Commerce Improperly Used AFA for Alleged Failure to Report Movement Expenses, Respondent Says

The four-count complaint contested Commerce's finding that the respondent "misreported its freight expenses," the agency's finding that Oman Aluminium had "unreported freight revenue," Commerce's decision to use AFA, and the way the agency used its AFA methodology in the review.

During the review, Oman Aluminium reported that it "maintains freight expense data in its SAP system in 'stages,' with Stage 1 representing movement expenses incurred in Oman, Stage 2 representing Omani port and shipping line movement expenses, and Stage 3 including movement expenses incurred in the United States." These stages are reported on a per-unit basis in the "applicable freight fields."

The petitioners raised concerns with Oman Aluminium's reporting of its movement expenses, including the methodology the company used to calculate "transaction-specific movement expenses." The respondent replied that it reported freight on an "actual delivery basis," meaning it had "no freight allocation calculation to explain" to Commerce.

Preliminarily, Commerce assigned Oman Aluminium a 5.84% AD rate and calculated the respondent's export price based on "packed prices to unaffiliated purchasers in the United States."

The petitioners again claimed that the respondent didn't demonstrate the "accuracy of its movement expenses," arguing that the sales documentation submitted by the company showed that it "allocated certain freight expenses but did not explain the allocation." The petitioners also said that, "based on a field" in Oman Aluminium's invoice to its customer listing a separate amount for "freight and insurance," the company obtained "unreported freight revenue."

In response, Oman Aluminium sent a letter to Commerce arguing that "the sales documents" in its previous submission "reveal that the single shipment and associated freight expenses cover two distinct sales transactions and corresponding invoices, which tie to" the company's "reported freight expenses and the freight invoices included in the same sales trace exhibit." The respondent included a worksheet "comprising purely information already on the record, explaining how the per-unit freight reported" by the company for the two sales ties to the freight invoices included in the sales trace documents." Commerce accepted the letter and the worksheet.

However, in the final results, the agency hit Oman Aluminium with a 42.28% AD margin after finding that the company "failed to identify" that domestic inland freight expenses, international freight expenses, U.S. inland freight expenses and U.S. customs duty expenses "reflected allocations, not transaction-specific unit costs." Commerce said the respondent "had not provided detailed allocation information supporting its movement expenses" and "failed to provide any information on its collection of freight revenues related to specific freight expenses, which also did not permit Commerce to 'cap' freight revenue pursuant to its normal practice.

The agency turned to AFA. For the supposed failure to provide allocation information backing its movement expenses, Commerce used Oman Aluminium's "highest reported transaction-specific expense for any reported transaction, and applied that amount as the relevant movement expense incurred for all reported transactions." For the "alleged failure to report freight revenue for certain freight expenses," the agency "reduced gross unit price for all sales by the percentage difference between the net price (exclusive of freight revenue) and gross unit price (inclusive of freight revenue) for the single sample sale information contained on the record in the sample sales trace."

Oman Aluminium argued that Commerce improperly found that the respondent failed to notify the agency it had "allocated its freight expenses, as instructed." The agency "conflates its instructions to explain the 'method of allocation' in certain instances with its instructions to 'describe how you calculated the unit cost,'" the complaint said. Oman Aluminium said it didn't "allocate freight expenses but rather reported, as instructed, actual freight expenses on a per-unit basis."

In finding that an unknown number of sales weren't properly reported with separate freight revenue due to Oman Aluminium's allocation of certain freight expenses and failure to "explain that it did so," the agency "ignored its own longstanding practice" of "finding freight revenue when 'the record contains evidence that the service was negotiated between seller and buyer, and that the revenues do not exceed the expenses.'" Evidence on the record doesn't show that the respondent "separately negotiated freight services with its customers," the brief said. Even if the respondent had allocated expenses and explained this allocation, there's "no indication that a description of an allocation methodology would have revealed the existence of such negotiations," the respondent argued.

The company added that the agency's use of AFA didn't meet the legal requirement for invoking it. Commerce didn't have a basis to rely on facts available, since there "were no gaps in the record," and the agency can't use adverse facts available, since the respondent "cooperated to the best of its ability." To the extent Commerce didn't have the information it needed, "it was statutorily required to ask [Oman Aluminium] for this [to] remedy any apparent deficiencies, but it never did so."

The respondent added that Commerce unreasonably applied its AFA methodology by over-applying certain international freight expenses and applying the highest-value partial AFA adjustment to the company's reported U.S. duty field. Lastly, Commerce "failed to cap any supposed freight revenues by the amount of associated freight expenses, consistent with its normal practice," the brief said.