Jiangsu Senmao Bamboo & Wood Indus. Co. v. United States ( 2018 )

Slip Op. 18-67
UNITED STATES COURT OF INTERNATIONAL TRADE
JIANGSU SENMAO BAMBOO AND
WOOD INDUSTRY CO., LTD., et al.,
Plaintiffs,
and
GUANGDONG YIHUA TIMBER
INDUSTRY CO., LTD., et al.,
Plaintiff-Intervenors, Before: Timothy C. Stanceu, Chief Judge
v. Consol. Court No. 15-00225
UNITED STATES,
Defendant,
and
COALITION FOR AMERICAN
HARDWOOD PARITY, et al.,
Defendant-Intervenors.
OPINION AND ORDER
[Remanding to the agency a determination in an administrative review of an antidumping duty
order of certain multilayered wood flooring from the People’s Republic of China]
Dated:June 8, 2018
Jeffrey S. Neeley, Husch Blackwell LLP, of Washington, D.C., argued for plaintiffs and
defendant-intervenors Jiangsu Senmao Bamboo and Wood Industry Co., Ltd., Baishan Huafeng
Wooden Product Co., Ltd., Changbai Mountain Development and Protection Zone Hongtu Wood
Industrial Co., Ltd., Chinafloors Timber (China) Co., Ltd., Dalian Kemian Wood Industry Co.,
Ltd., Dalian Qianqiu Wooden Product Co., Ltd., Dasso Industrial Group Co., Ltd., Dongtai Fuan
Universal Dynamics, LLC., Dun Hua Sen Tai Wood Co., Ltd., Dunhua City Wanrong Wood
Industry Co., Ltd., Fusong Jinlong Wooden Group Co., Ltd., Fusong Jinqiu Wooden Product
Co., Ltd., Fusong Qianqiu Wooden Product Co., Ltd., Guangzhou Panyu Kangda Board Co.,
Ltd., Hunchun Forest Wolf Wooden Industry Co., Ltd., Jiafeng Wood (Suzhou) Co., Ltd.,
Consol. Court No. 15-00225 Page 2
Jiangsu Guyu International Trading Co., Ltd., Jiangsu Kentier Wood Co., Ltd., Jiangsu Mingle
Flooring Co., Ltd., Jiangsu Simba Flooring Co., Ltd., Jiashan HuiJiaLe Decoration Material Co.,
Ltd., Jilin Forest Industry Jinqiao Flooring Group Co., Ltd., Kemian Wood Industry (Kunshan)
Co., Ltd., Nanjing Minglin Wooden Industry Co., Ltd., Puli Trading Limited, Shanghai Lizhong
Wood Products Co., Ltd./The Lizhong Wood Industry Limited Company of Shanghai/Linyi
Youyou Wood Co., Ltd., Suzhou Dongda Wood Co., Ltd., Tongxiang Jisheng Import And
Export Co., Ltd., Zhejiang Fudeli Timber Industry Co., Ltd., and Zhejiang Shiyou Timber Co.,
Ltd.
Gregory S. Menegaz, deKieffer & Horgan, PLLC, of Washington, D.C., for plaintiffs
Dunhua City Jisen Wood Industry Co., Ltd. and Yingyi-Nature (Kunshan) Wood Industry Co.,
Ltd. With him on the brief were Alexandra H. Salzman, James K. Horgan, and Judith L.
Holdsworth.
Jill A. Cramer, Mowry & Grimson, PLLC, of Washington, D.C., argued for plaintiff,
plaintiff-intervenor, and defendant-intervenor Fine Furniture (Shanghai) Limited. With her on
the brief were Kristin H. Mowry, Jeffrey S. Grimson, and Sarah M. Wyss.
Harold D. Kaplan, Hogan Lovells US LLP, of Washington, D.C., for plaintiffs
Armstrong Wood Products (Kunshan) Co., Ltd. and Armstrong Flooring, Inc. With him on the
brief was Craig A. Lewis.
Mark R. Ludwikowski, Clark Hill PLC, of Washington, D.C., for plaintiff and
plaintiff-intervenor Lumber Liquidators Services, LLC.
Ronald M. Wisla, Kutak Rock LLP, of Washington, D.C., argued for plaintiffs,
plaintiff-intervenors, and defendant-intervenors BR Custom Surface, CDC Distributors, Inc.,
CLBY Inc. doing business as D&M Flooring, Custom Wholesale Floors, Inc., Dalian Penghong
Floor Products Co., Ltd., Doma Source LLC, Dunhua City Hongyuan Wooden Products Co.,
Ltd., Galleher Corporation, HaiLin LinJing Wooden Products, Ltd., Hangzhou Hanje Tec Co.,
Ltd., Hangzhou Zhengtian Industrial Co., Ltd., Huzhou Chenghang Wood Co., Ltd., Huzhou
Fulinmen Imp. & Exp. Co., Ltd., Metropolitan Hardwood Floors, Inc., Mudanjiang Bosen Wood
Industry Co., Ltd., Nakahiro Jyou Sei Furniture (Dalian) Co., Ltd., Pinnacle Interior Elements,
Ltd., Real Wood Floors, LLC, Shanghai Eswell Timber Co., Ltd., Shanghai Shenlin Corporation,
Shenyang Haobainian Wooden Co., Ltd., Shenzhenshi Huanwei Woods Co., Ltd., Swiff Train
Co., Timeless Design Import LCC, V.A.L. Floors, Inc., Wego Chemical & Mineral Corp.,
Xuzhou Shenghe Wood Co., Ltd., Zhejiang Dadongwu Greenhome Wood Co., Ltd., Zhejiang
Fuma Warm Technology Co., Ltd., Zhejiang Longsen Lumbering Co., Ltd., and Zhejiang
Tianzhen Bamboo & Wood Development Co., Ltd. With him on the brief was Lizbeth R.
Levinson.
John R. Magnus, Tradewins LLC, of Washington, D.C., for plaintiff, plaintiff-intervenor,
and defendant-intervenor Old Master Products, Inc. With him on the brief was Sheridan S.
McKinney.
Consol. Court No. 15-00225 Page 3
Jonathan M. Zielinski, Cassidy Levy Kent (USA) LLP, of Washington, D.C., for
plaintiff-intervenor Guangdong Yihua Timber Industry Co., Ltd. With him on the brief was
Thomas M. Beline.
Jeffrey S. Levin, Levin Trade Law, P.C., of Bethesda, MD, for plaintiff and
defendant-intervenor Coalition for American Hardwood Parity.
Tara K. Hogan, Commercial Litigation Branch, Civil Division, U.S. Department of
Justice, of Washington D.C., argued for defendant United States. With her on the brief were
Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director,
and Claudia Burke, Assistant Director. Of counsel was Mercedes C. Morno, Office of the Chief
Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce.
Stanceu, Chief Judge: In this consolidated action, numerous parties contest the final
determination the International Trade Administration, U.S. Department of Commerce
(“Commerce” or the “Department”), issued to conclude the second periodic administrative
review of an antidumping duty order on multilayered wood flooring from the People’s Republic
of China (“China” or the “PRC”). Concluding that the contested determination is contrary to law
in certain respects, the court remands the determination to Commerce for reconsideration and
correction as appropriate.
I. BACKGROUND
A. The Contested Decision
The determination contested in this litigation (the “Final Results”) is Multilayered Wood
Flooring From the People’s Republic of China: Final Results of Antidumping Duty
Administrative Review and Final Results of New Shipper Review; 2012-2013, 80 Fed.
Reg. 41,476 (Int’l Trade Admin. July 15, 2015) (“Final Results”).1 Incorporated by reference in
1
After issuing the decision contested in this action, Commerce published two corrections,
neither of which involved matters relevant to this litigation. See Multilayered Wood Flooring
From the People’s Republic of China: Correction to the Final Results of Antidumping Duty
Administrative Review, 80 Fed. Reg. 49,986 (Int’l Trade Admin. Aug. 18, 2015); Multilayered
Wood Flooring From the People's Republic of China: Correction to the Final Results of
(continued . . .)
Consol. Court No. 15-00225 Page 4
the Final Results is the Department’s issues and decision memorandum (“Final Issues and
Decision Memorandum”). Issues and Decision Mem. for the Final Results of 2012-2013
Antidumping Duty Administrative Review of Multilayered Wood Floor from the People’s
Republic of China (Int’l Trade Admin. July 8, 2015) (P.R. Doc. 418), available at
https://enforcement.trade.gov/frn/summary/prc/2015-17368-1.pdf (last visited June 5, 2018)
(“Final I&D Mem.”).
B. Proceedings before Commerce
Commerce issued the antidumping duty order on multilayered wood flooring from the
PRC (the “Order”) in late 2011. Multilayered Wood Flooring from the People’s Republic of
China: Amended Final Determination of Sales at Less Than Fair Value and Antidumping Duty
Order, 76 Fed. Reg. 76,690 (Int’l Trade Admin. Dec. 8, 2011). Commerce identified the
“subject merchandise,” i.e., the merchandise that is subject to the Order, as “multilayered wood
flooring” (“MLWF”) but stated that this merchandise “is often referred to by other terms, e.g.,
‘engineered wood flooring’ or ‘plywood flooring.’” Id. at 76,690. The Order defines such
flooring generally as “composed of an assembly of two or more layers or plies of wood
veneer(s)” in which “[t]he several layers, along with the core, are glued or otherwise bonded
together to form a final assembled product.” Id. (footnote omitted).
In December 2013, Commerce announced the opportunity for interested parties to request
a review of the Order. Antidumping or Countervailing Duty Order, Finding, or Suspended
Investigation; Opportunity to Request Administrative Review, 78 Fed. Reg. 72,636 (Int’l Trade
Admin. Dec. 3, 2013). The Coalition for American Hardwood Parity (the “Coalition”), the
(. . . continued)
Antidumping Duty Administrative Review, 80 Fed. Reg. 52,447 (Int’l Trade Admin.
Aug. 31, 2015).
Consol. Court No. 15-00225 Page 5
petitioner in the antidumping duty investigation culminating in the Order (and a plaintiff and
defendant-intervenor in this litigation), requested that Commerce review 91 Chinese
exporter/producers of the subject merchandise, and 45 additional interested parties also requested
a review. See Multilayered Wood Flooring From the People’s Republic of China: Preliminary
Results of Antidumping Duty Administrative Review; 2012-2013, 80 Fed. Reg. 1,388 (Int’l Trade
Admin. Jan. 9, 2015) (“Prelim. Results”). Commerce initiated the second periodic
administrative review of the Order (“second review”) on February 3, 2014, covering the period
of December 1, 2012 through November 30, 2013 (the “period of review” or “POR”). Initiation
of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in
Part, 79 Fed. Reg. 6,147 (Int’l Trade Admin. Feb. 3, 2014).
On April 21, 2014, Commerce determined it impracticable to examine individually all of
the respondents subject to the review and, therefore, selected the two largest exporters during the
POR, Dalian Dajen Wood Co., Ltd. (“Dalian Dajen”) and Zhejiang Layo Wood Industry Co. Ltd.
(“Layo Wood”), as “mandatory respondents,” i.e., exporter/producers whose sales of subject
merchandise during the POR Commerce would examine individually and to whom Commerce
intended to assign individual weighted-average dumping duty margins. See Selection of
Respondents for the 2012-2013 Administrative Review of the Antidumping Duty Order on
Multilayered Wood Flooring from the People’s Republic of China at 3-7 (Int’l Trade Admin.
Apr. 21, 2014) (P.R. Doc. 161) (“Respondent Selection Mem.”). Because Layo Wood was
excluded from the Order as a result of litigation stemming from the final determination that
culminated in issuance of the Order, see Baroque Timber Industries (Zhongshan) Company, Ltd.
v. United States, 38 CIT __, 971 F. Supp. 2d 1333 (2014), Commerce substituted for Layo Wood
Consol. Court No. 15-00225 Page 6
the next largest exporter by volume, Jiangsu Senmao Bamboo and Wood Industry Co., Ltd.
(“Senmao”), as the second mandatory respondent.
Commerce published the preliminary results of the second review (the “Preliminary
Results”) on January 9, 2015. Prelim. Results, 80 Fed. Reg. at 1,388. Commerce incorporated
by reference a “Decision Memorandum for Preliminary Results.” Id. at 1,388 n.1; see Decision
Memorandum for Preliminary Results of Antidumping Duty Administrative Review: Multilayered
Wood Flooring from the People’s Republic of China (Int’l Trade Admin. Dec. 31, 2014) (P.R.
Doc. 343), available at https://enforcement.trade.gov/frn/summary/prc/2015-00197-1.pdf (last
visited June 5, 2018) (“Prelim. I&D Mem.”). For the Preliminary Results, Commerce calculated
weighted-average dumping margins of zero for Dalian Dajen and 18.27% for Senmao. Prelim.
Results, 80 Fed. Reg. at 1,389. Commerce preliminarily assigned the 18.27% rate calculated for
Senmao to the “separate-rate” respondents, i.e., those exporter/producers of the subject
merchandise whom Commerce was not examining individually but who could establish
independence from the control of the PRC government. See id. Under the Department’s
practice, the separate-rate respondents would qualify for a rate different than the rate Commerce
would assign to exporters/producers who had failed to establish independence from government
control.
In the Final Results, published on July 15, 2015, Commerce assigned weighted-average
dumping margins of zero to Dalian Dajen and 13.74% to Senmao. Final Results, 80 Fed. Reg.
at 41,478. Commerce assigned the 13.74% rate calculated for Senmao to the separate-rate
respondents. Id.
Consol. Court No. 15-00225 Page 7
C. The Parties to this Consolidated Action
Eight cases contesting the Final Results, commenced between July 28, 2015 and
August 14, 2015, were consolidated by order dated January 15, 2016.2 Order (Jan. 15, 2016),
ECF No. 56.
The following parties and groups of parties are plaintiffs in this consolidated action:
(1) the Coalition, an association of U.S. producers of multilayered wood flooring and a
participant in the second review; (2) Dunhua City Jisen Wood Industry Co., Ltd. (“Jisen Wood”)
and Yingyi-Nature (Kunshan) Wood Industry Co., Ltd. (“Yingyi-Nature”), two separate-rate
respondents; (3) Old Master Products, Inc. (“Old Master”), a U.S. importer of subject
merchandise; (4) Armstrong Wood Products (Kunshan) Co., Ltd., a producer and exporter of
subject merchandise (that was previously imported by Armstrong World Industries, Inc.), and
Armstrong Flooring, Inc. (together, “Armstrong”), the successor-in-interest to Armstrong World
Industries, Inc.;3 (5) the “Penghong Plaintiffs,” a group that includes separate-rate respondents
and importers of subject merchandise;4 (6) Fine Furniture (Shanghai) Limited (“Fine Furniture”),
2
Under Consolidated Court No. 15-00225 are the following eight cases: Dunhua City
Jisen Wood Industry Co. v. United States, Court No. 15-00204; Fine Furniture (Shanghai) Ltd. v.
United States, Court No. 15-00210; Jiangsu Senmao Bamboo and Wood Industry Co. v. United
States, Court No. 15-00225; Old Master Products, Inc. v. United States, Court No. 15-00230;
Armstrong Wood Products (Kunshan) Co. v. United States, Court No. 15-00234; Dalian
Penghong Floor Products Co. v. United States, Court No. 15-00236; Lumber Liquidators
Services, LLC v. United States, Court No. 15-00237; and Coalition for American Hardwood
Parity v. United States, Court No. 15-00238.
3
Armstrong Flooring, Inc. was substituted as a plaintiff for Armstrong World Industries,
Inc. by court order on May 16, 2016. See Order (May 16, 2016), ECF No. 87; see also Mot. for
Substitution of Armstrong Flooring, Inc. for Armstrong World Industries, Inc. as a Consol. Pl.
(Apr. 15, 2016), ECF No. 80.
4
The “Penghong Plaintiffs” are BR Custom Surface, CDC Distributors, Inc., CLBY Inc.
doing business as D&M Flooring, Custom Wholesale Floors, Inc., Dalian Penghong Floor
(continued . . .)
Consol. Court No. 15-00225 Page 8
a separate-rate respondent;5 (7) Lumber Liquidators Services, LLC (“Lumber Liquidators”), a
U.S. importer of subject merchandise; and (8) the “Senmao Plaintiffs,” which include the
mandatory respondent Senmao and various separate-rate respondents.6 Guangdong Yihua
(. . . continued)
Products Co., Ltd., Doma Source LLC, Dunhua City Hongyuan Wooden Products Co., Ltd.,
Galleher Corporation, HaiLin LinJing Wooden Products, Ltd., Hangzhou Hanje Tec Co., Ltd.,
Hangzhou Zhengtian Industrial Co., Ltd., Huzhou Chenghang Wood Co., Ltd., Huzhou
Fulinmen Imp. & Exp. Co., Ltd., Metropolitan Hardwood Floors, Inc., Mudanjiang Bosen Wood
Industry Co., Ltd., Nakahiro Jyou Sei Furniture (Dalian) Co., Ltd., Pinnacle Interior Elements,
Ltd., Real Wood Floors, LLC, Shanghai Eswell Timber Co., Ltd., Shanghai Shenlin Corporation,
Shenyang Haobainian Wooden Co., Ltd., Shenzhenshi Huanwei Woods Co., Ltd., Swiff Train
Co., Timeless Design Import LCC, V.A.L. Floors, Inc., Wego Chemical & Mineral Corp.,
Xuzhou Shenghe Wood Co., Ltd., Zhejiang Dadongwu Greenhome Wood Co., Ltd., Zhejiang
Fuma Warm Technology Co., Ltd., Zhejiang Longsen Lumbering Co., Ltd., and Zhejiang
Tianzhen Bamboo & Wood Development Co., Ltd.
5
Fine Furniture (Shanghai) Limited (“Fine Furniture”) and Yingyi-Nature (Kinshan)
Wood Industry Co., Ltd. (“Yingyi-Nature”) withdrew from the complaint filed in Jiangsu
Senmao Bamboo and Wood Industry Co. v. United States, Court No. 15-00225, see Order
(Aug. 14, 2015), ECF No. 14, because counsel erroneously included Fine Furniture and
Yingyi-Nature in that complaint despite the fact that the two separate-rate respondents “had filed
separate complaints for this Commerce Department review through other counsel.” Consent
Mot. to Withdraw Compl. of Two Pls. 2 (Aug. 13, 2015), ECF No. 11. Despite their withdrawal
as plaintiffs from Jiangsu Senmao Bamboo and Wood Industry Co. v. United States, Court
No. 15-00225 (in which Fine Furniture later intervened as a plaintiff-intervenor, see Order
(Aug. 26, 2015), ECF No. 25), Fine Furniture remains a plaintiff in Fine Furniture (Shanghai)
Limited v. United States, Court No. 15-00210 and Yingyi-Nature remains a plaintiff in Dunhua
City Jisen Wood Industry Co. v. United States, Court No. 15-00204.
6
The “Senmao Plaintiffs” are Jiangsu Senmao Bamboo and Wood Industry Co., Ltd.
(“Senmao”), Baishan Huafeng Wooden Product Co., Ltd., Changbai Mountain Development and
Protection Zone Hongtu Wood Industrial Co., Ltd., Chinafloors Timber (China) Co., Ltd., Dalian
Kemian Wood Industry Co., Ltd., Dalian Qianqiu Wooden Product Co., Ltd., Dasso Industrial
Group Co., Ltd., Dongtai Fuan Universal Dynamics, LLC., Dun Hua Sen Tai Wood Co., Ltd.,
Dunhua City Wanrong Wood Industry Co., Ltd., Fusong Jinlong Wooden Group Co., Ltd.,
Fusong Jinqiu Wooden Product Co., Ltd., Fusong Qianqiu Wooden Product Co., Ltd.,
Guangzhou Panyu Kangda Board Co., Ltd., Hunchun Forest Wolf Wooden Industry Co., Ltd.,
Jiafeng Wood (Suzhou) Co., Ltd., Jiangsu Guyu International Trading Co., Ltd., Jiangsu Kentier
Wood Co., Ltd., Jiangsu Mingle Flooring Co., Ltd., Jiangsu Simba Flooring Co., Ltd., Jiashan
HuiJiaLe Decoration Material Co., Ltd., Jilin Forest Industry Jinqiao Flooring Group Co., Ltd.,
Kemian Wood Industry (Kunshan) Co., Ltd., Nanjing Minglin Wooden Industry Co., Ltd., Puli
(continued . . .)
Consol. Court No. 15-00225 Page 9
Timber Industry Co., Ltd. (“Yihua”), a separate-rate respondent, is a plaintiff-intervenor in this
consolidated action. Before the court are motions for judgment on the agency record filed by
these plaintiffs and Yihua, which are opposed by defendant United States.
II. DISCUSSION
A. Jurisdiction and Standard of Review
The court exercises jurisdiction according to section 201 of the Customs Courts Act
of 1980, 28 U.S.C. § 1581(c), under which the court reviews actions commenced under
section 516A of the Tariff Act of 1930 (the “Tariff Act”), as amended, 19 U.S.C. § 1516a,
including an action contesting a final determination concluding an administrative review of an
antidumping duty order. See 19 U.S.C. § 1516a(a)(2)(B)(iii).7 In reviewing a final
determination, the court “shall hold unlawful any determination, finding, or conclusion found . . .
to be unsupported by substantial evidence on the record, or otherwise not in accordance with
law.” Id. § 1516a(b)(1)(B)(i).
B. Periodic Review of an Antidumping Duty Order on Merchandise Imported from a Nonmarket
Economy Country
When Commerce conducts, upon a request or requests, a periodic review of an
antidumping duty order, Commerce is directed by the statute to “review and determine . . . the
amount of any antidumping duty,” 19 U.S.C. § 1675(a)(1)(B), and in doing so is directed to
determine “the normal value and export price (or constructed export price) of each entry of the
(. . . continued)
Trading Limited, Shanghai Lizhong Wood Products Co., Ltd./The Lizhong Wood Industry
Limited Company of Shanghai/Linyi Youyou Wood Co., Ltd., Suzhou Dongda Wood Co., Ltd.,
Tongxiang Jisheng Import And Export Co., Ltd., Zhejiang Fudeli Timber Industry Co., Ltd., and
Zhejiang Shiyou Timber Co., Ltd.
7
Unless otherwise noted, all citations to the United States Code herein are to the 2012
edition. All citations to the Code of Federal Regulations herein are to the 2015 edition.
Consol. Court No. 15-00225 Page 10
subject merchandise, and . . . the dumping margin for each such entry.” Id. § 1675(a)(2)(A). A
“dumping margin” is “the amount by which the normal value exceeds the export price[8] or
constructed export price[9] of the subject merchandise.” Id. § 1677(35)(A).
Under the antidumping duty statute, the normal value of subject merchandise typically
will be determined based on prices in sales in the exporting country (the “home market”) of a
product that is “like” the subject merchandise (the “foreign like product,” see 19 U.S.C.
§ 1677(16)). 19 U.S.C. § 1677b(a)(1). When the exporting country is a nonmarket economy
(“NME”) country, Commerce, as provided in section 773(c) of the Tariff Act, 19 U.S.C.
§ 1677b(c), as a general matter determines the normal value of subject merchandise “on the basis
of the value of the factors of production utilized in producing the merchandise” with additions
for “general expenses and profit plus the cost of containers, coverings, and other expenses.”10
19 U.S.C. § 1677b(c)(1). Among the “factors of production” are “(A) hours of labor required,
(B) quantities of raw materials employed, (C) amounts of energy and other utilities consumed,
and (D) representative capital cost, including depreciation.” 19 U.S.C. § 1677b(c)(3). The
8
“Export price” is determined from “the price at which the subject merchandise is first
sold (or agreed to be sold) before the date of importation by the producer or exporter of the
subject merchandise outside of the United States to an unaffiliated purchaser in the United States
or to an unaffiliated purchaser for exportation to the United States,” to which are made certain
adjustments. 19 U.S.C. § 1677a(a).
9
“Constructed export price” is determined from “the price at which the subject
merchandise is first sold (or agreed to be sold) in the United States before or after the date of
importation by or for the account of the producer or exporter of such merchandise or by a seller
affiliated with the producer or exporter, to a purchaser not affiliated with the producer or
exporter,” to which are made certain adjustments. 19 U.S.C. § 1677a(b).
10
The International Trade Administration, U.S. Department of Commerce, considers
China to be a “nonmarket economy [(‘NME’)] country,” a term defined in 19 U.S.C.
§ 1677(18)(A) as “any foreign country that the administering authority determines does not
operate on market principles of cost or pricing structures, so that sales of merchandise in such
country do not reflect the fair value of the merchandise.”
Consol. Court No. 15-00225 Page 11
statute provides that “the valuation of the factors of production shall be based on the best
available information regarding the values of such factors in a market economy country or
countries considered to be appropriate by the administering authority.” 19 U.S.C. § 1677b(c)(1).
The statute further provides that Commerce, “in valuing factors of production . . . shall utilize, to
the extent possible, the prices or costs of factors of production in one or more market economy
countries that are . . . at a level of economic development comparable to that of the nonmarket
economy country, and . . . significant producers of comparable merchandise.” 19 U.S.C.
§ 1677b(c)(4). In the second review, Commerce chose Thailand as the single “surrogate”
country for purposes of § 1677b(c). See Final I&D Mem. at 41.
C. Issues Presented for Judicial Review
Certain claims in this consolidated case, made by various plaintiffs, pertain to the
Department’s method of determining the normal value of the subject merchandise produced by
Senmao under the nonmarket economy country procedures of 19 U.S.C. § 1677b(c). The
Coalition challenges the Department’s surrogate value for Senmao’s plywood input, and
Senmao, Yingyi-Nature, and Jisen Wood, joined by Yihua and several other plaintiffs who were
respondents in the second review, challenge the Department’s surrogate value for “overlaying”
glue and challenge the method by which Commerce calculated a surrogate cost for foreign inland
freight. All plaintiffs, and Yihua, who were respondents in the second review challenge the
Department’s choice of record information for use in calculating categories of surrogate
expenses (factory overhead and selling, general, and administrative (“SG&A”) expenses) and
surrogate profit.11
11
Lumber Liquidators Services, LLC (“Lumber Liquidators”), an importer of subject
merchandise, made only this claim in its motion for judgment on the agency record. See
(continued . . .)
Consol. Court No. 15-00225 Page 12
Fine Furniture claims that the Department’s refusal to accept Fine Furniture as a
voluntary respondent was not in accordance with the law and was an abuse of discretion.
Yingyi-Nature, Jisen Wood, and Armstrong, joined by Fine Furniture, Old Master, the
Penghong Plaintiffs, and Yihua, claim that Commerce, in determining the export price for
Senmao’s subject merchandise, made an unlawful deduction from the price upon which export
price is determined (the “starting price”) to account for irrecoverable value-added tax (“VAT”)
imposed by the PRC.
Old Master claims that Commerce acted unlawfully in assigning to the separate-rate
respondents the rate of 13.74%, arguing that this rate, being based entirely on the individual
margin Commerce determined for one respondent, i.e., Senmao, is not a representative sample
and not reflective of commercial reality.
The Penghong Plaintiffs claim that the Department impermissibly allowed the Coalition
to amend its request for an administrative review of, and thereby obtain an administrative review
of, Shenyang Haobainian Wooden Co., Ltd. after the expiration of the applicable due date for
such requests. The court addresses the various claims below.12
D. Claims Challenging the Department’s Surrogate Values for Raw Materials
1. The Coalition’s Claim Challenging the Department’s Surrogate Value for Plywood
The Coalition claims that the surrogate value Commerce applied for plywood, one of the
raw materials Senmao used in producing the subject merchandise, was not based on the best
(. . . continued)
Pl.-Intervenor Lumber Liquidators Services, LLC Rule 56.2 Mem. in Supp. of Mot. for J. upon
the Agency R. 2-8 (Mar. 22, 2016), ECF No. 67.
12
The court does not consider certain claims that were included in complaints filed in this
consolidated case because these claims were not raised in the briefing required by USCIT
Rule 56.2 and therefore have been waived.
Consol. Court No. 15-00225 Page 13
available information on the record and therefore was unlawful. Pl.’s Rule 56.2 Mem. in Supp.
for J. upon the Agency R. 7 (Mar. 15, 2016), ECF No. 61-1 (“Coalition’s Br.”). Because
Commerce did not address in its Final Issues and Decision Memorandum a particular argument
the Coalition made in the brief it filed during the review, the court remands the surrogate value
determination to Commerce for reconsideration of this issue.
For the Final Results, Commerce used import value data obtained from the Global Trade
Atlas (“GTA”) pertaining to plywood imports in Thailand (Thai Harmonized Tariff Schedule
(“Thai HTS”) subheading 4412.32.00-000) to value Senmao’s plywood input. Final I&D Mem.
at 41. Commerce calculated an average unit value (“AUV”) for Thai imports from all countries
other than those Commerce inferred to have benefited from export subsidies (India, Indonesia,
South Korea and Thailand) and nonmarket economy countries (e.g., China and Vietnam). See
Prelim. I&D Mem. at 20. The six remaining source countries in the Thai import data were
Finland, Germany, Malaysia, Russia, Taiwan, and the United States (with Germany representing
a negligible quantity). The resulting AUV was the surrogate value Commerce applied to the
plywood input, which was $96.53 per cubic meter. Final I&D Mem. at 42.
The Coalition does not contest the Department’s decision to use import data from
Thailand, rather than data from another possible surrogate country, in determining the plywood
surrogate value. Nor does the Coalition contest the decision to exclude the data from certain
countries based on subsidization or status as a nonmarket economy country. The Coalition
confines its claim to how Commerce used the GTA Thai import data, arguing that Commerce
erred by not excluding from the AUV calculation the data on imports into Thailand from Taiwan
and the United States, the data for each of which the Coalition characterizes as having an
aberrationally low AUV. Coalition’s Br. 8. The AUVs for the imports from Taiwan and the
Consol. Court No. 15-00225 Page 14
United States were $13 per cubic meter and $23 per cubic meter, respectively. See Coalition for
American Hardwood Parity’s Case Br. at Ex. 6 (Feb. 10, 2015) (P.R. Doc. 392) (“Coalition’s
Case Br.”). The Coalition submits that an AUV of $370 per cubic meter would have resulted
were the imports from Taiwan and the United States excluded from the surrogate value
calculation. Coalition’s Br. 9.
The Coalition argues that the Thai AUV for plywood imports from Taiwan on a
per-kilogram basis is less than the Thai AUVs for imports of wood chips or particles and for
other sawdust, wood waste, and scrap. See Coalition’s Br. 9; see also Coalition’s Case Br. 14.
The Coalition argues, essentially, that wood chips or particles and other sawdust, wood waste,
and scrap should be valued less than plywood, such that the Thai AUV for plywood imports
from Taiwan must be aberrationally low. The Coalition asserts that the Thai AUV “for
non-coniferous wood scrap in the form of chips or particles” is $0.0243 per kilogram and that the
Thai AUV “for other sawdust, wood waste, and scrap” is $0.0805 per kg, while the Thai AUV
for plywood from Taiwan, on a per-kilogram basis, is $0.0204 per kg. Coalition’s Br. 9. The
Coalition calculated this latter figure by converting the AUV for Taiwan of $13 per cubic meter
to kilograms by applying a density factor of 638.96 kg/cubic meter.13 See Coalition’s Case Br.
at Ex. 1, Ex. 8.
Because the Coalition made its argument regarding chips, sawdust, waste, and scrap in its
case brief filed before Commerce, see Coalition’s Case Br. at 14, and because the data
supporting this argument potentially would detract from the Department’s finding that the Thai
13
The Coalition calculated the 638.96 kg/cubic meters factor by averaging the density of
four types of plywood placed on the record by Fine Furniture. See Coalition for American
Hardwood Parity’s Case Br. at Ex. 1 (Feb. 10, 2015) (P.R. Doc. 392); see also Administrative
Review of the Antidumping Duty Order on Multilayered Wood Flooring from the People’s
Republic of China: Surrogate Value Comments at Ex. SV-3 (Oct. 31, 2014) (P.R. Docs. 307-12).
Consol. Court No. 15-00225 Page 15
AUV of plywood imports from Taiwan was not aberrationally low, Commerce was obligated to
address this argument in its final determination. See SKF USA Inc. v. United States,
630 F.3d 1365, 1374 (Fed. Cir. 2011) (“Commerce also has an ‘obligation’ to address important
factors raised by comments from petitioners and respondents.” (citations omitted)). Commerce
did not do so. See Final I&D Mem. at 41-43. The court, therefore, directs Commerce to
reconsider its surrogate value for plywood in light of this argument. In doing so, the court
expresses no view on whether the data the Coalition cites necessarily require Commerce to find
that the Thai AUVs of plywood imports from Taiwan or the United States are aberrationally low.
At this time, the court will not rule on the other arguments the Coalition presented in contesting
the plywood surrogate value.
2. Claims Challenging the Department’s Surrogate Value for “Overlaying” Glue
Senmao reported using two types of glue in producing subject merchandise, “overlaying”
glue and “fixing” glue. Final I&D Mem. at 47. At issue in this litigation is the surrogate value
for overlaying glue, which Senmao used “to adhere the face veneer and plywood.” Id.
Commerce valued Senmao’s overlaying glue input using AUVs obtained from Thai GTA import
data pertaining to a subheading under Thai HTS heading 3506. Id. at 48.
Senmao, Yingyi-Nature, and Jisen Wood claim that Commerce erred in concluding that
Thai HTS heading 3506 includes within its scope Senmao’s overlaying glue. They claim that the
correct classification for this overlaying glue is under Thai HTS heading 3909 and, therefore,
that Commerce should have used instead the GTA data for a subheading under this heading to
value the overlaying glue. Mem. of Law in Supp. of Senmao Pls.’ Mot. for J. on the Agency R.
under USCIT Rule 56.2 34-38 (Mar. 15, 2016), ECF No. 63 (“Senmao’s Br.”); Pls. Dunhua City
Consol. Court No. 15-00225 Page 16
Jisen Wood Industry Co., Ltd. and Yingyi-Nature (Kunshan) Wood Industry Co., Ltd. Mem. in
Supp. of Mot. for J. on the Agency R. 6-7 (Mar. 22, 2016), ECF No. 69-2 (“Jisen Wood’s Br.”).
The two headings at issue are internationally harmonized, i.e., the relative scope of each
is determined according to the tariff classification rules and principles of the international
Harmonized Commodity Description and Coding System (“Harmonized System” or “HS”).
Because Thailand (like the United States and, essentially, all of its trading partners) is a member
of the Harmonized System Convention, the Thai HTS is structured according to the
nomenclature of the HS to the six-digit level. Classification of all goods under the Harmonized
System is governed by the “General Rules for the Interpretation of the Harmonized System,”
(also identified as the “General Interpretive Rules” or “GIRs”), which, like the HS nomenclature,
are effectuated in the tariff laws of all member countries of the Harmonized System Convention.
See Explanatory Notes to the Harmonized Commodity Description and Coding System, 5th ed.
(2012) (“ENs”) (setting forth and explaining the proper application of the GIRs to the HS
nomenclature).14 GIR 1 provides that “for legal purposes, classification shall be determined
according to the terms of the headings and any relative Section or Chapter Notes and, provided
such headings or Notes do not otherwise require, according to the following provisions,” i.e.,
GIRs 2 through 6.
Adjudicating Senmao’s and Yingyi-Nature and Jisen Wood’s claims requires the court to
consider whether the Department’s finding that the GTA data for Thai HTS heading 3506 were
the “best available information,” 19 U.S.C. § 1677b(c)(1), is supported by substantial evidence.
For the reasons discussed below, the court concludes that it was not. The record does not contain
14
All citations to the World Customs Organization’s Harmonized Commodity
Description and Coding System (“HS”) Explanatory Notes (“ENs”) contained herein are to the
2012 edition with the 2015 supplements.
Consol. Court No. 15-00225 Page 17
evidence to support a determination that the overlaying glue is properly classified under Thai
HTS heading 3506.
The terms of HS heading 35.06 (and, therefore, the terms of Thai HTS heading 3506 as
well) are as follows: “Prepared glues and other prepared adhesives, not elsewhere specified or
included; products suitable for use as glues or adhesives, put up for retail sale as glues or
adhesives, not exceeding a net weight of 1 kg.” EN 35.06. The terms of HS heading 39.09 (and
Thai HTS heading 3909) are: “Amino-resins, phenolic resins and polyurethanes, in primary
forms.” EN 39.09.
There is evidence on the record, in a questionnaire response submitted by Senmao,
indicating that the overlaying glue, as would be expected for an adhesive used in manufacturing,
was not put up for retail sale in containers of 1 kg. or less. See Multilayered Wood Flooring
from the People’s Republic of China: Supplemental Section A, C &D Response 8
(Sept. 29, 2014) (P.R. Doc. 295) (“Senmao’s Supp. QR”) (describing the overlaying glue as a
glue “only used for industrial purposes”). The questionnaire response also states that the
overlaying glue, as purchased by Senmao, is a finished glue rather than a powder resin that is
processed into finished glue. Id. at 9. Accordingly, by application of GIR 1, the glue could be
classified under Thai HTS 3506 only if it is “not elsewhere specified or included,” i.e., not
included in another heading of the nomenclature. The record lacks evidence to support a
conclusion that the overlaying glue is not included within the scope of another heading of the
Thai HTS.
Some finished glues are in the form of liquids and pastes (“primary forms”) and are
classified within HS Chapter 39 (“Plastics and articles thereof”):
In addition to substances necessary for “curing” (such as hardeners (cross-linking
agents) or other co-reactants and accelerators), these liquids or pastes may contain
Consol. Court No. 15-00225 Page 18
other materials such as plasticizers, stabilisers, fillers and colouring matter,
chiefly intended to give the finished products special physical properties or other
desirable characteristics. The liquids and pastes are used for casting, extrusion,
etc., and also as impregnating materials, surface coatings, bases for varnishes and
paints, or as glues, thickeners, flocculants, etc.
EN to Chapter 39 (emphasis added).
Within Chapter 39, Heading 39.09 (“Amino-resins, phenolic resins and polyurethanes, in
primary forms”) contains a six-digit, internationally-harmonized subheading, 3909.10 (“Urea
resins; thiourea resins”). In its surrogate value comments, Senmao identified Thai HTS
subheading 3909.10 as the correct six-digit subheading for its overlaying glue (specifically
identifying as the correct classification the country-specific subheading of HTS 3909.10.90-000).
See Multilayered Wood Flooring from the People’s Republic of China: Surrogate Value
Comments at Ex. 1 (Aug. 11, 2014) (P.R. Doc. 266-67) (“Senmao’s SV Comments”). HS
Subheading 3909.10 is one of three six-digit subheadings within HS heading 39.09 that pertain to
the amino-resins classifiable under the heading (the others being HS subheading 3909.20
(“Melamine resins”) and HS subheading 3909.30 (“Other amino-resins”)). The Explanatory
Note for heading 39.09 provides that:
These resins are used for the manufacture of transparent, translucent or brightly
coloured articles of plastics and are much used for moulding table and fancy ware
and electrical goods. In solutions and dispersions (emulsions and suspensions),
(whether or not modified with oils, fatty acids, alcohols, or other synthetic
polymers) they are employed as glues and as textile dressings, etc. (See the
General Explanatory Note to this Chapter [39], exclusion (b), for the classification
of glues.).
EN 39.09 (emphasis added). “Exclusion (b)” in the General Explanatory Note to Chapter 39
provides the critical distinction between the resin-based glues of HS heading 35.06 and those of
heading 39.09. It instructs that the following glues are excluded from Chapter 39:
Preparations specially formulated for use as adhesives, consisting of polymers or
blends thereof of headings 39.01 to 39.13 which, apart from any permitted
Consol. Court No. 15-00225 Page 19
additions to the products of this Chapter (fillers, plasticisers, solvents, pigments,
etc.) contain other added substances not falling in this Chapter (e.g., waxes, rosin
esters, unmodified natural shellac) . . . (heading 35.06).
EN Chapter 39, exclusion (b). There is evidence of record that the overlaying glue does not
contain added substances other than those considered permitted additions by the language of
exclusion (b), which identifies as including fillers, plasticizers, solvents, and pigments, but this
evidence is limited to Senmao’s surrogate value comments, which identified Thai HTS
subheading 3909.10 as the correct six-digit subheading for its overlaying glue. See Senmao’s SV
Comments at Ex. 1. On the other hand, the record contains no evidence that the overlaying glue
does contain any substance that would result in its classification outside of the scope of HS
heading 39.09 and, therefore, within the scope of HS heading 35.06, which as to bulk liquids and
pastes is limited to prepared glues “not elsewhere specified or included.” See EN 35.06. Despite
this complete lack of record evidence, Commerce determined Thai HTS heading 3506 to be the
correct tariff classification for Senmao’s overlaying glue. It did so without even making a
finding of fact that the overlaying glue contained a specific substance removing it from the scope
of Thai HTS heading 3909. Nor did Commerce conduct a proper analysis of the tariff
classification issue presented to it. Instead, Commerce based its determination that the Thai
GTA import data for a subheading of heading 3506 (specifically, Thai HTS
subheading 3506.91.90-00015) was the best available information on a series of findings—all of
which are irrelevant to the issue of which heading is the correct one—and erroneous conclusions
that violate established principles of tariff classification under the HS.
15
Senmao submits that Commerce erroneously identified Thai HTS
subheading 3506.91.00-000 as subheading “3506.91.90-000,” which Senmao alleges does not
exist. See Mem. of Law in Supp. of Senmao Pls.’ Mot. for J. on the Agency R. under USCIT
Rule 56.2 34 n.1 (Mar. 15, 2016), ECF No. 63 (“Senmao’s Br.”).
Consol. Court No. 15-00225 Page 20
Commerce began its analysis by reciting its familiar criteria for selecting surrogate
values. Final I&D Mem. at 47 (“[T]he Department’s preference is to use, where possible, a
range of publicly available, non-export, tax-exclusive, and product-specific prices for the
POR . . . .”). It then compared the two competing tariff classifications based on these four
criteria, stating that “[r]egarding HTS subheading 3909.10.90-000 and 3506.91.90-000, we find
that both represent a broad market average, are publicly available, are exclusive of taxes and
duties and are contemporaneous with the POR. However, based on the record before us, we do
not find the HTS classifications to be equally specific to the overlaying glue input reported by
Senmao.” Id. This was error. Because the GTA data are generated according to the
international HS nomenclature and the GIRs, which form the basis of Thailand’s tariff
classification scheme, a surrogate value determined according to a set of Thai import data can be
valid and reliable only if the data set is selected according to the established HS tariff
classification principles. Commerce itself seems to acknowledge this much, citing and relying in
part on a legal note within the international “harmonized commodity description and coding
system.” Id. In deciding which set of GTA data was the best available information, Commerce
first needed to determine which of the competing Thai HTS headings, 3506 or 3909, was correct
for the overlaying glue. Commerce overlooked this issue, addressing instead the question of
which of two subheadings, each of which was under a different heading, was more specific.
“Relative specificity” is the criterion applied by GIR 3(a), not GIR 1, and it is a fundamental
principle of tariff classification under the HS (if not the most fundamental principle) that resort
to GIR 3 may not be had unless the correct heading cannot be determined according to GIRs 1
and 2. GIR 3 applies only “[w]hen by application of Rule 2(b) or for any other reason, goods are
prima facie, classifiable under two or more headings.” GIR 3. Here, it is error to choose
Consol. Court No. 15-00225 Page 21
between the two headings based on relative specificity because the terms of both cannot, even
prima facie, describe the overlaying glue. By the terms of HS heading 35.06, the two headings
are mutually exclusive. See HS heading 35.06 (“Prepared glues and other prepared adhesives,
not elsewhere specified or included . . .” (emphasis added)). In short, Commerce erred in
choosing Thai HTS 3506 over Thai HTS 3909 without regarding the principle of GIR 1, and it
also erred in deciding upon a subheading (which it based on the impermissible criterion of
relative specificity) before deciding upon a heading, in violation of the GIRs in general and GIRs
1 and 6 in particular.
Commerce further erred in rejecting Thai HTS heading 3909 based in part on HS Note 6
to Chapter 39 as it relates to the term “in primary forms” as used in Thai HTS heading 3909 and
certain subheadings thereunder. See Final I&D Mem. at 47-48. As Commerce noted, “Legal
Note 6 of Chapter 39 of the harmonized commodity description and coding system provides that
‘primary forms’ includes liquids, pastes, and powders.” Id. at 47. The record evidence (i.e.,
Senmao’s response to the supplemental questionnaire) shows that the overlaying glue is not a
powder, but it does not show that it is not a liquid or paste, and, as a practical matter, it is hard to
imagine that it could function as overlaying glue if it were anything but a liquid or paste. See
Senmao’s Supp. QR at 9. Finding as a fact that “[t]o the extent that Senmao’s purchased
‘finished’ glue undergoes any further processing, it is minimal at best,” Commerce concludes
that this finding “weighs against finding that the overlaying glue reported by Senmao was in a
‘primary form.’”16 Final I&D Mem. at 48. This conclusion is misguided. The finding that
16
Commerce noted that Senmao “separately reported flour as an ‘additive to mix the
overlaying glue.’” Issues and Decision Mem. for the Final Results of 2012-2013 Antidumping
Duty Administrative Review of Multilayered Wood Floor from the People’s Republic of China 48
(Int’l Trade Admin. July 8, 2015) (P.R. Doc. 418), available at
(continued . . .)
Consol. Court No. 15-00225 Page 22
Senmao’s overlaying glue did not undergo significant processing after it was purchased in no
way supports a conclusion that this glue is excluded from the scope of Thai HTS heading 3909.
As Note 6 to Chapter 39 of the HS and the ENs make clear, a finished glue can be in a “primary
form” as a liquid or paste, and some finished glues are liquids or pastes that are correctly
classified under HS heading 39.09. Similarly misguided is the Department’s conclusion that
“Senmao expressly stated that it did not use powder resin in producing subject merchandise,
which is a subset of the products covered under HTS 3909.10.90-000” and “[a]s such,
HTS 3909.10.90-000 includes a product that Senmao expressly disclaims using (powder resin),
detracting from its specificity to Senmao’s input.” Id. The record evidence that Senmao did not
use a powder resin does not support a finding or conclusion that Senmao’s asserted classification
was incorrect.
In summary, there was no record evidence to support a valid finding that the overlaying
glue is excluded from the scope of Thai HTS heading 3909. As discussed above, Thai HTS
heading 3506 could be correct only if the overlaying glue is excluded from heading 3909. There
was some evidence that Thai HTS heading 3909 is the correct heading, albeit limited to
Senmao’s assertion to that effect. The finding that the Thai GTA data for a subheading of Thai
HTS heading 3506 were better “available information” than the data for a subheading of Thai
HTS heading 3909 is, therefore, entirely unsupported by record evidence.
Senmao argues that Commerce acted contrary to law when, at the urging of the petitioner,
it rejected Senmao’s case brief on the ground that the portions of the brief referencing the HS
Explanatory Notes constituted an untimely submission of new factual information. Senmao’s
(. . . continued)
https://enforcement.trade.gov/frn/summary/prc/2015-17368-1.pdf (last visited June 5, 2018)
(“Final I&D Mem.”).
Consol. Court No. 15-00225 Page 23
Br. 37; see Rejection of Submission of Case Brief Filed in the 2012-2013 Administrative Review
of the Antidumping Duty Order on Multilayered Wood Flooring from the People’s Republic of
China (Feb. 12, 2015) (P.R. Doc. 396) (“Dep’t’s Letter”). Senmao refiled its brief after deleting
the references Commerce rejected. Before the court, Senmao again relies upon the ENs in
support of its claim. See Senmao’s Br. 36-37. Defendant argues that the Department’s decision
to reject Senmao’s initial case brief was proper and, further, that because the ENs constitute
information that is not on the record, the court may not consider them in addressing Senmao’s
claim. See Def.’s Resp. to Mots. for J. upon the Admin. R. 24 (July 14, 2016), ECF No. 90
(“Def.’s Br.”). According to defendant, because this is not a “customs classification case,” the
court’s review of the Department’s determination is “limited to the record developed before
Commerce.” See id.
Commerce was wrong to reject the case brief with the EN references, and defendant is
wrong in arguing that the court should not consider the ENs in adjudicating the claim. The
Department’s regulation, 19 C.F.R. § 351.102(b)(21), defines “factual information” to include
several categories of “evidence” and also to include “[p]ublicly available information submitted
to value factors under § 351.408(c),” i.e., factors of production in a nonmarket economy
proceeding. The ENs are not evidence. Rather than factual information that might be considered
“evidence,” they are an international legal reference essential to the proper interpretation of the
HS nomenclature and GIRs. See, e.g., Degussa Corp. v. United States, 508 F.3d 1044, 1047
(Fed. Cir. 2007) (explaining that the ENs are “generally indicative of the proper interpretation of
a tariff provision”). Nor are the ENs information described by 19 C.F.R. § 351.102(b)(21)(iii)
(“Publicly available information submitted to value factors under § 351.408(c) . . .”). The
information to which § 351.408(c)(iii) refers is properly interpreted, consistent with the statutory
Consol. Court No. 15-00225 Page 24
provision it is effectuating, as “information regarding the values of . . . factors [of production] in
a market economy country or countries,” 19 U.S.C. § 1677b(c)(1), and “prices or costs of factors
of production,” id. § 1677b(c)(4). The ENs cannot serve as “information” to “value” anything,
are not information on “prices” or “costs,” and, moreover, emanate from an international body,
the World Customs Organization (the “WCO”), not from any particular country or countries.
Here, the pertinent information Senmao submitted, and Commerce considered, for valuation of
the overlaying glue factor of production was the Thai GTA information. As a legal reference on
the interpretation of the GIRs and the HS nomenclature, including the scope of headings and
six-digit subheadings, the WCO’s Explanatory Notes are in this context essentially no different
than any other legal reference a party may cite in a case brief before Commerce or argue before a
court, such as a statute, judicial precedent, or restatement of the law. For these reasons, the court
concludes that Commerce misapplied its regulation in rejecting Senmao’s case brief and that
defendant is misguided in arguing that the court may not consider the ENs as a legal reference in
adjudicating this claim.
Senmao argues that the record citations to the ENs that Commerce refused to consider
“would have resolved the issue.” Senmao’s Br. 35. If by this Senmao is arguing that the ENs,
when applied to the record information about the overlaying glue, resolve the question of the
proper tariff heading, the court disagrees. As the court discussed previously, the fact needed to
determine whether Thai HTS heading 3506 or Thai HTS heading 3909 is the correct heading is
the composition of the glue that includes, in particular, the identity of the added ingredients. By
submitting Thai HTS subheading 3909.10.90-000 as the correct tariff classification, Senmao has
disclosed publicly that the finished glue is based on a urea resin or thiourea resin. Senmao
included in its questionnaire response a more specific chemical identity for the main component
Consol. Court No. 15-00225 Page 25
of the finished glue (for which it claimed confidential treatment), but it did not disclose the
identity of any other component of the finished glue (nor did Commerce request that it do so).17
In conclusion, the Department’s determination that GTA data for a subheading under
Thai heading 3506 is the best available record information with which to value the overlaying
glue input is not supported by substantial evidence. The court, therefore, must remand this
determination for reconsideration.
Nothing on the record refutes Senmao’s assertion in its surrogate value submission that
its overlaying glue is properly classified under Thai HTS heading 3909. On the record as it now
stands, Commerce on remand must accept that assertion because the opposite assertion—that
heading 3506, which applies only to bulk finished adhesives that are “not elsewhere specified or
included,” is the correct heading—is entirely unsupported by record evidence. In the alternative,
Commerce has the discretion to reopen the record in an effort to reach a new determination,
supported by valid factual findings, of which of the two tariff headings is correct. If using GTA
import data to value this input, it must determine the correct tariff heading before it may proceed
to select the proper subheading. See GIRs 1, 6 (the correct subheading is to be determined
according to terms of the subheadings and related subheading legal notes and according to
GIRs 1-5 applied mutatis mutandis at the subheading level, only after the correct heading has
been determined).
17
Had Commerce consulted the Explanatory Notes to ascertain the intended scope of the
competing headings, it likely would have requested in the supplemental questionnaire the
information needed to resolve the question of which heading was proper for the overlaying glue.
It is unrealistic for Commerce to expect that it invariably will be able to determine the correct
GTA import data for valuing a production input without consulting the ENs, which are an
essential reference for resolution of tariff classification questions at the internationally-
harmonized four- and six-digit levels of the HS nomenclature.
Consol. Court No. 15-00225 Page 26
E. Claims Challenging the Department’s Choice of Financial Statements for Valuing Factory
Overhead Expenses, Selling, General and Administrative Expenses, and Profit
In determining normal value in a proceeding involving goods from a nonmarket economy
country, Commerce typically calculates surrogate values for factory overhead expenses, for
selling, general & administrative expenses, and for profit, by calculating and applying “financial
ratios” derived from the financial statements of one or more producers of identical or comparable
merchandise in the primary surrogate country. See 19 C.F.R. § 351.408(c)(4). For these
purposes, Commerce used the financial statements of Eiwlee Industrial Co., Ltd. (“Eiwlee”), a
producer in Thailand of various wood products, including MLWF, finding that those financial
statements constituted the best available information on the record. See Final I&D Mem. at 27.
All plaintiffs except the Coalition challenge the Department’s use of Eiwlee’s financial
statements to calculate the surrogate financial ratios. See Senmao’s Br. 11-23; Mem. of P. & A.
in Supp. of Rule 56.2 Mot. for J. upon the Agency R. by Consol. Pl. Fine Furniture (Shanghai)
Ltd. 20-34 (Mar. 15, 2016), ECF No. 62-1 (“Fine Furniture’s Br.”); Pl.-Intervenor Lumber
Liquidators Services, LLC Rule 56.2 Mem. in Supp. of Mot. for J. upon the Agency
R. 2-8 (Mar. 22, 2016), ECF No. 67 (“Lumber Liquidators’ Br.”); Jisen Wood’s Br. 3-4; Mem. in
Supp. of Rule 56.2 Mot. for J. upon the Agency R. by Consol. Pls. Armstrong Wood Products
(Kushan) Co., Ltd. and Armstrong World Industries, Inc. 4-6 (Mar. 22, 2016), ECF No. 68-1
(“Armstrong’s Br.”) (summarizing arguments in support of its financial ratios claim and
incorporating the arguments of Senmao, Fine Furniture, and “other parties seeking reduction of
Senmao’s rate”); see also Mem. of P. & A. in Supp. of Rule 56.2 Mot. for J. upon the Agency R.
by Consol. Pl. Old Master Products Inc. 5 (Mar. 22, 2016), ECF No. 70 (“Old Master’s Br.”)
(incorporating the arguments made by “other parties challenging,” inter alia, the selection of the
surrogate financial ratios); Pl.-Intervenor Guangdong Yihua Timber Industry Co., Ltd.’s Rule
Consol. Court No. 15-00225 Page 27
56.2 Mot. for J. on the Agency R. 2 (Mar. 22, 2016), ECF No. 71 (“Yihua’s Br.”) (incorporating
Senmao’s and Fine Furniture’s arguments); Mem. of P. & A. in Supp. of Consol. Pls.’ 56.2 Mot.
for J. on the Agency R. 9 (Mar. 22, 2016), ECF No. 72-1 (“Penghong’s Br.”) (same).
For the Preliminary Results, Commerce calculated the financial ratios using Eiwlee’s
financial statements because it found that “Eiwlee is the only surrogate producer for which there
is record evidence showing that it is a producer of identical (i.e., engineered wood flooring),
rather than comparable (e.g., plywood, solid wood flooring, etc.) merchandise.” Prelim. I&D
Mem. at 22 (footnote omitted). Commerce chose Eiwlee’s 2013 statements over Eiwlee’s 2012
statements because “the 2013 statements . . . cover 11 months of the [December 1, 2012 through
November 30, 2013] POR, whereas the 2012 statements cover only the first month of the POR.”
Id.; see Ex. 1 (“Eiwlee’s 2013 Financial Statements”) and Ex. 2 (“Eiwlee’s 2012 Financial
Statements”) to Multilayered Wood Flooring from the People’s Republic of China: Second
Administrative Review: Petitioners’ Comments Prior to Preliminary Results and Submission of
Factual Information (Nov. 3, 2014) (P.R. Docs. 314-315).
For the Final Results, Commerce again chose to rely on Eiwlee’s financial statements
over those on the record pertaining to any other producer in Thailand. In doing so, it stated that
“it is the Department’s preference to match the surrogate companies’ production experience with
respondents’ production experience, and whenever possible, surrogate country producers of
identical merchandise provided that the [surrogate value (“SV”)] data is not distorted or
otherwise unreliable.” Final I&D Mem. at 27 (footnote omitted).
In a change from the Preliminary Results, Commerce used the 2012 Eiwlee statements
despite the reduced coverage of the POR, based on a finding that an auditor of Eiwlee’s 2013
statements qualified her opinion as to the 2013 statements, having identified an insufficiency in
Consol. Court No. 15-00225 Page 28
the information the company provided on Eiwlee’s employee retirement benefit obligations for
the fiscal year ending on December 31, 2013. Id. at 29. Nevertheless, Commerce “relied on
certain 2012 figures reported in the 2013 statements in instances where the 2012 figures offer
greater detail when compared to the 2012 figures in the 2012 statements.”18 Id. Commerce
added that “[s]pecifically, we have used the detailed breakout of the 2012 cost of sales, which
includes material costs and overhead expenses, from the 2013 statements.” Id.
The arguments made in support of the claims that Eiwlee’s financial statements are not
the best available information on the record are that (1) Eiwlee’s production process is less
similar to Senmao’s production process than that of another company whose financial statement
is on the record and (2) there is evidence that Eiwlee’s financial statements are affected by
Eiwlee’s receipt of a countervailable subsidy. Fine Furniture raises an additional objection to the
use of the 2013 Eiwlee financial statements based on the auditor’s finding of an insufficiency in
the information the company provided on Eiwlee’s employee retirement benefit obligations. For
the reasons discussed below, the court concludes that these arguments do not suffice to cause the
court to order Commerce to reconsider the decisions it made in the Final Results that relate to the
use of Eiwlee’s 2012 and 2013 financial statements to calculate the financial ratios.
18
The 2012 financial statements of Eiwlee Industrial Co., Ltd. (“Eiwlee”) contain data
for 2011 and 2012 (Eiwlee’s fiscal year is the calendar year). See Ex. 2 to Multilayered Wood
Flooring from the People’s Republic of China: Second Administrative Review: Petitioners’
Comments Prior to Preliminary Results and Submission of Factual Information (Nov. 3, 2014)
(P.R. Docs. 314-315) (“Eiwlee’s 2012 Financial Statements”). Eiwlee’s 2013 financial
statements contain data for 2012 and 2013. See Ex. 1 to Multilayered Wood Flooring from the
People’s Republic of China: Second Administrative Review: Petitioners’ Comments Prior to
Preliminary Results and Submission of Factual Information (Nov. 3, 2014) (P.R. Docs. 314-315)
(“Eiwlee’s 2013 Financial Statements”).
Consol. Court No. 15-00225 Page 29
1. Commerce Was Not Compelled by the Record Evidence to Choose Neotech’s Financial
Statement over Eiwlee’s Financial Statements Due to the Type of Merchandise Produced
For their argument that the Eiwlee statements are not the best available information,
plaintiffs point to the financial statement of a Thai producer of plywood, Neotech Plywood
Company Limited (“Neotech”), arguing that this is preferable to the statements of Eiwlee, which
produced, in addition to MLWF, products including wooden household products and wooden
furniture.19 They argue that the production process of these other products is less comparable to
the production process of subject merchandise than is the production process for plywood. See
Senmao’s Br. 15-23; Lumber Liquidators’ Br. 2-8; Fine Furniture’s Br. 27-29, 32-34; Jisen
Wood’s Br. 3-4; Armstrong’s Br. 4. Senmao argues that the other products Eiwlee produces,
e.g., wooden furniture, involve a more complex production process than does MLWF and that
this production process differs from Senmao’s MLWF production process to a greater degree
than the difference between the MLWF production process and that of plywood. Senmao’s
Br. 13, 15-16. Senmao adds that “[a]ll three websites of Eiwlee indicate that Eiwlee is a member
of ‘The Thai Furniture Industries Association’ and the ‘Thai Housewares Trade Association,’”
while “[n]o mention is made of any membership in any association of flooring producers.”
Senmao’s Br. 18. Lumber Liquidators argues that “Commerce’s use of Eiwlee’s financial
statements was improper because it is a manufacturer of furniture and other merchandise more
complex than MLWF.” Lumber Liquidators’ Br. 2. According to Lumber Liquidators, the fact
that Eiwlee produces furniture “disqualifies it as a surrogate for financial ratios based on
19
Eiwlee produces “woodenwares, wooden housewares, wooden kitchenwares, Thailand
wooden flooring, gift, decorative items, small furniture, and Thailand household wooden
products.” Multilayered Wood Flooring from the People’s Republic of China: Response to
Petitioner’s Comments Prior to the Preliminary Results and Submission of Factual Information
at Attach. (Nov. 13, 2014) (P.R. Doc. 318).
Consol. Court No. 15-00225 Page 30
Commerce’s prior decisions,” pointing out that in the investigation Commerce concluded that
wooden bedroom furniture producers were less comparable to MLWF producers than were
plywood producers. Id. at 3 (citation omitted).
Among the evidence Commerce relied upon was Eiwlee’s website, which “describes
Eiwlee as ‘one of Thailand’s leading wood manufacturers and exporters of high quality wood
flooring (engineered wood flooring, solid wood flooring, & wood deck), and
woodenware/houseware/furniture’” and “states that Eiwlee ‘is committed to producing highest
quality engineered hardwood flooring and woodenware in alignment with American and
European standards.’” Final I&D Mem. at 27 (citing Multilayered Wood Flooring from the
People’s Republic of China: Second Administrative Review: Petitioners’ Comments Prior to
Preliminary Results and Submission of Factual Information at Ex. 3 (Nov. 3, 2014) (P.R.
Docs. 314-315) (“Pet.’s Pre-Prelim. Comments”)). Commerce further noted that “one of
Eiwlee’s websites is www.asianfloor.com” and that “there is no record evidence that establishes
the percentage of wood flooring Eiwlee produces as compared to any other products.” Id.
at 27-28 (footnote omitted).
While the record lacked quantitative evidence on the proportion of Eiwlee’s production
that was multilayered wood flooring, the qualitative evidence consisting of Eiwlee’s highlighting
its engineered wood flooring production on its website is sufficient to support the Department’s
finding, id. at 27, that Eiwlee’s MLWF production was significant. Neotech produced plywood
but, according to the record evidence, did not produce MLWF. Commerce did not err in placing
significant weight on that distinction. As a laminated wood product, plywood has a physical
characteristic in common with MLWF, but still it is a different product. Plaintiffs have not made
the case that the record compels the conclusion that the Neotech statement necessarily was the
Consol. Court No. 15-00225 Page 31
better choice. The record evidence, considered on the whole, was sufficient for Commerce to
conclude that the statement of Neotech was not preferable to those of Eiwlee because of Eiwlee’s
production of merchandise in addition to MWLF.
2. The Record Did Not Require Commerce to Reject the Eiwlee Statements for Receipt of a
Countervailable Subsidy
Fine Furniture, Yingyi-Nature, Jisen Wood, and Armstrong argue that the inclusion of an
entry for “packing credits” in Eiwlee’s financial statements provided Commerce with reason to
believe or suspect that Eiwlee benefited from a countervailable subsidy. See Fine Furniture’s
Br. 21-27; Jisen Wood’s Br. 4; Armstrong’s Br. 4; see also Eiwlee’s 2012 Financial Statement at
Note 7; Eiwlee’s 2013 Financial Statement at Note 7. These plaintiffs contend that because
Commerce “prefers to use financial statements without evidence of a countervailable subsidy,”
Final I&D Mem. at 30, Commerce erred in using Eiwlee’s financial statements. Rather than
support these arguments, the record supported the Department’s decision not to reject the Eiwlee
financial statements on the ground that Eiwlee benefited from a countervailable subsidy.
Fine Furniture’s argument relies, in part, on the legislative history of the Omnibus Trade
and Competitiveness Act of 1988, Pub. L. No. 100–418, 102 Stat. 1107 (1988). See Fine
Furniture’s Br. 21 (citing H.R. Rep. No. 100–576, at 590–91 (1988) (Conf. Rep.), reprinted in
1988 U.S.C.C.A.N. 1547, 1623–24 (“In valuing such factors [of production], Commerce shall
avoid using any prices which it has reason to believe or suspect may be dumped or subsidized
prices. However, the conferees do not intend for Commerce to conduct a formal investigation to
ensure that such prices are not dumped or subsidized, but rather intend that Commerce base its
decision on information generally available to it at that time.”)).
In past proceedings, Commerce has found certain government-provided export packing
credits to constitute countervailable subsidies. Final I&D Mem. at 30 (citing as an example
Consol. Court No. 15-00225 Page 32
1,1,1,2-Tetrafluroethane From the People’s Republic of China: Final Determination of Sales at
Less Than Fair Value, 79 Fed. Reg. 62,597 (Int’l Trade Admin. Oct. 20, 2014)). In this review,
Commerce found the evidence insufficient to support a conclusion that Eiwlee “benefitted from a
government-provided countervailable subsidy.” Id. The record evidence in question consisted
of a line item under Note 7 of Eiwlee’s 2012 statement and a similar line item under Note 7 of
Eiwlee’s 2013 statement. Note 7 of the 2013 statement is entitled “Overdraft and Short-term
Borrowing from Financial Institutions,” see Eiwlee’s 2013 Financial Statement at Note 7, while
Note 7 of the 2012 statement is entitled “Bank Overdrafts and Short-term Loans from Financial
Institutions,” see Eiwlee’s 2012 Financial Statement at Note 7. Each Note 7 lists the total
overdraft and short-term borrowing for each of two fiscal years, broken down into four
categories: “Bank overdraft,” “Promissory notes,” “Promissory notes sale agreement”
(2013 statement) and “Agreements to sell promissory notes” (2012 statement), and “Packing
credit.” See Eiwlee’s 2013 Financial Statement at Note 7; Eiwlee’s 2012 Financial Statement at
Note 7. A line item lists the combined interest expense for all four categories of credit and
instructs that the credit is guaranteed with the Company’s land and building and the director’s
personal guarantee in full. See Eiwlee’s 2013 Financial Statement at Note 7; Eiwlee’s 2012
Financial Statement at Note 7. For the packing credit, the interest rate is listed in both
statements as “6.625% - 6.75%.” See Eiwlee’s 2013 Financial Statement at Note 7; Eiwlee’s
2012 Financial Statement at Note 7.
Commerce noted that “Eiwlee’s financial statements only contain an item for ‘packing
credit,’” Final I&D Mem. at 30 (footnote omitted), and indeed the notes lack any reference to an
export packing credit and any indication that the packing credit was provided by the government.
Plaintiffs point to no record evidence indicating that this credit was an export credit or a
Consol. Court No. 15-00225 Page 33
government-provided credit or that it was provided at a below-market interest rate. As a result,
this record evidence was insufficient to compel Commerce to find that it had been presented with
a reason to believe or suspect that the data in the Eiwlee financial statements were distorted by a
government-provided, countervailable subsidy.
3. Commerce Permissibly Relied upon Information in Eiwlee’s 2013 Financial Statement that
Pertained to 2012
Fine Furniture argues that Commerce should not have used the 2012 information from
Eiwlee’s 2013 financial statements because of the issue raised by the auditor. See Fine
Furniture’s Br. 29-31. According to Fine Furniture, “Commerce’s decision to use data from a
financial statement that failed to comply with applicable accounting rules cannot be the ‘best
available information’ where other financial statements on the record were not disavowed by the
companies’ own auditors.” Fine Furniture’s Br. 30. Fine Furniture further argues that
“Commerce relied on sheer speculation that Eiwlee’s failure to follow Thai accounting rules had
no impact on 2012 data carried forward and restated in the tainted 2013 financial statement” and
that “Commerce places greater reliance on Eiwlee’s accountants in 2013 than the company’s
own auditor who conferred only a ‘qualified opinion’ with respect to the whole 2013 report,
including the 2012 data contained therein.” Id.
The language by which the auditor expressed her reasons for issuing a conditional
opinion on the 2013 Eiwlee financial statements refutes the premise of Fine Furniture’s
arguments. The auditor’s entire explanation, presented in the Auditor’s Report under the
heading “Criteria for Conditional Opinion for Material Misstatement (Insufficient Accounting
Audit Evidence),” was as follows:
As at 1 January 2011, the Federation of Accounting Profession issued the
reporting standard for Non-Publicly Accountable Entities which requires that the
Company must provide estimate employee retirement benefit obligations.
Consol. Court No. 15-00225 Page 34
However, the Company neither provided nor recorded estimate employee
retirement benefit obligations in accordance with such reporting standard in their
financial statements for the year ended 31 December 2013. As a result, I was not
satisfied with the audit evidence regarding the estimate employee retirement
benefit for the year ended 31 December 2013 because I did not receive documents
and relevant information for the audit of such estimate from the Company. I,
therefore, was unable to reach conclusion on the adjustment value for the estimate
employee retirement benefit. Any adjustment, if any, may affect the presentation
of the Company’s performance for the year ended 31 December 2013.
Eiwlee’s 2013 Financial Statement. Commerce did not rely on “sheer speculation” in
concluding that the 2012 data as restated in the 2013 financial statements was not affected by the
auditor’s finding of noncompliance with a reporting standard. As to any adjustment to correct
the deficiency in required reporting of estimated employee retirement benefit obligations, the
auditor stated that “[a]ny adjustment, if any, may affect the presentation of the Company’s
performance for the year ended 31 December 2013.” Id. Fine Furniture’s argument that the
auditor “conferred only a ‘qualified opinion’ with respect to the whole 2013 report, including the
2012 data contained therein,” Fine Furniture’s Br. 30, is not persuasive because it is not the most
reasonable interpretation of the auditor’s explanation. Commerce was not unreasonable in
interpreting the auditor’s statement of the reasons for issuing a conditional opinion to refer only
to the company’s financial performance for 2013. The auditor’s statement under the heading
“Conditional Opinion” provides further support for the Department’s conclusion that the auditor
did not consider the restated 2012 data to have been affected by the failure of the company to
follow the cited reporting standard:
In my opinion, except the effect from the abovementioned issued [sic] for
which I expressed conditional opinion, the financial statements referred to above
present fairly, in all material respects, the statement of financial position as at
31 December 2013, and the results of operations for the year then ended of Eiwlee
Industrial Co., Ltd. are in accordance with the reporting standard for Non-Publicly
Accountable Entities.
Consol. Court No. 15-00225 Page 35
Eiwlee’s 2013 Financial Statement. Therefore, substantial evidence is present on the record to
support the Department’s finding that the auditor did not consider the restated 2012 information,
as presented in the 2013 financial statements, to have been affected by the noncompliance with
the reporting standard for estimated employee retirement benefit obligations.
F. Claims Challenging the Department’s Surrogate Value for Foreign Inland Freight
In calculating normal value according to 19 U.S.C. § 1677b(c), Commerce adds to the
price of material inputs a surrogate cost for the expense incurred for inland transportation of the
materials, to which it refers as “foreign inland freight” or “truck freight,” to the point of
production. It also applies its foreign inland freight surrogate cost to capture the expense of
transporting finished goods to the port of exportation, which it deducts from U.S. price (EP or
CEP). Senmao, Yingyi-Nature, Jisen Wood, and Armstrong claim that the Department’s
surrogate cost for foreign inland freight was unsupported by substantial evidence. See Senmao’s
Br. 23-29; Jisen Wood’s Br. 5-6; Armstrong’s Br. 4-5.
To calculate a surrogate cost for foreign inland freight in the second review, Commerce
relied in part on a World Bank report entitled Doing Business 2014: Thailand. See Attach. V to
Preliminary Results of the Second Administrative Review of Multilayered Wood Flooring from
the People’s Republic of China: Surrogate Value Memorandum (Dec. 31. 2014) (P.R.
Docs. 347-48) (“Doing Business.”). In a section entitled “Trading across Borders,” the report
provides “indicators” for various costs associated with importing goods into Thailand and
exporting goods out of Thailand. Id. at 72-79. In a table entitled “Procedures to export,” Doing
Business lists a cost of $210 for “Inland transportation and handling.” Id. at 78. This cost is
presented in the report in association with three other costs, “Documents preparation” ($175),
“Customs clearance and technical control” ($50), and “Ports and terminal handling” ($160), for a
Consol. Court No. 15-00225 Page 36
total cost of $595 for “Procedures to export.” Id. In a parallel table entitled “Procedures to
import,” the report also lists a cost of $210 for “Inland transportation and handling.” Id.
at 78-79. This cost is also presented in the report in association with three other costs,
“Documents preparation” ($135), “Customs clearance and technical control” ($255) and “Ports
and terminal handling” ($160), for a total cost of $760 for “Procedures to import.” Id.
Doing Business states that its cost indicators, inter alia, “cover trade logistics, including
the time and cost of inland transport to the largest business city.” Id. at 72. “To make the data
comparable across economies, Doing Business uses several assumptions about the business and
the traded goods.” Id. Among the several assumptions are that the business “[i]s located in the
periurban area of the economy’s largest business city” and that the traded goods “[a]re
transported in a dry-cargo, 20-foot full container load.” Id.
Commerce did not rely solely on Doing Business in calculating a surrogate cost for
foreign inland freight. See Final I&D Mem. at 34-36. Commerce also relied upon its own
previous decisions that it issued in prior reviews and investigations. See Final I&D Mem. at 35
(citing, inter alia, Prestressed Concrete Steel Rail Tie Wire from the People’s Republic of China:
Issues and Decision Memorandum for the Final Determination of Sales at Less Than Fair Value
at 16-22 (Int’l Trade Admin. Apr. 28, 2014), available at
https://enforcement.trade.gov/frn/summary/prc/2014-10240-1.pdf (last visited June 5, 2018)).
Even were the court to presume that Commerce could rely on these documents as published
decisions (although they are not on the record of the second review), it would not alter the
court’s conclusion that the record lacks the underlying information from which the findings
reached in these prior decisions were based.
Consol. Court No. 15-00225 Page 37
Commerce supplemented the $210 cost from Doing Business with a determination that a
“20-foot, full container load” should be considered to weigh 10 metric tons, citing for this its
determination in Monosodium Glutamate From the People’s Republic of China: Final
Determination of Sales at Less Than Fair Value and the Final Affirmative Determination of
Critical Circumstances, 79 Fed. Reg. 58,326 (Int’l Trade Admin. Sept. 29, 2014) and
accompanying Issues and Decision Memorandum, Monosodium Glutamate from the People’s
Republic of China: Issues and Decision Memorandum for the Final Determination of Sales at
Less Than Fair Value at 5-9 (Int’l Trade Admin. Sept. 22, 2014), available at
https://enforcement.trade.gov/frn/summary/prc/2014-23136-1.pdf (last visited June 5, 2018).20
See Final I&D Mem. at 34 n.117. From that previous determination Commerce also adopted the
assumption that the $210 cost should be associated with a distance traveled of 77.165 kilometers.
See id. at 34 n.124. Commerce explained its derivation of this distance as follows:
While Doing Business does not specify which major port(s) in Thailand serves as
the basis for its reporting rates, as we noted in our Preliminary Results, in
Prestressed Concrete and other proceedings,[21] the Department determined that
20
A website listed in Doing Business 2014: Thailand,
http://www.doingbusiness.org/methodlogy, states as to “[a]ssumptions about the traded goods”
that “[t]he traded product travels in a dry-cargo, 20-foot, full container load” and that it “weighs
10 tons and is valued at $20,000.” Trading Across Borders Methodology, World Bank Group,
https://web.archive.org/web/20150107114039/http://www.doingbusiness.org/methodology/tradin
g-across-borders (last visited June 5, 2018); see Attach. V to Preliminary Results of the Second
Administrative Review of Multilayered Wood Flooring from the People’s Republic of China:
Surrogate Value Memorandum at 103 (Dec. 31. 2014) (P.R. Docs. 347-48) (“Doing Business”)
(indicating that the methodology for Doing Business 2014: Thailand can be found at the
aforementioned website). The court has not been able to locate the information from this website
on the record of the second review.
21
The reference to Prestressed Concrete is a reference to Final Determination of Sales at
Less Than Fair Value: Presetressed Concrete Steel Rail Tie Wire From the People’s Republic of
China, 79 Fed. Reg. 25,572 (Int’l Trade Admin. May 5, 2014) and accompanying Issues and
Decision Memorandum, which Commerce cited in a footnote. See Final I&D Mem. at 35 n.123
(citing, inter alia, Prestressed Concrete Steel Rail Tie Wire from the People’s Republic of China:
(continued . . .)
Consol. Court No. 15-00225 Page 38
there are two major ports in Thailand (Port of Bangkok (44.33 km from port to
Bangkok Industrial Area); and Laem Chabang Port (110 km from port to Bangkok
Industrial Area)). In these other proceedings, we determined that it was
reasonable to base our calculations on an average of those two distances. The
Department finds that the distances it used to calculate the SVs are consistent with
the methodology employed by Doing Business in constructing its indicators given
that the distances are calculated from a periurban area to Thailand’s two major
ports.[22]
Final I&D Mem. at 35 (footnotes omitted). Thus, while obtaining the $210 cost estimate from
Doing Business, which was on the record of the proceeding below, Commerce relied upon
non-record sources for the weight of the loaded 20-foot container and the distance to and from
the major ports in Thailand. Commerce interpreted the reference in Doing Business to the
“periurban area of the economy’s largest business city” as reasonably justifying its basing its
distance determination on the distance to the ports from the “Bangkok Industrial Area,” a term
Doing Business did not use.
Using the 77.165 kilometer distance, the weight of 10 metric tons, and the $210 cost that
it obtained from Doing Business, Commerce calculated a surrogate foreign inland freight cost of
$0.0002722 per kilogram, per kilometer. Multilayered Wood Flooring from the People’s
Republic of China: Final Surrogate Value Memorandum at Attch. III (Int’l Trade Admin.
(. . . continued)
Issues and Decision Memorandum for the Final Determination of Sales at Less Than Fair Value
at 16-22 (Int’l Trade Admin. Apr. 28, 2014), available at
https://enforcement.trade.gov/frn/summary/prc/2014-10240-1.pdf (last visited June 5, 2018).
22
In support of this finding, Commerce again cited Monosodium Glutamate From the
People’s Republic of China Final Determination of Sales at Less Than Fair Value and the Final
Affirmative Determination of Critical Circumstances, 79 Fed. Reg. 58,326 (Int’l Trade Admin.
Sept. 29, 2014) and accompanying Issues and Decision Memorandum, Monosodium Glutamate
from the People’s Republic of China: Issues and Decision Memorandum for the Final
Determination of Sales at Less Than Fair Value at 5-9 (Int’l Trade Admin. Sept. 22, 2014),
available at https://enforcement.trade.gov/frn/summary/prc/2014-23136-1.pdf (last visited
June 5, 2018).
Consol. Court No. 15-00225 Page 39
July 8, 2015) (P.R. Doc. 419). Senmao argues that “[t]he only information that is on the record
for Thailand is the flat per ton transportation and handling value of US $21/MT reported by
Doing Business.” Senmao’s Br. 28-29. Senmao adds that “[i]f Doing Business is to be used,
then this rate can be used to calculate respondent’s inland freight shipments” and that “[t]his
value represents a more accurate value because it is not based on unsupported assumptions that
are not tied to Doing Business.” Id. at 29. In the alternative, Senmao argues that Commerce
should have used record data from Indonesia instead of the Thai data that Commerce used in
determining the surrogate cost. Id. Senmao argues, further, that the Department’s surrogate cost
calculation is flawed in another respect in that it presumes that “handling” occurs once every
77.165 kilometers when logic would dictate that it is incurred only once per shipment, when
goods are loaded or unloaded; i.e., Senmao argues that handling cost does not vary with
distance.23 Senmao’s Br. 24-27 (arguing that “anything below 77.165 KM distance results in a
charge for ‘handling’ below the actual costs and anything above the 77.165 KM distance results
in a charge for ‘handling’ above the actual costs”). Yingyi-Nature, Jisen Wood, and Armstrong
also make the arguments advanced by Senmao. See Jisen Wood’s Br. 5-6; Armstrong’s Br. 4-5.
The court cannot sustain the Department’s surrogate cost for foreign inland freight
because, apart from the record evidence supporting the $210 cost estimate, which consists of the
Doing Business report, the remaining elements of the Department’s calculation depend on
information that is not on the record of the second review. On remand, Commerce must
reconsider its surrogate cost and make a new determination that is based on factual findings, each
of which is supported by substantial evidence on the record, and that is based on sound
23
The $210 cost estimate from Doing Business does not include “Ports and terminal
handling.” Doing Business at 78-79.
Consol. Court No. 15-00225 Page 40
reasoning. In redetermining a surrogate cost, Commerce is not bound to confine itself to the
evidence relating to Thailand and may consider all record evidence relevant to the determination
of a surrogate cost for foreign inland freight.
Defendant raises various arguments as to why the court is required to sustain the
Department’s surrogate cost for foreign inland freight, all of which are unpersuasive. Defendant
argues that the Department’s methodology is consistent with past practice and retains the internal
consistency of the Department’s calculations. Def.’s Br. 29-31. As to the distance Commerce
used, defendant argues that the plaintiffs “do not cite evidence that other distances are more
appropriate or that the distances upon which Commerce relied are factually inaccurate.” Id.
at 32. These arguments fail to address Senmao’s objection that everything in the calculation not
obtained from Doing Business is absent from the record and is, therefore, unsupported
speculation. Regardless of the Department’s past practice, the court is unable to sustain a
determination that is based on factual findings for which there is no evidence present on this
administrative record. Defendant maintains that plaintiffs have offered no evidence to support
the argument that handling cost does not vary with the distance traveled by the cargo, but this
argument also misses the point. There is no record evidence to support the illogical premise that
handling cost does vary with distance traveled. The $210 cost estimate is for “Inland
transportation and handling,” for either an import or an export shipment, and there is no record
evidence as to how much was for handling and how much was for transport alone. Senmao has
identified a flaw that detracts from the reasonableness of the Department’s methodology. There
might be instances in which a lack of record data makes a methodological flaw unavoidable, but
even in such a situation, the Department’s method must be reasonable and adequately explained
based on the record evidence that exists and the choices that the evidence makes available. Here,
Consol. Court No. 15-00225 Page 41
the surrogate cost Commerce calculated is based in part on assumptions that record evidence
does not support.
Defendant argues, further, that neither Senmao nor any other party preserved the
argument that Commerce, in the alternative, should have used the data pertaining to Indonesia by
exhausting administrative remedies before the agency. Def.’s Br. 33. The court does not reach
defendant’s exhaustion of remedies argument because the court is not ruling that Commerce,
upon remand, is required to use any particular method of determining a surrogate cost. Instead,
the whole record is open to the Department’s consideration.
G. Fine Furniture’s Claim that Commerce Unlawfully Denied Fine Furniture’s Request to Be a
Voluntary Respondent
Commerce did not assign Fine Furniture an individual weighted-average dumping
margin. Fine Furniture submitted a request to be a voluntary respondent, which had it been
granted would have resulted in Fine Furniture’s being assigned an individual weighted-average
dumping margin in the review. Commerce denied the request and included Fine Furniture
among the separate-rate respondents assigned the 13.74% rate. Fine Furniture claims the
Department’s denial of its request to be a voluntary respondent was contrary to law. For the
reasons discussed below, the court finds merit in this claim.
Paragraph (1) of subsection 777A(c) of the Tariff Act requires that Commerce “shall
determine the individual weighted average dumping margin for each known exporter and
producer of the subject merchandise.” 19 U.S.C. § 1677f-1(c)(1). An exception to this general
requirement is contained within the same subsection, as follows:
If it is not practicable to make individual weighted average dumping margin
determinations under paragraph (1) because of the large number of exporters or
producers involved in the investigation or review, the administering authority may
determine the weighted average dumping margins for a reasonable number of
exporters or producers by limiting its examination to—
Consol. Court No. 15-00225 Page 42
(A) a sample of exporters, producers, or types of products that is statistically
valid based on the information available to the administering authority at
the time of selection, or
(B) exporters and producers accounting for the largest volume of the subject
merchandise from the exporting country that can be reasonably examined.
Id. § 1677f-1(c)(2). When Commerce invokes this exception, it typically limits the investigation
or review to an examination of “exporters and producers accounting for the largest volume of the
subject merchandise from the exporting country” and determines the individual
weighted-average dumping margins for only those exporters and producers. See id. That is the
procedure Commerce followed in the second review.
A respondent not selected for individual examination potentially still may receive an
individually-determined margin according to section 782(a) of the Tariff Act, which provides
that Commerce, upon limiting the number of respondents according to section 777A(c), “shall
establish an . . . individual weighted average dumping margin for any exporter or producer not
initially selected for individual examination” if two conditions are met. 19 U.S.C. § 1677m(a)
(prior to 2015 amendments). The first condition applying to this “voluntary respondent”
procedure is that an exporter or producer seeking individual examination submit “the information
requested from exporters or producers selected for examination” by the same deadlines that
apply to the selected respondents. 19 U.S.C. § 1677m(a)(1) (prior to 2015 amendments). Fine
Furniture satisfied this condition and thereby submitted a qualifying voluntary respondent
request. The second condition, which Congress addressed in section 782(a)(2), is at issue in this
case. Section 782(a)(2) provided Commerce discretion to deny a qualifying voluntary
respondent request in certain circumstances.
Consol. Court No. 15-00225 Page 43
On June 29, 2015, while Commerce was conducting the instant review, Congress
amended section 782(a)(2), among other provisions in the antidumping duty and countervailing
duty statute. See Trade Preferences Extension Act of 2015, Pub. L. No. 114-27, § 506,
129 Stat. 362, 386-87 (2015) (“TPEA”). Prior to the amendment to section 782(a)(2), which was
made by section 506 of the TPEA, Commerce was required to accept a qualifying voluntary
respondent request if “the number of exporters or producers who have submitted such
information is not so large that individual examination of such exporters or producers would be
unduly burdensome and inhibit the timely completion of the investigation.” 19 U.S.C.
§ 1677m(a)(2) (prior to 2015 amendments). As amended by the TPEA, the provision
(renumbered as section 782(a)(1)(B)) allowed Commerce to deny a qualifying request if “the
number of exporters or producers subject to the investigation or review is not so large that any
additional individual examination of such exporters or producers would be unduly burdensome
to the administering authority and inhibit the timely completion of the investigation or review.”
19 U.S.C. § 1677m(a)(1)(B) (post 2015 amendments). The TPEA also added a provision (the
new section 782(a)(2)) giving a broad definition to the term “unduly burdensome” and allowing
Commerce to consider any factors relating to the timely completion of an investigation and
review that it considers appropriate.24
24
New section 782(a)(2) provides that:
In determining if an individual examination under paragraph (1)(B) would
be unduly burdensome, the administering authority may consider the following:
(A) The complexity of the issues or information presented in the
proceeding, including questionnaires and responses thereto.
(B) Any prior experience of the administering authority in the same or
similar proceeding.
(C) The total number of investigations under Part I [countervailing duty]
or II [antidumping duty] of this subtitle and reviews under section 1675 of this
(continued . . .)
Consol. Court No. 15-00225 Page 44
The TPEA amendment expanded considerably the discretion Commerce could exercise in
denying a qualifying voluntary respondent request. Because the TPEA did not specify an
effective date for the change in section 782(a)(2), nothing in the TPEA expressly precluded
Commerce from applying its new discretion in the instant review, which was concluded upon the
publication of the Final Results on July 15, 2015 and therefore after the June 29, 2015 date of the
amendment. See Gozlon-Peretz v. United States, 498 U.S. 395, 404 (1991) (stating principle that
“absent a clear direction by Congress to the contrary, a law takes effect on the date of its
enactment”); Ad Hoc Shrimp Trade Action Comm. v. United States, 802 F.3d 1339, 1352 (Fed.
Cir. 2015) (holding that Section 502 of the TPEA “unambiguously applies only to Commerce
determinations made after the date of enactment”).
Nevertheless, Commerce decided to delay until August 6, 2015 the date on which it
would exercise the expanded discretion afforded by the amendment to section 782(a)(2). This
was the date of publication of an interpretive rule Commerce issued to address the question of
the dates upon which it would apply the various provisions of the TPEA. Dates of Application of
Amendments to the Antidumping and Countervailing Duty Laws Made by the Trade Preferences
Extension Act of 2015, 80 Fed. Reg. 46,793, 46,795 (Int’l Trade Admin. Aug. 6, 2015)
(“Interpretive Rule”) (stating that Commerce will “apply this provision [section 506 of the
TPEA] to determinations made on or after August 6, 2015”). In the instant review, Commerce
acted upon Fine Furniture’s voluntary respondent request under the old version of
(. . . continued)
title being conducted by the administering authority as of the date of the
determination.
(D) Such other factors relating to the timely completion of each such
investigation and review as the administering authority considers appropriate.
19 U.S.C. § 1677m(a)(2) (post 2015 amendments).
Consol. Court No. 15-00225 Page 45
section 782(a)(2) and the more limited level of discretion that it provided. Final I&D Mem.
at 14.
The court will review the Department’s rejection of Fine Furniture’s voluntary
respondent request under the prior version of the statute, i.e., under the narrower discretion to
which Commerce voluntarily limited itself, for two reasons. First, a court must review an agency
decision according to the reasoning the agency puts forth. Motor Vehicle Mfrs. Ass’n of U.S.,
Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 50 (1983) (“[A]n agency’s action must be
upheld, if at all, on the basis articulated by the agency itself.”). Second, no party to this action is
contesting the Department’s decision to apply the older version of the statute or challenging the
validity of the interpretive rule setting forth a post-enactment date upon which Commerce would
apply its expanded discretion.
After referring to the submission of information by certain parties to an investigation or
review, the pre-TPEA version of section 782(a)(2) places a specific limitation on the
Department’s discretion to deny “qualifying” voluntary respondent requests, i.e., requests by
respondents who have submitted by the applicable deadlines the information requested from
exporters or producers selected for examination. 19 U.S.C. § 1677m(a)(2) (prior to 2015
amendments). Read in pertinent part, the statute reads as follows:
[T]he administering authority shall establish . . . an individual weighted average
dumping margin for any exporter or producer . . . who submits to the
administering authority the information requested from exporters or producers
selected for examination, if . . . the number of exporters or producers who have
submitted such information is not so large that individual examination of such
exporters or producers would be unduly burdensome and inhibit the timely
completion of the investigation.
19 U.S.C. § 1677m(a) (prior to 2015 amendments) (emphasis added). Under the provision, the
general rule is that Commerce will examine individually all such requesters. The exception,
Consol. Court No. 15-00225 Page 46
which as an exception to a general rule should be read narrowly, allows Commerce to review
fewer than all requesters.
According to plain meaning, the reference to “the number of exporters or producers who
have submitted such information” and the later reference to “such exporters or producers” must
be read to refer to the same group of exporters or producers. See 19 U.S.C. § 1677m(a)(2) (prior
to 2015 amendments). Nevertheless, the provision is not without ambiguity. The interpretive
question that arises is whether both are references to the exporters or producers who have
submitted the information as necessary in order to be considered as voluntary respondents, or
whether both are references to all exporters and producers who have submitted the information
“requested from exporters or producers selected for examination,” i.e., the mandatory
respondents plus the respondents requesting treatment as voluntary respondents. In this instance,
the court is not called upon to answer the question as to which interpretation should be preferred
because Commerce has settled the question by adopting the former interpretation.
Specifically, for the Final Results Commerce interpreted the phrase “number of exporters
or producers who have submitted such information” to include only the exporters or producers
who voluntarily have submitted “the information requested from exporters or producers selected
for examination,” 19 U.S.C. § 1677m(a) (prior to 2015 amendments), i.e., the requesters for
voluntary respondent status, not the total number of exporters or producers who have submitted
the information (which also would include the mandatory respondents). See Final I&D Mem.
at 14 (interpreting those words to mean “the number of such companies that have voluntarily
provided such information” (emphasis added)). Where a statute is susceptible to more than one
interpretation, a court will defer to the agency’s interpretation if it is a reasonable one. See
Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). The court
Consol. Court No. 15-00225 Page 47
considers the Department’s interpretation reasonable because it is consistent with the plain
meaning and the context of the provision as a whole.
The Department’s interpretation raises another issue of statutory construction that the
court must consider. This issue is the intended meaning of the term “so large” as used in the
clause “not so large that individual examination of such exporters or producers would be unduly
burdensome and inhibit the timely completion of the investigation.” 19 U.S.C. § 1677m(a)(2)
(prior to 2015 amendments). The words “so large” necessarily signal an intended comparison
with another number that is relatively smaller. The difficulty posed by this case is that the
“number of exporters or producers” was one. This is the smallest possible number that can exist
in any situation in which the voluntary respondent procedure could be invoked.
Commerce impliedly interpreted the statute such that the number in question—one—is
“so large” as to allow it to reject Fine Furniture’s voluntary respondent request, even though it
was the only such request pending before it in the second review. When examining this
interpretation according to the two-step process required by Chevron, the court must conclude
that this interpretation is unreasonable on its face. According to plain meaning, as well as logic,
a number cannot be “so large” in comparison with another number, and, at the same time, be as
small as it possibly can be. The general rule established by 19 U.S.C. § 1677m(a) (prior to 2015
amendments) is that Commerce must examine individually all exporters and producers that
requested voluntary respondent treatment; the exception allows Commerce to examine fewer
than all of them if the number of requestors is “so large that individual examination of such
exporters or producers would be unduly burdensome and inhibit the timely completion of the
investigation.” 19 U.S.C. § 1677m(a) (prior to 2015 amendments) (“the administering authority
shall establish . . . an individual weighted average dumping margin for any exporter or
Consol. Court No. 15-00225 Page 48
producer . . . who submits to the administering authority the information requested” (emphasis
added)). Under the Department’s interpretation, Commerce may avoid reviewing any requestor
of voluntary respondent status even if the number of requestors is as small as possible. The
court, therefore, rejects this interpretation under “step one” of the Chevron analysis as contrary to
plain meaning.25 The Supreme Court stated in Chevron that “[f]irst, always, is the question
whether Congress has directly spoken to the precise question at issue. If the intent of Congress is
clear, that is the end of the matter; for the court, as well as the agency, must give effect to the
unambiguously expressed intent of Congress.” Chevron, 467 U.S. at 842-843 (footnote omitted).
“If a court, employing traditional tools of statutory construction, ascertains that Congress had an
intention on the precise question at issue, that intention is the law and must be given effect.” Id.
at 843 n.9.
Regarding congressional intent, the Statement of Administrative Action accompanying
the Uruguay Round Agreements Act (“SAA”) does not compel a conclusion that the
Department’s implied interpretation of the term “not so large” is reasonable. The SAA discusses
the voluntary respondent procedure as follows:
(3) Treatment of Voluntary Respondents
Section 231 of the bill adds section 782(a) to the Act which provides that,
in cases where Commerce has limited its examination to selected exporters and
producers, it nevertheless will calculate an individual dumping margin for any
exporter or producer not selected for examination that provides the necessary
information on a timely basis and in the form required. Although Commerce,
25
This Court’s decision in Tri Union Frozen Products, Inc. v. United States, 40 CIT __,
163 F. Supp. 3d 1255, 1279-85 (2016), is distinguishable. That case did not review the statutory
construction of 19 U.S.C. § 1677m(a) (prior to 2015 amendments) that Commerce put forth in
this review.
Consol. Court No. 15-00225 Page 49
consistent with Article 6.10.2 of the Agreement,[26] will not discourage voluntary
responses and will endeavor to investigate all firms that voluntarily provide
timely responses in the form required, in certain cases (including cases involving
the same product from multiple countries) where the number of exporters or
producers is particularly high, Commerce may decline to analyze voluntary
responses because it would be unduly burdensome and would preclude the
completion of timely investigations or reviews. Section 782(a) generally codifies
existing practice.
Statement of Administrative Action accompanying the Uruguay Round Agreements Act, H.R.
Rep. No. 103–316, Vol. 1 at 873 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4201. The first
sentence establishes the general principle that Commerce must examine individually all
companies that voluntarily submit the requisite responses and in fact states the principle in the
absolute. The second sentence provides an exception to the general principle, referring to
“certain cases” in which “the number of exporters or producers is particularly high,” and in so
doing might be referring to those requesting voluntary respondent status, consistent with the
reference earlier in the sentence. Although it is possible to read the reference to “the number of
exporters or producers” as also including the number of the mandatory respondents, this is not
the only plausible reading. In any event, the SAA does not lend support to the Department’s
26
Article 6.10.2 of the Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994 provides as follows:
In cases where the authorities have limited their examination, as provided
for in this paragraph [based on statistically valid sampling or largest export
volume], they shall nevertheless determine an individual margin of dumping for
any exporter or producer not initially selected who submits the necessary
information in time for that information to be considered during the course of the
investigation, except where the number of exporters or producers is so large that
individual examinations would be unduly burdensome to the authorities and
prevent the timely completion of the investigation. Voluntary responses shall not
be discouraged.
Agreement on Implementation of Article VI of the General Agreement on Tariffs and
Trade 1994, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade
Organization, Annex 1A, 1868 U.N.T.S. 201 (1994).
Consol. Court No. 15-00225 Page 50
construction, which is at odds with plain meaning and logic. Consistent with the plain meaning
of the statute, the SAA clarifies that the procedure described in the second sentence is intended
as an exception to the general rule set forth in the first sentence, which is that Commerce will
examine individually all respondents who voluntarily and timely submit responses in the correct
form. Only when the number of exporters or producers is “particularly high” may Commerce
deviate from the general rule by examining fewer than all such requesters.
In determining that examining Fine Furniture would be “unduly burdensome,”
Commerce noted that neither of the mandatory respondents had previously been subject to an
individual review, that the Department “needed to submit multiple questionnaires in order to
become familiar with both companies’ corporate structures, sales and FOPs,” and that its
“analysis of Dajen was especially complicated due to its possible affiliations with several other
companies located in different countries.” Final I&D Mem. at 15. Commerce also cited its
“current resource availability.” Id. From these findings, Commerce determined that individually
examining Fine Furniture would be “unduly burdensome and inhibit the timely completion of the
review.” Id. Because Commerce has based its inquiry on an unreasonable construction of the
governing statutory provision, the court does not reach the issue of whether these findings, and
the ultimate determination not to examine Fine Furniture as a voluntary respondent, are
supported by substantial record evidence.
In summary, the court concludes that Commerce, having decided that the “number” of
exporters or producers to be considered is the number of requestors for voluntary respondent
status, has adopted a statutory interpretation that necessarily implicates the issue of the proper
meaning of the words “not so large that individual examination of such exporters or producers
would be unduly burdensome and inhibit the timely completion of the investigation.” 19 U.S.C.
Consol. Court No. 15-00225 Page 51
§ 1677m(a)(2) (prior to 2015 amendments). Further, the court holds impermissible the
Department’s implicit interpretation of those words such that the number one can be “so large”
for purposes of the statutory standard. Therefore, the court cannot sustain the Department’s
decision to reject Fine Furniture’s voluntary respondent request on the reasoning Commerce put
forth.
Defendant argues that Fine Furniture failed to exhaust its administrative remedies for
certain of the arguments it makes before the court, having raised in its case brief before
Commerce “that Commerce may only decline to review voluntary respondents where they
represent a large number.” Def.’s Br. 37. The court disagrees with the implication that Fine
Furniture raised only that argument. See Administrative Review of the Antidumping Duty Order
on Multilayered Wood Flooring from the People’s Republic of China: Case Brief for
Consideration Prior to the Final Results 11-16 (Feb. 9, 2015) (P.R. Doc. 386). Moreover, the
argument defendant identifies as being included in Fine Furniture’s case brief is a meritorious
one, for the reasons the court discussed above. Defendant argues that, in any event, Commerce
in this instance reasonably exercised its discretion to refuse to allow Fine Furniture to serve as a
voluntary respondent. The court is unable to agree with this argument because Commerce
denied the voluntary respondent request based on faulty reasoning. As the court has explained,
that reasoning was grounded in an impermissible interpretation of section 782(a)(2) as it existed
prior to amendment by the TPEA. Commerce, therefore, must reconsider its decision to deny
Fine Furniture’s voluntary respondent request.
H. Claims that Commerce Impermissibly Made a Deduction from U.S. Price of 8% of the
Export Value of Senmao’s Subject Merchandise to Account for Irrecoverable Value-Added Tax
Yingyi-Nature, Jisen Wood, and Armstrong, joined by Old Master, Yihua, Fine
Furniture, and the Penghong Plaintiffs, challenged as unlawful a downward adjustment
Consol. Court No. 15-00225 Page 52
Commerce made in determining the export price of Senmao’s subject merchandise, pursuant to
19 U.S.C. § 1677a(c)(2)(B), for what Commerce described as “irrecoverable” value-added tax
imposed by the PRC government.27 See Jisen Wood’s Br. 7; Armstrong’s Br. 6; Old Master’s
Br. 5; Yihua’s Br. 2; Fine Furniture’s Br. 34; Penghong’s Br. 9. Because the Department’s
adjustment to Senmao’s starting price for irrecoverable VAT was based on an invalid factual
finding and accordingly was contrary to law, the court remands the determination of export price
to the Department for corrective action.
Under section 731 of the Tariff Act, 19 U.S.C. § 1673, an antidumping duty is imposed
“in an amount equal to the amount by which the normal value exceeds the export price (or the
constructed export price) for the merchandise.” 19 U.S.C. § 1673. Section 772 of the Tariff Act,
19 U.S.C. § 1677a, determines export price (“EP”) and constructed export price (“CEP”) by
making various adjustments to “[t]he price used to establish export price and constructed export
27
The Senmao Plaintiffs voluntarily dismissed their claim challenging the Department’s
“determination regarding the offset to U.S. price for the Value Added Tax (‘VAT’).” Compl.
¶ 19 (Aug. 10, 2015), ECF No. 7; see Order (Apr. 20, 2017), ECF No. 120 (dismissing Count
Three of Senmao’s complaint). Prior to the dismissal, all other plaintiffs and
plaintiff-intervenors who were respondents in the second review either asserted this claim or
joined in it as plaintiff-intervenors. See Mem. of P. & A. in Supp. of Rule 56.2 Mot. for J. upon
the Agency R. by Consol. Pl. Old Master Products, Inc. 5 (Mar. 22, 2016), ECF No. 70; Mem. in
Supp. of Rule 56.2 Mot. for J. upon the Agency R. by Consol. Pls. Armstrong Wood Products
(Kushan) Co., Ltd. and Armstrong World Industries, Inc. 6 (Mar. 22, 2016), ECF No. 68-1; Pls.
Dunhua City Jisen Wood Industry Co., Ltd. and Yingyi-Nature (Kunshan) Wood Industry Co.,
Ltd. Mem. in Supp. of Mot. for J. on the Agency R. 7-8 (Mar. 22, 2016), ECF No. 69-2; Pl.-
Intervenor Guangdong Yihua Timber Industry Co., Ltd.’s Rule 56.2 Mot. for J. on the Agency R.
2 (Mar. 22, 2016), ECF No. 71; Mem. of P. & A. in Supp. of Rule 56.2 Mot. for J. upon the
Agency R. by Consol. Pl. Fine Furniture (Shanghai) Ltd. 34 (Mar. 15, 2016), ECF No. 62-1;
Mem. of P. & A. in Supp. of Consol. Pls.’ 56.2 Mot. for J. on the Agency R. 9 (Mar. 22, 2016),
ECF No. 72-1; see also Order, Dunhua City Jisen Wood Industry Co. v. United States,
No. 15-204 (Aug. 28, 2015), ECF No. 35 (granting Lumber Liquidator’s motion to intervene).
Consol. Court No. 15-00225 Page 53
price,” 19 U.S.C. § 1677a(c); Commerce refers to the unadjusted price for determining EP and
CEP as the “starting price.”28 See 19 C.F.R. § 351.402(a).
Section 772(c)(2)(B) of the Tariff Act directs Commerce to reduce the starting price by
“the amount, if included in such price, of any export tax, duty, or other charge imposed by the
exporting country on the exportation of the subject merchandise to the United States, other than
an export tax, duty, or other charge described in section 1677(6)(C) of this title.”29 19 U.S.C.
§ 1677a(c)(2)(B). An adjustment made under this provision reduces EP and CEP starting prices
and thereby increases any dumping margin. In calculating Senmao’s 13.74% margin, Commerce
deducted from the prices used to establish export price amounts it calculated as 8% of the export
value of the subject merchandise, based on what Commerce considered to be the amount of
“irrecoverable VAT,” a term Commerce used to describe VAT that is paid on materials used in
producing the subject merchandise (“input VAT”) and that is not refunded upon the exportation
of that merchandise. See Prelim I&D Mem. at 19; Final I&D Mem. at 12-13. In this review,
Commerce calculated “irrecoverable VAT” as the difference between a 17% VAT rate it found
that China imposed on material inputs used in producing the subject merchandise and a 9% VAT
28
The starting price for determining export price is “the price at which the subject
merchandise is first sold (or agreed to be sold) before the date of importation by the producer or
exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in
the United States or to an unaffiliated purchaser for exportation to the United States.” 19 U.S.C.
§ 1677a(a). The starting price for determining constructed export price is “the price at which the
subject merchandise is first sold (or agreed to be sold) in the United States before or after the
date of importation by or for the account of the producer or exporter of such merchandise or by a
seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or
exporter.” Id. § 1677a(b).
29
An export tax, duty, or other charge described in 19 U.S.C. § 1677(6)(C) is an export
tax, duty, or other charge “levied on the export of merchandise to the United States specifically
intended to offset the countervailable subsidy received.” 19 U.S.C. § 1677(6)(C).
Consol. Court No. 15-00225 Page 54
“refund rate” Commerce concluded was allowed upon exportation of that merchandise. Final
I&D Mem. at 13.
Yingyi-Nature, Jisen Wood, Old Master, and Armstrong, joined by other plaintiffs who
were producers or exporters and respondents in the second review, claim that the 8% deduction
Commerce made in calculating Senmao’s margin was unsupported by substantial evidence and
therefore unlawful. These plaintiffs incorporate the arguments made by Senmao. See Senmao’s
Br. 29-34; see also Old Master’s Br. 5 (incorporating Senmao’s arguments); Armstrong’s Br. 6
(same); Jisen Wood’s Br. 7 (same); Fine Furniture’s Br. 34 (same); Yihua’s Br. 2 (same).
Yingyi-Nature and Jisen Wood argue that “[t]he Department’s 8 percent unrefunded
VAT deduction from the U.S. price is not reflective of the actual amount of the VAT assessed by
the Government of China (‘GOC’) on Senmao’s exports and is thus not supported by substantial
evidence.” Jisen Wood’s Br. 7. Yingyi-Nature and Jisen Wood are correct. The record does not
contain substantial evidence, or any evidence, to support a finding of fact that the PRC imposed a
tax, duty, or charge in the amount of 8% “on Senmao’s exports.” Commerce based its ultimate
factual finding that China did impose such an 8% tax, duty, or charge on Senmao’s exported
merchandise on various subordinate findings, but among them is a critical finding the record
evidence does not support. Commerce found that what it considered to be irrecoverable input
VAT “amounts to a tax, duty or other charge imposed on exports that is not imposed on domestic
sales.” Final I&D Mem. at 12-13 (emphasis added). This finding is contradicted by the record
evidence consisting of Senmao’s questionnaire responses and attachments thereto, which explain
in detail the VAT system to which Senmao was subject. The record evidence fails to
demonstrate that, under China’s VAT system, Senmao’s domestic sales did not incur
irrecoverable VAT.
Consol. Court No. 15-00225 Page 55
Commerce compared “the PRC’s VAT regime” to what it called a “typical VAT system,”
under which, it presumed, all VAT incurred by a company in producing goods for export is
rebated. Id. at 12. According to China’s VAT regime as interpreted by Commerce, a company
in China producing merchandise for export pays a value-added tax on the materials used in
producing the subject merchandise (i.e., the VAT to which Commerce referred as “input VAT”)
and, due to exportation, is “refunded” only a portion of that input VAT. Final I&D Mem. at 12
(finding that the PRC’s VAT regime, as opposed to a “typical VAT system,” is one “where some
portion of the input VAT that a company pays on purchases of inputs used in the production of
exports is not refunded” (footnote omitted)). The Department’s finding that this unrefunded
(“irrecoverable”) portion of the “input” VAT “amounts to a tax, duty, or other charge imposed
on exports that is not imposed on domestic sales,” id. at 12-13, cannot be reconciled with the
relevant submissions Senmao made for the record. These submissions included a response to
Sections C&D of the Department’s initial questionnaire with various exhibits (including copies
of PRC VAT regulations).
Senmao’s questionnaire response explained that it was subject to value-added tax liability
on sales of its finished products (whether sold in the domestic market or for export) but did not
pay to the tax authority a VAT on materials it used in producing its goods. Multilayered Wood
Flooring from the People’s Republic of China: Section C&D Response at C-33 – C-36
(June 30, 2014) (P.R. Doc. 238) (“Senmao’s Sections C&D Response”). Senmao further
explained that the VAT of 17% on the materials was included in the prices it paid for those
materials and was available as a deduction from the liability to the tax authority for “VAT-out”
(output VAT) on the combined sales, both domestic and export, of the finished products. In
other words, the 17% VAT applicable to materials Senmao used in production was VAT paid by
Consol. Court No. 15-00225 Page 56
its material suppliers and passed on to Senmao. Id. Senmao described the Chinese VAT system
as follows:
According to Article 4 of the VAT Regulations of China, the formula for
the calculation of the VAT payable is: VAT payable = VAT-out – VAT-in. The
“VAT-out” refers to the sales value of the product times the applicable VAT rate,
and the “VAT-in” refers to the theoretical VAT, i.e. not an actual VAT paid to the
tax authority, contained in the purchase values of the materials used in the
production of the sold goods. In other words, regardless of whether the sales are
made in domestic or to foreign markets, the VAT payable is the difference
between the VAT-out and the VAT-in.[30]
Id. at C-34. With respect to “VAT-out,” Senmao further explained that the VAT rate applicable
to its finished products sold domestically is 17% and that its finished products sold for export are
subject to VAT-out at a reduced rate, calculated according to a 9% reduction from the 17% rate,
for a VAT-out rate of 8%. Id. at C-35. Senmao summarized the calculation of its VAT liability
by stating that “the final formula for calculation of the total value levied on both the domestic
and export sale[s] is: VAT payable = VAT-out of domestic sales + FOB [free-on-board] price of
the export good x 8% - value VAT-in of all materials purchased.” Id. Because its “VAT-in”
exceeded its liability for “VAT-out,” i.e., the output VAT, the result of the calculation was that
Senmao paid no output VAT on its sales of its exported merchandise. Senmao’s Sections C&D
Response at Exhibit C-5.
30
An attachment to Senmao’s questionnaire response, “Interim Regulations for the
People’s Republic of China on Value-added Tax (Revision in 2008),” is consistent with
Senmao’s explanation. See Multilayered Wood Flooring from the People’s Republic of China:
Section C&D Response at Ex. C-3 (June 30, 2014) (P.R. Doc. 238) (“Senmao’s Sections C&D
Response”). Article 8 of those regulations provides that “[f]or taxpayers who purchase goods . . .
value-added tax paid or borne shall be the input tax,” and Article 4 provides that the “Tax
payable = Output tax payable for the current period – input tax for the current period.” Id.
Article 5 specifies that “the output tax shall be the value-added tax payable calculated on the
basis of the sales amounts involved and the tax rates prescribed in Article 2 of these
Regulations.” Id. Under Article 2, the generally-applicable tax rate “shall be 17%.” Id.
Consol. Court No. 15-00225 Page 57
Commerce stated in the Final Issues and Decision Memorandum that “[i]n the Section C
response in field 45.0, Senmao reported that it incurred zero net VAT expense based on its own
formula derived by an allocation on all VAT paid for inputs of merchandise for both domestic
and export markets.” Final I&D Mem. at 13. That was not in fact what Senmao reported and
that was not what Commerce asked in the questionnaire. See 2012 - 2013 Antidumping
Administrative Review of Multilayered Wood Flooring from-the People’s Republic of China:
Antidumping Questionnaire at C-26 – C-27 (Int’l Trade Admin. May 15, 2014) (P.R. Doc. 192).
Commerce did not ask Senmao to report its “net VAT expense.” See id. Section C of the initial
questionnaire directed that “[i]f you pay value-added taxes on your merchandise sold to the
United States and those taxes are not rebated upon export, report them here” and that “[i]f you
paid no such taxes, please provide official government documentation to demonstrate that you
were entitled to a 100% rebate on such taxes.” Id. at C-26. Senmao interpreted this question to
refer to VAT for which it was liable for payment, i.e., output VAT, not VAT that it paid to its
suppliers (input VAT). See Senmao’s Sections C&D Response at C-33 – C-36. Because the
questions to Senmao referred to taxes that “you paid,” Senmao’s interpretation of the question
was understandable. In response to the Department’s questionnaire, Senmao, referring to output
VAT, informed Commerce that “[s]ince the actual VAT on the export sales to the U.S. is a
negative figure, we report ‘0’ in this field.” Id. at C-36. Commerce rejected Senmao’s
calculation of its VAT liability and proceeded to reach a finding, unsupported by the record
evidence, that Senmao had incurred “irrecoverable” input VAT of 8% of the export value of its
subject merchandise. Final I&D Mem. at 12-13.
Exhibit C-5 to Senmao’s Sections C&D Questionnaire Response (“VAT Calculation”)
provided data showing the amount of “VAT-in” that Senmao incurred during the POR in its
Consol. Court No. 15-00225 Page 58
purchases of materials. Senmao’s Sections C&D Response at Ex. C-5. According to the record
evidence provided by Senmao, the input VAT served as a deduction from potential output VAT
liability but did not serve as a basis for a “refund” or “rebate” of input VAT such that 8% of this
input VAT was not recovered by reason of exportation of the merchandise.31 The more
important point, however, is that Commerce lacked evidentiary support for its finding that under
the PRC’s VAT system a producer of exported merchandise such as Senmao did not incur
irrecoverable input VAT on domestic sales. To the contrary, the record evidence consisting of
Senmao’s questionnaire responses and its exhibits demonstrates that Senmao incurred
irrecoverable input VAT on both its domestic and its export sales.32 According to that evidence,
the difference between its domestic sales and its export sales, with respect to treatment under the
Chinese VAT system, was that the export sales received a preferential reduction of 9% from the
generally-applicable 17% rate for output VAT, resulting in a preferential VAT rate of 8% on the
sales for export.
31
Exhibit C-5 to Senmao’s Sections C&D Questionnaire Response (“VAT Calculation”),
the data in which is claimed as confidential business information, compares the amount of input
VAT to the potential liability for output VAT. See Senmao’s Sections C&D Response at
Ex. C-5.
32
Although Senmao could seek to “recover” its input VAT as part of the total amount it
obtains from buyers of its merchandise, that would appear to be true regardless of whether the
buyer is domestic or foreign. Under the Article 21 of the PRC VAT regulations Senmao
attached to its questionnaire response, some Chinese purchasers of Senmao’s product could
obtain “special invoices for value-added tax”: “Taxpayers that sell goods or taxable services
shall issue special invoices for value-added tax to purchasers that ask for such invoices and
specify both sales amounts and output tax in such invoices.” Senmao’s Sections C&D Response
at Ex. C-3. This option is not available in some circumstances, such as sales by small-scale
taxpayers or to individual consumers, and it is not available “[w]here tax exemption provisions
are applicable to goods or taxable services that are sold.” Id. In any event, the evidence
consisting of the VAT regulations would establish only that any deduction from output VAT
liability that may be enabled by such invoices would reduce the output VAT liability of
Senmao’s purchaser, not that of Senmao.
Consol. Court No. 15-00225 Page 59
The Department’s erroneous finding that irrecoverable input VAT “amounts to a tax,
duty or other charge imposed on exports that is not imposed on domestic sales,” Final I&D Mem.
at 12-13, was a critical error, for it was an essential part of the reasoning by which Commerce
found that irrecoverable input VAT amounts to a “tax, duty, or other charge imposed by the
exporting country on the exportation of the subject merchandise to the United States” within the
meaning of 19 U.S.C. § 1677a(c)(2)(B). Commerce stated that the intent of its practice of
deducting 8% as “a fixed percentage of EP” was “arriving at a tax neutral dumping comparison.”
Id. at 13 (citing Methodological Change for Implementation of Section 772(c)(2)(B) of the Tariff
Act of 1930, as Amended, In Certain Non-Market Economy Antidumping Proceedings, 77 Fed.
Reg. 36,481, 36,483 (Int’l Trade Admin. June 19, 2012)). But an input VAT incurred upon the
purchase of materials for use in production of goods both for export sale and domestic sale
cannot correctly be found in fact to be a tax, duty, or charge that is not imposed on domestic
sales. The Department’s reasoning that the irrecoverable input VAT must be deducted from EP
starting prices in order to attain tax neutrality is based on that erroneous finding. There is no
record evidence from which Commerce could find that Senmao’s export sales incurred a “tax,
duty, or other charge” that its domestic sales avoided. Under the Chinese VAT system as shown
by the evidence placed on the record by Senmao, export sales were not treated less favorably
than were domestic sales (and in fact were treated more favorably).
In summary, it cannot be shown on the record of this case that, as Commerce presumed,
irrecoverable input VAT is incurred under the Chinese VAT scheme exclusively with respect to
export sales. Instead, the evidence placed on the record by Senmao is that the PRC VAT system
imposes input VAT on the materials used in all production of a good, whether or not the finished
good subsequently produced is exported. Therefore, the evidence of record does not support the
Consol. Court No. 15-00225 Page 60
Department’s ultimate finding that the tax in question “amounts to” an export tax, duty, or
charge imposed by the exporting government on the exportation of the subject merchandise.33
Simply stated, input VAT incurred on materials used in domestic production that is not rebated
or refunded upon the sale of the good (whether domestically or to an export market) made from
those materials cannot, as a factual matter, “amount to” something it is not.
In conclusion, the Department’s decision to make the deductions from Senmao’s EP
starting prices for “irrecoverable” input VAT was erroneous because it was based on a critical
finding of fact, i.e., that irrecoverable input VAT did not occur on domestic sales, that was
unsupported by record evidence and illogical. On remand, Commerce must reach a new
determination on the VAT issue that does not have these deficiencies.
33
Because the record evidence is at variance with the factual findings Commerce made
about Chinese VAT as imposed on Senmao, the court need not reach in this case the question of
whether Chinese irrecoverable VAT, when considered according to the Department’s findings
and interpretations pertaining to the functioning of the PRC’s VAT regulations, falls within the
intended scope of 19 U.S.C. § 1677a(c)(2)(B). That question has been considered in various
decisions by this Court. Compare Qingdao Qihang Tyre Co. v. United States, 42 CIT __, __,
Slip Op. 18-35 at *7-27 (Apr. 4, 2018) (holding that Chinese value-added tax, when considered
according to the Department’s own finding of fact that it is imposed on materials used in
producing exported subject merchandise, whether or not refunded upon exportation of the
finished good, is not an “export tax, duty, or other charge” within the meaning of the statutory
phrase and that Congress had a specific intent to the contrary), with Jacobi Carbons AB v. United
States, 42 CIT __, __, Slip Op. 18-46 at *50-60 (Apr. 19, 2018) (concluding that Department’s
interpretation that Chinese irrecoverable VAT falls within the statutory phrase “export tax, duty,
or other charge” is entitled to deference), Aristocraft of Am., LLC v. United States, 41 CIT __,
__, 269 F. Supp. 3d 1316, 1321-26 (2017) (same), Jacobi Carbons AB v. United States,
41 CIT __, __, 222 F. Supp. 3d 1159, 1186-88 (2017) (same), Diamond Sawblades Mfrs.’ Coal.
v. United States, 42 CIT __, __, Slip Op. 18-28 at *4-12 (Mar. 22, 2018) (same), Juancheng
Kangtai Chem. Co. v. United States, 41 CIT __, __, Slip Op. 17-3 at *25-31 (Jan. 19, 2017)
(same), and Fushun Jinly Petrochemical Carbon Co. v. United States, 40 CIT __, __, Slip
Op. 16-25 at *20-25 (Mar. 23, 2016) (same); see also China Manufacturers Alliance, LLC v.
United States, 41 CIT __, __, 205 F. Supp. 3d 1325, 1344-51 (2017). In this case, plaintiffs do
not specifically challenge the Department’s statutory interpretation of 19 U.S.C.
§ 1677a(c)(2)(B) and instead challenge the Department’s decision to make the deduction from
Senmao’s EP starting prices on the grounds that the decision was made according to findings
unsupported by substantial record evidence. The court adjudicates the claims on those grounds.
Consol. Court No. 15-00225 Page 61
I. Old Master’s Claim Challenging the Assignment of the 13.74% Rate to the Separate-Rate
Respondents
In the Final Results, Old Master was assigned the separate-rate margin of 13.74%. See
Final Results at 41,478. Because Commerce calculated a zero margin for Dalian, this rate was
based entirely upon the examination of Senmao, the only individually examined respondent that
did not receive a zero or de minimis rate. See Final I&D Mem. at 52. Old Master challenges the
rate that it was assigned, arguing that Commerce abused its discretion and acted contrary to law
by calculating an assessment rate for separate-rate respondents that “roughly quadruple[d] the
deposit rate” and that was “untethered to commercial reality.” Old Master’s Br. 2. Old Master
contends that it was unreasonable in this case for Commerce to calculate the separate rate by
using a method for calculating the “all-others” rate that is used in investigations because the rate
here was based on a single mandatory respondent, “a clearly non-representative sample,” which
resulted in a rate that does not reflect “commercial reality.” Id. at 3-4. For the reasons discussed
below, the court rejects this claim.
Paragraph (1) of subsection 777A(c) of the Tariff Act requires that Commerce “shall
determine the individual weighted average dumping margin for each known exporter and
producer of the subject merchandise.” 19 U.S.C. § 1677f-1(c)(1); see also 19 U.S.C.
§ 1675(a)(1)(B). An exception to this general requirement is contained within the same
subsection, which reads as follows:
If it is not practicable to make individual weighted average dumping margin
determinations under paragraph (1) because of the large number of exporters or
producers involved in the investigation or review, the administering authority may
determine the weighted average dumping margins for a reasonable number of
exporters or producers by limiting its examination to--
(A) a sample of exporters, producers, or types of products that is statistically valid
based on the information available to the administering authority at the time of
selection, or
Consol. Court No. 15-00225 Page 62
(B) exporters and producers accounting for the largest volume of the subject
merchandise from the exporting country that can be reasonably examined.
Id. § 1677f-1(c)(2). When Commerce has invoked this exception, it necessarily must establish
margins for the unselected respondents that remain subject to the review by a means other than
an individual examination. In administrative reviews involving products from a nonmarket
economy country, the statute is silent as to how Commerce must establish a rate for these
unselected respondents. To “fill the statutory gap, Commerce generally follows the method for
determining the all-others rate in market economy investigations.” Def.’s Br. 47. That method,
which applies to investigations, rather than reviews, is outlined in 19 U.S.C. § 1673d(c)(5)(A),
which sets forth a general rule under which Commerce is to base the all-others rate on “the
weighted average of the estimated weighted average dumping margins established for exporters
and producers individually investigated, excluding any zero and de minimis margins, and any
margins determined entirely under section 1677e of this title” (i.e., determined entirely according
to facts otherwise available). 19 U.S.C. § 1673d(c)(5)(A). The Department followed its practice
here and assigned to the separate-rate respondents that were not individually examined a rate of
13.74%, which was the only rate calculated for an individually examined respondent that was not
zero or de minimis. See Def.’s Br. 47.
Old Master argues that Commerce should not have applied its normal procedure because,
after excluding Dalian Dajen’s zero margin, the separate rate was based upon only one
individually examined respondent. See Old Master’s Br. 3. According to Old Master, using the
rate of only one individually examined respondent is not representative of those respondents that
were not individually examined and is not “logically connected” to the “commercial reality” of
the separate-rate respondents. See id. at 3-4. These arguments are without merit.
Consol. Court No. 15-00225 Page 63
Old Master appears to base its “commercial reality” argument on the fact that the 13.74%
rate “roughly quadruple[d] the deposit rate.” Old Master’s Br. 2. The cash deposit rate, though,
is only an “estimated” rate, consistent with the retrospective statutory scheme for assessment of
antidumping duties, under which Commerce, at a later time, determines the amount of
antidumping duty that actually is to be assessed and collected upon the liquidation of entries of
subject merchandise. See 19 C.F.R. § 351.212(a) (“[T]he United States uses a ‘retrospective’
assessment system under which final liability for antidumping and countervailing duties is
determined after merchandise is imported.”).
Old Master posits that the 13.74% rate is “non-representative” because it is based on an
examination of a single mandatory respondent. Old Master’s Br. 4. At no point during the
administrative review did Old Master contest the selection of the mandatory respondents or
argue that Senmao was not a suitable candidate. Because Senmao was one of the “exporters and
producers accounting for the largest volume of the subject merchandise from the exporting
country,” see 19 U.S.C. § 1677f-1(c)(2)(B), its pricing practices are presumptively representative
of the other exporters and producers of subject merchandise. Old Master has not put forth a
convincing reason why Senmao should not be presumed to be representative of the other
exporters and producers of subject merchandise.
Finally, Old Master does not point to any provision of the statute that Commerce violated
in assigning to it an all-others rate based upon the rate of the only individually examined
respondent that did not receive a zero or de minimis margin. While Old Master is correct that
19 U.S.C. § 1673d(c)(5)(A) explicitly applies to investigations, the Court of Appeals has
reasoned that “the statutory framework [of § 1673d] contemplates that Commerce will employ
the same methods for calculating a separate rate in periodic administrative reviews as it does in
Consol. Court No. 15-00225 Page 64
initial investigations.” Albemarle Corp. & Subsidiaries v. United States, 821 F.3d 1345, 1352
(Fed. Cir. 2016) (citing 19 U.S.C. § 1675(a)). In sum, Old Master has not shown that the
Department, in assigning to it an all-others rate based upon the rate of the only individually
examined respondent to not receive a zero or de minimis margin, acted unlawfully.
Nevertheless, because Old Master was a separate-rate respondent in the review and a plaintiff in
this consolidated action, it is eligible to benefit from any final redetermination of the rate to be
applied to separate-rate respondents as a result of this litigation.
J. Claims of the Penghong Plaintiffs that Commerce Unlawfully Conducted a Review of
Shenyang Haobainian Wooden Co., Ltd.
Shenyang Haobainian Wooden Co., Ltd. was a separate-rate respondent in the second
review and, therefore, was assigned the 13.74% rate. Shenyang Haobainian Wooden Co., Ltd.
and the other Penghong Plaintiffs claim that Commerce unlawfully conducted the administrative
review of Shenyang Haobainian Wooden Co., Ltd. in the absence of a timely request for a
review of this company. Penghong’s Br. 3-9. In support of their claim, the Penghong Plaintiffs
assert that the petitioner’s original request for a review of various producers and exporters,
although timely, sought a review of Shenyang Haobainian Wood Co., not Shenyang Haobainian
Wooden Co., Ltd. They submit that “[i]n the preliminary results of the first review the
Department determined that Shenyang Haobainian Wood Co. was not the same company as
Shenyang Haobainian Wooden Co., Ltd.” and that petitioner had been on notice that Shenyang
Haobainian Wooden Co., Ltd. was the correct name of the company. Id. at 7. According to the
Penghong Plaintiffs, the petitioners’ subsequent filing of a request for a review of Shenyang
Haobainian Wooden Co., Ltd. was untimely, having been filed on January 21, 2014, 21 days
after the due date Commerce announced for requesting reviews, which was December 31, 2013.
Id. at 6. The Penghong Plaintiffs claim that Commerce impermissibly accepted this untimely
Consol. Court No. 15-00225 Page 65
second request, in violation of its own practice and regulations, and that the review of Shenyang
Haobainian Wooden Co., Ltd. was, therefore, contrary to law. They seek as a remedy that the
court order the rescission of the review as to that company. Id. at 9.
The court denies relief on two grounds. First, there has been no showing that any of the
Penghong Plaintiffs other than Shenyang Haobainian Wooden Co., Ltd. has standing to bring this
claim. Second, as to Shenyang Haobainian Wooden Co., Ltd., which necessarily has standing,
the court denies relief because the record demonstrates a failure to exhaust administrative
remedies.
1. Lack of Demonstrated Standing on the Part of Penghong Plaintiffs Other than Shenyang
Haobainian Wooden Co., Ltd.
Because Shenyang Haobainian Wooden Co., Ltd. participated in the second review as a
respondent and was assigned the 13.74% rate, this plaintiff has standing to assert a claim that its
review should not have been conducted. With respect to the other Penghong Plaintiffs, the
complaint alleges as to standing only that “Plaintiffs are producers and/or exporters to the United
States of MLWF manufactured in China or are U.S. importers into the United States of MLWF
manufactured in China” and that “all Plaintiffs have standing” due to their participation in the
underlying administrative proceeding. Compl. ¶ 5, Dalian Penghong Floor Products Co. v.
United States, No. 15-00236 (Sept. 8, 2015), ECF No. 6. This general allegation of prudential
standing does not suffice as an allegation of an injury in fact. Although the Penghong Plaintiffs
include U.S. importers of subject merchandise, their submissions fail to allege that any specific
Penghong Plaintiff was an importer of merchandise produced or exported by Shenyang
Haobainian Wooden Co., Ltd. and had one or more entries of such merchandise that were subject
to the second review. Absent such a factual allegation, the court has no basis to conclude that the
Penghong Plaintiffs in general were affected adversely by the Department’s refusal to rescind the
Consol. Court No. 15-00225 Page 66
review of Shenyang Haobainian Wooden Co., Ltd. The complaint of the Penghong Plaintiffs
alleges an injury in fact sufficient to confer standing only with respect to Shenyang Haobainian
Wooden Co., Ltd. Therefore, this company is the only plaintiff that may assert the claim in
question, and the parallel claims of all other Penghong Plaintiffs challenging the Department’s
conducting a review of Shenyang Haobainian Wooden Co., Ltd. must be dismissed for lack of
standing.
2. Failure of Shenyang Haobainian Wooden Co., Ltd. to Exhaust Its Administrative Remedies
The court is directed to require exhaustion of administrative remedies “where
appropriate.” 28 U.S.C. § 2637(d). Commerce has provided by regulation that the case brief
filed during the administrative proceeding “must present all arguments that continue in the
submitter’s view to be relevant to the Secretary’s final determination or final results, including
any arguments presented before the date of publication of the preliminary determination or
preliminary results.” 19 C.F.R. § 351.309(c)(2). Here, Shenyang Haobainian Wooden Co., Ltd.
objects to the Department’s acceptance of the petitioners’ second request for the review but
implicitly acknowledges that the argument was not presented in the case brief. See Consol. Pls.’
Reply Br. 2 (Aug. 11, 2016), ECF No. 104 (“Penghong’s Reply Br.”) (arguing that its failure to
exhaust should not bar judicial review here); see also Multilayered Wood Flooring from the
People’s Republic of China; Submission of the Case Brief on Behalf 27 Chinese Producers
and/or Exporters (Feb. 9, 2015) (P.R. Doc. 391).
The doctrine of exhaustion of administrative remedies requires, as a general matter, that a
party raising an issue upon judicial review first have presented its arguments to the
administrative agency in the manner the agency requires. “Simple fairness to those who are
engaged in the tasks of administration, and to litigants, requires as a general rule that courts
Consol. Court No. 15-00225 Page 67
should not topple over administrative decisions unless the administrative body not only has erred
but has erred against objection made at the time appropriate under its practice.” United States v.
L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 37 (1952). The court fairly can presume that had the
issue of rescission of the review of Shenyang Haobainian Wooden Co., Ltd. been raised in the
case brief, Commerce, consistent with its ordinary practice and procedure, would have addressed
that issue in the Final Issues and Decision Memorandum, presenting the reasons for any decision
it rendered thereon. Had this occurred, and the agency’s final decision been unfavorable to
Shenyang Haobainian Wooden Co., Ltd., the court would have been presented with a final
decision for judicial review, complete with reasoning incorporated by reference in the Final
Results. But because the issue was not preserved in the case brief—the procedure expressly
required by the agency’s regulations—Commerce did not have occasion to set forth in the Final
Results or the incorporated Final Issues and Decision Memorandum a determination on the
question presented.
Shenyang Haobainian Wooden Co., Ltd. is correct in arguing, as it does in its reply brief,
that failure to exhaust administrative remedies is not jurisdictional and that, accordingly, the
court may exercise discretion as to whether to require exhaustion. Penghong’s Reply Br. 2. But
it fails to show that in the circumstance presented the court is required to excuse the failure to
exhaust its administrative remedies. Moreover, it presents no reason why the issue could not
have been raised in the case brief, as § 351.309(c)(2) required. The arguments instead are that
the court should excuse this failure on the ground of futility or should do so on the ground that
the claim is “purely legal in nature.” Penghong’s Reply Br. 3. Although these are grounds that
in some instances have caused courts to excuse the failure to exhaust administrative remedies,
neither suffices in the situation presented by this record.
Consol. Court No. 15-00225 Page 68
Regarding futility, plaintiff argues that “[r]aising the rejected argument in the
administrative case brief would have been a futile exercise, as Commerce had already made its
determination by conducting the administrative review.” Penghong’s Reply Br. 3. This
argument is not technically accurate, as the review could not be considered to have been
“conducted” prior to issuance of the Final Results. Before then, Commerce as a procedural
matter retained the power to rescind the review of Shenyang Haobainian Wooden Co., Ltd. The
earlier decision to accept the petitioners’ second request and proceed with the review was by
definition not a final administrative decision, as signified by the case brief procedure of
§ 351.309(c)(2). Instead, the initial decision was one Commerce procedurally was free to alter
between the issuance of the Preliminary Results and the Final Results.
As to the pure legal question justification, plaintiff argues that its “claim, that Commerce
violated its regulations by allowing a change to an administrative review request after the
deadline, is purely legal in nature and no additional information is necessary for the Court to
decide the issue.” Penghong’s Reply Br. 3. It might be true that “no additional information is
necessary” for the court to decide the question presented on the merits, but if it is true it is only
because the administrative record contains the factual details bearing on the issue. That is not
the same as saying that only a pure legal question is presented. Deciding the issue on the merits
would require resort to the record for consideration of the specific factual circumstances
according to which Commerce reached a decision not to reject the second review request, as
reflected in the preliminary results of the second review. Shenyang Haobainian Wooden Co.,
Ltd., having declined to pursue the issue in its case brief, allowed that decision to become a final
decision as embodied in the Final Results. Accordingly, it may not challenge the merits of that
decision before the court.
Consol. Court No. 15-00225 Page 69
III. CONCLUSION
For the reasons discussed in the foregoing, the court remands the Final Results published
as Multilayered Wood Flooring From the People’s Republic of China: Final Results of
Antidumping Duty Administrative Review and Final Results of New Shipper Review; 2012-2013,
80 Fed. Reg. 41,476 (Int’l Trade Admin. July 15, 2015) for reconsideration, and correction as
appropriate, in accordance with this Opinion and Order, of the Department’s decisions on: (1) the
surrogate value for plywood, (2) the surrogate value for overlaying glue, (3) the surrogate cost
for foreign inland freight, (4) the denial of voluntary respondent status to Fine Furniture, and
(5) the deduction from Senmao’s EP starting prices for irrecoverable value-added tax. Upon
consideration of all papers and proceedings in this action, and upon due deliberation, it is hereby
ORDERED that the Rule 56.2 motion of plaintiff the Coalition be, and hereby is,
granted; it is further
ORDERED that the Rule 56.2 motions of plaintiffs Fine Furniture, Senmao, Armstrong,
Yingyi-Nature and Jisen Wood, Old Master, and the Penghong Plaintiffs, and plaintiff-intervenor
Yihua, be, and hereby are, granted in part and denied in part; it is further
ORDERED that the Rule 56.2 motion of plaintiff Lumber Liquidators be, and hereby is,
denied; it is further
ORDERED that the Final Results be, and hereby are, set aside as unlawful in some
respects and remanded for reconsideration and redetermination in accordance with this Opinion
and Order; it is further
ORDERED that Commerce shall issue, within 90 days of the date of this Opinion and
Order, a new determination upon remand (“Remand Redetermination”) that conforms to this
Opinion and Order and redetermines dumping margins as appropriate; it is further
ORDERED that plaintiffs, plaintiff-intervenors, and defendant-intervenors may file
comments on the Remand Redetermination within 30 days from the date on which the Remand
Redetermination is filed with the court; and it is further
Consol. Court No. 15-00225 Page 70
ORDERED that defendant may file a response to the comment submissions within
15 days from the date on which the last of any such comments is filed with the court.
/s/ Timothy C. Stanceu
Timothy C. Stanceu, Chief Judge
Dated: June 8, 2018
New York, New York