                                          Slip-Op. 12-132

                  UNITED STATES COURT OF INTERNATIONAL TRADE



ESSAR STEEL LIMITED,

                   Plaintiff,

       v.                                              Before: Judith M. Barzilay, Senior Judge

UNITED STATES                                          Court No. 09-00197

                   Defendant,

       and

UNITED STATES STEEL
CORPORATION,

                  Defendant-Intervenor.



                                            OPINION

[Commerce’s AFA rate calculation is remanded for further explanation.]

                                                                     Dated: October 15, 2012

Arent Fox LLP (Mark P. Lunn and Diana Dimitriuc Quaia) for Plaintiff Essar Steel Limited.

Stuart F. Delery, Acting Assistant Attorney General; Jeanne E. Davidson, Director; Patricia M.
McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States
Department of Justice (David D’Alessandris) for Defendant United States; Deborah King, Office
of the Chief Counsel for Import Administration, United States Department of Commerce, of
counsel, for Defendant.

Skadden Arps Slate Meagher & Flom, LLP (Robert E. Lighthizer, Jeffrey D. Gerrish, Stephen J.
Narkin, and Nathaniel B. Bolin) for Defendant-Intervenor United States Steel Corporation.


       BARZILAY, Senior Judge: This matter returns to the court following a decision by the

Court of Appeals for the Federal Circuit affirming in part and reversing in part this court’s

decision in Essar Steel Ltd. v. United States, 2011 WL 238657 (Jan. 25, 2011). See Essar Steel
Court No. 09-00197                                                                            Page 2


Ltd. v. United States, 678 F.3d 1268 (Fed. Cir. 2012) (“Essar”). After the Federal Circuit issued

its mandate, Plaintiff Essar Steel Limited (“Essar”) contacted the court for guidance with regard

to two issues it believed were unresolved: (1) whether Commerce corroborated the adverse facts

available (“AFA”) rate assigned to Essar for its participation in the State Government of

Chhattisgarh Industrial Policy (“CIP”) 1; and (2) whether that rate was punitive. Although the

parties argued these issues in their briefs before the Court of International Trade, the court did

not reach them in its initial decision remanding the case back to Commerce. See Essar Steel

Ltd.v. United States, 34 CIT __, __, 721 F. Supp. 2d 1285, 1300 (2010). The court then sustained

the remand results without deciding the issues discussed above. See Essar Steel Ltd., 2011 WL

238657. The parties appealed that decision. Accordingly, the issues of corroboration and whether

the AFA rate is punitive were not before the Federal Circuit.

       The Federal Circuit, however, in its decision affirming Commerce’s application of AFA,

observed that “the countervailing duty imposed for Essar’s participation in the CIP was on par

with similar subsidy programs and therefore not punitive. Commerce did not err in its application

of adverse facts, and no party argues that the application of adverse facts based on the record

before the remand was punitive.” Essar, 678 F.3d at 1276 (emphasis added). Although this

language could be construed as having decided the issues presented here, the parties concede,

and the court agrees, that it did not. See Letter from David F. D’Alessandris, Trial Attorney, U.S.

Department of Justice, to Judith M. Barzilay, Senior Judge, U.S. Court of International Trade,

Docket Entry No. 93 (Sept. 11, 2012); Letter from Mark P. Lunn, Attorney, Arent Fox LLP, to

1
 The CIP provides incentives to accelerate the process of industrialization in the state. It is a
subsidy that Commerce has deemed countervailable. See Certain Hot-Rolled Carbon Steel Flat
Products from India, 74 Fed. Reg. 20,923 (Dep’t Commerce May 6, 2009) (final results CVD
review) (“Final Results”); see also Issues and Decision Memorandum: Final Results and Partial
Rescission of Countervailing Duty Administrative Review, Certain Hot-Rolled Carbon Steel Flat
Products from India at 3-4, 22 (Apr. 29, 2009) (“Decision Memorandum”), available at
http://ia.ita.doc.gov/frn/summary/INDIA/E9-10496-1.pdf.
Court No. 09-00197                                                                             Page 3


Judith M. Barzilay, Senior Judge, U.S. Court of International Trade, Docket Entry No. 94 (Sept.

14, 2012). The question before the Federal Circuit was limited to whether it was appropriate for

Commerce to apply AFA to Essar for its participation in the CIP programs. That court decided it

was. See Essar, 678 F.3d at 1279. Whether the specific AFA rate was uncorroborated or perhaps

even punitive has not been decided by this court or the Federal Circuit. Therefore, this court must

consider these issues to bring this case to a close. The court, though, must first determine

whether a remand is necessary for Commerce to consider the issue of corroboration in the first

instance. The court has jurisdiction pursuant to 28 U.S.C. § 1581(c).

                                  I. STANDARD OF REVIEW

       When reviewing Commerce’s countervailing duty determinations under 19 U.S.C. §

1516a(a)(2)(B)(iii) and 28 U.S.C. § 1581(c), the U.S. Court of International Trade sustains

Commerce‘s “determinations, findings, or conclusions” unless they are “unsupported by

substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C. §

1516a(b)(1)(B)(i). More specifically, when reviewing agency determinations, findings, or

conclusions for substantial evidence, the court assesses whether the agency action is “reasonable

and supported by the record as a whole.” Nippon Steel Corp. v. United States, 458 F.3d 1345,

1352 (Fed. Cir. 2006) (internal quotations and citation omitted). Substantial evidence has been

described as “such relevant evidence as a reasonable mind might accept as adequate to support a

conclusion.” Dupont Teijin Films USA v. United States, 407 F.3d 1211, 1215 (Fed. Cir. 2005)

(quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)). Substantial evidence has also

been described as “something less than the weight of the evidence, and the possibility of drawing

two inconsistent conclusions from the evidence does not prevent an administrative agency’s

finding from being supported by substantial evidence.” Consolo v. Fed. Mar. Comm'n, 383 U.S.

607, 620 (1966).
Court No. 09-00197                                                                            Page 4


                                          II. DISCUSSION

        This case involves an administrative review of a countervailing duty order covering

Certain Hot-Rolled Carbon Flat Products from India. See Final Result, 74 Fed. Reg. 20,923. In

the Final Results, Commerce found that Essar had failed to cooperate by not acting to the best of

its ability to comply with a request for information about its participation in the CIP programs,

justifying application of adverse facts available. See Decision Memorandum at 6. Although

Commerce attempted to calculate an individual rate for Essar based on the benefit received from

the CIP programs, it was unable gather the necessary information from respondents, and

therefore relied on secondary information to derive a rate. See id. Specifically, Commerce used

the highest above de minimis subsidy rate calculated for similar programs (from prior

proceedings) involving grants, the provision of goods for less than adequate remuneration

(LTAR), and indirect taxes. See id. at 22-26. Commerce explained its methodology for

calculating the AFA rate assigned to Essar for its participation in the CIP programs but did not

discuss the specific issue of corroboration. See id. at 3, 6, 22-26.

        Essar claims that Commerce failed to corroborate the AFA rate that it calculated for

Essar’s participation in the CIP programs. Pl. Br. 33; Pl. Reply 10. Specifically, Essar argues that

Commerce failed to establish the relevance of the rate assigned to Essar as a reasonably accurate

estimate of its actual rate. Pl. Br. 36-37 (citing Fujian Lianfu Forestry Co. v. United States, 33

CIT __, __, 638 F. Supp. 2d 1325, 1336 (2009)). Essar also argues that Commerce cannot

assume that the highest rate from a prior proceeding is reliable and relevant. Pl. Br. 37. The crux

of Essar’s claim is that the AFA rate for the CIP programs is unreasonable because Commerce

did not tie the selected rate to Essar.

        In Fujian Lianfu Forestry Co., Ltd. v. United States, 33 CIT __, __, 638 F. Supp. 2d

1325, 1334 (2009) (“Fujian”), the court summarized the corroboration requirement:
Court No. 09-00197                                                                             Page 5


               When applying a total AFA rate, Commerce shall, “to the extent
       practicable,” corroborate that rate “from independent sources that are reasonably
       at [its] disposal.” 19 U.S.C. § 1677e(c). The statute does not prescribe any
       methodology for corroborating a total facts available rate, but the regulations state
       that corroborate “means that the Secretary will examine whether the secondary
       information to be used has probative value.” 19 C.F.R. § 351.308(d) (parroting
       Uruguay Round Agreements Act Statement of Administrative Action, H.R.Rep.
       No. 103–316, vol. 1 at 870 (1994), reprinted in 1994 U.S.C.C.A.N. 3773, 4199).
       A total facts available proxy rate should therefore have probative value of a
       “reasonably accurate estimate of the respondent's actual rate, albeit with some
       built-in increase intended as a deterrent to noncompliance.” De Cecco, 216 F.3d
       at 1032. As a general matter, Commerce assesses the probative value of secondary
       information by examining its reliability and relevance. See Ball Bearings and
       Parts Thereof from France, Germany, Italy, Japan, Singapore, and the United
       Kingdom, 70 Fed.Reg. 54, 711, 54,712–13 (Sept. 16, 2005) (final results). For
       specific secondary information like a total facts available proxy, the corroboration
       analysis therefore depends on whether the proxy is a reliable and relevant
       indicator that satisfies the De Cecco standard.

Id. The Fujian court, albeit in the context of an antidumping proceeding, issued a remand

because Commerce’s “attempted corroboration never explains whether the selected proxy

is a reliable and relevant indicator of a ‘reasonably accurate estimate of [respondent’s]

actual rate, albeit with some built-in increase intended as a deterrent to noncompliance.’

In short Commerce never ties the rate to [respondent].” Id. at 1336 (quoting F.lli De

Cecco Di Filippo Fara S. Martino S.p.A v. United States, 216 F.3d 1027, 1032 (Fed. Cir.

2000) (“De Cecco”).

       Although this action involves a CVD proceeding, the corroboration requirement applies

equally to both, see 19 U.S.C. 1677e(c). When Commerce resorts to secondary information (in

either a CVD or antidumping proceeding), Commerce must corroborate that information, or

explain why such corroboration is not practicable. See id. Here, although Commerce used

secondary information to calculate Essar’s AFA rate, Commerce did not discuss corroboration.

See Decision Memorandum at 3, 6, 22-26. Counsel for Defendant provides some explanation as

to why Commerce’s AFA calculation was properly corroborated, Def. Br. 27-33, but these are
Court No. 09-00197                                                                             Page 6


post hoc rationalizations of agency counsel to which the court may not defer. See Motor Vehicle

Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 50 (1983) (“[C]ourts may not accept

. . . counsel’s post hoc rationalizations for agency action.”). The court must therefore remand

this issue to Commerce to consider the issue in the first instance.

       For over a decade the court has applied the De Cecco standard to review the

reasonableness of Commerce’s AFA rate choices in antidumping proceedings. Under that

standard the court reviews whether Commerce chose a reasonably accurate estimate of the

respondent’s actual dumping rate with some built-in increase to deter non-compliance. See

DeCecco, 216 F.3d at 1032. The DeCecco standard would seem to apply in the CVD context as

well. If Commerce believes otherwise, it can explain its inapplicability on remand. Absent a

reason to apply a different standard, the court stands ready to review whether the facts and

circumstances of the administrative record support Commerce’s AFA CVD rate as a reasonably

accurate estimate of the respondent’s actual benefit (under the CIP programs) plus some built in

increase to deter non-compliance, with due account for the practicability of corroboration.

       Bear in mind that the court is not rejecting the notion that Commerce may have selected a

reasonable AFA rate, but to sustain such a rate the court needs Commerce to explain (1) how it

corroborated the AFA rate assigned to Essar, or (2) why corroboration is not practicable. See 19

U.S.C. § 1677e(c); see also Sodium Nitrite From the People's Republic of China: Final

Affirmative Countervailing Duty Determination, 73 Fed. Reg. 38,981, 38,983 (Dep’t Commerce

2008) (“Unlike other types of information, such as publicly available data on the national

inflation rate of a given country or national average interest rates, there typically are no

independent sources for data on company-specific benefits resulting from countervailable

subsidy programs.”)
Court No. 09-00197                                                                             Page 7


       Essar also challenges Commerce’s AFA rate calculation as punitive. Pl. Br. 39. The

court, however, does not believe this issue has merit. Essar specifically argues that the AFA rate

is punitive “considering that in past reviews Commerce never found Essar to have used the [CIP]

program at issue.” Pl. Br. 39 (citing Am. Silicon Tech. v. United States, 26 CIT 1216, 240 F.

Supp. 2d 1306 (2002) (“American Silicon”)). This therefore appears to be an argument about the

sufficiency of Commerce’s corroboration, not whether the selected rate is punitive. If the latter,

the court would have expected far more developed argumentation and analysis of the other

available rates and an explanation why the selected rate represents an unreasonable choice. See,

e.g., American Silicon, 240 F. Supp. 2d at 1312-1313 (concluding that AFA rate was punitive by

comparing assigned rate to other calculated rates from prior reviews). Essar never provides such

an analysis, leaving the court to develop its own theory of why the selected rate may be punitive,

effectively litigating the issue for Essar. This the court will not do. See Home Prods. Int., Inc. v.

United States, 36 CIT __, __, 837 F. Supp. 2d 1294, 1301 (2012) (quoting United States v.

Zannino, 895 F.2d 1, 17 (1st Cir.1990) (“[I]ssues adverted to in a perfunctory manner,

unaccompanied by some effort at developed argumentation, are deemed waived. It is not enough

merely to mention a possible argument in the most skeletal way, leaving the court to do counsel's

work, create the ossature for the argument, and put flesh on its bones.”)).

       Again, the central issue here is corroboration. Commerce must corroborate Essar’s AFA

rate or explain why corroboration is not practicable. See 19 U.S.C. § 1677e(c).
Court No. 09-00197                                                                          Page 8


                                       III. CONCLUSION

         The court cannot sustain Commerce’s AFA rate calculation in its current posture.

Accordingly, the court remands to Commerce to address the corroboration requirement under 19

U.S.C. § 1677e(c). It is hereby

         ORDERED that this action is remanded to Commerce to address the issue of

corroboration; it is further

         ORDERED that Commerce is to file its remand results on or before December 14, 2012;

and it is further

         ORDERED that the parties are to file their comments (limited to 10 pages), if necessary,

no later than 45 days after Commerce files its remand results with the court.



Dated:    October 15, 2012                           ___ /s/ Judith M. Barzilay    __
         New York, New York                          Judith M. Barzilay, Senior Judge
