CAFC OKs Penalty AD Rates for Cooperators With Unresponsive Upstream Suppliers
The Commerce Department can impose penalty rates on foreign exporters for noncooperation by their upstream suppliers, said the U.S. Court of Appeals for the Federal Circuit in a May 29 decision. Although the court rejected the particular rate assigned to Mueller Comercial in an administrative review on circular welded non-alloy steel pipe from Mexico covering entries in 2008-09, it said that penalty rates can be applied to cooperative exporters in cases where they induce cooperation by other entities.
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Mueller is an exporter that buys the majority of its pipe from two companies. One of those companies, Ternium, didn’t provide cost data needed to calculate Mueller’s rate, so Commerce picked the least favorable cost data on the record that it could find and assigned Mueller an AD rate of 19.81%. Ternium, which didn’t cooperate at all, got a full-on penalty rate of 48.33%. CAFC said the rate assigned to Mueller didn’t reflect commercial reality, and remanded for Commerce to take another look.
But the appeals court also said Commerce’s general policy rationale was sound. Commerce had said Mueller should have induced Ternium’s cooperation by refusing to use it as a supplier. Also, Ternium wouldn’t be deterred from its lack of cooperation if Mueller were unaffected, because Ternium could otherwise evade its penalty AD duty rate by funneling its goods through Mueller, Commerce had said. CAFC ruled that Commerce “may rely on such policies as part of a margin determination for a cooperating party like Mueller, as long as the application is reasonable on the particular facts,” reflects commercial reality, and the cooperating company has some control over the non-cooperating supplier in order to induce cooperation.
(Mueller Comercial de Mexico v. U.S., Fed. Cir. 13-1391, dated 05/29/14, Judges Newman, Dyk and Taranto)