Fine Furniture (Shanghai) Ltd. v. United States , 748 F.3d 1365 ( 2014 )

United States Court of Appeals
for the Federal Circuit
______________________
FINE FURNITURE (SHANGHAI) LIMITED,
GREAT WOOD (TONGHUA) LTD., AND
FINE FURNITURE PLANTATION (SHISHOU) LTD.,
Plaintiff-Appellant,
AND
BAROQUE TIMBER INDUSTRIES (ZHONGSHAN)
CO., LTD., RIVERSIDE PLYWOOD CORPORATION,
SAMLING ELEGANT LIVING TRADING (LABUAN)
LIMITED, SAMLING GLOBAL USA, INC., SAMLING
RIVERSIDE CO., LTD., SUZHOU TIMES
FLOORING CO., LTD., SHANGHAI ESWELL
TIMBER CO., LTD., SHANGHAI LAIRUNDE WOOD
CO., LTD., SHANGHAI NEW SIHE WOOD CO., LTD.,
SHANGHAI SHENLIN CORPORATION, VICWOOD
INDUSTRY (SUZHOU) CO., LTD., XUZHOU
SHENGHE WOOD CO., LTD., AND A&W (SHANGHAI)
WOODS CO., LTD.,
Plaintiffs-Appellants,
AND
CHANGZHOU HAWD FLOORING CO., LTD.,
DUNHUA CITY JISEN WOOD INDUSTRY CO.,
LTD., DUNHUA CITY DEXIN WOOD INDUSTRY
CO., LTD., DALIAN HUILONG WOODEN
PRODUCTS CO., LTD., KUNSHAN YINGYI-
NATURE WOOD INDUSTRY CO., LTD., AND KARLY
WOOD PRODUCT LIMITED,
Plaintiffs-Appellants,
2 FINE FURNITURE v. US
AND
HUNCHUN FOREST WOLF INDUSTRY CO., LTD.,
NANJING MINGLIN WOODEN INDUSTRY CO.,
LTD., DALIAN PENGHONG FLOOR PRODUCTS
CO., LTD., DONGTAI FUAN UNIVERSAL
DYNAMICS, LLC, ZHEJIANG FUDELI TIMBER
INDUSTRY CO., LTD., FUSONG QIANQIU
WOODEN PRODUCT CO., LTD., POWER DEKOR
GROUP CO., LTD., JIAFENG WOOD (SUZHOU) CO.,
LTD., JIANGSU SENMAO BAMBOO AND WOOD
INDUSTRY CO., LTD., SHENYANG HAOBAINIAN
WOODEN CO., LTD., GUANGZHOU PAN YU KANG
DA BOARD CO., LTD., NAKAHIRO JYOU SEI
FURNITURE (DALIAN) CO., LTD., YIXING LION-
KING TIMBER INDUSTRY CO., LTD.,
GUANGZHOU PANYU SOUTHERNSTAR CO., LTD.,
DALIAN KEMIAN WOOD INDUSTRY CO., LTD., FU
LIK TIMBER (HK) COMPANY,LTD., PULI
TRADING LTD., ZHEJIANG SHIYOU TIMBER CO.,
LTD., SHANGHAI LIZHONG WOOD PRODUCTS
CO., LTD., AND SHENZHENSHI HUANWEI WOODS
CO., LTD.,
Plaintiffs-Appellants,
AND
THE BUREAU OF FAIR TRADE FOR IMPORTS &
EXPORTS, MINISTRY OF COMMERCE, AND
PEOPLES REPUBLIC OF CHINA,
Plaintiff,
v.
UNITED STATES,
Defendant-Appellee,
FINE FURNITURE v. US 3
AND
THE COALITION FOR AMERICAN HARDWOOD
PARITY,
Defendant.
______________________
2013-1158, -1172, -1173, -1174
______________________
Appeals from the United States Court of International
Trade in No. 11-CV-0533, Chief Judge Donald C. Pogue.
______________________
Decided: April 23, 2014
______________________
KRISTIN H. MOWRY, Mowry & Grimson, PLLC, of
Washington, DC, argued for all plaintiff-appellants. With
her on the brief were JEFFREY S. GRIMSON, JILL A.
CRAMER, and SARAH M. WYSS, for Fine Furniture (Shang-
hai) Limited, et al. FRANCIS J. SAILER, MARK E. PARDO
and ANDREW T. SCHUTZ, Grunfeld Desiderio Lebowitz
Silverman & Klestadt, LLP, of Washington, DC, for
Baroque Timber Industries (Zhongshan) Co., Ltd., et al;
GREGORY S. MENEGAZ, DeKieffer & Hogan, of Washington,
DC, for Changzhou Hawd Flooring Co., Ltd., et al.;
JEFFREY S. NEELEY and STEPHEN W. BROPHY, Barnes,
Richardson, & Colburn, LLP, of Washington, DC, for
Dalian Kemian Wood Industry Co., Ltd., et al. Of counsel
were JEFFREY KEVIN HORGAN, DeKieffer & Horgan, of
Washington, DC, and KAVITA MOHAN, Grunfeld, Desider-
io, Lebowitz, Silverman & Klestadt, LLP, of Washington,
DC.
ALEXANDER V. SVERDLOV, Trial Attorney, Commercial
Litigation Branch, Civil Division, United States Depart-
ment of Justice, of Washington, DC, argued for defendant-
4 FINE FURNITURE v. US
appellee. With him on the brief were STUART F. DELERY,
Acting Assistant Attorney General, and JEANNE E.
DAVIDSON, Director. Of counsel was SCOTT D. MCBRIDE,
Senior Attorney, Office of the Chief Counsel for Import
Administration, United States Department of Commerce,
of Washington, DC. Of counsel was JONATHAN M.
ZIELINSKI, of Washington, DC.
______________________
Before NEWMAN, PLAGER, and CHEN, Circuit Judges.
PLAGER, Circuit Judge.
This is a countervailing duty (“CVD”) case under the
United States’ trade laws. It involves the application of
adverse inferences in a CVD investigation when a party
fails to provide requested information.
Fine Furniture (Shanghai) Limited, et al. (referred to
hereafter collectively as “Fine Furniture”), is a producer of
hardwood flooring in China, whose flooring material is
imported into the United States. In response to a petition
by domestic industries, the U.S. Department of Commerce
(“Commerce”) instituted a CVD investigation of multi-
layered wood flooring in China. Commerce selected Fine
Furniture as a mandatory respondent in the investiga-
tion. After the government of China, the foreign govern-
ment respondent in the investigation, did not provide
requested information, Commerce relied on adverse
inferences to find that the government’s provision of
electricity constituted a specific financial contribution and
applied this adverse inference to select the benchmark for
determining the existence and amount of benefit. 1
1 See Multilayered Wood Flooring From the People’s
Republic of China, 76 Fed. Reg. 19,034, 19,036 (Dep’t of
Commerce Apr. 6, 2011) (Preliminary Determination).
FINE FURNITURE v. US 5
The Court of International Trade (“the trial court”)
determined that Commerce properly utilized adverse
inferences to substitute for information controlled by the
government of China that was not provided in the course
of the investigation. Fine Furniture appeals the judg-
ment of the trial court, alleging that Commerce improper-
ly used adverse inferences against Fine Furniture, a
cooperating party, in calculating the CVD rate.
We conclude that, in calculating the CVD rate, Com-
merce properly applied adverse inferences to determine
the CVD levied on the importation. We affirm the judg-
ment of the Court of International Trade.
BACKGROUND
The CVD statute is a remedial measure that provides
relief to domestic manufacturers by imposing duties upon
imports of comparable foreign products that have the
benefit of a subsidy from the foreign government. 19
U.S.C. § 1671(a). The statute mandates that if “the
government of a country or any public entity within the
territory of a country” is providing a countervailable
subsidy with respect to the production or exportation of
specific merchandise, “then there shall be imposed upon
such merchandise a countervailing duty, in addition to
any other duty imposed, equal to the amount of the net
countervailable subsidy.” Id.
Commerce initiated a CVD investigation on multi-
layered wood flooring from China in November 2010 in
response to a petition from domestic producers. 2 Com-
merce limited its individual examination to those compa-
nies accounting for the largest volume of imports, and
selected Fine Furniture as a mandatory respondent.
2 See Multilayered Wood Flooring From the People’s
Republic of China, 75 Fed. Reg. 70,719 (Dep’t of Com-
merce Nov. 18, 2010) (Initiation Notice).
6 FINE FURNITURE v. US
During the investigation, Commerce sent out ques-
tionnaires to analyze an allegation that the government of
China subsidized the respondents’ electricity costs.
Among other things, Commerce sought draft provincial
price proposals for 2006 and 2008 for each province in
which the mandatory respondents were located. 3 It is
undisputed that Fine Furniture provided all of the infor-
mation requested of it, while the government of China did
not. 4
Commerce determined that the government of China’s
decision not to provide all of the requested information
was a failure to cooperate to the best of its ability. Specif-
ically, Commerce requested information for 2006 and
2008 documenting how electricity rates were determined
for each province in which mandatory respondents were
located, including draft provincial price proposals. The
government of China declined to provide this information,
creating a gap in the record.
Accordingly, Commerce applied an adverse inference
to find that the Electricity Program provided a financial
contribution and was specific to the identified respond-
ents. Commerce also applied adverse inferences to de-
termine the benchmark price for electricity—that is, the
price that could have constituted adequate remuneration.
Commerce compared the respondents’ reported electricity
costs with the calculated benchmark price to determine
the benefit that respondent companies received under the
Electricity Program. 5
In its petition to the trial court, Fine Furniture chal-
lenged Commerce’s determination, arguing that Com-
3 See Preliminary Determination, 76 Fed. Reg. at
19,036.
4 See id.
5 76 Fed. Reg. at 64,315.
FINE FURNITURE v. US 7
merce’s use of adverse inferences was impermissible
because Fine Furniture cooperated in Commerce’s inves-
tigation. The trial court rejected this argument, finding
that Commerce did not apply adverse inferences against
Fine Furniture; rather, as the trial court explained,
Commerce applied adverse inferences as its method for
determining the information requested from, but not
provided by, the government of China. Fine Furniture
(Shanghai) Ltd. v. United States, 865 F. Supp. 2d 1254,
1260-63 (Ct. Int’l Trade 2012). This appeal followed.
We have jurisdiction over this appeal pursuant to 28
U.S.C. § 1295(a)(5).
DISCUSSION
1. Standard of Review
We review decisions of the Court of International
Trade evaluating Commerce’s final determinations by
reapplying the standard that the Court of International
Trade applied in reviewing the administrative record.
SNR Roulements v. United States, 402 F.3d 1358, 1361
(Fed. Cir. 2005); Micron Tech., Inc. v. United States, 117
F.3d 1386, 1393 (Fed. Cir. 1997). Accordingly, we will
uphold Commerce’s determination unless it is “unsup-
ported by substantial evidence on the record, or otherwise
not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).
On questions of law, we review Commerce’s construc-
tion of the trade statute based on the two-pronged frame-
work established by Chevron, U.S.A. v. Natural Resources
Defense Council, Inc., 467 U.S. 837 (1984). See Agro
Dutch Indus. v. United States, 508 F.3d 1024, 1029-1030
(Fed. Cir. 2007) (finding that review of Commerce’s inter-
pretation of a governing statute should be conducted
within the framework established by Chevron). The first
prong requires the court to determine whether Congress’
intent is clear. If it is, the court “must give effect to the
8 FINE FURNITURE v. US
unambiguously expressed intent of Congress.” Chevron,
467 U.S. at 842-43.
If, however, Congress’ intent under the statute re-
garding the matter at issue is not clear, then the second
prong of Chevron requires the court to determine whether
the agency’s interpretation of the statute is a reasonable
one. See id. at 842-44. The Supreme Court has reaf-
firmed that Commerce’s “interpretation governs in the
absence of unambiguous statutory language to the contra-
ry or unreasonable resolution of language that is ambigu-
ous.” See United States v. Eurodif S.A., 555 U.S. 305, 316
(2009). As the Court explained in Eurodif, the “whole
point of Chevron is to leave the discretion provided by the
ambiguities of a statute with the implementing agency.”
Id. (internal quotes and citation omitted).
2. The Role of Adverse Inferences
Fine Furniture’s appeal calls on us to decide whether
Commerce properly applied adverse inferences to substi-
tute for information of the purported governmental subsi-
dy not known to the mandatory respondent and not
provided by the government. Pursuant to 19 U.S.C.
§ 1671(a), Commerce is required to impose countervailing
duties on merchandise that is produced with the benefit of
government subsidies. A foreign government’s sale of
goods to a company within a particular industry for less
than adequate remuneration is a common type of subsidy.
See 19 U.S.C. § 1677(5)(E)(iv). Such a subsidy exists
when (1) a foreign government provides a financial con-
tribution (2) to a specific industry and (3) a recipient
within the industry receives a benefit as a result of that
contribution. 19 U.S.C. § 1677(5)(B). Analyzing all three
factors is therefore necessary for Commerce to determine
whether a CVD must be imposed.
To analyze these factors, Commerce often requires in-
formation from the foreign government allegedly provid-
ing the subsidy. See Essar Steel Ltd. v. United States, 721
FINE FURNITURE v. US 9
F. Supp. 2d 1285, 1296-97 (Ct. Int’l Trade 2010), rev’d on
other grounds by 678 F.3d 1268 (Fed. Cir. 2012). In
particular, Commerce asks the foreign government to
provide information regarding whether that government
provides a financial contribution and whether that contri-
bution is specific to an industry—the first two factors of
the statutory requirement for a subsidy. Commerce
requests this information from foreign governments
because, normally, those governments “are in the best
position to provide information regarding the administra-
tion of their alleged subsidy programs, including eligible
recipients.” Id. at 1297.
Additionally, Commerce sometimes requires infor-
mation from a foreign government to determine whether a
particular respondent received a benefit from an alleged
subsidy—the statute’s third criterion. In determining the
amount of benefit a particular respondent receives, Com-
merce generally compares the price paid by the respond-
ent to the good’s market price, also known as a
benchmark. See 19 U.S.C. § 1677(5)(E); 19 C.F.R.
§ 351.511(a)(2)(i). However, in situations in which there
is no domestic or world market price for the allegedly
subsidized good, Commerce determines the benchmark by
analyzing whether the foreign government set the price
for the good pursuant to market principles—that is,
whether the good was provided to respondents for ade-
quate remuneration. See 19 C.F.R. § 351.511(a)(2)(ii). To
make this determination, Commerce requires information
from the foreign government about how it sets its price.
In instances in which Commerce lacks the necessary
information to make such a determination, the statute
instructs Commerce to use facts otherwise available. 19
U.S.C. § 1677e(a). Additionally, the statute permits
Commerce to apply an adverse inference in selecting from
among the facts otherwise available when an interested
party fails to cooperate by not acting to the best of its
10 FINE FURNITURE v. US
ability to comply with a request for information. 19
U.S.C. § 1677e(b).
a. The Statute
19 U.S.C. § 1677e(b) reads:
If the administering authority or the Commission
(as the case may be) finds that an interested party
has failed to cooperate by not acting to the best of
its ability to comply with a request for information
from the administering authority or the Commis-
sion, the administering authority or the Commis-
sion (as the case may be), in reaching the
applicable determination under this subtitle, may
use an inference that is adverse to the interests of
that party in selecting from among the facts oth-
erwise available.
The dispute in this case centers on the phrase “that
party,” which has its antecedent basis in the words “inter-
ested party.” Fine Furniture argues that Commerce went
beyond the statutory limitations of section 1677e by using
the government’s non-responsiveness to Commerce’s
questionnaire as justification to penalize Fine Furniture
with a subsidy rate based on adverse inferences. Fine
Furniture argues that this is improper because Fine
Furniture was fully cooperative in its own responses to
Commerce and had no control over the government.
Further, Fine Furniture argues that the statute is unam-
biguous in its protection of cooperative parties.
The Government responds that the statutory grant of
authority set forth in 19 U.S.C. § 1677e(b) is clear and
unambiguous. The Government argues that there is no
support in the statute for Fine Furniture’s assertion that
the authorization to apply adverse inferences cannot
extend to instances when doing so affects a cooperating
respondent. Thus, the Government argues that Com-
FINE FURNITURE v. US 11
merce’s actions were consistent with the plain meaning of
the statute and should be upheld.
We agree with the Government and find that 19
U.S.C. § 1677e(b) is clear and unambiguous in its authori-
zation of the use of adverse inferences to substitute for
information not provided by an interested party. The
statute defines an “interested party” to include “the
government of a country in which [the subject] merchan-
dise is produced or manufactured.” 19 U.S.C.
§ 1677(9)(B). Thus, on its face, the statute authorizes
Commerce to apply adverse inferences when an interested
party, including a foreign government, fails to provide
requested information. Although Fine Furniture argues
that this authorization cannot extend to instances when
doing so affects a cooperating respondent, there is no
support for this exception in the statute’s text.
Because the statute is unambiguous, there is no need
to look to the second prong of the Chevron analysis. We
turn next to the propriety of Commerce’s application of
adverse inferences on these facts in light of 19 U.S.C.
§ 1677e(b).
b. Application of the Statute
Fine Furniture argues that Commerce’s inferences
were not adverse to the government of China, but only to
Fine Furniture because Fine Furniture was the only party
who was actually impacted by the inferences. Absent a
finding that Fine Furniture was non-cooperative, Fine
Furniture argues that the application of an adverse
inference against Fine Furniture is improper under 19
U.S.C. § 1677e(b). Fine Furniture argues that the Court
of International Trade has recognized that a party is the
target of an adverse inference if it “suffers the effect” of
the adverse inferences. Appellant’s Br. 17-18 (quoting
SKF USA Inc. v. United States, 675 F. Supp. 2d 1264,
1277 (Ct. Int’l Trade 2009)).
12 FINE FURNITURE v. US
Fine Furniture further challenges Commerce’s meth-
od for filling the gap in information left by the govern-
ment of China’s lack of response by selecting the highest
electricity rates to calculate the benchmark used to de-
termine the benefit received by Fine Furniture from the
inferred subsidy. Fine Furniture argues that Commerce’s
adoption of an adverse benchmark, which was applied to
Fine Furniture’s benefit calculation, is a direct application
of adverse inferences against a cooperative party. Accord-
ing to Fine Furniture, it provided Commerce with all of
the information necessary to determine the appropriate
electricity rate without applying an adverse inference.
Even if there were gaps in the record, without a separate
determination that Fine Furniture failed to cooperate to
the best of its ability, Fine Furniture argues that Com-
merce cannot use adverse facts to fill in gaps if doing so
will negatively impact Fine Furniture.
The Government defends Commerce’s application of
adverse inferences, arguing that Commerce properly
determined that the government of China’s refusal to
answer questions about the Electricity Program justified
the use of adverse inferences to substitute for the missing
information. The Government argues that using adverse
inferences to substitute for information that the govern-
ment of China refused to provide was not an application
of adverse inferences against Fine Furniture, but rather it
was an application of adverse inferences in ascertaining
the information that the government of China—a non-
cooperating party—did not provide.
The Government points out that Commerce used re-
spondents’ actual reported data to measure the benefit
received in order to ensure that the adverse inference was
applied only with regard to the missing information and
not the information supplied by Fine Furniture. There-
fore, the Government argues, by not substituting any
adverse inferences for the facts provided by Fine Furni-
FINE FURNITURE v. US 13
ture, Commerce did not apply adverse inferences against
Fine Furniture.
The Government argues that Fine Furniture mis-
characterizes the information gap Commerce needed to
fill. The missing information was not simply the data
points of electricity rates, but rather how those rates were
determined. Absent information from the government of
China, Commerce did not know what the list of electricity
rates for each province reflected—were they a fair market
value or a government subsidy?
Because the government of China refused to provide
information as to how the electricity process and costs
varied among the various provinces that supplied electric-
ity to industries within their areas, Commerce relied on
an adverse inference to determine that Fine Furniture
received a countervailable subsidy. Fine Furniture, 865
F. Supp. 2d at 1260. Commerce also noted that the gov-
ernment of China did not provide the data sufficient to
establish the benchmark price for electricity, leading
Commerce to apply an adverse inference by choosing the
highest applicable electricity rates for the user categories
reported by the mandatory respondents to calculate the
benchmark. Id. at 1261-62. This selection is made under
the assumption that this price is the least likely to be
subsidized and is consistent with what Commerce has
done in other administrative determinations in which the
government of China refused to respond to portions of
Commerce’s questionnaires.
The Government further argues that Fine Furniture
misreads the SKF decision. The Government distin-
guishes SKF, pointing out that in SKF Commerce itself
“openly acknowledged that it chose the [adverse] rate
because that rate was adverse to” the cooperating plain-
tiff. SKF, 675 F. Supp. 2d at 1276. Here Commerce takes
the position that adverse inferences were not applied
14 FINE FURNITURE v. US
against any of the information provided by Fine Furni-
ture.
3. Analysis
The record supports the Government’s position. In
reaching its decision, Commerce explained that the gov-
ernment of China failed to cooperate by not acting to the
best of its ability to comply with Commerce’s request for
information because it did not respond by the deadline
dates, nor did it adequately explain why it was unable to
provide the requested information. Because the govern-
ment of China did not provide the requested information,
Commerce was forced to substitute for the missing infor-
mation and did so in accordance with 19 U.S.C.
§ 1677e(b).
Commerce did not apply adverse inferences to substi-
tute for any information that was actually submitted by
the cooperating respondents, such as the actual rate Fine
Furniture reported paying for electricity. Commerce used
this rate to determine the amount of benefit that Fine
Furniture received under the Electricity Program.
Further, Commerce’s actions are entirely consistent
with this court’s precedent. Specifically, in KYD, Inc. v.
United States, 607 F.3d 760, 768 (Fed. Cir. 2010), this
court found that a collateral impact on a cooperating
party does not render the application of adverse infer-
ences in a CVD investigation improper. KYD was closely
affiliated with King Pac, the non-cooperating party: KYD
is an importer of bags made by King Pac. Id. at 761. This
court held that an adverse inference imposed due to King
Pac’s failure to cooperate that collaterally impacts KYD
was proper and has the potential to encourage coopera-
tion from King Pac, or it would at least encourage import-
ers not to deal with King Pac and other non-cooperating
exporters. Id. at 768.
FINE FURNITURE v. US 15
Conversely, in the case that Fine Furniture relies up-
on, Changzhou Wujin Fine Chemical Factory Co., Ltd. v.
United States, 701 F.3d 1367, 1370 (Fed. Cir. 2012), the
parties were unrelated, unaffiliated companies. In this
case, we held that even though the hypothetical rate,
determined using adverse inferences, was not directly
applied to cooperating respondents, the cooperating
respondents were the only entities impacted by the recal-
culated rate. Id. at 1378. At least in part due to the
relationship among the parties, we held applying this
adverse rate to cooperating respondents was improper,
since a remedy reaching a cooperating party would have
no impact on the non-cooperating parties. Id.
In the present case, Fine Furniture is a company
within the country of China, benefitting directly from
subsidies the government of China may be providing,
even if not intending to use such subsidy for anticompeti-
tive purposes. Therefore, a remedy that collaterally
reaches Fine Furniture has the potential to encourage the
government of China to cooperate so as not to hurt its
overall industry. Unlike in SKF, Commerce in this case
did not choose the adverse rate to punish the cooperating
plaintiff, but rather to provide a remedy for the govern-
ment of China’s failure to cooperate. SKF, 675
F. Supp. 2d at 1276.
The purpose of 19 U.S.C. § 1677e(b), according to the
URAA Statement of Administrative Action (“SAA”), which
“shall be regarded as an authoritative expression by the
United States concerning the interpretation and applica-
tion of the [URAA],” 19 U.S.C. § 3512(d), is to encourage
future cooperation by “ensur[ing] that the party does not
obtain a more favorable result by failing to cooperate than
if it had cooperated fully.” H.R. Doc. No. 103-316, vol. 1,
at 870, reprinted in 1994 U.S.C.C.A.N. 4040. Additional-
ly, by authorizing Commerce to provide a reasonable
estimate based on the best facts available, accompanied
by a reasonable adverse inference used in place of missing
16 FINE FURNITURE v. US
information, this statute provides a mechanism for reme-
dying sales at less than fair value to aid in the protection
of U.S. industry.
Although it is unfortunate that cooperating respond-
ents may be subject to collateral effects due to the adverse
inferences applied when a government fails to respond to
Commerce’s questions, this result is not contrary to the
statute or its purposes, nor is it inconsistent with this
court’s precedent.
CONCLUSION
We affirm the Court of International Trade’s Final
Determination.
AFFIRMED