that such a test was lacking in the old law: ``when a
legislative body amends statutory language, its intention is to change
existing law.'' Ta Chen continues: ``Congress completely rewrote the
statutory language of the affiliated parties provision * * * adding the
control test.'' Id. at 24 and 25. If control had been a factor in the
pre-URAA Tariff Act's definition of related parties, Ta Chen concludes,
there would have been no need to change the statutory language within
the context of the Uruguay Round negotiations.
The Department, Ta Chen argues, has similarly distinguished between
the prior definition of ``related parties'' and the expanded definition
of ``affiliated persons,'' which, Ta Chen asserts, introduced the
concept of control. Ta Chen notes that the Department in its Notice of
Proposed Rulemaking (Proposed Rule) (61 FR 7308 (February 27, 1996))
issued in the wake of the URAA's amendments, remarked upon the
confusion of many parties over the definition of control, and noted
that the statute and SAA failed to provide ``sufficient guidance as to
when the Department will consider an affiliate to exist by virtue of
`control' * * *'' Case Brief at 28, quoting Proposed Rule. If the
control test always existed in the law, Ta Chen asks, why is the
Department only now beginning to define control? The answer, Ta Chen
submits, is that the control test was added by the 1995 amendments of
the URAA.
To buttress its contention that the URAA added a control test to
the related-party equation, Ta Chen notes that non-equity control
relationships have been common--and widely known--for years prior to
enactment of the URAA; yet, Ta Chen asserts, neither Congress nor the
Department felt an apparent need to address these non-equity
relationships within the context of the antidumping law. Furthermore,
generally-accepted accounting principles (GAAP) in the United States
have long recognized, and distinguished between, relationships
involving control and those involving equity interest. Ta Chen
maintains that this bifurcation is evident in the Department's
administration of antidumping administrative reviews; since enactment
[[Page 2120]]
of the URAA the Department's antidumping questionnaires, verification
outlines, and published determinations are replete with discussions of
control, whereas ``[s]uch discussion does not exist under the pre-[URAA
Tariff] Act.'' The reason, Ta Chen avers, is ``not because the world
changed * * * [r]ather, the reason is that the law changed.'' Case
Brief at 31.
The Preliminary Results, Ta Chen continues, are contrary not only
to the plain language of the statute and the common meaning of the term
``related,'' but also fly in the face of long-standing Department
practice. Citing Crankshafts and Disposable Pocket Lighters from
Thailand, 60 FR 14263, 14268 (March 16, 1995) (Pocket Lighters), Ta
Chen contends that under the pre-URAA statute, the Department has
determined that two parties cannot be considered related absent common
stock ownership. According to Ta Chen, in Disposable Lighters the
Department refused to find two parties related despite closely
intertwined operations, joint manipulation of prices and production
decisions, and long-standing business relationships, including past
ownership of one party by the other. The decisive factor in this
determination, Ta Chen suggests, was the absence of any common equity
relationship between the two entities during the period under review.
Ta Chen maintains that the Department has hewn to this interpretation
in litigation, as well. For example, Ta Chen continues, in Nacco
Materials the Department concluded that the respondent and its two
related entities satisfied the ownership requirements of section
771(13)(C) of the Tariff Act through direct or indirect ownership by
the respondent. See Nacco Materials, at 10 and 11. Ta Chen insists that
in the instant review Ta Chen, San Shing, and Sun have not satisfied
what Ta Chen views as a statutory requirement for finding parties
related.
Ta Chen suggests that even cases cited by petitioners in the
stainless pipe case to support their claim that parties can be related
through control (see, e.g., Certain Fresh Cut Flowers From Colombia, 61
FR 42833, 42861 (August 19, 1996) (Colombian Flowers), and Roller
Chain, Other Than Bicycle Chain, From Japan, 57 FR 43697 (September 22,
1992)) indicate that the Department defined ``any interest'' solely in
terms of equity ownership. Case Brief at 36 and 37. Ta Chen maintains
that prior to the Preliminary Results the Department has never stated
that control of a company is tantamount to controlling an interest in
that party. Indeed, Ta Chen avers, such control is ``irrelevant to
whether the statutory standard is met.'' Id. at 37. As an example, Ta
Chen cites Fresh Cut Roses From Ecuador where, Ta Chen argues, the
Department concluded that the petitioner's concerns over the
possibility of price manipulation and control of production and sales
were inapposite as there was no evidence that ``any of these statutory
indicators'' of related parties had been found. See Fresh Cut Roses
From Ecuador, 60 FR 7019, 7040 (February 6, 1995). According to Ta
Chen, the Department likewise argued before the Court of International
Trade (the Court) that the issue of control over prices ``is irrelevant
to the initial determination of whether the parties are indeed
related'' within the meaning of section 771(D) of the Tariff Act. Case
Brief at 38, quoting Torrington Co., Inc. v. United States, Slip Op.
97-29 (CIT March 7, 1997). In that case, Ta Chen argues, the Court
concluded that ``requiring Commerce to look beyond the financial
relationships of the companies would obviate the need for a statute
setting forth specific guidelines for determining whether parties are
indeed related.'' Id. at 40, quoting Torrington at 19. And in Zenith
Radio Corp. v. United States (Zenith), Ta Chen maintains, the Court
affirmed the Department's position that such financial relationships
``go to the essence of those relationships which the law details in 19
U.S.C. Sec. 1766(13).'' Id., quoting Zenith at 606 F. Supp 695, 699
(CIT 1985), aff'd, 783 F.2d 185 (Fed. Cir. 1986). Ta Chen points to
Cellular Mobile Telephones From Japan, 54 FR 48011, 48016 (November 20,
1989) as another instance where the Department ruled that the presence
of non-equity relationships embodied in a Japanese keiretsu was
irrelevant to its related-party determination. Case Brief at 40.
Ta Chen draws further support for its interpretation of the statute
from a ``separate line of cases'' involving the collapsing of related
parties. While conceding that home market collapsing determinations are
not coterminous with the Department's definition of exporter for the
purpose of determining United States price, Ta Chen nonetheless asserts
the Department has consistently reached the statutory definition that
two parties are related before proceeding to the ``non-statutory
question'' of whether or not to collapse the two entities for purposes
of antidumping margin calculation. Case Brief at 45 and 46, citing
Pocket Lighters, 60 FR 14263, 14276, Fresh Cut Roses From Ecuador, 60
FR 7019, 7040 (February 6, 1995), and Colombian Flowers, 61 FR 42833,
42853 (1996). Rather, Ta Chen avers, the Department's Preliminary
Results ``put[ ] the cart before the horse'' by, as Ta Chen frames it,
reaching the collapsing decision first, and then using that decision to
determine whether Ta Chen is related to San Shing and Sun within the
meaning of section 771(13)(B) and (C) of the Tariff Act. Case Brief at
47. Citing these ``parallel lines'' of precedent, Ta Chen argues that
the Department has always found parties ``only related when one owns
another and no other factors are considered relevant.'' Id. at 48 and
49.
Ta Chen next turns to the Department's conclusion in the
Preliminary Results that Ta Chen and Sun were related pursuant to
subsection 771(13)(B) of the Tariff Act by virtue of the common
ownership interests allegedly held by Mr. Frank McLane, who at the time
in question was still a board member of Ta Chen. Ta Chen notes that the
Preliminary Results assert that Mr. McLane simultaneously held equity
interest in Ta Chen and owned Sun outright, thus making Ta Chen and Sun
related. This conclusion, Ta Chen argues, is both factually and legally
flawed. As a threshold matter, Ta Chen asserts, subsection 771(13)(B)
of the Tariff Act holds that the exporter includes the person ``by whom
or for whose account'' the subject pipe is imported into the United
States (i.e., Mr. McLane's Sun), if such person owns or controls ``any
interest in the business of the exporter, manufacturer or producer''
(i.e., Ta Chen). In Ta Chen's view, the Department could at most
conclude that Mr. McLane was related to Sun or that Mr. McLane was
related to Ta Chen. The Department could not argue, Ta Chen maintains,
that Sun was, therefore, related to Ta Chen. Case Brief at 97.
Ta Chen adduces additional support for its contention that Frank
McLane did not simultaneously own interests in Sun and Ta Chen by
citing to corporate tax returns for San Shing for the 1992 and 1993 tax
years. According to Ta Chen, San Shing's return for the year ended
October 31, 1993 does not list Mr. McLane as either an officer or an
owner. Ta Chen also argues that separate D&B reports on Ta Chen
International, submitted by the stainless pipe petitioners, do not list
Sun as a related concern. Furthermore, Ta Chen claims, its audited
financial statements do not list Sun as being related to Ta Chen or
TCI, although they do list Mr. McLane's other business interests, such
as McLane Leisure and McLane Manufacturing, as related parties. Case
Brief at 105. Finally, Ta Chen concludes, the Department has stated in
verification reports in other proceedings that Mr. McLane's involvement
with Sun commenced after he left Ta Chen. Id.,
[[Page 2121]]
citing Ta Chen's July 18, 1994 submission.
Assuming that Ta Chen and Sun were related before November 1993, Ta
Chen submits that it did not sell subject merchandise to Sun prior to
that time. According to Ta Chen, until November Ta Chen sold to San
Shing, doing business as Sun Stainless, Inc., not to Frank McLane's Sun
Stainless, Inc. ``It would be pure conjecture,'' Ta Chen submits, for
the Department to conclude that Ta Chen sold to Mr. McLane's Sun. Case
Brief at 107.
Finally, assuming that the pre-URAA law permits consideration of
control in finding parties related, Ta Chen argues that the application
of such a test in the instant review is unlawful absent sufficient
agency explanation. The Preliminary Results, Ta Chen insists, represent
a departure from the Department's practice of defining related parties
in terms of five percent equity ownership; the failure to note and
explain this so-called departure renders this determination unlawful.
Case Brief at 51, citing USX Corp. v. United States, 682 F. Supp. 60,
63 (CIT 1988). Furthermore, Ta Chen continues, the Preliminary Results
represent an unfair retroactive application of what Ta Chen describes
as a new control test under section 771(13) of the pre-URAA Tariff Act.
Principles of fairness, Ta Chen submits, require the Department to
reverse its preliminary finding that Ta Chen was related to San Shing
and Sun, especially, Ta Chen argues, because (i) This is a case of
first impression, (ii) The Preliminary Results represent an abrupt
departure from past administrative practice with respect to related-
party issues, (iii) Ta Chen relied upon its understanding of the law
then in effect when it responded to the Department's requests for
information on related parties, (iv) The Preliminary Results would
impose an ``enormous'' burden upon Ta Chen (by raising its margins to
the BIA rates presented in the Preliminary Results), and (v) There is,
in Ta Chen's view, no statutory interest in applying this new test to
this backlog review.
Petitioner dismisses Ta Chen's arguments as to the statutory
definition of related parties, characterizing Ta Chen's lengthy case
brief as ``a desperate, albeit feeble, attempt to distort and
selectively package the facts.'' In petitioner's view the issues are,
in fact, quite simple. First, petitioner avers, the information Ta Chen
itself provided ``in a misleading, untimely, and unacceptable manner''
demonstrates amply that Ta Chen was related to San Shing and Sun.
Petitioner's September 11, 1997 Rebuttal Brief (Rebuttal Brief) at 2.
Second, petitioner accuses Ta Chen of intentionally mis-characterizing
its true relationships with San Shing and Sun, and of failing to
provide the Department with accurate and reliable U.S. sales data to
serve as the basis for calculating Ta Chen's margin in this review.
According to petitioner, under the plain language of the statute
the only possible conclusion the Department could reach is that Ta Chen
and San Shing and Sun 4 are related. Id. at 3. Petitioner
points out that section 771(13)(C) of the Tariff Act defines the
``exporter'' (i.e., Ta Chen) as including any person (i.e., San Shing
and Sun) ``if the exporter manufacturer, or producer owns or controls,
directly or indirectly, through stock ownership or control or
otherwise, any interest in the business conducted by such person.''
Rebuttal Brief at 4 (original emphasis). Petitioner suggests that the
control indicia listed by the Department in the Preliminary Results,
such as pledging of security interests in the parties' assets,
possession of their signature stamps, the dedicated interconnection of
computers, the sharing of office and sales personnel, and Mr. Shieh's
negotiation of prices with San Shing's and Sun's customers, indicate
clearly that Ta Chen was related to San Shing and Sun. In fact,
petitioner contends, any one of these indicia in isolation would be
sufficient to find Ta Chen related to San Shing and Sun. ``Remarkably,
in the case of Ta Chen, each one of these situations existed.'' Given
the breadth and depth of these parties' interrelationships, petitioner
insists, Ta Chen's claim that it is not related to San Shing and Sun
``can only be interpreted as a blatant attempt to mislead the
Department and impede this antidumping review.'' Rebuttal Brief at 4.
---------------------------------------------------------------------------
\4\ Out of caution, petitioner's Rebuttal Brief refers to San
Shing and Sun as ``Company X.''
---------------------------------------------------------------------------
Contrary to Ta Chen's assertions, petitioner continues, the Tariff
Act clearly does not limit the Department's related-party
determinations only to those cases presenting documented evidence of
direct equity ownership. Petitioner avers that the statute authorizes
the Department to look beyond equity ownership to consider ``any and
all situations where the nature of the relationship between the two
parties allows the possibility of price and cost manipulation.'' Id.
Thus, petitioner asserts, the pre-URAA definition of related parties
extended beyond a simple test for equity ownership and provided
expressly for situations wherein one party controls, through means
other than stock ownership, any interest in the business of the other
party. Indeed, were the Department to ignore the ``obvious and
persuasive evidence'' that Ta Chen was related to San Shing and to Sun,
petitioner concludes, it would be guilty of ``failing to fulfill its
role and obligations under the statute.'' Id. at 4 and 5.
Department's Position
Based upon our review of the evidence on the record in this review,
we conclude that the Department cannot reasonably rely upon sales
between Ta Chen and San Shing or Sun for the purpose of calculating Ta
Chen's dumping margin for this review. We agree with petitioner that
the record evidence is clear that Ta Chen was, in fact, related to San
Shing and Sun, as defined in section 771(13) of the pre-URAA Tariff
Act.
First, nothing in the statute or its legislative history proscribes
the examination of non-equity relationships in making a related-party
determination pursuant to section 771(13) of the pre-URAA Tariff Act.
The plain language of the Tariff Act provides the Department with the
statutory mandate to examine, where appropriate, whether parties are
related by means of control in defining the exporter for purposes of
determining U.S. price. Furthermore, the Department has recognized in
its pre-URAA administrative determinations that certain factual
situations require it to look to non-financial factors when making its
related-party determinations, an interpretation of the statute which
the Court has upheld.
We also reject Ta Chen's contention that the definition of
``interest'' in section 771(13) (B) and (C) is limited to common stock
ownership; nothing in the statute itself or its accompanying
legislative history so constrains the Department in its analysis of
related parties. Rather, the principal reason stock ownership is so
often cited as the basis for finding an exporter related to a U.S.
importer is simply because equity ownership is the most common
indicator of two parties' relationship found in commercial practice. In
fact, common equity ownership has served as prima facie evidence that
two parties are related for purposes of the Tariff Act. See, e.g.,
Color Television Receivers, Except for Video Monitors, From Taiwan, 53
FR 49706, 49712 (December 9, 1988). That common equity ownership
constitutes prima facie evidence of related-party status is not,
however, tantamount to saying it is the only evidence of such a
relationship. Put simply, the statute does not direct
[[Page 2122]]
the Department to find parties unrelated in the absence of common stock
ownership. Further, nothing in the statute, the legislative history, or
the regulations defines ``interest'' as being limited solely to stock
ownership, or fixes a bright-line figure for the requisite level of
equity ownership at five percent or more.
Turning first to the statutory language, the statute's explicit
reference to parties being related ``through stock ownership or control
or otherwise'' demonstrates clearly that Congress anticipated that
companies could be related for the purposes of defining the
``exporter'' through means other than through stock or equity
ownership. Such a reading is consistent with Congressional intent, the
legislative history, and the express purpose of section 771(13) of the
Tariff Act, which is to determine the proper basis for United States
price in calculating dumping margins. As Ta Chen notes, ``[i]t is an
elementary principle of statutory construction that a portion of the
statute should not be rendered a nullity.'' See Asocoflores. Ta Chen's
reading of the statute, however, would render a nullity the explicit
statutory references to parties being related ``through stock ownership
or control or otherwise.'' Therefore, accepting the narrow reading of
the statute posited by Ta Chen would be inconsistent with the plain
language of the statute.
In addition, the Senate Report accompanying the 1921 Act clarifies
that the Department is not limited solely to consideration of equity
interests in making its related-party determinations, nor does it limit
``financial interests'' solely to common equity ownership. Congress
specifically included non-equity relationships as possible bases for
finding parties related; by noting that an interest can involve a
financial interest or interest ``through agency, stock control, resort
to organization of subsidiary corporation or otherwise,'' Congress
clearly envisioned the possibility of non-equity relationships between
an exporter and an importer such that the prices between them become
unreliable for purposes of calculating antidumping margins. See S. Rep.
No. 67-16, at 13 (1921). Clearly, then, Congress did not share the view
of section 771(13) urged by Ta Chen that related parties were limited
per se to those sharing common equity ownership. Rather, Congress's
broader view, as expressed in the plain language of the statute,
afforded the Department the discretion to examine non-financial
relationships where, as here, the record evidence so demanded. Any
other reading of the legislative history would place artificial
restraints on the Department's analysis and would be inconsistent with
commercial realities, which recognize a wide range of relationships
which could affect pricing and production decisions between parties.
Turning to the Department's interpretation of the relevant
statutory provisions, at one time the Department focused primarily upon
equity interests in rendering its related-party determinations under
section 771(13) of the Tariff Act. See, e.g., Cellular Mobile
Telephones and Subassemblies From Japan, 54 FR 48011, 48016 (November
20, 1989), and Small Business Telephones, 54 FR 53141, 53151 (Dec. 27,
1989). The Department concluded that an equity interest of five percent
or more, standing alone, was sufficient evidence to demonstrate that
the prices between the parties could be manipulated. See, e.g., Final
Determinations of Sales at Less Than Fair Value: Certain Hot-Rolled
Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat
Products, and Certain Corrosion-Resistant Carbon Steel Flat Products
From Japan, 58 FR 37154, 37157 (July 9, 1993). In certain situations,
the Department decided that the facts on record did not justify
examining factors of control beyond five percent equity ownership when
determining if parties were related. See, e.g., Pocket Lighters, 60 FR
14263 (March 16, 1995). In Zenith the Court upheld our decision not to
broaden the related party inquiry beyond an examination of equity
relationships. 606 F. Supp. 695, 699 and 700 (CIT 1985). The court
stated that the Department is not required by the statute to look
beyond financial relationships.5
---------------------------------------------------------------------------
\5\ Ta Chen misreads the Court's decision in Zenith. There the
Court found that while there was no statutory requirement that the
Department examine ``relationships which do not find expression in
financial terms,'' nowhere did the court assert that the Department
was statutorily barred from an examination of non-financial
relationships. Zenith, 606 F. Supp. at 700
---------------------------------------------------------------------------
However, the Department has recognized the possibility of parties
being related through non-financial interests in factual situations
where elements of control exist that raise the distinct possibility of
price manipulation. Thus, the Department has not felt constrained to
examine only financial relationships and, where appropriate, has
ventured beyond a consideration of equity ownership in its
interpretation of section 771(13) of the Tariff Act. See, e.g.,
Portable Electric Typewriters From Japan: Final Results of
Administrative Review, 48 FR 7768, 7770 (February 24, 1983)
(considering factors indicating control, but ultimately rejecting the
sufficiency of these factors to prove the parties were related in this
case); Final Determination of Sales at Less Than Fair Value: Oil
Country Tubular Goods From Argentina, 60 FR 33539, 33544 (June 28,
1995) (considering, in addition to equity factors, non-equity factors
such as shared management and indirect control before concluding that
the producer was not related to certain customers). For example, in
Polyethylene Terephthalate Film From Korea, the Department ``confirmed
that the three entities are related in terms of common stock ownership,
shared directors, and common management control'' for purposes of
determining U.S. price. See Final Determination of Sales at Less Than
Fair Value: Polyethylene Terephthalate Film From Korea, 56 FR 16305,
16314 (April 22, 1991) (emphasis added). Similarly, in Roller Chain
From Japan the Department, in finding that respondent Sugiyama was
related to its customer, stated that it ``considers shared directorship
to be evidence of a relationship between these two organizations.''
Roller Chain, Other Than Bicycle Chain, From Japan, 57 FR 43697, 43701
(Sept. 22, 1992). Again, the Department clearly examined factors of
control, and not solely the level of equity ownership in defining
related parties under the statute.
The Court has affirmed the Department's interpretation that a
related-party determination may include an examination of non-financial
factors. In Sugiyama Chain Co. v. United States, the Court expressly
rejected the plaintiff's argument that section 771(13)(C) of the Tariff
Act limited the Department to an examination of financial relationship
when determining if parties are related under that provision of the
statute. 852 F. Supp. 1103, 1112 (CIT 1994). Instead, the Court held
that the Department ``may properly consider `both financial and/or non-
financial connections' when assessing whether parties are related
within the meaning of [section 771(13)(c)].'' Id. (quoting E.I. DuPont
De Nemours & Co. v. United States, 841 F. Supp. 1237, 1248 (CIT 1993)
(DuPont). Similarly, the court in DuPont ruled that the Department's
examination of both financial and non-financial factors was in
accordance with its statutory mandate. See DuPont, 841 F. Supp. at
1248.
As the express statutory language indicates, the purpose of the
pre-URAA definition of ``exporter'' provided at section 771(13) is to
``determine when an importer is `connected' to the exporter so as to
warrant the use of
[[Page 2123]]
`exporters sales price' as the basis for U.S. price.'' Statement of
Administrative Action at 839. Under the statute the Department may not
rely upon prices between an exporter and a related U.S. customer in
calculating dumping margins because of the possibility that prices
between these parties will be manipulated to mask dumping activities of
the foreign respondent. As stated earlier, in order to effectuate this
statutory mandate the Department has recognized that certain non-
financial relationships between parties may give rise to the potential
for price manipulation or control. See, e.g., Polyethylene
Terephthalate Film From Korea, 56 FR 16305, 16314 (April 22, 1991);
Portable Electric Typewriters From Japan, 48 FR 7768, 7770 (February
24, 1983). The Court has held that this interpretation is reasonable
and in accordance with the law.
Ta Chen's exclusive focus on equity ownership in its Case Brief
ignores the express purpose of the related-party determination made
pursuant to section 771(13). While the Department's inquiry may begin
with an examination of equity ownership, nothing precludes examination
of other factors, especially where, as here, we have record evidence of
non-financial relationships demonstrating connections between the
parties which raise the distinct possibility of price manipulation. Our
examination of related parties in light of non-financial relationships
in this review is consistent with the express purposes of this
provision. In fact, Ta Chen insists in its case brief that its prices
to San Shing and Sun were lower than prices to its other U.S.
customers, mistakenly viewing this as evidence that the parties could
not be related, and that the prices between them are reliable for
margin calculations. On the contrary, by offering preferential pricing
for goods sold to San Shing and Sun, Ta Chen not only has demonstrated
that its relationship with San Shing and Sun raises the possibility of
Ta Chen affecting pricing, but has admitted that this relationship has
resulted in preferential pricing. We also find misplaced Ta Chen's
emphasis on revisions to the Tariff Act effected by the URAA. Contrary
to Ta Chen's argument, new section 771(33) does not represent a
fundamental change in the statute's intent. Rather, the URAA's
definition of affiliated persons merely ``shifted the focus to control
rather than equity.'' See Memorandum to Jeffrey P. Bialos in
Engineering Process Gas Turbo-Compressor Systems From Japan, December
4, 1996 at 2. While in the past the predominant focus was on control
through equity ownership, the new Tariff Act highlights all means of
control in addition to equity ownership. See Engineering Process Gas
Turbo-Compressor Systems From Japan.
We also do not accept Ta Chen's definition of ``any interest'' as
being limited to a minimum five percent equity ownership. The five-
percent equity test is a mere starting point in the Department's
inquiry, establishing prima facie evidence that two parties are
related. The analysis urged by Ta Chen would ignore the clear evidence
in the record of this review that Ta Chen controlled San Shing and Sun
and, through these parties, could manipulate prices to U.S. customers.
We conclude further that Ta Chen did, in fact, have a non-equity
financial interest in San Shing and Sun. The totality of the facts in
this case, including Ta Chen's control of San Shing's and then Sun's
check signing stamps, the unfettered computer ties, the involvement of
Mr. Shieh in negotiating the prices accepted by San Shing and Sun, the
exclusive supplier relationships, the pledging of San Shing's and Sun's
assets to TCI's benefit, the intermingling of personnel, the
preferential pricing and credit terms (for more on each of these ties
see our response to Comment 2, below), and the rise and disappearance
at Ta Chen's behest of both San Shing and Sun as Ta Chen's sole
distributors, all point to the inescapable conclusion that San Shing's
and Sun's financial interests were indistinguishable from Ta Chen's.
In fact, given the depth and breadth of these non-equity financial
ties, one would reasonably expect to find common equity ownership. Its
absence is the only missing element in the panoply of indicia which
demonstrate that Ta Chen ``owned or controlled, through stock
ownership, or control, or otherwise,'' an interest in the business of
San Shing and Sun. Notwithstanding this absence, the Department cannot
be obliged to find that no relationship exists where parties have no
equity interest between them. Such a limitation would invite parties to
evade the antidumping law by simply avoiding any common stock
ownership.
Finally, assuming, arguendo, that the statute and the Department's
past practice bar a finding that Ta Chen was related to San Shing and
Sun pursuant to section 771(13)(C) of the Tariff Act, the facts of this
review lead us to conclude, nevertheless, that the prices between these
parties were, at a minimum, subject to manipulation by Ta Chen. Ta Chen
acknowledges that its prices to San Shing and Sun were lower than its
prices to Ta Chen's other U.S. customers. This pattern of preferential
pricing undermines the credibility of Ta Chen's assertions concerning
its relationships with San Shing and Sun and renders prices between
them unsuitable for margin calculation purposes, given our statutory
mandate to calculate dumping margins based upon arm's-length prices to
the United States.
Our interpretation of the related-party provisions for these final
results is consistent with the plain language of the statute when
applied to the facts of this case. Any other conclusion would render
this portion of the Tariff Act a nullity and would result in
absurdities, given the evidence of record demonstrating Ta Chen's
control over these parties. Both San Shing and Sun were established by
current or former managers and officers of Ta Chen, were staffed
entirely by current or former Ta Chen employees, and distributed only
Ta Chen products in the United States. Finally, we reject Ta Chen's
suggestion that the Department has in this case applied some extra-
statutory test based upon ``substantial'' interest. Our use of this
adjective in the Preliminary Results was descriptive only, and in no
way implies the use of any new basis for the examination of
relationships based upon control.
Comment 2: Ta Chen's Control of San Shing and Sun
Assuming, arguendo, that the statute permits finding parties
related based upon control, Ta Chen insists that it exercised no
control over either San Shing or Sun. Ta Chen first contends that if it
had held any interest in San Shing or Sun it would have ``received
something'' from Chih Chou Chang's sale of San Shing to Frank McLane,
and the subsequent sale of Mr. McLane's Sun Stainless, Inc. to a third
party, Picol Enterprises.6 Ta Chen claims that it received
nothing from either transaction, which ``alone demonstrates that Ta
Chen had no interest in either [San Shing or] Sun.'' Case Brief at 54.
---------------------------------------------------------------------------
\6\ This firm is identified variously as ``Picol International''
and ``Picol Enterprises.'' The contract covering Frank McLane's sale
of Sun lists the purchaser as ``Picol Enterprises.''
---------------------------------------------------------------------------
Furthermore, Ta Chen argues, even the indicia of control cited by
the Department in the Preliminary Results do not lead to a finding that
Ta Chen exercised control over San Shing and Sun. For example, while Ta
Chen concedes that it had physical custody of the check signature
stamps used first by San Shing and later by Sun, Ta Chen claims that it
could not unilaterally execute checks drawn against San Shing's or
Sun's accounts. Nor, Ta Chen
[[Page 2124]]
continues, could Ta Chen prevent either San Shing or Sun from writing
checks without Ta Chen's approval and signature. This physical custody
of the signature stamp was, Ta Chen insists, merely an avenue for
monitoring disbursements by these companies. Ta Chen suggests that this
was a prudent measure given both the large volume of merchandise
involved, as well as the 210-day credit terms Ta Chen extended first to
San Shing and then to Sun. In Ta Chen's view, under these conditions it
was entirely reasonable to impose ``strong measures'' to permit
``stringent credit monitoring.'' Case Brief at 57.
In addition, Ta Chen admits that it had full access to San Shing's
and Sun's computer systems. Because, Ta Chen claims, San Shing and Sun
could write checks without using the signature stamps held by Ta Chen,
this method of monitoring their disbursements ``was not perfect.'' Id.
Hence, Ta Chen insisted upon additional computer monitoring of San
Shing's and Sun's accounts receivable and payable. Ta Chen concludes by
insisting that (i) It did not control disbursements of funds by San
Shing and Sun, and (ii) Any such control over disbursements would be
irrelevant where, as in the instant review, the only control at issue
would be control over prices. Such stringent control, Ta Chen argues
further, is an acceptable practice under the Uniform Commercial Code
(UCC). According to Ta Chen, under Article 9 of the UCC, ``policing''
or ``dominion'' by a secured party (here, Ta Chen) over its unrelated
debtors (referring to San Shing and Sun) ``is both permissible and
expected.'' Case Brief at 59, citing Sec. 9-205, Comment 5 of the UCC.
In other contexts, Ta Chen argues, courts have found it unremarkable
that one company would provide its financial and computer records to a
second unrelated company.
Ta Chen also takes issue with the Preliminary Results' conclusion
that Ta Chen shared sales department personnel with San Shing and Sun.
According to Ta Chen, the record indicates that no individuals were
simultaneously employed by Ta Chen and either San Shing or Sun. As to
the activities of Ta Chen's former sales manager Ken Mayes, Ta Chen
asserts that Mr. Mayes was an independent contractor, and not an
employee of Ta Chen. Ta Chen maintains that Mr. Mayes only began
working for San Shing (and later, Sun) after terminating the
independent contractor relationship with Ta Chen. Furthermore, Ta Chen
continues, it is not uncommon for individuals in the U.S. stainless
steel market to move about among the limited number of players in the
industry. While acknowledging that Ta Chen did provide some assistance
to San Shing and Sun, Ta Chen insists that its employees remained on Ta
Chen's payroll, acting on Ta Chen's behalf. Case Brief at 63. Even if
Ta Chen shared employees with San Shing or Sun, Ta Chen avers, such
commingling of personnel would not indicate that the parties are
related. Even company officers, Ta Chen suggests, are merely corporate
employees who do not necessarily have a share of, and therefore, an
interest in, their employers. Ta Chen argues that the Department may
not assume that because an individual is employed simultaneously by two
firms, the two firms are related, or that the individual controls any
interest in the firms. Id. at 64. Ta Chen also insists that a payment
Ta Chen made to Mr. Mayes in 1995, or three years after he allegedly
left Ta Chen's employ, does not indicate that Mr. Mayes was employed by
Ta Chen in the intervening period (i.e., when he worked for San Shing
and Sun). Rather, Ta Chen claims, this payment stemmed from a previous
agreement between Mr. Mayes and Mr. Robert Shieh, Ta Chen's and TCI's
president and CEO, whereby in return for Mr. Mayes's expertise and
assistance in Ta Chen's start-up in the United States, Ta Chen would
pay a certain amount to Mr. Mayes should it reach a pre-determined
level of profits in any future year. Ta Chen accuses the Department of
establishing a ``per se rule'' that because money changed hands between
Ta Chen and Ken Mayes, Mr. Mayes was an employee of Ta Chen, and
further, Ta Chen and Mr. Mayes were, therefore, related parties. This
one-time profit sharing payment, Ta Chen argues, conferred no ownership
rights or control over prices to Mr. Mayes, and is thus irrelevant to a
related-party determination. Further, Ta Chen insists, both Ta Chen and
San Shing (or Sun) acted freely and in their own best interests
throughout this period. Id. at 68 and 69.
The close business relationships which existed in the instant
review, Ta Chen maintains, do not constitute grounds for finding Ta
Chen related with San Shing or Sun. For instance, Ta Chen argues, in
OCTG From Argentina the Department found close business ties between
parties irrelevant, even in the face of a prior equity connection.
Subsequent equity ties were likewise found irrelevant in Pocket
Lighters, 60 FR 14263, 14267. According to Ta Chen, the parties at
issue must be related through equity ownership at the time of the sales
in question for the relationship to be legally relevant. Case Brief at
65. Furthermore, Ta Chen continues, the Department has previously
examined cases wherein a respondent provided ``clerical type
assistance'' [sic] to customers and found such assistance irrelevant to
the issue of relatedness. See, e.g., Polyethylene Terephthalate Film
From Korea, 62 FR 10526, 10529 (1997). In Tapered Roller Bearings From
Japan, 61 FR 57629 (November 7, 1996), Ta Chen maintains, even the
provision of sales personnel, training, inventory management
assistance, use of computer resources for inventory and ordering,
accounting assistance, and marketing and customer service training were
insufficient to find a U.S. subsidiary related to its customers. Ta
Chen continues by noting that the Department's level-of-trade analysis
performed under the post-URAA Tariff Act routinely includes examination
of precisely these types of relationships, demonstrating, Ta Chen
submits, that ``such services can be, and are, provided by sellers to
their unrelated customers.'' Case Brief at 66.
Furthermore, Ta Chen argues, in past cases the Department has
determined that parties are not related even in the face of much
starker evidence of the parties' consanguinity. According to Ta Chen,
in Certain Fresh Cut Flowers From Mexico, 56 FR 1794, 1799 (January 17,
1991) the parties shared the same address, telephone numbers, invoice
forms, and the same individual signed all invoices. The Department not
only found the parties unrelated, but ``did not indicate that these
facts were even relevant to whether the parties were related.'' Case
Brief at 67.
Ta Chen also insists that there was nothing untoward in Ta Chen's
practice of meeting with the customers of San Shing and Sun, and
forwarding orders from these customers to San Shing and Sun. On the
contrary, Ta Chen maintains, ``it is a perfectly understandable
business practice for a mill to act in this way and to meet with it own
previous customers and assure them that its use of a new inventory-
holding master distributor will not adversely affect service or the
price competitiveness of its products.'' Case Brief at 70, n. 17. Ta
Chen claims that its officials ``knew the prices'' Sun would charge for
subject pipe fittings, and accepted customer orders on behalf of San
Shing and Sun. As Ta Chen ``would not wish to undermine [San Shing and]
Sun,'' Ta Chen claims, it forwarded these orders to San Shing or Sun,
as appropriate, rather than simply filling the order and billing the
customers directly. Case Brief at 71. According to Ta Chen's account,
San Shing and Sun were free to accept or
[[Page 2125]]
reject any orders obtained by Ta Chen. Ta Chen likens this pattern of
activity with a commission agent who secures an order on behalf of a
given supplier, and then forwards that order to the supplier. In Ta
Chen's estimation, such a transaction would not render the
commissionaire related to the supplier.
Furthermore, Ta Chen asserts, such practices as described in this
review are common between unrelated parties and ``thus, are not
probative of Ta Chen and [San Shing and] Sun being related.'' Case
Brief at 73. Citing statements by officials of a U.S. pipe company, a
U.S. pipe and pipe fittings distributor, and a distributors'
association, which Ta Chen submitted for the record, Ta Chen contends
that mill officials would not fill orders directly from their
distributors' customers, thus undercutting the distributors; rather, Ta
Chen claims, the mill would forward the order to the distributor. Ta
Chen challenges the credibility of one witness put forth by the
stainless pipe petitioners, Mr. Brent Ward, who asserted in a sworn
affidavit that such intimate involvement of a mill with its customers'
subsequent sales of merchandise is unheard of among unrelated parties.
Ta Chen wonders whether ``this lone domestic mill witness can really
speak knowledgeably about the practices of offshore mills in assuring
[the] ultimate customers about shipment and delivery with respect to
subject merchandise (pipe and fittings).'' Id. at 74 (original
emphases).
Ta Chen argues that even if it knew the prices at which San Shing
and Sun would sell the subject merchandise they purchased from Ta Chen,
such knowledge ``is of no moment.'' Id. Ta Chen cites the public
testimony of Joe Avento before the International Trade Commission (the
Commission) in an unrelated inquiry that the market for fungible
products such as stainless pipe and pipe fittings is price-driven, and
that these prices are ``generally well known by [ ] participants'' in
the marketplace. Id. at 75. Ta Chen also cites to Tapered Roller
Bearings From Japan, where a respondent provided its distributors with
resale prices, as another case where the supplier had knowledge of its
customers' prices. Again, Ta Chen avers, such knowledge would be
insufficient grounds for finding two parties related for purposes of
the Tariff Act.
Turning next to the liens held by Ta Chen on San Shing's and Sun's
assets, which these parties supplied voluntarily, Ta Chen argues that
such liens do not make parties related and are, in fact, common between
unrelated parties. Ta Chen reiterates that it sold pipe fittings and
other stainless steel pipe products to San Shing and Sun on extended
credit terms. As an exercise in prudence, Ta Chen allows, it obtained a
security interest in the inventory and accounts receivable of first San
Shing, and then Sun. Furthermore, Ta Chen submits, its assignment of
these security interests to a third party (i.e., TCI's creditor bank)
is irrelevant to a discussion of whether Ta Chen was related to San
Shing and Sun. In fact, Ta Chen stresses, the UCC, at Sec. 9-318,
Comment 4, notes that security interests in ``intangibles'' such as
accounts receivable ``can be freely assigned.'' Case Brief at 81,
quoting UCC section 9-318, Comment 4.
Ta Chen states that in June 1993 TCI asked San Shing to grant a
lien directly to TCI's bank. Ta Chen insists that this arrangement had
the same result as TCI securing an interest in San Shing's inventory
and accounts receivable and then assigning this interest to TCI's bank.
Asking San Shing to grant the lien directly to TCI's bank was, Ta Chen
avers, ``a way to simplify a still otherwise ordinary commercial
arrangement,'' and imposed no additional burdens upon San Shing. Id. Ta
Chen accuses the Department of creating another per se rule that
providing UCC security interests as a condition for obtaining a loan
makes two parties related. Rather, Ta Chen submits, failure to seek a
lien on a borrower's assets would be a stronger indication that two
parties are related, and that the creditor did not need to secure the
debt. Ta Chen also claims that San Shing (and later, Sun) actually did
receive consideration in return for granting these UCC liens, in the
form of extended credit terms.
In addition, Ta Chen claims that since San Shing and Sun only
distributed Ta Chen products, any liens on their inventory and accounts
receivable were necessarily limited to the outstanding amounts owed to
Ta Chen. That the liens covered all of San Shing's inventory and
accounts receivable is, Ta Chen declares again, ``of no moment.'' Ta
Chen notes that Article 9 of the UCC permits creditors to seek a
``blanket'' interest in both existing and ``after-acquired'' assets,
rather than attempting to secure interests only in specific assets.
Case Brief at 83. Nor is it unusual, Ta Chen continues, for a party
pledging its assets as security to a creditor to pledge full
cooperation in enforcing the lien in the event of default by the
creditor. In the instant case, Ta Chen submits, as San Shing and Sun
held the accounts receivable at issue, efforts to secure payment from
San Shing's and Sun's customers would necessarily continue to rest with
San Shing and Sun.
Ta Chen also sees nothing unusual in San Shing and Sun, putatively
unrelated parties, entering into these security arrangements with no
written documentation as to their terms. Ta Chen claims that, while it
was ``unable to find any formal writing memorializing the agreement
that [TCI's loan with its creditor bank] would always be less than the
accounts payable of San Shing and McLane's Sun Stainless to TCI,'' such
agreements were, Ta Chen contends, ``referenced in various
correspondence during the relevant period between the parties * * *''
Case Brief at 85. Ta Chen implies that, just as terms of sales are not
always committed to writing, there is nothing unusual in the absence of
written documents concerning the debt financing arrangements between Ta
Chen and San Shing, and between Ta Chen and Sun.
Even if the facts surrounding the debt financing arrangements
between these parties were, in fact, unusual, Ta Chen avers, that would
not provide a basis for finding Ta Chen related with San Shing or Sun.
Ta Chen asserts that all parties acted freely and in their own best
interests. Therefore, Ta Chen concludes, these security agreements do
not indicate that Ta Chen controlled San Shing or Sun. Ta Chen points
to the statements it submitted for the record from two individuals
involved in the steel industry in the United States as support for its
contention that security arrangements such as those described above are
``reasonable given a concern of nonpayment.'' Case Brief at 88. Ta Chen
quotes one of these statements at length, noting with approval this
individual's opinion that such measures can and do occur between
suppliers and their unrelated distributor customers. Not only did Ta
Chen's witnesses find these arrangements ``perfectly normal,'' but
TCI's audited financial statements likewise did not include San Shing
or Sun when listing loan guarantees provided by related parties. Id. at
89.
As two final notes with respect to the debt financing arrangements,
Ta Chen states that no prior Departmental precedent exists for the
proposition that secured debts or loan guarantees are sufficient
grounds for finding parties related under the pre-URAA Tariff Act. Even
under what Ta Chen interprets as a broader definition of
``affiliation'' under the post-URAA Tariff Act, to date the Department
has yet to find that loans make parties affiliated. Case Brief at 90,
citing to Certain Internal Combustion Industrial Forklift Trucks From
Japan, 62 FR 5592, 5604 (February
[[Page 2126]]
6, 1997), and Large Newspaper Printing Presses From Japan, 61 FR 38139,
38157 (July 23, 1996). Second, Ta Chen criticizes the Preliminary
Results for failing to explain precisely how the liens at issue in this
review could affect control over prices which, Ta Chen reiterates, is
the only aspect of control relevant to this review.
Ta Chen next discusses San Shing's and Sun's exclusive supplier
relationships with Ta Chen. While conceding that, in fact, San Shing
and Sun purchased and sold Ta Chen products exclusively, Ta Chen claims
that San Shing and Sun were ``free to do business with others of
[their] own choosing, as well as buy and sell others' products.'' Case
Brief at 90. Ta Chen cites prior cases decided under the pre-URAA
statute wherein the Department considered exclusive buy-sell
relationships; in such cases, Ta Chen argues, the Department did not
find such relationships indicative of the parties' being related. Id.,
citing Portable Electric Typewriters From Japan, 48 FR 7768, 7770
(February 28, 1983), and Certain Residential Door Locks and Parts
Thereof From Taiwan, 54 FR 53153 (December 27, 1989) (Door Locks From
Taiwan). Even under post-URAA determinations, Ta Chen avers, the
Department has not found exclusive buy-sell relationships sufficient to
consider two or more parties affiliated. According to Ta Chen, the
Department examined such relationships in Cold-Rolled and Corrosion
Resistant Carbon Steel Flat Products From Korea, 62 FR 18404, 18441
(April 15, 1997) and Open-End Spun Rayon Singles Yarn From Austria, 62
FR 14399, 14401 (March 26, 1997), and concluded that because the
parties were free to transact with others, their exclusive buy-sell
arrangements did not render the parties affiliated. Case Brief at 91
and 92. On a broader plane, Ta Chen continues, San Shing and Sun could
not be considered ``reliant'' upon Ta Chen because each had interests
beyond their dealings with Ta Chen. San Shing, Ta Chen notes, sold
fasteners, while Mr. McLane had interests involving lawnmower parts and
plastic patio furniture. Ken Mayes, Ta Chen asserts, had an additional
business interest in another pipe distributor, Stainless Specialties,
Inc.
As further evidence that San Shing and Sun were not related to Ta
Chen, the company states that its ``net, ex-factory price to [San Shing
and] Sun was less than its net, ex-factory price to other U.S.
customers.'' Case Brief at 95 (original emphasis). These pricing
patterns, Ta Chen asserts, demonstrate that Ta Chen ``did not have
control over'' San Shing and Sun. Id. Ta Chen allows that, had it
exercised control over these distributors, it would have charged them
higher prices, so as to mask any dumping of subject pipe fittings sold
to genuinely unrelated customers. That Ta Chen's prices to San Shing
and Sun were lower than its prices to other customers ``further
confirm[s]'' that Ta Chen is not related to San Shing or to Sun.
Ta Chen also assails the credibility of the D&B report cited in the
Preliminary Results as evidence that Ta Chen and Sun were related
through Frank McLane's common equity ownership. According to Ta Chen,
the conclusion in the D&B report that Frank McLane and Ken Mayes had
been active with Sun since 1992 (indicating that Mr. McLane
simultaneously held equity in Ta Chen and owned Sun outright) is based
upon hearsay: ``[o]ne D&B clerk apparently heard something from
somebody. A second D&B clerk speculates from what the first D&B clerk
said.'' Case Brief at 100. According to Ta Chen, its certification that
Mr. McLane ``had no involvement with any Sun before the one he
incorporated in September 1993'' should be sufficient to refute the D&B
report. Id. Requiring Ta Chen to go beyond the certified questionnaire
responses ``unlawfully places the burden on Ta Chen to rebut the D&B
report.'' Id. at 108. Ta Chen also claims that the Department should
disregard the D&B report because petitioners in the stainless pipe case
failed to submit the September 1994 D&B report to the Department prior
to the October 1994 verification in the first review of WSSP.
Assuming that the D&B report constitutes evidence, Ta Chen asserts
that it is not substantial evidence and, therefore, any reliance upon
it is unlawful. Citing Timken Co. v. United States, 894 F. 2d 385, 388
(Fed. Cir. 1990), Ta Chen argues that ``substantial evidence is ``such
relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.' '' Case Brief at 101. Ta Chen notes that Dun &
Bradstreet issues a stock disclaimer with its reports that it does not
guarantee their accuracy. Further, Ta Chen charges, the accuracy of
this particular report is further impeached by the apparent removal of
the unique D&B number identifying the subject of the report. Ta Chen
asserts that this is not a minor matter since two Suns are at issue in
this case--San Shing's dba Sun Stainless, Inc., and Frank McLane's Sun
Stainless, Inc. Ta Chen also hints that other alterations may have been
made to the D&B report.
In addition, Ta Chen maintains that the D&B report does not
specifically cite Mr. Mayes as the source for the claim that Messrs.
McLane and Mayes had been active in Sun Stainless since 1992. Since the
D&B report does not indicate that Mr. McLane was president or owner of
Sun prior to November 1993, the clear and unequivocal evidence
indicates that Mr. McLane only became involved with Sun at the later
date. In fact, Ta Chen submits, the contract of sale between Mr. McLane
and Picol International, dated July 1995, states that Mr. McLane was
president of Sun since November 5, 1993.
In closing on this point, Ta Chen alleges that the Department
treated it unfairly by not accepting into the record submissions by Ta
Chen addressing the credibility of the D&B report. Ta Chen asserts that
it first received notice of the possible ``breadth of section
771(13)(B),'' and the importance of the D&B report, upon publication of
the Department's Preliminary Results. Case Brief at 109. Ta Chen
maintains that its July 2, 1997 submission on this point (rejected by
the Department as untimely new factual information) should have been
accepted for the record.
Suggesting that Ta Chen's version of events is ``embarrassingly
lacking in any degree of common sense or logic,'' petitioner contends
that ``[b]y any reasonable standard, Ta Chen exerted control over [San
Shing and Sun]--as evidenced by its own belated admissions to the
record of this review.'' Rebuttal Brief at 2 and 4. Petitioner contends
that Ta Chen's continued denial of any control over San Shing and Sun
is ludicrous, and stresses that Ta Chen failed to demonstrate that the
types of relationships it enjoyed with San Shing and Sun are in any
manner common between parties dealing at arm's length. Id. at 5. Ta
Chen, petitioner avers, is the only foreign or domestic supplier of
pipe fittings to whom San Shing and Sun pledged their assets. Ta Chen
is the only supplier to have dedicated, interconnected
telecommunications and computer systems with San Shing and Sun. Ta Chen
is the only supplier with whom San Shing and Sun shared sales and
clerical personnel. Ta Chen is the only supplier to whom San Shing and
Sun surrendered the signature stamps used to execute withdrawals from
their checking accounts. Finally, Ta Chen is the only supplier whose
president, Mr. Shieh, routinely accompanied San Shing's and Sun's
personnel on sales calls, and discussed prices with San Shing's and
Sun's customers. ``In fact,'' petitioner concludes, ``the `common
sense' standard, in addition to any legal standard, permits only one
conclusion,'' i.e., that Ta Chen and San Shing and Sun were related and
operating under
[[Page 2127]]
common control. Rebuttal Brief at 5. Petitioner accuses Ta Chen of
establishing San Shing and then Sun for ``purposes specifically related
to this and other antidumping investigations and reviews.'' Id. at 6.
Petitioner dismisses as ``laughable'' Ta Chen's use of statements
by various individuals to support its contentions that the types of
relationships between Ta Chen and San Shing and Sun are ordinary and
commonplace practices for parties dealing at arm's length. If, in fact,
the statements of any of these witnesses reflected common practices in
the stainless steel pipe fitting markets, petitioner suggests, they
would have supplied actual examples of other cases where unrelated
parties: (i) Shared signature stamps, computer facilities, and sales
department personnel, (ii) Participated in joint sales negotiations,
and (iii) Pledged their assets to secure one another's debts. ``Neither
Ta Chen nor its so-called experts have or ever will provide such
examples because no such examples exist.'' Rebuttal Brief at 7
(original emphasis). And the reason no such examples exist, petitioner
concludes, is that such practices are not at all characteristic of
dealings between truly unrelated parties dealing at arm's length but,
rather, provide indisputable evidence that Ta Chen and San Shing and
Sun were related and operating under joint control.
Department's Position
We agree with petitioner that the factual evidence of record
demonstrates a level of operational control exercised by Ta Chen over
both San Shing and Sun that more than satisfies the statutory
provisions for finding Ta Chen, San Shing, and Sun related parties.
Ta Chen in its case brief focuses upon each indicium of control
cited in the Preliminary Results in isolation, characterizing each of
these connections as (i) Commonplace and unremarkable in the commercial
world, (ii) Insufficient to demonstrate Ta Chen's control of these
parties, and, (iii) Irrelevant to a finding that these parties are
related for purposes of the Tariff Act. However, we have examined the
totality of the evidence in this case as it pertains to Ta Chen's
overarching control over not only the activities of San Shing and Sun,
but over their existence as well.
In placing such emphasis on a so-called five-percent equity test,
Ta Chen ignores the true purpose of section 771(13) of the Tariff Act,
which is to define the ``exporter'' for purposes of determining the
correct basis for U.S. price. According to Ta Chen's repeated
assertions, the only relevance of the present discussion is whether or
not Ta Chen could control pricing decisions made by San Shing and Sun
in selling subject merchandise in the United States. In fact, the
evidence of record indicates this was so, as do Ta Chen's own
admissions during the course of this review. As we have indicated, San
Shing and Sun were both established by current or former managers and
officers of Ta Chen, were staffed entirely by current or former Ta Chen
employees, and distributed only Ta Chen pipe products in the United
States. Throughout their involvement in these proceedings, Ta Chen had
control of San Shing's and Sun's bank accounts, with authority to sign
checks issued by San Shing, its dbas, and Frank McLane's Sun. Ta Chen
also had physical custody of these parties' check-signing stamps. Ta
Chen further controlled San Shing's and Sun's assets and these parties
pledged their assets as collateral for a loan obtained on behalf of
TCI. In addition, Ta Chen enjoyed full-time and unfettered computer
access to San Shing's and Sun's computerized accounting records. Ta
Chen's owner, Robert Shieh, owned the property housing San Shing and
Sun, and Ta Chen shared sales and clerical personnel with the two
companies. Finally, Robert Shieh actually negotiated the prices that
San Shing and Sun would realize on their subsequent resales of subject
merchandise to unrelated customers.
Furthermore, for the Department to conclude that Ta Chen did not
exercise effective control over San Shing and Sun would require the
Department to ignore numerous lacunae in Ta Chen's account. The
inconsistencies, inaccuracies, partial admissions, and lack of
documentation in Ta Chen's version of events in this administrative
review do not support Ta Chen's claims.
First, as for Ta Chen's argument that had it held an interest in
San Shing or Sun it would have received consideration for the sale of
San Shing to Mr. McLane, and Mr. McLane's eventual sale of Sun
Stainless, Inc. to a third party, this argument suffers from one fatal
flaw. Ta Chen's claim that Mr. McLane purchased San Shing from Chih
Chou Chang in the fall of 1993 is unsubstantiated. The transaction
itself has never been documented for the record. In fact, aside from Ta
Chen's claims on this matter, we have no evidence that any assets, or
consideration therefor, actually changed hands in September 1993. Ta
Chen's failure to document for the record this transaction is
significant given Ta Chen's ability to enter into the record the most
sensitive financial information concerning these parties, e.g., the
individual tax returns of Frank McLane and the corporate tax returns of
the putatively unrelated parties, San Shing and Sun. More
fundamentally, as we discuss above, record evidence indicates that Ta
Chen misstated the commencement of Frank McLane's (and Ken Mayes's)
involvement with the second ``Sun Stainless, Inc.,'' incorrectly
indicating that Mr. McLane did not simultaneously act as president of
Sun and as a director and shareholder of Ta Chen. Because the
underlying chronology is itself impeached, we cannot accept at face
value Ta Chen's claim that it did not receive compensation for these
transactions, whether in the form of cash value or other non-monetary
consideration.
Turning now to the indications of control enumerated in the
Preliminary Results, we affirm our preliminary finding that Ta Chen
controlled San Shing's and Sun's disbursements. One avenue Ta Chen used
to exercise this control was through its possession of San Shing's and
Sun's signature stamps. Ta Chen's assertion that it is commonplace for
a business entity to surrender control over its disbursements to an
unrelated party, as both San Shing and Sun did to Ta Chen, by turning
over physical custody of their signature stamps to an unrelated
supplier is not credible and is not supported by record evidence. Nor
is there record support for Ta Chen's ex post facto claim that it could
not execute checks unilaterally; having possession of both the checks
and the signature stamp enabled Ta Chen to execute checks at will upon
these entities' accounts. Furthermore, there is no support, either in
the record of this review or in the Department's experience, for the
notion that such a drastic step as demanding control over an unrelated
customer's checking account would be required to effect ``stringent
credit monitoring'' of the customer's expenditures, as Ta Chen claims
here. In fact, control by one party over another party's checking
account is usually only found between related parties.
Similarly, we find that Ta Chen's unlimited level of computer
access to San Shing's and Sun's proprietary data supports a finding
that Ta Chen exercised control over these parties. Ta Chen's assertions
with respect to this invasive computer access are unpersuasive and are
not supported by evidence in the record. Ta Chen attempts to present
its full-time and unrestricted ability to scrutinize San Shing's and
Sun's proprietary business records as prudent monitoring by a
[[Page 2128]]
creditor of its unrelated debtors which is ``permissible and expected''
under provisions of the UCC. We note that, while a creditor is entitled
to periodic reports from a debtor concerning, e.g., the debtor's sales
and deliveries and the agings of accounts receivable used as
collateral, nothing in the UCC envisions the unlimited access Ta Chen
enjoyed here. See Nassberg, Richard T., The Lender's Handbook, American
Law Institute, American Bar Association Committee on Continuing
Professional Education, Philadelphia, 1986, at 32 and 33. Further, Ta
Chen has offered no examples of any other firm allowing its unrelated
supplier such extensive access to its payroll and accounting
information. The reason Ta Chen did not give examples of such computer
access is because, contrary to Ta Chen's claims, such a practice is not
common and, to the Department's knowledge, does not exist between truly
unrelated parties. As we noted in the final results of the 1994-1995
administrative review of stainless pipe, ``Ta Chen officials stated at
the Department's [June 1997] verification at TCI that [Sun] maintained
no security system or passwords with which to limit or terminate Ta
Chen's access to its records; Ta Chen's access to [Sun's] accounting
system was complete.'' Certain Welded Stainless Steel Pipe From Taiwan,
62 FR 37543, 37549 (July 14, 1997).7
---------------------------------------------------------------------------
\7\ The original text identifies Sun as ``Company B.'' Although
the verification concerned the 1994-1995 administrative review of
WSSP, this narrative applied to prior periods as well, including the
time covered by the instant review. See Memorandum to the File,
Certain Welded Stainless Steel Pipe from Taiwan, June 19, 1997, at
5, a public version of which is on file in room B-099 of the main
Commerce building.
---------------------------------------------------------------------------
With respect to the claimed need for the computer access and
control over San Shing's and Sun's disbursements, this claim too is
undermined by Ta Chen's own statements in the record. Ta Chen insists
that it required these measures of control as a means of monitoring its
customers in light of the substantial quantities of merchandise Ta Chen
sold to San Shing and Sun, and in return for the 210-day credit terms
offered by Ta Chen.8 But as Ta Chen noted in its July 28,
1994 submission in the first administrative review of stainless pipe,
San Shing was an established company enjoying ``substantial resources
including lines of credit.'' Ta Chen's July 28, 1994 submission at 9.
Furthermore, with respect to the balances owed by San Shing and Sun, as
Ta Chen itself concedes, Ta Chen's ``risk [of non-payment] is not
significant, since actual bad debt has not been a problem.'' Ta Chen's
December 13, 1996 submission at 81. If San Shing enjoyed such
substantial resources, and never presented a risk of non-payment, Ta
Chen's stated need to implement such extraordinary monitoring measures
to secure payment for its sales is without support. The absence of a
genuine credit risk would, in fact, attenuate the need for this
relationship. The second possible reason for these ties, posited by Ta
Chen's witnesses, is that it allows for ``just-in-time'' delivery of
inventory. While electronic ordering is a common and growing practice
between suppliers and their distributors, this typically entails a
sharply delimited level of access--most commonly, a one-way
communication between the customer's purchasing department and the
supplier's sales department. We are aware of no circumstances where
electronic ordering would allow a supplier to have unrestricted access
to the accounts payable, accounts receivable, inventory, and payroll
data of an unrelated customer. We conclude that these untrammeled on-
line computer ties existed because Ta Chen was controlling and
directing San Shing and Sun.
---------------------------------------------------------------------------
\8\ We note that, in addition to preferential pricing, these
extended credit terms offered to San Shing and Sun would further
indicate that their dealings were not at arm's length.
---------------------------------------------------------------------------
We also conclude that the record indicates that Ta Chen shared
personnel with San Shing and Sun. In fact, Ta Chen's December 13, 1996
submission details a long two-way history of shared office personnel
between Ta Chen and San Shing dating to before San Shing ever purchased
a single pipe fitting from Ta Chen. For example, Ta Chen claims that
``[f]rom the outset of [Ta Chen's and San Shing's] landlord-tenant
relationship, TCI provided San Shing USA with assistance from its
personnel and, from time to time, the use of TCI office equipment.''
Furthermore, San Shing ``provided necessary technical and other support
to TCI personnel'' when TCI commenced its production of fasteners. See
Ta Chen's December 13, 1996 submission at pages 51 through 54. In
addition, Ta Chen's sales manager, Mr. Mayes, also acted as sales
manager for San Shing and for Sun. For more on Mr. Mayes's role in
these reviews, see our response to Comment 3, below. When considered
together with the other indicia of control, this commingling of
personnel lends additional support to the conclusion that Ta Chen was
related to San Shing and Sun as defined in the Tariff Act.
With respect to Ta Chen's involvement in negotiating sales prices
to San Shing's and Sun's customers--the true focus of this inquiry--Ta
Chen insists that this involvement does not indicate control by Ta Chen
of San Shing and Sun, and further asserts that such practices are
commonplace. However, we agree with petitioner that Ta Chen's claim
that negotiating the prices of its customers' subsequent sales is
common between unrelated parties is unsupported either by record
evidence or the Department's experience. San Shing and Sun Stainless
were engaged in the distribution of a fungible, commodity product,
i.e., ASTM A312 stainless steel pipe, and pipe fittings manufactured
from this pipe. As Ta Chen's witness Mr. Joe Avento notes, the market
for such products is price-driven. With little margin for profit, an
unrelated distributor, as a matter of survival, would guard the prices
it would accept for reselling the product in order, as the stainless
pipe petitioners phrase it, to ``maximize whatever negotiating room
[the customer] has with [its] supplier.'' See Rebuttal Brief of
Collier, Shannon, Rill & Scott, September 10, 1997 at 15. Ta Chen has
argued that the only element of control relevant to an antidumping
proceeding is control over prices; Ta Chen's admitted role in setting
prices for San Shing's and Sun's subsequent sales of pipe fittings to
unrelated customers in the United States is evidence of precisely this
type of control. For Ta Chen, as the supplying mill, to liken its role
in these transactions to that of a mere commission agent, passing
purchase orders between end-users and its distributors San Shing and
Sun, is not credible. Ta Chen has noted that Ta Chen officials
(specifically, Ta Chen's president, Mr. Robert Shieh) not only met with
customers of San Shing and Sun, but that these same customers would
contact Ta Chen directly, bypassing altogether their putative
suppliers, San Shing and Sun. Ta Chen claims that ``Ta Chen officials
would not wish to undermine [San Shing or] Sun,'' and that it merely
forwarded any purchase orders it received to San Shing or Sun for their
independent consideration and acceptance or rejection. See Ta Chen's
Case Brief at 71. Here again, however, there is no record evidence,
aside from Ta Chen's unsupported claims, that it ever forwarded a
customer's order to San Shing or Sun, nor is there evidence of either
San Shing or Sun ever rejecting a purchase order so obtained from TCI.
Furthermore, Ta Chen's fastidious avoidance of ``undermining'' San
Shing and Sun was unnecessary, given its control of the transactions
from the mill in Tainan to the delivery to the ultimate end user in the
United States.
[[Page 2129]]
Turning to the debt security arrangements between San Shing, Sun
Stainless, TCI, and TCI's creditor bank, Ta Chen claims that such
arrangements are ``irrelevant.'' Ta Chen maintains that debt security
arrangements by themselves have proven insufficient grounds for finding
parties related for purposes of section 771(13) of the Tariff Act.
Nevertheless, the nature of these particular security assignments,
including the absence of any written agreement between these putatively
unrelated parties, further supports our finding that transactions
between these parties were not at arm's length. Within the larger
context of Ta Chen's relationships with these entities, we find the
debt security arrangements provide additional evidence of the degree of
Ta Chen's control over all aspects of San Shing's and Sun's operations.
Here, San Shing, and then Sun, unilaterally, and without consideration,
assigned their entire inventory and accounts receivable directly to
TCI's bank to facilitate a loan for TCI. That San Shing and Sun would
accept such a risk without any consideration--without even a written
agreement memorializing the terms and duration of the agreement--is not
consistent with the dealings between truly unrelated companies. Nor has
Ta Chen offered convincing evidence that this arrangement is, in fact,
commonplace. Ta Chen fails to note that the UCC financing statements
submitted for the record ``serve only to perfect the lender's rights
against competing creditors and that rights so perfected must be
created under a valid security agreement.'' The Lender's Handbook, op.
cit. at 27. In spite of numerous submissions focusing upon the
significance of these loan guarantees and their relevance to these
proceedings, and in spite of our specific requests that Ta Chen do so,
Ta Chen has never submitted evidence that a valid security agreement
was ever created. Ta Chen has stated only that it ``asked'' first San
Shing, and then Sun, to assign their inventory and receivables as
security for a line of credit TCI obtained from a California bank, and
that these parties agreed freely in return for extended credit terms.
See Case Brief at 81 and 82. However, that these putatively unrelated
parties would accede to such a request in the absence of any written
security agreement as to the nature of the assignments, their scope,
their duration, etc. does not comport with the actions of unrelated
parties dealing at arm's length. Contrary to Ta Chen's assertion, in
fact, the existence of these UCC filings absent any valid security
agreement serves merely to underscore the dominion Ta Chen enjoyed over
the actions and the assets of both San Shing and Sun.
Furthermore, Ta Chen has never documented for the record why the
supposedly unrelated San Shing would be willing to offer its accounts
receivable and inventory to secure a loan for TCI, or why Sun,
supposedly unrelated to either Ta Chen or to San Shing, would assume
these same obligations in toto when, as of the claimed date of its
founding, it would have no outstanding balances whatever with Ta Chen.
Two other aspects of these security agreements bear noting. First, that
the secured amount available to TCI from its bank was always limited to
the value of these receivables is an ipse dixit which Ta Chen, the sole
party able to do so, has failed to document for the record. Ta Chen
claims in its case brief that these agreements were ``referenced in
various correspondence during the relevant periods between the
parties,'' yet, curiously, Ta Chen elected not to submit any of this
correspondence for the record. Our thorough review of Ta Chen's and
TCI's correspondence files during the October 1994 verifications for
the stainless pipe review also failed to reveal a single mention of
these agreements. Second, Ta Chen insists that because San Shing and
Sun only sold Ta Chen products, the value of any assets assigned by San
Shing and Sun to TCI's bank necessarily equaled the amount owed by San
Shing and Sun to TCI. See Case Brief at 82 and 83. However, this would
be true only if San Shing and Sun sold this merchandise at the same
price it originally paid to TCI. If San Shing and Sun marked up the
price of the merchandise, which they would have to do to realize any
profit from these transactions, then the secured amount necessarily
exceeded the receivables San Shing and Sun owed to TCI. Furthermore,
San Shing sold nuts and bolts for the automotive industry. Thus, its
inventory and accounts receivable from the start of this relationship
extended beyond the pipe and pipe fittings supplied by Ta Chen.
Contrary to Ta Chen's assertions, the value of San Shing's inventory
and accounts receivable clearly did exceed the amount San Shing owed to
Ta Chen for its pipe products.
As for the exclusive supplier relationships between Ta Chen, San
Shing and Sun, Ta Chen concedes that it was the exclusive supplier to
both entities, but claims that each was free to do business with
whomever it chose. However, Ta Chen has presented no evidence of San
Shing or Sun ever seeking to purchase pipe fittings or pipe from any
other firm. In fact, the record clearly indicates that except for the
fasteners manufactured by San Shing Hardware Works, Ltd., San Shing
dealt exclusively with Ta Chen merchandise; Sun Stainless was
established for this purpose alone. Both were entirely reliant upon Ta
Chen for their supplies of pipe and pipe fittings. We also find that Ta
Chen's case cites in this regard are not on point. In Portable Electric
Typewriters, for example, respondent Tokyo Juki sold merchandise
exclusively to EuroImport, S.A., a subsidiary of Olivetti. Petitioner,
citing a number of factors, including assumption of start-up costs,
Olivetti's supplying typewriter parts to Tokyo Juki, and the fact that
Tokyo Juki sold subject typewriters exclusively to EuroImport, alleged
that Tokyo Juki and Olivetti were related parties. We concluded that
``Olivetti's and Tokyo Juki's relationship does not constitute control
as contemplated by section 771(13) of the Tariff Act,'' and that
petitioner's arguments with respect to EuroImport were ``not
persuasive.'' Portable Electric Typewriters From Japan, 48 FR 7768,
7771.9 While EuroImport had an exclusive distributor
arrangement to distribute Tokyo Juki's typewriters, there is no
indication that the obverse was true, i.e., that Tokyo Juki was the
sole supplier to EuroImport. In all likelihood, EuroImport also
distributed typewriters manufactured by its parent, Olivetti, and may
have distributed typewriters supplied by any number of manufacturers.
Unlike the instant case, there is no evidence that EuroImport was
dependent upon Tokyo Juki for its continued sales operations. Thus,
Portable Electric Typewriters never reaches the issue of whether or not
an exclusive supplier relationship is, or is not, evidence of parties'
being related under section 771(13) of the Tariff Act by means of
control. Furthermore, in sharp contrast to the instant case, the
totality of evidence in Portable Electric Typewriters clearly indicated
that Tokyo Juki could not control Olivetti or vice versa. Likewise, the
cite to Residential Door Locks From Taiwan is inapposite. There we
concluded that ``[t]here is no evidence on the record that Posse and
Tong Lung operated closely together, were billed jointly, had their
day-to-day operations directed by joint owners, or conducted
transactions
[[Page 2130]]
between themselves.'' Residential Door Locks From Taiwan, 54 FR 53153,
53161. We did not say, as Ta Chen asserts, that exclusive-supplier
relationships could not be indicative of related-party status; on the
contrary, we clearly examined the issue of exclusive supplier
relationships within the context of a related-party determination and
found that not only was there no exclusive supplier relationship
between Posse and Tong Lung, there were no business transactions of any
kind between the two.
---------------------------------------------------------------------------
\9\ This discussion of ``control as contemplated by section
771(13) of the Tariff Act'' would be unnecessary if, as Ta Chen
insists, the statute only defined related parties in terms of common
equity ownership.
---------------------------------------------------------------------------
Furthermore, Ta Chen has presented no evidence in support of its
contention that these indicia of control, including computer access,
control of disbursements, and intervention by a mill in its unrelated
customers' sales are common. Despite the claims of Ta Chen's witnesses,
Mr. Charles Reid, Mr. Theodore Cadieu of the USX Corporation, and
officials from a U.S. pipe producer and an association of distributors
that such practices happen ``all the time,'' none could cite a single
specific example of similar ties between unrelated parties. The head of
the distributors' association, who would be expected to have
familiarity with the practices of its membership, failed to name a
single member firm engaging in such ``common'' practices. See Ta Chen's
February 7, 1997 submission at 54, and Ta Chen's April 1, 1997
submission. As a final note on the qualification of the stainless pipe
petitioner's affiant, Mr. Brent Ward, to speak to ``the practices of
offshore mills,'' Ta Chen has known at least since the Department's
April 28, 1997 public hearing (in the 1994-1995 administrative review
of stainless pipe) Mr. Ward's qualifications to address these matters.
Mr. Ward is the president of the domestic pipe producer, Damascus-
Bishop Tube Company, and also the Specialty Tubing Group, an
association of North American producers of welded stainless steel pipe.
His firm also purchases and distributes ornamental steel tubing
produced by offshore mills. See Memorandum to the File, October 30,
1997, at 2, and Hearing Transcript (``Open Session''), In the Matter of
Certain Welded Stainless Steel Pipe From Taiwan, May 12, 1997 at 15
through 21 and 34 through 37, on file in room B-099 of the main
Commerce building. It is worth quoting Mr. Ward, acting in all three
capacities, at some length:
[a]t most, if it is necessary, a producing mill might have the
opportunity to meet with both a distributor and that distributor's
customer to discuss issues of material specification and/or quality
requirements, but not to discuss issues of prices and quantities. .
. . [I]n reality distributors in the welded stainless steel pipe
industry in the United States that are truly unaffiliated with their
supplying mills jealously guard both their corporate independence
and their commercial ties with their customers and limit any contact
by the mills with those customers as much as possible. The logic
behind this approach at one level, of course, is simply that the
distributors do not want to lose control of their businesses and do
not want their customers to buy directly from the mills and
eliminate the distributor's role in the chain of distribution.
See Affidavit of Mr. Brent Ward, submitted April 8, 1997, on file
in room B-099 of the main Commerce Building.
We find Mr. Ward's common-sense description of the business ties
typically found between unrelated parties to be credible, especially in
light of Ta Chen's inability to cite any evidence to the contrary.
Finally, turning to Ta Chen's relationship with Sun through Mr.
McLane's full ownership of Sun while holding a share of, and acting as
a director for, Ta Chen, we find that substantial evidence of record in
this review indicates that Mr. McLane's involvement with Sun predates
the September 14, 1993 date claimed by Ta Chen. Rather, Mr. McLane,
working with Mr. Mayes, established Sun and was actively engaging in
sales of subject merchandise by 1992. The evidence of this is not, as
Ta Chen characterizes it, hearsay. It is, in fact, the September 20,
1994 report of a disinterested and credible organization, Dun &
Bradstreet, whose reports are routinely relied upon by the business and
investment communities in assessing businesses' creditworthiness. Dun &
Bradstreet's source, in turn, was Mr. Ken Mayes who, as the putative
vice president and director of Sun, clearly had familiarity with the
history and operations of this firm. In a May 27, 1994 interview with
Dun & Bradstreet's analysts, Mr. Mayes stated that ``Sun Stainless,
Inc.'' was started in 1992.10 Mr. Mayes noted that Mr.
McLane was the president and he the vice president of Sun. Furthermore,
the D&B report includes a ``fiscal statement'' covering the period from
November 1, 1992 to October 31, 1993. This document shows that for the
year ended October 31, 1993, Sun had millions of dollars in sales,
accounts payable, and accounts receivable.
---------------------------------------------------------------------------
\10\ We note this date coincides with Ta Chen's decision to
``exit the ESP business'' and to rely on newcomers to the pipe
industry as its sole distributors in the United States. Thus,
contrary to Ta Chen's allusions, the D&B report has not erroneously
stated the founding date of San Shing USA, which existed as a
distributor of fasteners manufactured by its parent, San Shing
Hardware Works, Ltd., in Taiwan prior to its involvement in Ta
Chen's pipe distribution. See Case Brief at 107.
---------------------------------------------------------------------------
If, as Ta Chen claims, Frank McLane's Sun Stainless, Inc. only
became operational as of November 1, 1993, there should have been no
financial activity whatever reported for the year prior to that date.
Certainly, there would be no activity reported prior to September 1993
when Mr. McLane allegedly founded his new Sun Stainless, Inc. Perhaps
recognizing this inconsistency, Ta Chen suggested in an August 2, 1995
letter originally submitted in the first review of stainless pipe:
[t]he Dun & Bradstreets submitted by Petitioners on Frank
McLane's Sun Stainless, Inc. obviously include the financial results
of San Shing USA for the pre-October 31, 1993 period and the
financial results of Frank McLane's Sun Stainless, Inc. for the
period November 1, 1993 onward.
Ta Chen's February 7, 1997 submission at 73, n. 4 (original bracketing
deleted).
Ta Chen went on to speculate that ``D&B's reporting in this fashion
may be useful, as the profitability of San Shing USA's assets during
the pre-October 31, 1993 period may be a useful indicator of the
financial performance of Frank McLane's Sun Stainless, Inc. during the
post-November 1, 1993 period.'' Id. It is not at all obvious, however,
that the D&B report for a putatively new corporate entity, Sun
Stainless, Inc., would include the financial results for a separate
party, San Shing. Unless Mr. Mayes incorrectly presented San Shing's
financial results as Sun's own, Dun & Bradstreet could not have
confused the two. Indeed, since San Shing used the name ``Sun
Stainless, Inc.'' as a fictitious dba name only, any search for
financial information on ``Sun Stainless, Inc.'' (as distinct from San
Shing Hardware Works, USA), would be unavailing because, according to
Ta Chen, Sun never really existed before September 1993, other than as
a name on San Shing's invoice forms. Furthermore, if Sun had truly
started as a new, independent entity in November 1993, the performance
of San Shing in the prior year would be of little or no help in
predicting how a new firm, with different ownership, different levels
of financing, and different levels of business experience and
expertise, would perform in the market.
Mr. Mayes's May 27, 1994 statements to a disinterested person,
i.e., Dun & Bradstreet, were made at a time when Mr. Mayes had no
reason to foresee that the stainless pipe petitioners and, later, the
Department, would inquire as to the dates of Sun's establishment. To
the contrary, his later statements on Ta Chen's behalf for the record
of the
[[Page 2131]]
fittings and pipe reviews were made at a time when he had a direct
interest in sustaining Ta Chen's claim that it was not related to Sun.
We conclude that the information contained in the D&B report more
accurately reflects the history of Frank McLane's Sun Stainless,
Inc.11
---------------------------------------------------------------------------
\11\ This same chronology was corroborated by a foreign market
researcher retained by petitioners in the stainless pipe case. See
the July 12, 1995 submission of Collier Shannon Rill & Scott at
Attachment 5, a public version of which is on file in Room B-099 of
the main Commerce building. Even if the D&B analysts interpreted
erroneously Mr. Mayes's May 27, 1994 statements, it is clear that
Mr. McLane negotiated the purchase of San Shing USA's inventory
sometime prior to mid-September 1993, i.e., while he was still a
shareholder in, and director of, Ta Chen.
---------------------------------------------------------------------------
Comment 3: Use of Best Information Available
Even if the Department had the discretion to find Ta Chen related
to San Shing and Sun within the meaning of section 771(13) of the
Tariff Act, Ta Chen argues, the Department nonetheless acted unlawfully
in applying BIA to Ta Chen. According to Ta Chen, the Department never
clearly requested from Ta Chen any information regarding control of San
Shing or Sun by Ta Chen, and never indicated what such control might
entail. Citing Sigma Corp. v. United States, 841 F. Supp. 1255 (CIT
1994), Ta Chen asserts that the Department cannot `` `expect a
respondent to be a mind-reader' * * * BIA cannot be imposed for failure
to provide information that was not requested, or clearly requested.''
Case Brief at 112 (Ta Chen's emphasis omitted). Ta Chen also points to,
inter alia, Usinor Sacilor v. United States, 907 F. Supp. 426, 427 (CIT
1995), Creswell Trading Co., Inc. v. United States, 15 F. 3d 1054, 1062
(Fed. Cir. 1994), Daewoo Electronic Co. v. United States, 13 CIT 253
266, and Queen's Flowers de Colombia, et al., v. United States, Slip
Op. 96-152 (CIT September 25, 1996) as supporting its contention that
the Department may not penalize a respondent ``for failure to provide
information on relationships which the respondent had no fair notice
that the Department wanted.'' Case Brief at 112 through 114.
The Preliminary Results are especially galling, Ta Chen charges,
given what Ta Chen characterizes as the Department's oft-stated
position that ``control indicia were irrelevant under the pre-[URAA]
statute.'' Id. at 114. In cases involving financial inter-dependencies,
interlocking and coordinated directors and officers, and de facto joint
operation through, e.g., a Japanese keiretsu, Ta Chen claims, the
Department has ``repeatedly and publicly'' stated that control was
irrelevant to its analysis. Id.
Furthermore, Ta Chen avers, Ta Chen submitted for the record the
information relied upon by the Department as indicative of control
prior to issuing any supplemental questionnaires in this review. With
this information in hand, Ta Chen alleges, the Department issued
supplemental questionnaires in this review, all covering Ta Chen's
sales to San Shing and Sun. At no time, Ta Chen submits, did the
Department ask Ta Chen to report the subsequent resales of Ta Chen pipe
fittings made by San Shing and Sun Stainless. Ta Chen argues that in
Olympic Adhesives, Inc. v. United States, 899 F. 2d 1565, 1573 (Fed.
Cir. 1990) the Court of Appeals for the Federal Circuit (Federal
Circuit) held that when a respondent answers fully the Department's
questionnaire and receives a supplemental request ``pursuing a
different inquiry,'' the respondent has reasonable grounds for
believing that the original queries were fully answered. Case Brief at
116. This holds a fortiori, Ta Chen continues, where the information
concerning Ta Chen's relationships with San Shing and Sun was submitted
prior to the Department's supplemental questionnaire. Why, Ta Chen
asks, if the previous information ``clearly indicated'' that Ta Chen
was related to San Shing and Sun, did the Department ask Ta Chen for
wide-ranging information concerning Ta Chen's sales to San Shing and
Sun, but never to report sales by San Shing and Sun? Ta Chen submits
that it is not the Department's practice to determine that a response
is inadequate in toto because a respondent reports the wrong body of
U.S. sales, not to inform the respondent of the deficiency, to ask
extensive questions about the putatively useless sales data, and only
then to notify the respondent of what the Department now claims was
evident all along: that the Department could not use Ta Chen's reported
U.S. sales.
Ta Chen concludes that the questionnaires it received did not state
that parties could be considered related through control; therefore, Ta
Chen declares, it would be unlawful for the Department to proceed on
the basis of BIA because Ta Chen failed to address these control issues
in its responses.
If the Department continues to hold that Ta Chen's submitted U.S.
sales data are unusable for these final results, Ta Chen nonetheless
disputes the Preliminary Results' finding that Ta Chen failed to
cooperate with the Department and, thus, deserves adverse (or ``first
tier'') BIA. First, Ta Chen rejects the Department's conclusion that Ta
Chen failed to disclose fully its relationships with San Shing and Sun.
Rather, Ta Chen claims, it reported that Ta Chen was not related to San
Shing and Sun as defined by the Tariff Act. Only later, Ta Chen avers,
in the context of the 1994-1995 administrative review of stainless pipe
did the Department phrase the question differently, asking Ta Chen to
describe ``all relationships'' with San Shing and Sun. Ta Chen asserts
that it answered fully this broader inquiry in its November 12, 1996
response in that proceeding. Ta Chen dismisses petitioner's claim that
Ta Chen was forthcoming with this new information only because of a
separate legal proceeding as both speculative and irrelevant to these
proceedings. Rather, Ta Chen holds, once the Department framed the
question as it did in the 1994-1995 pipe review, Ta Chen responded
candidly.
Ta Chen also claims that it explained accurately the provenance of
the dba names used by San Shing and that, in any event, the Department
failed to explain the significance of Ta Chen's account to the decision
to apply uncooperative BIA. Furthermore, Ta Chen submits, any sales of
subject pipe fittings to ``Sun Stainless, Inc.'' were to Frank McLane's
Sun, not to San Shing and its dba Sun, thus making the derivation of
these names especially irrelevant to these later sales. Case Brief at
121, citing the Department's verification report for the 1992-1993
review of welded stainless steel pipe. Ta Chen challenges the
Preliminary Results' conclusion that Ta Chen misled the Department with
respect to the origin of the dba names. According to Ta Chen, its
November 12, 1996 submission in the 1994-1995 review of stainless pipe
(the relevant portions of which were submitted for the record of this
review on December 13, 1996) never claimed that ``all of the dba names
would appear in the Ta Chen customer list submitted in the original
[LTFV] investigation.'' Id. Rather, Ta Chen argues, only some of these
names would be drawn from the customer list with the remainder selected
because they were ``American[-]sounding.'' Id. In any event, Ta Chen
continues, the record does indicate the prior existence of six of the
eight dba names Ta Chen claims were used by San Shing. Ta Chen claims
that Charles Reid, with whom the Department spoke at the October 1994
verification in the pipe review, was also owner of Wholesale Alloys,
one of the dba names. As to the use of the name Sun, Ta Chen asserts:
[t]he record does not establish the prior existence of the name
Sun in the market. But
[[Page 2132]]
what the record does show is that San Shing essentially went by the
name Sun. That is what it was known as in the market and the vast
bulk of its sales were under the name Sun. For someone to have the
mindset that this was a company known as Sun, but on occasion using
other dba names, would be reasonable and reflect the reality of the
situation.
Case Brief at 123.
As for one customer name, Anderson Alloys (Anderson), Ta Chen
insists that the Department in the Preliminary Results has assumed
incorrectly that the Anderson of South Carolina is the same as San
Shing's dba Anderson Alloys. The record, Ta Chen notes, is replete with
references to two Andersons. The Anderson allegedly owned and operated
by Charles Reid had a South Carolina mailing address; any sales to this
Anderson, Ta Chen avers, can be segregated in Ta Chen's U.S. sales
listing through use of this address. Furthermore, Ta Chen declares, all
sales to Anderson after November 1, 1993 were to the South Carolina
firm, as San Shing USA was no longer using the dba designation Anderson
Alloys. ``By then, Sun was of course a sufficiently known company in
the market that there was no reason to use dba designations for name
recognition.'' Case Brief at 125.
Ta Chen takes issue with the pipe petitioners' attempt to portray
the use of dba names as part of an effort to conceal sales to San
Shing. Citing its October 20, 1994 submission in the 1992-1993
stainless pipe review, Ta Chen claims that it reported its U.S. sales
to the Department using the names as appearing on the invoices TCI
issued to the customer. For example, Ta Chen continues, a majority of
its invoices to San Shing bore the name ``Sun Stainless, Inc.'', and
were so reported. Other sales to San Shing under its other dba names
were likewise reported using the applicable dba name. Furthermore, Ta
Chen argues, its submitted sales data reflect a trend where sales to
the various dbas were supplanted by sales exclusively to Sun Stainless,
Inc., as ``Sun became more well-known and the use of alternative dba
names became unnecessary.'' Case Brief at 127.
As for the sales contracts between Ta Chen and San Shing, and
between San Shing and Frank McLane, Ta Chen avers that these documents
were not unusual, nor did they provide substantial grounds for adverse
BIA. Contrary to the Preliminary Results, Ta Chen claims that the June
1992 contract, while allowing the possibility of future negotiations,
did, in fact, set the prices for the sale of San Shing's inventory to
Frank McLane. According to Ta Chen, sales contracts often omit price
terms when, e.g., ``the parties in their repeated dealings have
customarily set the price at a later date,'' or in the face of risks of
a ``fluctuating market, particularly where delivery is postponed a
considerable period of time (for example, `delivery six months from
today.')'' Case Brief at 129, quoting, respectively, Nelson, Deborah L,
and Jennifer L. Howicz, Williston on Sales, 5th Ed. at 377, and
Hawkland, Will D., Uniform Commercial Code Series, Sec. 2-305:01 at 301
(1997). Under the two-year term of the contract between Ta Chen and San
Shing, Ta Chen submits, the open-ended nature of this contract was not
remarkable. Ta Chen also claims that the first such purchase, which
entailed all of TCI's then-existingU.S. inventory of welded stainless
steel pipe, was concluded prior to the preliminary LTFV determination
in that case, thereby averting suspension of liquidation. According to
Ta Chen, the second incremental purchase six months later was timed to
permit TCI to sell all of its existing inventory of pipe fittings prior
to suspension of liquidation in this investigation. See Preliminary
Determination of Sales at Less Than Fair Value: Certain Stainless Steel
Butt-Weld Pipe Fittings From Taiwan, 57 FR 61047 (December 23, 1992).
Ta Chen asserts that such agreements between Ta Chen and San Shing were
not improvident and that, in any event, these contracts are irrelevant
for purposes of the Tariff Act. The Department, Ta Chen alleges, failed
to explain why an ``unusual'' contract would suffice to treat the
respondent with adverse BIA. Case Brief at 132. When confronted with
similar contracts in other cases, Ta Chen argues, the Department
concluded that the contracts were ``not necessary or relevant to
calculation of the dumping margin,'' and have never been the basis for
imposing uncooperative BIA. Id.
With respect to Mr. Mayes's involvement with Ta Chen, San Shing,
and Sun, Ta Chen maintains that this is also an inappropriate basis for
resorting to adverse BIA. Mr. Mayes, Ta Chen declares, worked for Ta
Chen, later worked for San Shing, and later still worked for Mr.
McLane's Sun; however, ``[Mr.] Mayes never worked for Ta Chen and Sun
at the same time.'' Ta Chen submits that an employee leaving one
company to work for another ``happens all the time.'' Case Brief at
133. As to Ta Chen's previous statement that Mr. Mayes was never
``employed by San Shing,'' Ta Chen claims that it did note that Mr.
Mayes was an ``independent contractor'' for San Shing. An independent
contractor is not, Ta Chen declares, an employee. Case Brief at 134. As
to monies paid by Ta Chen to Mr. Mayes after his alleged departure from
TCI, Ta Chen insists that there was a single payment in 1995 pursuant
to the standing agreement between Ta Chen and Mr. Mayes. According to
Ta Chen, in return for helping Ta Chen get its start in theU.S. pipe
market by turning over his customer lists to Ta Chen, Mr. Mayes would
become eligible for a one-time payment should Ta Chen reach a specific
profit level. Ta Chen suggests that ``in a cyclical steel industry,
where, when profits are good, they are great,'' achieving this level of
profit was ``almost an inevitability.'' Case Brief at 135. Ta Chen
charges once again that the Department has created a per se rule that
payment of money by one party to another is tantamount to employment by
the former of the latter. Rather, Ta Chen concludes, this one-time
profit-sharing payment conferred no ownership rights and is, thus,
irrelevant to the issue of related parties.
Ta Chen next assails the Department's characterization in the
Preliminary Results that Ta Chen misled the Department with respect to
the debt-financing arrangements between Ta Chen and San Shing and Ta
Chen and Sun. According to Ta Chen, its descriptions of these
arrangements were ``consistent'' and ``clear'' throughout this review.
Ta Chen insists that as early as July 1994 evidence submitted in the
stainless pipe case indicated that San Shing's accounts receivable were
``not securing San Shing's debt to TCI but, rather, Ta Chen's debt to a
Los Angeles bank.'' Case Brief at 137, see also the Department's
Preliminary Results Analysis Memorandum, March 4, 1997 at 6.
Furthermore, Ta Chen disagrees with the Preliminary Results' conclusion
that it had misled the Department through its various characterizations
of the debt arrangements. That Ta Chen pursued one argument to rebut
the petitioners' submission as to the implication of the debt
assignment, and later pursued a different argument to address
petitioners' documentary evidence of those assignments is not, Ta Chen
insists, a basis for concluding that Ta Chen misled the Department.
Finally, Ta Chen avers, the relevance of Ta Chen's submissions
addressing the security arrangements is unclear given the ``undefined''
nature of the Department's control test. Finally, Ta Chen claims that
the alternating arguments cited in its Case Brief were only presented
in the 1992-1993 review of stainless pipe; thus, they are
[[Page 2133]]
irrelevant with respect to a BIA decision in this review of pipe
fittings.
Ta Chen claims further that the Department's verification reports
in the first administrative review of stainless pipe confirm that the
company cooperated fully with the Department. Ta Chen states that it
answered accurately every question asked, and supplied all requested
documents. ``There is,'' Ta Chen insists, ``no record evidence
otherwise.'' Id. at 139 and 140. Noting the free access granted to the
Department's verifiers, Ta Chen concludes that ``[n]ever once did the
verifiers state that, per a control standard for relatedness, they were
now going to address common indicia of control, or ask questions
thereon. There are no statements in any of the verification reports
otherwise.'' Case Brief at 140. Ta Chen dismisses the Preliminary
Results' claim that Ta Chen withheld relevant information from the
verifiers ``[d]espite repeated probing by [the] verifiers,'' claiming
that the Preliminary Results failed to explain what this ``repeated
probing'' involved. Id, quoting the Department's Preliminary Results
Analysis Memorandum at 7. Ta Chen claims that the concern expressed by
the Department during verification was whether one party owned the
other, not whether one party controlled another. ``Nothing was said or
asked by the verifiers to suggest otherwise.'' Id. The Department
cannot, Ta Chen insists, resort to BIA where it ``does not have the
information it wants because it did not ask the right questions.'' Id.
at 141. Furthermore, even if an alleged failure to be forthcoming in
the October 1994 verification of stainless pipe could be cited as
grounds for adverse BIA in the 1992--1993 review of that case, Ta Chen
continues, such is not the case for the 1992--1994 administrative
review of pipe fittings. Conceding that it has, in fact, entered the
relevant portions of the 1994 pipe verification reports into the record
of this review of butt-weld pipe fittings (and in the 1993--1994 review
of stainless pipe), Ta Chen nevertheless insists that it ``did not use
the verification in the first pipe review to conceal its relationship
with [San Shing and] Sun in these other reviews.'' Case Brief at 142.
Comparing its treatment at the hands of the Department in the
instant review to that of respondents in other proceedings, Ta Chen
suggests that the Department has elsewhere allowed far more egregious
conduct to pass without resort to first-tier BIA. For example, Ta Chen
cites a review of Antifriction Bearings (except Tapered Roller
Bearings) From France, et al., 57 FR 28360 (June 24, 1992), where the
Department applied uncooperative BIA only to those companies that
failed to respond to the questionnaire altogether. There, Ta Chen
submits, the Department applied second-tier BIA to other firms despite
``extensive misrepresentations and omission in [the firms']
questionnaire responses.'' Id. Likewise, Ta Chen cites Emerson Power
Transmission Corp. v. United States, 903 F. Supp. 48 (CIT 1995)
(Emerson), and NSK, Ltd. v. United States, 910 F.Supp. 663 (CIT 1995)
(NSK) for the proposition that second-tier BIA is ``proper and
consistent with'' Departmental practice where a respondent has tried
but failed to cooperate. Id. at 144, quoting NSK, Ltd. v. United
States. In addition, Ta Chen avers, a Binational Panel Review convened
pursuant to Article 1904 of the North American Free Trade Act concluded
that the Department must impose second-tier BIA in light of the
respondents' ``repeated efforts to provide answers to the Department's
numerous questionnaires.'' Id.
Ta Chen notes that the Department applied second-tier BIA in
Certain Small Business Telephones From Taiwan, 59 FR 66912 (December
28, 1994), and Certain Fresh Cut Flowers From Colombia, 59 FR 15159
(March 31, 1994), even though respondents in these proceedings
improperly reported U.S. sales to related parties, improperly
classified ESP sales as PP sales, and misreported data which were
crucial to the dumping calculations. In Sugiyama Chain Co., Ltd. v.
United States, 852 F. Supp. 1003 (CIT 1994), a case spanning seven
review periods, Ta Chen points out that the Department relied upon
second-tier cooperative BIA despite Sugiyama's failure to report its
sixty percent equity relationship with its ``dominant'' home market
customer. In addition, Ta Chen claims, the Department found that
Sugiyama failed to provide its financial statements, had significant
unrecorded transactions, and could not reconcile its U.S. and home
market sales listings. Yet, Ta Chen asserts, the Department applied
cooperative BIA in all but one of the seven reviews at bar. Ta Chen
argues that because it disclosed the information upon which the
Department based its related-party determination (as distinct from the
Sugiyama case, where the Department discovered this information on its
own), Ta Chen should not be a candidate for first-tier uncooperative
BIA.
As for the choice of a BIA margin, Ta Chen takes issue with the
Department's use of the highest margin from the petition as BIA in the
Preliminary Results. In Certain Welded Carbon Steel Pipes and Tubes
From Thailand, 62 FR 17590 (April 10, 1997), Ta Chen maintains, the
Department used an average of the petition margins as BIA even though
(i) The Department discovered purchases from and sales to affiliated
parties and (ii) The parties' affiliation was evident on the basis of
common stock ownership and, thus, the respondent should have known to
report the affiliated-party transactions. Similarly, according to Ta
Chen, in Brass Sheet and Strip From Sweden, 57 FR 29278 (July 1, 1992),
the Department rejected a respondent's questionnaire response in toto,
applying first-tier BIA; yet, Ta Chen notes, despite what it
characterizes as the more egregious failings of the company's
questionnaire response, the Department assigned as adverse BIA the
respondent's own margin from the LTFV investigation. Selection of a BIA
margin, Ta Chen asserts, should be based upon an objective reading of
the respondent's cooperation, rather than any subjective and
speculative standard of intent. Id. at 148 and 151.
Ta Chen urges the Department to use as BIA Ta Chen's cash deposit
rate from the LTFV investigation, claiming this would be sufficient to
``motivate cooperation'' on the part of Ta Chen. Id. at 153. Ta Chen
reasons that it requested the three pending administrative reviews in
order to reduce its antidumping liabilities; if the Department
reinstated the prior cash deposit rate of 3.27 percent, ``Ta Chen's
purpose in participating in these reviews will have been completely
undermined.'' Case Brief at 153. Ta Chen draws a distinction between
the pending review of pipe fittings and other cases wherein a
respondent is required to participate in an administrative review
sought by a petitioner; in the latter case, Ta Chen argues, the threat
of a higher margin suggested by petitioner serves to induce
respondents' cooperation. This is especially so, Ta Chen argues, where
the possible revocation of the antidumping duty order with respect to
the respondent hangs in the balance. Ta Chen suggests that it requested
the first reviews of pipe fittings and stainless pipe with the
expectation that it would receive zero or de minimis margins in all
three and, thereby, be eligible for revocation. In fact, Ta Chen notes,
it requested revocation of the welded stainless steel pipe order during
the 1994-1995 review of that case. Failure to cooperate in the instant
reviews, Ta Chen concludes, would defeat Ta
[[Page 2134]]
Chen's purpose in requesting these reviews in the first place.
Ta Chen distinguishes these reviews from the issue before the Court
in Industria de Fundicao Tupy and American Iron & Alloys Corp. v.
United States (Industria de Fundicao), 936 F. Supp. 1009, 1019 (CIT
1989). In contrast to this review, Ta Chen submits, the review at issue
in Industria de Fundicao was requested by the petitioners. In light of
the respondent's failure to cooperate, Ta Chen notes, petitioners in
that case presented evidence that this firm's existing dumping margin
would be insufficient to induce cooperation. There, Ta Chen concludes,
the Department also used an average of the margins alleged in the
antidumping petition in establishing a margin based on BIA.
Ta Chen also faults the 76.20 percent BIA margin presented in the
Preliminary Results as unlawfully punitive, contending that it is not
probative of current conditions. Consistent with the holdings of the
Federal Circuit in D&L Supply Co, Inc. v. United States, (D&L Supply)
1997 WL 230117 at 2 (Fed. Cir. May 8, 1997), Ta Chen asserts that there
is an ``interest in selecting a rate that has some relationship to
commercial practices in the particular industry.'' Case Brief at 155,
quoting D&L Supply. Rather, Ta Chen argues, the Department has already
verified that Ta Chen's margins should be 3.27 percent for the
stainless pipe case and 0.67 percent for the pipe fittings case. These
past margins, Ta Chen submits, are ``substantial evidence'' as to Ta
Chen's expected future dumping of subject merchandise. Id. at 156. Ta
Chen urges the Department to disregard the margins suggested in the
petition in favor of the verified dumping margins from the appropriate
LTFV determination.
Ta Chen also suggests that the failure of the petitioner in this
case to request a review of Ta Chen for the first three PORs is
indicative of petitioner's belief that Ta Chen is not dumping pipe
fittings into the U.S. market. In administrative reviews requested
solely by a respondent who then fails to cooperate, Ta Chen argues, the
Department's practice is to impose second-tier BIA. The Department's
treatment of Ta Chen in the instant reviews, Ta Chen asserts,
constitutes another per se rule (i.e., that it is irrelevant whether
respondents or petitioners requested the review when selecting BIA),
which is contrary to the Department's practice of deciding BIA issues
on a case-by-case basis.
In addition, Ta Chen notes what it sees as significant changes in
the U.S. market since publication of the antidumping duty order. Ta
Chen claims that it is no longer forced to compete against other
Taiwanese producers of stainless steel products who, according to Ta
Chen, largely withdrew from the U.S. market after the imposition of
antidumping duties. In support of this contention, Ta Chen quotes from
a 1996 determination by the Canadian International Trade Tribunal which
concludes that ``Taiwanese producers other than Ta Chen have been
excluded from the U.S. market.'' Ta Chen's Case Brief at 166 and 167.
Ta Chen also insists that the health of the U.S. industry has improved
markedly since the original investigation in this case. Id. at 162 and
163, citing Welded Stainless Steel Pipe From Malaysia, ITC Pub. No.
2744 (March 1994).
According to Ta Chen, petitioner's inaction is especially relevant
in light of statements made by representatives of the US industry in
other antidumping proceedings. For instance, Ta Chen claims that the US
industry testified before the Commission in the investigation of welded
stainless steel pipe from Malaysia that the imposition of antidumping
duties on stainless pipe from Taiwan had effectively eliminated dumping
by Taiwanese producers. See ITC Pub. No. 2744 at I-10. Ta Chen cites a
telephone conversation purportedly held between the president of a US
pipe producer and Robert Shieh wherein this individual stated that he
did not think a review of Ta Chen was necessary. Case Brief at 158. In
a similar vein, Ta Chen cites the testimony of Mr. Avento, president of
the US pipe producer Bristol Metals, insisting that ``Taiwan imports
have been checked by the antidumping laws.'' Ta Chen's Case Brief at
162, quoting Economic Effects of Antidumping and Countervailing Duty
Orders and Suspension Agreements, ITC Pub. No. 2900 (June 1995). Ta
Chen argues that these statements ``support a [zero] percent dumping
finding for Ta Chen.'' Id. at 163. Furthermore, Ta Chen suggests that
these statements, coming after the original petition in this case, are
more indicative of present market conditions. Ta Chen also cites to
statements submitted by Ta Chen into the record of this review from the
pipe company president and another purchaser of Ta Chen's pipe and pipe
fittings, both claiming that ``Ta Chen could not have been dumping at a
significant rate during this period'' through San Shing and Sun. Case
Brief at 164. Taken together, Ta Chen submits that petitioner's failure
to request a review, and the subsequent statements as to the state of
the U.S. market for stainless steel pipe products after imposition of
antidumping duties, indicate that petitioner has ``repudiated [the
76.20 percent margin] as inapplicable to more recent time periods,
including the period of [this review].'' Id. at 165. Furthermore, Ta
Chen argues, the BIA rate from the LTFV investigation applied to
producers other than Ta Chen and is, thus, ``irrelevant and unlawful.''
Petitioner assails Ta Chen's attempts ``to unfairly undermine and
manipulate the antidumping process to its own advantage,'' claiming
that Ta Chen's comportment in this review warrants nothing less than
first-tier, uncooperative BIA. Rebuttal Brief at 2. By standing firm in
asserting that Ta Chen is not related to San Shing and Sun, petitioner
charges, Ta Chen makes ``a complete mockery of both law and reason.''
Id. at 6. Rather, petitioner continues, Ta Chen's behavior underscores
its persistent unwillingness to cooperate with the Department in this
review. Additional evidence of Ta Chen's uncooperative stance,
petitioner suggests, is its insistence on treating the identities of
certain of its so-called expert witnesses as business proprietary
information, thus preventing public disclosure of these individuals'
names. Petitioner hints that the true reason for requesting proprietary
treatment of these individuals' identities is that their testimony does
not reflect accurately common practices in the industry and, therefore,
the individuals are loathe to have the stainless steel community at
large know of their role in ``such deception.'' Id. at 7.
According to petitioner, the timing and quality of Ta Chen's
revelations in this review make clear that Ta Chen ``deliberately
ignored and/or refused to cooperate'' with the Department's requests
for factual information. Id. Further, Ta Chen's continued obstinacy is
made manifest in Ta Chen's Case Brief, providing vivid testimony that
Ta Chen still refuses to cooperate and is actively impeding this
review. Id. Ta Chen's insistence on reporting its sales to San Shing
and Sun, rather than its first sales to truly unrelated parties,
petitioner maintains, has deprived the Department of the necessary
sales database for calculating Ta Chen's margin in this review. That Ta
Chen has ``clearly and deliberately withheld factual information
explicitly requested by the Department,'' petitioner argues, dictates
that the Department base Ta Chen's margin on total first-tier BIA. Id.
at 8.
Petitioner insists that there was, in fact, no ambiguity with
respect to the Department's definition of related
[[Page 2135]]
parties and the specific sales data the Department requested in this
review. Rather than being a cooperative respondent, petitioner avers
that Ta Chen deliberately misled the Department and only revealed the
true nature of its ties to San Shing and Sun when the Department opted
to verify Ta Chen's responses in the 1994-1995 review of welded
stainless steel pipe. Id. Ta Chen's protestations that it did not
apprehend that the Department might possibly find it related to San
Shing, petitioner asserts, are ``laughable.''
Citing Ta Chen's behavior in other proceedings before the
Department, petitioner points to what it characterizes as a pattern of
deception in ``its overall track record in the U.S. antidumping
arena.'' Rebuttal Brief at 8. For example, petitioner continues, in an
investigation of stainless steel flanges from Taiwan, Ta Chen insisted
on participating as a voluntary respondent, even though, petitioner
alleges, Ta Chen was not a producer of the subject merchandise and had
not up to that time supplied stainless steel flanges to the U.S.
market. Only when the Department was preparing to verify Ta Chen's
sales and cost-of-production responses, petitioner maintains, did Ta
Chen abruptly withdraw from the investigation and accept the ``all
others'' margin of 48 percent. See Final Determination of Sales at Less
Than Fair Value: Certain Forged Stainless Steel Flanges From Taiwan, 58
FR 68859 (December 29, 1993) (Flanges From Taiwan). When considered
with Ta Chen's behavior in the reviews of stainless pipe and pipe
fittings, petitioner argues, this pattern of behavior indicates Ta
Chen's ``strategy of manipulating U.S. dumping law to its advantage.''
Id. at 10.
Because Ta Chen ``repeatedly and deliberately lied to the
Department'' concerning its U.S. sales in this review, petitioner
contends, Ta Chen deserves to be treated as an uncooperative
respondent, and to receive total, first-tier BIA as the basis for its
margin. Id. Petitioner suggests that U.S. antidumping law is
essentially fair ``when all parties cooperate by providing timely,
factual, reliable information'' to the Department. However, petitioner
continues, a respondent debases this fairness through submission of
``untimely, inaccurate, unreliable, misleading information'' at the
expense of those parties who do cooperate. Id. In such cases,
petitioner argues, the Department must take fair and decisive action to
protect the integrity of the administrative review process for all
interested parties, both respondents and petitioners. In light of Ta
Chen's behavior in the instant proceeding, petitioner concludes, the
Department must continue to base Ta Chen's margin upon the 76.20
percent BIA rate.
Department's Position
As is clear from our responses to Comments One and Two, we believe
that Ta Chen submitted the improper body of U.S. sales to the
Department. We believe that the U.S. sales data submitted by Ta Chen in
the 1992-1994 administrative review cannot be relied upon in
calculating Ta Chen's dumping margin. These flaws affect such a vast
majority of Ta Chen's U.S. sales in this review as to render its
questionnaire responses unuseable in toto.
We also agree with petitioner that, through its persistent refusal
to disclose fully its relationships with San Shing and Sun, despite our
manifest interest in these relationships, Ta Chen impeded the conduct
of this administrative review and did not act to the best of its
ability by providing complete, accurate and verifiable responses to the
Department's questionnaires.
As a factual matter, we reject Ta Chen's claims that the Department
never clearly requested information from Ta Chen concerning its sales
to unrelated customers in the United States, or that the Department was
in some way remiss in failing to seek data on San Shing's or Sun's
downstream sales. In fact, the only reason we did not insist
immediately that Ta Chen report San Shing's and Sun's sales as its
first sales to unrelated customers in the United States is because the
full extent of these extraordinary relationships was not known until
two-and-a-half years after we had received Ta Chen's original response.
In our original antidumping questionnaire, issued July 20, 1994, we
asked Ta Chen to report its first U.S. sales to unrelated customers,
and provided the statutory definition of related parties, including the
references to parties being related ``through stock ownership or
control or otherwise,'' at Appendix II. Ta Chen instead reported sales
to numerous customers, representing each of these as Ta Chen's separate
and unrelated customers. Despite the fact that well over eighty percent
of Ta Chen's U.S. sales in the instant review were to San Shing, Ta
Chen never acknowledged this company's existence in its initial
questionnaire response. When petitioners in the stainless pipe case
first obtained business and real estate records indicating that Ta Chen
might be related to these parties, Ta Chen admitted the existence of
San Shing, and presented the wholly unconvincing story of San Shing's
entrance into the United States market (see below for more on this
point).
As the pipe petitioners adduced additional evidence pointing to Ta
Chen's concealment of relevant information, Ta Chen proffered arguments
why the Department should not inquire further into these relationships.
Due to petitioners' related party allegations, the Department sent a
team of five verifiers to Tainan and three to Long Beach in October
1994 to verify Ta Chen's questionnaire responses in the 1992-1993
review of welded stainless steel pipe. Ta Chen argues now that the
results of these verifications, as outlined in the Department's reports
for the record, prove conclusively that Ta Chen cooperated fully in
this review. To the contrary, the results of these verifications do not
support Ta Chen's repeated claims that it cooperated with the
Department. Despite an extensive verification of related-party issues,
Ta Chen withheld all of the information concerning its extensive ties
to San Shing and Sun. We were able to verify only those aspects of the
control indicia for which the stainless pipe petitioners had already
produced documentary evidence for the record: Ta Chen provided
information concerning (i) The dates Mr. McLane allegedly sold his
stock in Ta Chen, and (ii) Mr. Shieh's ownership of the real property
allegedly rented first to San Shing and then to Sun, including the
arm's-length nature of the monthly rents charged by Mr. Shieh. Despite
having free access to any employee, and despite reviewing TCI's
correspondence files with relevant customers, including San Shing and
Sun, and Ta Chen's correspondence files with TCI, we did not find a
single memorandum, letter, facsimile message, phone message, or any
other communication concerning the check-signing ability, the computer
access, the debt-financing arrangements, the shared employees, etc.
And, Ta Chen's protestations notwithstanding, the verifiers did indeed
ask questions about, inter alia, the facts of, and reasons for, Mr.
McLane's establishment of the second ``Sun Stainless, Inc.,'' Mr.
Shieh's rental of property to San Shing and Sun, and other questions
about their dealings. The Department went so far as to poll other
offices within the International Trade Administration for information
on Ta Chen, and to interview third parties, such as the president of
San Shing Hardware Works, Ltd. in Tainan and several of Ta Chen's
putative U.S. agents (including
[[Page 2136]]
Mr. Reid) in Long Beach.12 See Memoranda, Holly A. Kuga to
Robert Chu, Ian Davis, Dan Duvall, and to Charles Bell, dated October
5, 1994. Clearly, all of these efforts were to determine if the
transactions between these parties were at arm's length. And all were
equally unavailing.
---------------------------------------------------------------------------
\12\ It should be noted that none of these individuals provided
any information about Ta Chen's and TCI's extraordinary ties to San
Shing and Sun.
---------------------------------------------------------------------------
Therefore, contrary to the claims in Ta Chen's Case Brief, after
two sales and two cost questionnaire responses, and full home market,
U.S., and cost-of-production verifications in the 1992-1993 review of
stainless pipe, Ta Chen disclosed nothing about the nature of its ties
to San Shing and Sun. Finally, in November and December 1996, Ta Chen
made further partial disclosures of the facts surrounding its
relationships with San Shing and Sun in the context of the 1994-1995
review of stainless pipe. The incomplete nature of these disclosures
was made clear when Ta Chen, in its September 3, 1997 Case Brief,
disclosed additional salient information for the first time: Ta Chen
identified two additional dba names used by San Shing during this
period. Ta Chen's partial and belated disclosure of relevant factual
information casts further doubt on the reliability of its reported
sales data as a whole.
Had Ta Chen been laboring under any misapprehension of the
statutory definition of related parties, it could have contacted the
Department's officials, as instructed in the questionnaire. Further,
the allegations filed by petitioners in the stainless pipe case in July
1994, October 1994, and July 1995 concerning San Shing and Sun
Stainless, and the Department's attendant focus upon this issue, put Ta
Chen on notice that its relationships with San Shing and Sun were a
major issue in this review. Instead, Ta Chen released information
piecemeal and incompletely.
Ta Chen's explanations for its behavior during these reviews are in
themselves problematic. As a preliminary matter, they make little sense
from a business standpoint when one looks beyond the text of the legal
arguments. Ta Chen claimed that in 1992 it elected to forsake the ESP
business, essentially because reporting ESP sales in the wake of the
antidumping duty order would be too burdensome. Ta Chen, relying on the
Department's verification reports in the 1992-1993 review of welded
stainless steel pipe, continues:
[a]fter the imposition of the antidumping duty order on
[stainless pipe], Ta Chen turned to San Shing Hardware Works, USA
(San Shing USA). San Shing USA was established by the president of
San Shing Hardware Works Co., Ltd. (San Shing Taiwan) to sell pipe
products and fasteners in the United States out of a U.S. warehouse.
Ta Chen officials stated that San Shing USA contacted Ta Chen's
former sales representatives in the United States and established an
arrangement whereby San Shing USA, an unknown in the U.S. pipe
market, could sell Ta Chen pipe using these representatives' names
on a [dba] basis.
Ta Chen's February 7, 1997 submission at 47 (emphasis added; Ta Chen's
bracketing omitted).
Ta Chen, therefore, elected to rely upon San Shing, a company with
no prior experience in the stainless steel or tubular products
industries, to replace TCI as its sole distributor of stainless steel
pipe fittings and stainless pipe in the United States. Having made this
decision, San Shing then purportedly on its own struck deals with known
pipe dealers in the United States who had been prior TCI customers,
whereby San Shing would use these dealers' names as dbas. The customers
would then turn over their customer lists to San Shing and stand aside,
allowing San Shing effectively to replace them in the distribution
chain. However, having gone to such lengths to secure the names of
known players in the U.S. market, San Shing then funneled the majority
of its sales through the one previously unknown dba, ``Sun Stainless,
Inc.''
However, as petitioners in the stainless pipe case pointed out,
this arrangement makes neither commercial nor logical sense. See the
October 12, 1994 submission of Collier Shannon Rill & Scott at 7.
According to Ta Chen's narrative account, San Shing ``was not a well-
known name in the U.S. pipe business.'' Ta Chen's December 13, 1996
submission at 54. Therefore, San Shing, operating under its various dba
names, e.g., Sun and Anderson Alloys, sold Ta Chen pipe and pipe
fittings to the same customers who formerly purchased pipe from TCI's
customers, e.g., Sun and Anderson Alloys. The stated reason for this
arrangement is that downstream purchasers who did not know San Shing
would be put at ease by allowing them to deal with a name they knew.
But clearly Sun's and Anderson's former customers knew with whom they
were dealing. If San Shing replaced these dealers, their customers
would not ``feel more comfortable'' because they were buying pipe from
``San Shing, dba Sun Stainless,'' or ``San Shing, dba Anderson
Alloys.'' On a more elementary level, this narrative would have us
believe that established pipe distributors in the United States, who
earned their income by purchasing pipe fittings from TCI and reselling
them after a markup to various end users, simply stepped aside and
allowed San Shing to use their businesses' names to sell to their
former customers. Such a step is inconsistent with commercial reality,
and yet Ta Chen claims to have found not one, but eight stainless pipe
products distributors amenable to this arrangement.
Ta Chen also misstated the origins of the dba names themselves. In
a December 20, 1996 submission in the 1994-1995 review of stainless
pipe Ta Chen, again quoting the Department's verification reports,
explained that:
[Ta Chen] officials stated that San Shing USA contacted Ta
Chen's former representatives in the United States and established
an arrangement whereby San Shing USA, an unknown in the U.S. pipe
market, could sell Ta Chen pipe using the representative's names on
a [dba] basis. According to TCI, its sales representatives readily
agreed.
Ta Chen's February 7, 1997 submission at 62, quoting the Department's
November 6, 1996 verification reports.
To verify this claim the Department introduced into the record of
this review Ta Chen's U.S. customer list from the LTFV investigation of
stainless pipe. See Memorandum for the File, February 24, 1997. The
most significant dba name, ``Sun Stainless, Inc.,'' is not found on
this list. In fact, only three of the admitted eight dbas were prior Ta
Chen customers. In explaining the need for San Shing to use dbas and
how San Shing came to select the names it used, Ta Chen misstated the
origins of these names, and never explained for the record where the
dba names, most significantly ``Sun Stainless, Inc.,'' originated. Ta
Chen explains its earlier misstatements by arguing in its case brief
that its November 12, 1996 submission in the 1994-1995 pipe review did
not claim that ``all'' the dba names were those of prior TCI customers.
While this is true, Ta Chen did so claim when first confronted with the
pipe petitioners' knowledge of San Shing's and Sun's existence. Given
the absence of evidence on the record that any sale of assets to Frank
McLane ever took place (aside from Ta Chen's undocumented claims),
given the lack of clarity surrounding Sun's 1992 founding, and given Ta
Chen's failure to document for the record precisely how and why San
Shing came to use dba names in the first place, Ta Chen's version of
events is neither credible nor supported by evidence.
[[Page 2137]]
Other factual aspects of the record are also troubling. For
example, we continue to believe that the sales contract involving Chih
Chou Chang and Robert Shieh was, in fact, highly unusual. Ta Chen
argues that sales contracts with no prices are commonplace when such
transactions are customary between the parties, or where the date of
delivery is in doubt. That was certainly not the case here. These
transactions were not a ``customary practice'' between Ta Chen and San
Shing, they were one-time deals involving the transfer of Ta Chen's
entire existing inventory of stainless steel pipe and stainless steel
pipe fittings to San Shing. Delayed delivery was also not at issue, as
delivery was immediate, with Robert Shieh arranging to move the
merchandise from one of his properties (TCI's warehouse) to another of
his properties nearby, rented to San Shing. The relevance of the
contract in the present discussion is that its commercially-unrealistic
terms further indicate that San Shing was crafted by, and related to,
Ta Chen. We stand by our preliminary conclusion that ``[t]he terms of
this contract do not comport with Ta Chen's repeated assertions that
San Shing was new to the pipe trade, and so lacked familiarity with the
U.S. pipe market that it was compelled to use `dba' names which
`sounded more American.' '' Preliminary Analysis Memorandum, March 4,
1997, at 7 and 8 (original bracketing omitted).
We also disagree with Ta Chen's description of the activities of W.
Kendall Mayes. The record clearly indicates that Mr. Mayes, working
with TCI since its inception, took over the day-to-day management of
first San Shing and then Sun Stainless at the insistence of Ta Chen,
and not as a free agent who coincidentally migrated between these three
firms as a normal result of normal relocations within a tightly
restricted industry environment. As to the ``independent contractor''
relationship with Ta Chen, the record evidence indicates that Mr. Mayes
worked exclusively on behalf of Ta Chen, used Ta Chen office space and
equipment, was paid monthly by Ta Chen, was covered under Ta Chen's
group health insurance policy (even after he putatively ended his
employment with Ta Chen), and continued to enjoy substantial financial
benefits from his relationships with Ta Chen and Mr. Shieh long after
this relationship allegedly ended. Furthermore, in return for this
``independent contractor'' relationship, Mr. Mayes had to provide to Ta
Chen his own list of customers, thus effectively selling his business
to Ta Chen. We also disagree with Ta Chen's conclusion that the one-
time payment to Mr. Mayes conferred no control over pricing. Rather,
given Mr. Mayes's successive roles as sales manager for TCI, San Shing,
and Sun Stainless, together with Ta Chen's admitted role in negotiating
the final prices between San Shing and Sun and their unrelated
customers, the record indicates that Mr. Mayes enjoyed a knowledge and
control of prices unknown between unrelated parties. Finally, with a
sizeable payment to Mr. Mayes from Ta Chen dependent upon Ta Chen's
profitability, Mr. Mayes's own self-interest lay not in negotiating
truly arm's-length prices between San Shing and Sun and Ta Chen, but in
maximizing Ta Chen's profits in these transactions. This relationship
further buttresses the Department's Preliminary Results determination
that these transactions were not, in fact, at arm's-length. Rather than
enforcing a ``per se'' rule concerning the exchange of money between Ta
Chen and Mr. Mayes, we have drawn the only reasonable conclusion
possible in light of the record evidence.
As for sales made to Anderson Alloys, Ta Chen mistakenly argues
that the Department can sort these sales by customer address to
segregate sales made to the ``real'' Anderson Alloys in South Carolina
from those made to the dba Anderson Alloys. However, we have no idea
which sales are to which entity, as Ta Chen used the same address and
customer code for both Andersons. More to the point, the ability to
segregate sales to Charles Reid's Anderson and sales to San Shing's dba
Anderson would have no bearing on our decision to resort to total
first-tier BIA. Rather, we cannot ``use only portions of a response
that were verifiable since this `would allow respondents to selectively
submit data that would be to their benefit in the analysis of their
selling practices.' '' Chinsung Industries Co., Ltd. et al. v. United
States, 705 F. Supp 598, 601 (CIT 1989) (citations omitted). As the
Court noted in Persico Pizzamiglio, S.A. v. United States, by allowing
the Department ``to reject a submission in toto, the court encourages
full disclosure by the respondent, because only full disclosure will
lead to a dumping margin lower than that established by employing
BIA.'' Persico Pizzamiglio, S.A. v. United States, 18 CIT 299 (CIT
1994).
Finally, with respect to Ta Chen's reliance upon the statements of
Messrs. Avento and Reid to support its arguments, we note Bristol
Metal's and Mr. Avento's longstanding affiliation with Ta Chen. Bristol
Metals was one of Mr. Shieh's original partners in founding Ta Chen,
and Joseph Avento himself was at one time on Ta Chen's board of
directors. See, e.g., Ta Chen's September 19, 1994 questionnaire
response at Exhibit 2, and Ta Chen's December 13, 1996 submission at
50. Mr. Avento later joined the petitioners in the stainless pipe case
in initiating that investigation. He now appears before the Department
as Ta Chen's witness and advocate. Neither in its case brief nor in its
original filing of Mr. Avento's statement has Ta Chen elected to reveal
the current relationships between Ta Chen, Bristol Metals, and Mr.
Avento, such as whether Ta Chen and Bristol make purchases from each
other, or whether either holds stock in the other. Given Mr. Avento's
ongoing ties to Mr. Shieh and Ta Chen, the unsubstantiated nature of
his testimony, and Ta Chen's unwillingness to disclose for the record
Mr. Avento's current dealings with Mr. Shieh and Ta Chen, we are unable
to establish his credibility as a witness about the U.S. stainless
steel pipe and pipe fittings industries as a whole.
As for Charles Reid, Ta Chen acknowledges for the public record
that Mr. Reid, using at least three trade names, was a customer of Ta
Chen during the investigation and first period of administrative
review. See Case Brief at 122.
We conclude, therefore, that the use of total, adverse BIA is
appropriate in this case. The statute's provision for use of BIA is, as
the Federal Circuit has held, ``an investigative tool, which the
[Department] may wield as an informal club over recalcitrant
respondents whose failure to cooperate may work against their best
interest.'' Atlantic Sugar Ltd. v. United States, 744 F.2d 1556, 1560
(Fed. Cir. 1984). In the absence of subpoena power, the Department
``cannot be left merely to the largesse of the parties at their
discretion to supply the [Department] with information. * * *
Otherwise, alleged unfair traders would be able to control the amount
of antidumping duties by selectively providing the ITA with
information.'' Olympic Adhesives, Inc. v. United States, 899 F.2d 1565,
1571 (Fed. Cir. 1990). The decision to resort to BIA in an
administrative review is made on a case-by-case basis after evaluating
all evidence in the administrative record. With respect to the
selection of BIA, the Department is granted considerable deference in
deciding what constitutes the ``best'' information available. See
Allied-Signal Aerospace Corp. v. United States, 966
[[Page 2138]]
F.2d 1185, 1191 (Fed. Cir. 1993). The courts have long held that ``it
is for Commerce, not the respondent, to determine what is the best
information'' available. Yamaha Motor Co. v. United States, 910 F.
Supp. 679, 688 (CIT, 1995).
As discussed, we believe Ta Chen has impeded this administrative
review through the submission of inaccurate and incomplete information,
and through its lack of cooperation in bringing forth factual
information known by Ta Chen to be of immediate relevance to these
proceedings. We also agree with petitioner that Ta Chen's conduct in
this review warrants use of first-tier BIA.
We also find that Ta Chen's citations to past Departmental
determinations in support of using cooperative, second-tier BIA are not
on point. In Fresh Cut Flowers From Colombia, for example, the
respondent's related entities had either gone out of business entirely,
or were in the process of liquidation, and thus the firms were unable
to provide sales data to the Department. Similarly, in Certain Small
Business Telephones From Taiwan, the affiliated U.S. customer of
respondent Bitronics was out of business. We concluded that ``[s]ince
Bitronics made substantial attempts to submit information to the
Department,'' second-tier, or cooperative, BIA would be most
appropriate. See Certain Small Business Telephones From Taiwan;
Preliminary Results of Administrative Review, 59 FR 66912, 66913
(December 28, 1994). In the instant case, despite the 1995 sale of Sun
to Picol Enterprises, Ta Chen has never indicated any such difficulty
in accessing San Shing's and Sun's records, and has even submitted
these companies' federal income tax returns in the record of this
review.
Emerson and NSK, cited by Ta Chen as grounds for use of second-tier
BIA, are likewise not on point. Emerson involved a review of
antifriction bearings from Japan where the Department, in two
significant departures from standard practice, determined it would (i)
use a sampling of home market sales, and (ii) use annual average home
market prices as the basis for FMV, both to reduce the complexity and
reporting burden of the review. Respondent Nippon Pillow Block Sales
made good faith efforts to respond to the Department's questionnaire,
but misinterpreted the instructions concerning which home market sales
it would be required to report for purposes of sampling.13
In addition, the Department discovered other unreported sales at
verification. The Department determined that, while Nippon had
attempted to cooperate, it had failed to provide the home market sales
data necessary to calculate annual weighted-average prices; therefore,
Nippon's margin was based on second-tier BIA. In NSK, involving a
review of tapered roller bearings (TRBs) from Japan, plaintiff NSK
submitted complete, verifiable, and timely U.S. and home market sales
responses. However, NSK balked when directed to submit cost of
production data on TRB parts acquired from related suppliers, arguing
that the Department had no legal authority to request these data absent
``a specific and objective basis'' for suspecting that NSK's prices for
the parts had been less than the suppliers' cost of production. NSK,
910 F. Supp. at 666. The Court held that we properly rejected NSK's
arguments, and that we correctly resorted to partial second-tier BIA
for the missing cost data.14 In each of the cited cases,
while the responses were found to be deficient, the respondents
attempted to cooperate with the Department's review. We contrast the
behavior of these respondents with that of Ta Chen, and find that Ta
Chen not only failed to submit the proper body of U.S. sales, but
impeded the review. We conclude, therefore, that it would be
inappropriate to base Ta Chen's margin for this review on second-tier,
or cooperative, BIA.
---------------------------------------------------------------------------
\13\ Thus, while it is true that Nippon ``failed to report
approximately 80% of its home market sales,'' it is only fair to
note that Nippon was required to report only a portion of its home
market sales for sampling purposes to begin with. Emerson, 903 F.
Supp. at 52.
\14\ The Court did remand NSK, ordering the Department to
correct its application of second-tier BIA; the decision to use BIA
was, however, upheld.
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Similarly, we cannot accede to Ta Chen's suggestion that we apply
its margin from the LTFV investigation as first-tier BIA, as this would
amount to rewarding Ta Chen for its failure to disclose essential facts
to the Department and to report the proper body of its U.S. sales. Were
we to consider Ta Chen's margin, which was calculated in a segment of
these proceedings wherein Ta Chen was deemed cooperative and its
responses fully verified, as first-tier BIA, we would effectively cede
control of this review to Ta Chen. The respondent would be free to
submit selective, misleading, or inaccurate information, secure in its
knowledge that the worst fate it could expect would be to receive its
prior cash deposit rate as BIA. See Olympic Adhesives, Inc. v. United
States, 899 F.2d 1565, 1572 (Fed. Cir. 1990). We find the Court's
holdings in Industria de Fundicao to be directly on point: ``the Court
will not allow respondent to cap its antidumping rate by refusing to
provide updated information to [the Department].'' Industria de
Fundicao, 936 F. Supp 1009, 1011. Contrary to Ta Chen's suggested
approach, our aim in selecting BIA for non-cooperating respondents is
to choose a margin which is sufficiently adverse ``to induce
respondents to provide [the Department] with complete and accurate
information in a timely fashion.'' National Steel Corp. v. United
States, 913 F. Supp 593 (CIT 1996). Likewise, we find that the
antidumping proceedings of other countries, such as Canada, are
irrelevant to our selection of BIA in this review which is being
conducted pursuant to U.S. antidumping law. Furthermore, aside from its
irrelevance, information concerning antidumping proceedings before
Canadian authorities is not in the administrative record of this
review.
We also reject Ta Chen's assertion that the 76.20 percent BIA
margin is inappropriate because it was drawn from an earlier segment of
these proceedings. In Mitsuboshi Belting Corp. Ltd. v. United States,
the Court, relying upon the findings in Rhone Poulenc, found that the
Department's use of a margin drawn from a LTFV investigation was
reasonable and, further, that ``best information'' doesn't necessarily
mean ``most recent information.'' The Court also rejected plaintiff's
claim that the Department's choice of BIA was unreasonably harsh:
to be properly characterized as ``punitive,'' the agency would
have had to reject low margin information in favor of high margin
information that was demonstrably less probative of current
conditions. Here, the agency only presumed that the highest prior
margin was the best information of current margins. * * * We believe
a permissible interpretation of the statute allows the agency to
make such a presumption and that the presumption is not
``punitive.'' Rather, it reflects a common sense inference that the
highest prior margin is the most probative evidence of current
margins because, if it were not so, the importer, knowing of the
rule, would have produced current information showing the margin to
be less.
Mitsuboshi Belting Ltd. and MBL (USA) Corp. v. United States., Court
No. 93-09-00640, Slip Op. 97-28 (CIT March 12, 1997).
Likewise, in Sugiyama Chain Co., Ltd. et al., v. United States, the
plaintiff contested our selection of best information available as
having no probative value concerning Sugiyama's current margins because
the rate taken from the LTFV investigation had ``only a tenuous link to
Sugiyama Chain's margins in the instant review.'' The Court approved of
our use of the highest prior margin as BIA, noting that the
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Department ``can make a common sense inference--indeed, there is a
rebuttable presumption--that the highest prior margin is the most
probative evidence indicative of the current margin.'' Sugiyama Chain
Co., Ltd., et al. v. United States, 880 F. Supp. 869, 873 (CIT 1995);
see also Rhone Poulenc, Inc., v. United States, 710 F. Supp. 341, 346
(CIT 1989) (``There is no mention in the statute or regulations that
the best information available is the most recent information
available.''); aff'd 899 F.2d 1185 (Fed. Cir. 1990). Furthermore, we
reject Ta Chen's suggestion that the 76.20 percent margin has been
``verified as wrong.'' Our use of a margin drawn from data supplied by
the petitioner comports fully with section 776(b) of the Tariff Act. It
is not necessary, as Ta Chen appears to argue, for the Department to
conduct an economic analysis of the stainless steel fittings industry
before using a margin based on petitioner's data to determine the
validity of these data. See Tai Ying Metal Industries Co. v. United
States, 712 F. Supp 973, 978 (CIT 1989) (``it is reasonable for
Commerce to rely upon the published margin from the LTFV investigation
as the best information available without reassessing the record
therefrom''). Furthermore, as petitioner points out, Ta Chen fails to
note a prior investigation involving Ta Chen where the Department acted
precisely as we have acted here, i.e., using the highest margin from
the petition as first-tier BIA. In Certain Forged Stainless Steel
Flanges From Taiwan Ta Chen was deemed an uncooperative respondent
because it ``withdrew'' from the investigation immediately prior to
verification. As first-tier, uncooperative BIA the Department chose the
highest margin alleged in the petition, 48 percent, applying this rate
to Ta Chen and to two other uncooperative respondents. See Certain
Forged Stainless Steel Flanges From Taiwan, 58 FR 68859 (December 29,
1993).
The 76.20 percent margin has stood unchallenged for over six years
as the first-tier BIA margin and, in fact, still applies to one other
Taiwan manufacturer of subject merchandise. See Amended Final
Determination and Antidumping Duty Order, 58 FR 33250, 33251 (June 16,
1993). We conclude that use of this margin from the LTFV investigation
is entirely consistent with the statute, the Department's regulations,
and our past precedent.
We also find inapposite Ta Chen's argument that, since petitioner
did not request this review, petitioner is satisfied with Ta Chen's
existing cash deposit rate. Whether or not petitioner requested this
review is, at this point, irrelevant, and cannot be construed in any
way as evidence of Ta Chen's dumping activities, or lack thereof,
during the first period of review. Ta Chen's reference to our
determination concerning Yamaha in Antifriction Bearings From France,
et al. (57 FR 28360) is entirely inapposite. There, the Department was
merely summarizing the extent of Yamaha's cooperation in the review,
noting that ``Yamaha requested the review, provided the Department with
questionnaire responses, and submitted to verification of its response
* * *'' Ta Chen posits this one sentence as evidence of a per se rule
that if a respondent requests a review, it is immune from first-tier
BIA. Not only is this contention historically wrong, it ignores Ta
Chen's failure to cooperate in this review. As the Court noted in
Industria de Fundicao, a respondent may not cap its antidumping margins
by refusing to cooperate in an administrative review.
Final Results of Review
Based on our review of the arguments presented above, for these
final results we have made no changes in the margin for Ta Chen. We
have determined that Ta Chen's weighted-average margin for the period
December 23, 1992 through May 31, 1994 is 76.20 percent.
The Department shall determine, and the US Customs Service shall
assess, antidumping duties on all appropriate entries. The Department
will issue appraisement instructions directly to Customs.
Furthermore, the following deposit requirements will be effective
upon completion of the final results of this administrative review for
all shipments of certain stainless steel butt-weld pipe fittings from
Taiwan entered, or withdrawn from warehouse, for consumption on or
after the publication of the final results of this administrative
review, as provided in section 751(a)(1) of the Tariff Act:
(1) The cash deposit rate for Ta Chen will be 76.20 percent, the
rate established in this administrative review;
(2) For previously reviewed or investigated companies other than Ta
Chen, the cash deposit rate will continue to be the company-specific
rate published for the most recent period;
(3) If the exporter is not a firm covered in this review, a prior
review, or the LTFV investigation, but the manufacturer is, the cash
deposit rate will be the rate established for the most recent period
for the manufacturer of the merchandise; and
(4) If neither the exporter nor the manufacturer is a firm covered
in this or any previous review conducted by the Department, the cash
deposit rate will be 51.01 percent. See Amended Final Determination and
Antidumping Duty Order, 58 FR 33250, 33251 (June 16, 1993).
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of the antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective orders (APOs) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d). Timely written notification of
the return or destruction of APO materials, or conversion to judicial
protective order, is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
This determination is issued and published in accordance with
sections 751(a)(1) and 777(i)(1) of the Tariff Act (19 U.S.C.
1675(a)(1) and 1677f(i)(1)).
Dated: January 4, 2000.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 00-872 Filed 1-12-00; 8:45 am]
BILLING CODE 3510-DS-P