Last Thursday, the U.S. Court of Appeals for the Federal Circuit (CAFC) issued its decision in Dongbu Steel, saying, in essence, that the Department of Commerce can't take an inconsistent approach to zeroing -- no zeroing in investigations, but zeroing in administrative reviews -- without a good reason. Here are some key excerpts.
First, some background:
Commerce has previously argued that the relevant statutory provision compels zeroing. This court has opined that the statutory text applicable to both investigations and administrative reviews—namely the term “exceeds” in 19 U.S.C. § 1677(35)(A)—is sufficiently ambiguous to defer to Commerce’s decision of whether or not to use zeroing in both stages of its antidumping procedures.
...
Commerce has now decided to stop using zeroing in investigations to comply with international treaty obligations while continuing to use it in administrative reviews. Surely, under appropriate circumstances, Commerce may change its position as to whether to apply zeroing. ... The circumstances here, however, present a unique twist because Commerce’s compliance with international treaty obligations has lead it to interpret a single ambiguous statutory term inconsistently during different phases of an antidumping duty assessment, i.e., using zeroing for administrative reviews but no longer using zeroing for investigations. The issue presented in this case is whether Commerce is entitled to deference when it interprets 19 U.S.C. § 1677(35) inconsistently.
In a nutshell, the CAFC has made clear in the past the Commerce has the discretion to use zeroing, but is not required to. But now Commerce has stopped using zeroing in one situation, yet still uses it another.
In response to Commerce's approach, the appellant argued that:
it is unreasonable under Chevron for Commerce to construe the identical statutory provision—19 U.S.C. § 1677(35)—to have opposite meanings in investigations and administrative reviews where (1) nothing in the statutory language indicates that different interpretations were intended and (2) this court has rejected the claim that the meaning of § 1677(35) depends on the stage of the antidumping proceeding.
In this regard, during the proceedings before Commerce, the appellant had "submitted a letter to Commerce on January 11, 2007 challenging Commerce’s decision to continue using zeroing in administrative reviews after abandoning its use in investigations. Commerce rejected the letter as untimely."
The Court of International Trade "sustained Commerce’s final results" and held that "Timken and Corus I did not foreclose Commerce’s inconsistent use of zeroing in administrative reviews and investigations."
In the CAFC appeal, the CAFC explained that: "The central question here is whether it is reasonable for Commerce to use zeroing in administrative reviews even though it no longer uses this methodology in investigations." On this point, the CAFC said: "We have indicated that an agency action is arbitrary when the agency offers insufficient reasons for treating similar situations differently." The CAFC concluded as follows:
Commerce’s final determination does not contain any rationale for its inconsistent interpretations due to the procedural way in which the issue was raised. Oral Argument at 15:13-15:33. Recognizing this deficiency in the record, the government proffers a single explanation for Commerce’s inconsistent interpretation: The methodology for investigations was changed in response to an adverse WTO report though the Section 123 Determination. Basically, the government concedes that “it’s the same statute, the same provision, the same issue to be determined in both initial investigations and administrative reviews,” but the government has made the determination to implement a WTO decision with respect to investigations. ...
...
... the political branches’ decision to comply with the WTO ruling only as to investigations does not mean that it is lawful to give inconsistent constructions to the same statutory language. Rather, Commerce’s interpretation of the statute must comply with domestic law including reasonably interpreting statutes. Chevron, 467 U.S. at 842-43. In other words, the government’s decision to implement an adverse WTO report standing alone does not provide sufficient justification for the inconsistent statutory interpretations. ...
...
Applying Chevron step two to this ambiguous statute, we conclude that the agency has not provided a reasonable explanation for why the statute supports such inconsistent interpretations. ... We accordingly vacate the decision of the Court of International Trade and remand for further proceedings to give Commerce the opportunity to explain its reasoning. It may be that Commerce cannot justify using opposite interpretations of 19 U.S.C. § 1677(35) in investigations and in administrative reviews. Under such circumstances, Commerce is of course free to choose a single consistent interpretation of the statutory language. ...
So now it's over to Commerce to come up with some reasons for the inconsistent interpretation. [ADDED - Or to stop zeroing in reviews, thus removing the inconsistency.]
See Roger Alford's post here for more.
