IN THE MATTER OF:

Oil Country Tubular Goods from Mexico; Final Determination of Sales At Less Than Fair Value
(Continued)

2. Discussion and Decision of the Panel

The Panel has carefully considered the factual record before us on the financial expense issue, the arguments advanced by the Participants concerning that record, and the standard of review applicable to its deliberations, and determines that the Department’s decision to calculate financial expense on the basis of the 1994 half-year financial data selected by the Department as BIA must be sustained. The Panel reaches this result because it finds substantial record evidence that the Department asked TAMSA for the 1994 full-year, audited and unaudited financial data on at least two occasions during or covering periods of time in which at least the unaudited data had become available and, indeed, had been publicly filed by TAMSA with the Mexican Stock Exchange. The Department’s Requests Did Cover the Mexican Stock Exchange Filing There is clear evidence of such a request in a document that has not been cited by either the Department or North Star for this purpose. ²⁴⁷

In the Panel’s previous factual discussion of the financial expense issue, it has made reference to the March 6, 1995 Sales Verification Outline pursuant to which the Department submitted to TAMSA its agenda for the Sections A, B and C verifications. This document covered the Veracruz verification scheduled to take place between March 20-24, 1995 and the Houston verification scheduled to take place between April 10-12, 1995. Each of these periods covers or is subsequent to the date on which the 1994 unaudited financial data was filed by TAMSA with the Mexican Stock Exchange: March 23, 1995.

The Panel has quoted the key language from the Sales Verification Outline indicating that, at verification, TAMSA should present (1) its "[l]ast financial statement, or equivalent;" and (2) its "[l]atest internal financial statements. " In the Panel’s view, a straight-forward reading of this instruction is that TAMSA must present to the Department, by March 24^th in Veracruz and/or by April 12^th in Houston, the latest financial statement prepared by TAMSA for use in Mexico or the United States, irrespective of whether that statement has been published and filed or whether it merely exists as an "internal" company document. The Panel finds no ambiguity in this instruction ²⁴⁹ and is not persuaded that its appearance on a sales verification document, as opposed to a cost verification document, has any bearing on its validity or scope, on its usefulness to the Department for all verification purposes, or on its probativeness with respect to the issue before the Panel. Even if this document were not deemed fully probative, however, the record contains sufficient other evidence of the Department’s request for the 1994 financial data. As noted above, the Department asserts in its brief that both the audited and unaudited 1994 financial statements were requested at the Houston verification. ²⁵⁰

TAMSA, however, asserts that the Department requested (merely) the 1994 audited financial statement and the financial statement filed with the SEC. ²⁵¹

While neither the Cost Verification Report nor the Team Concurrence Memorandum is a model of clear writing and expression (e.g., neither document explicates what specific requests were made of TAMSA at the Houston cost verification), they are nevertheless official documents ²⁵² that do evidence TAMSA’s statements that (i) the audited financial statements were not available, and (ii) "no financial statement was filed with the securities oversight agencies." While the first statement was undoubtedly correct (audited financial statements had not been filed), the second statement was not (the 1994 unaudited financial statement had on March 23, 1995 been filed with the Mexican Stock Exchange), and the statements together inferentially support the view that the Mexican Stock Exchange filing had indeed been requested by the Department. Although the Panel does note some discrepancy between a key passage of the Team Concurrence Memorandum (referring to unaudited as well as audited statements) and the Cost Verification Report (referring solely to audited statements) ²⁵³ the Panel accepts, in the context of the Department’s numerous past requests to TAMSA for comprehensive financial data, that the Team Concurrence Memorandum is the most accurate reflection of the actual facts.

The Panel appreciates that TAMSA has vigorously disputed, both to the Department and to the Panel, certain of the statements made by the Department in the Cost Verification Report and the Team Concurrence Memorandum. ²⁵⁴

The Panel also accepts that TAMSA’s assertion that the Department never specifically requested the Mexican Stock Exchange filing is being made in good faith. Nevertheless, the Department is equally confident of its own interpretation of events, and the Panel accepts that the Department’s interpretation of these critical documents is, in the context of this proceeding, more faithful to their actual language and intended spirit than is the interpretation of those documents made by TAMSA. For this purpose, the Panel cites the useful and binding rule that a reviewing authority must take the administrative record as it finds it and disregard post hoc argumentation of counsel that is not consistent with that record. ²⁵⁵

Therefore, the Panel also finds that there is substantial evidence in the Cost Verification Report and the Team Concurrence Memorandum that support the Department’s assertion and finding that the 1994 financial data (unaudited as well as audited) were requested at the Houston cost verification and that the unaudited data, although available, was not supplied. The Department Properly Applied BIA This failure of TAMSA to supply requested data of course requires the Department to utilize BIA. The governing statute provides that: In making [its] determinations under this subtitle, [the Department] shall, whenever a party or any other person refuses or is unable to produce information requested in a timely manner and in the form required, or otherwise significantly impedes an investigation, use the best information otherwise available. ²⁵⁶

Judicial decisions make it clear that the Department "cannot be left merely to the largesse of the parties at their discretion to supply [it] with information." ²⁵⁷ The BIA rule is in fact used to prevent a respondent from controlling the results of an administrative proceeding by providing incomplete information or by delaying or hindering the proceeding. ²⁵⁸

In a recent case, the Court of International Trade held that the Department could resort to BIA if it found that a respondent inaccurately represented that it was unable to provide the sales data requested by the Department. ²⁵⁹

Having concluded that the Department was entitled to invoke BIA, due to TAMSA’s withholding of the requested 1994 financial data, the Panel next directs its attention to the question of the Department’s selection of a BIA rate. The Department correctly notes that neither the statute nor the relevant legislative history defines the term "best information available", ²⁶⁰ or dictates a particular BIA methodology for the Department to follow. Because Congress has "explicitly left a gap for the agency to fill," the Department’s construction of the statute must be accorded considerable deference. ²⁶¹

The Department’s methodologies have been informed by several Federal Circuit decisions and by numerous Court of International Trade decisions. These decisions suggest that, outside of unusual factual situations ²⁶² the Department enjoys substantial discretion on BIA issues, particularly as to the issue of the selection of a BIA rate. ²⁶³

So long as the agency has acted reasonably in selecting between cooperative and non-cooperative total BIA rates, ²⁶⁴ has acted reasonably in choosing between total and partial BIA ²⁶⁵ has selected a rate that does not "reward" the respondent for its conduct ²⁶⁶ and has selected a rate from among the universe of possible BIA rates that are actually contained on the administrative record, ²⁶⁷ the courts have been substantially disinclined to overturn the agency’s decision. As stated succinctly by another binational panel, "[t]he U.S. courts have consistently affirmed the discretion of the administering agencies to choose what is the ‘best information available." ²⁶⁸

Despite the mandate of the statute and the breadth of discretion, that the courts have sanctioned, it is common for respondents to argue, as TAMSA has argued, that the Department’s use and selection of BIA leads to inaccurate results and is "punitive." ²⁶⁹

However, arguments that a particular BIA rate was punitive (or arbitrary, inaccurate, not the "best," etc.) have fared poorly in the courts. ²⁷⁰

Undoubtedly, there is a natural tension between the goal of calculating accurate dumping margins ²⁷¹ and the use of the BIA rule as "an investigative tool, which [ITA] may wield as an informal club over recalcitrant parties" to induce noncomplying respondents to provide the agency with data needed to calculate accurate dumping margins. ²⁷²

The way to have accurate dumping margins, however, is for respondents to comply with the Department’s requests and to provide information which is both accurate and complete. Absent a respondent’s having done so, the Department has no choice but to rely on what is, by direct implication, less than accurate information. ²⁷³

Taking the above authorities into account, the Panel finds that the Department was not bound to a rigid BIA formula, as urged upon us by North Star ²⁷⁴ and was reasonable in selecting "reasonably be considered best"). The courts have also been disinclined to determine that a BIA rate was "punitive," particularly when the respondent to whom it was applied was given an opportunity to rebut the inference created by the selection of the BIA rate by producing the information requested. Rhone Poulenc, 899 F.2d at 1190-91.

among the five BIA rates available. The Panel also finds that the Department was reasonable in deciding not to further adjust the specific BIA rate chosen. ²⁷⁵

While the Department’s determination can be sustained on this ground alone, the Panel also finds that it is able to sustain the Department’s determination on the basis that the 1993, ²⁷⁶ financial expense data was not "representative" of the POI’s financial expenses; thus, the Department properly rejected that data and substituted therefor the half-year 1994 data. The Panel’s conclusion in this regard is guided by the substantial evidence on the record that shows a dramatic increase in TAMSA’s financial expenses during the first half of 1994, as compared to the first half of 1993. ²⁷⁷

In addition, while the Department made no direct explanation of this issue in the Final Determination, the Panel can readily understand the contribution made by the peso devaluation to that dramatic increase in financial expenses. As the Panel explains below, however, this lack of explanation by the Department is more troubling when the issue involves the apparent increase in TAMSA’s G&A expenses over the same period.

Before turning to the next issue, the Panel desires to state that it does not agree with certain language used by the Department in its brief to the Panel, which language was, in short-hand terms, intended to describe the process by which the Department requests information from respondents and respondents supply, or fail to supply, that information. In its Panel Rule 57(2) Brief, the Department referred to "standing requests" and "ongoing requests" for information, which language carries the implication that once respondent receives such a "standing request" it has an obligation beyond the due date of the request to continually update the information that is responsive to that request. ²⁷⁸

North Star made a similar suggestion in the hearing before the Panel. ²⁷⁹

The Panel finds no basis in the Department’s regulations for "standing requests" or "ongoing requests." Instead, the Panel understands that the Department must make specific requests for information which, under potential pain of BIA, the respondent must furnish by a specific date. If the requested information is supplied and is accurate, there is full compliance with the Department’s request. If the information is not supplied, or is incomplete or inaccurate, then the Department must evaluate whether to make a new request for the same information or to apply BIA. Of course, BIA would be inappropriate if the information specifically requested was not (yet) in existence. ²⁸⁰

The Panel believes, however, that BIA would also be inappropriate-and its application not only grossly unfair to respondents but contrary to statute and regulation-in situations where the Department decided, at any time of its choosing and with respect to any or all prior requests made by it during the investigation phase, that such information was part of a "standing request" which had not been properly updated. In fairness, the Panel would note that the above language may have simply been an unfortunate choice of words, since it appears that in fact both the Department and TAMSA fully complied with the regulations in this case. TAMSA appropriately requested extensions of time to supply information requested by the Department, and the Department appropriately granted such extensions where feasible. The Department did regularly reiterate and repeat its requests for updated financial data, recognizing that TAMSA could not produce what did not yet exist. As an additional aside, the Panel would also reject language put forward by North Star implying that TAMSA engaged in a pattern of evasive conduct. ²⁸¹

The Panel finds no evidence of that behavior, although it is obvious that the Panel does agree that the Department ultimately asked the right question at the right time, to which TAMSA regrettably gave the wrong response. As suggested above, our concern is not about the actual practice of the Participants in this case, merely with the language of the briefs that attempts to summarize that practice, which the Panel finds potentially misleading.

Continue on to Subsection B: Calculation of General and Administrative (G&A) Expense

²⁴⁷The Panel cannot account for the Department’s and North Star’s failure to cite and argue upon this document. While it concerns the sales (not cost) verifications, it nevertheless is directly on point and indeed supplies the very thing that TAMSA has consistently argued was missing: a direct request for any financial statements filed in Mexico, made at the time of, or with respect to, the date on which such financial statements had in fact been filed.

²⁴⁸ See supra text accompanying note 104.

²⁴⁹It is very comprehensive in scope and, since it applies to internal as well as external documents, unusually broad as well.

²⁵⁰ See supra text accompanying note 112.

²⁵¹ See supra note 115.

²⁵² North Star has observed that the Cost Verification Report is the official record of the verification procedures. See supra text accompanying note 242.

²⁵³ Cf. Team Concurrence Memorandum, Pub. Doc. 251, Fiche 46, Frame 1, at 11 and Cost Verification Report, Pub. Doc. 220, Fiche 39, Frame 1, at 9-10.

²⁵⁴ The Panel also appreciates, as TAMSA has stated in this matter, that a complex verification, conducted in a foreign country and in two languages, is a ripe setting for misunderstanding and miscommunication.

²⁵⁵ See supra text accompanying note 171.

²⁵⁶ 19 U.S.C. § 1677e(b) (emphasis added). See also 19 C.F.R. § 353.37(b) ("If an interested party refuses to provide factual information requested by the [Department] or otherwise impedes the proceeding, the [Department] may take that into account in determining what is the best information available.").

²⁵⁷ Olympic Adhesives v. United States, 899 F.2d 1565, 1571 (Fed. Cir. 1990).

²⁵⁸ Rhone Poulenc v. United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990), reh’g denied, 1990 U.S. App. LEXIS 6258 (Fed. Cir. 1990).

²⁵⁹ Usinor Sacilor v. United States, 872 F. Supp. 1000, 1007 (Ct. Int’l Trade 1994).

²⁶⁰ See 19 U.S.C. § 1677e© (1991); H. Rep. No. 317, 96^th Cong., 1^st Sess. 77 (1979); S. Rep. No. 249, 96^th Cong., 1^st Sess. 98 (1979).

²⁶¹ Allied-Signal Aerospace v. United States, 996 F.2d 1185, 1991 (Fed. Cir. 1993), quoting Chevron, 467 U.S. at 843-44.

²⁶² Cf. U.H.F.C. Co. v. United States, 916 F.2d 689, 701 (Fed. Cir. 1990) (ITA may not resort to BIA where a party has failed to provide information that does not exist); Olympic Adhesives, 899 F.2d at 1571-72 (ITA may not resort to BIA where complete answer to question is given but answer does not resolve issue being considered); Floral Trade Council v. United States, 775 F. Supp. 1492, 1498 (Ct. Int’l Trade 1991) (ITA may not resort to BIA in absence of an information request); and Daewoo Electronics v. United States, 712 F. Supp. 931, 944-45 (Ct. Int’l Trade 1989) (ITA may not resort to BIA where ITA has requested information without using its normal questionnaire procedure and without providing respondent with appropriate instructions needed to compile the information).

²⁶³ See Timken v. United States, 865 F. Supp. 850, 854 (Ct. Int’l Trade 1994), citing Allied Signal, 996 F.2d at 1191-92. See also list of authorities provided in Replacement Parts for Self-Propelled Bituminous Paving Equipment from Canada, USA-90-1904-01 (May 24, 1991), at 44 note 33, and Krupp Stahl, 822 F. Supp. at 792 (courts have granted the Department "broad discretion in determining what constitutes the BIA in a given situation.").

²⁶⁴Allied Signal, 996 F.2d at 1192 (concluding that ITA improperly applied non-cooperative total BIA rate to respondent which had demonstrably attempted to cooperate but was nevertheless unable to satisfy information request).

²⁶⁵ Persico Pizzamiglio, 16 ITRD at 1471 (if requested data is not provided, ITA has authority to reject response in total even if it is "substantially complete"); Paving Equipment, USA-90-1904-01 (May 15, 1992), at 76 (ITA has "discretion to use BIA in place of all or part of the information furnished to it"); Brother Industries, 771 F. Supp. at 383 (upholding use of BIA: "The law does not permit a party to pick and choose information it wishes to present to the agency, and a deficient submission may lead to an undesired result.") (see supra text accompanying note 245).

²⁶⁶See Rhone Poulenc, 899 F.2d at 1190-91; and Krupp Stahl, 822 F. Supp. at 793 (respondent "should not find itself in a better position as a result of its noncompliance....").

²⁶⁷19 U.S.C. § 1516a(b)(1)(B). The law also requires the agency to consider the most recent information on the record. See Rhone Poulenc, 899 F.2d at 1190 ("What is required is that the ITA obtain and consider the most recent information in its determination of what is best information.") (emphasis in original).

²⁶⁸New Steel Rail, Except Light Rail, From Canada, USA-89-1904-08, at 31 (August 30, 1990).

²⁶⁹ TAMSA Panel Rule 57(1) Brief, at 26 et seq.

²⁷⁰ The courts have not required ITA to prove that its selected BIA is the "best" in any absolute sense, and instead have applied the substantial evidence test. See Seattle Marine Fishing Supply Co. v. United States, 679 F. Supp. 1119, 1128 (Ct. Int’l Trade 1988); accord U.H.F.C. Co. v. United States, 706 F. Supp. 914, 922 (Ct. Int’l Trade 1989) (concurring with view that "the issue is not which, of all the information ITA has to choose from, is the best information available, but rather, whether the information chosen by ITA is supported by substantial evidence on the record"), modified on other grounds, 916 F.2d 689 (Fed. Cir. 1990); see also Chinsung Indus. Co. v. United States, 705 F. Supp. 598, 601 (Ct. Int’l Trade 1989) (rejecting view that ITA must use information that can

²⁷¹See Smith-Corona Group, 713 F.2d at 1578 ("One of the goals of the statute is to guarantee that the administering authority makes the fair value comparison on a fair basis¾comparing apples with apples."). See also Federal-Mogul Corp., 63 F.3d at 1580 ("Antidumping jurisprudence seeks to be fair, rather than to build bias into the calculation of dumping margins.").

²⁷² Atlantic Sugar v. United States, 744 F. 2d 1556, 1560 (Fed. Cir. 1984).

²⁷³ See e.g., Asociacion Colombiana de Exportadores v. United States, 704 F. Supp. 1114, 1126 (Ct. Int’l Trade 1989) (BIA is "not necessarily accurate information, it is information which becomes usable because a respondent has failed to provide accurate information"), reversed in part upon remand, 717 F. Supp. 834 (Ct. Int’l Trade 1989), aff’d on other grounds, 901 F. 2d 1089 (Fed. Cir. 1990), cert. denied, 111 S. Ct. 136 (1990); and Uddeholm v. United States, 676 F. Supp. 1234, 1236 (Ct. Int’l Trade 1987).

²⁷⁴ North Star has argued that Allied-Signal requires the Department to use the most adverse data on record as BIA. In response, the Department has argued that (i) Allied-Signal was permissive not mandatory ("Allied-Signal is about what Commerce may do, not what it must do"); and (ii) Allied-Signal permitted the Department to apply a "two tier" methodology in a total BIA case, but did not address partial BIA as has been invoked by the Department in this case. Department Panel Rule 57(2) Brief, at 51-54. The Department also notes that the Court of International Trade has "explicitly held that the Department is not required to always apply the highest possible rate to a non-cooperative respondent." Id., at 54, citing Saha Thai Steel Pipe Co. v. United States, 828 F. Supp. 57 (Ct. Int’l Trade 1993) (involving complete failure by respondent to reply to a questionnaire). The Panel concurs with the Department’s analysis on this issue.

²⁷⁵See Department Panel Rule 57(2) Brief, at 60-61 ("Due to TAMSA’s failure to cooperate in full, Commerce also definitively foreclosed a [ ] financial interest rate option removing the effects of the Mexican currency devaluation from data for the first six months of 1994...") (emphasis in original).

²⁷⁶ See supra note 229.

²⁷⁷ See supra note 229.

²⁷⁸ See Department Panel Rule 57(2) Brief, at 37 and 41.

²⁷⁹ See colloquy at p. 84, Panel Hearing Transcript: "PANELIST PARTAN: So you would share or accept the view that there’s no continuing obligation to supply these financial reports, owing to the earlier February request. MR. VERRILL: There’s some debate about that as to whether, if you file an answer that includes only information available as of that day, whether you have fully complied with the Department’s requirement and whether, if subsequently any of the information changes, there’s an obligation to update the information."

²⁸⁰ See U.H.F.C. Co., 916 F.2d at 701.

²⁸¹ North Star Panel Rule 57(1) Brief, at 15-16.