Macao Commercial and Industrial Spring Mattress Mfr. v. United States , 2020 CIT 37 ( 2020 )

Slip Op. 20-37
UNITED STATES COURT OF INTERNATIONAL TRADE
MACAO COMMERCIAL AND INDUSTRIAL
SPRING MATTRESS MANUFACTURER,
Plaintiff,
v.
Before: Leo M. Gordon, Judge
UNITED STATES,
Court No. 19-00005
Defendant,
and
LEGGETT & PLATT, INC.,
Defendant-Intervenor.
OPINION
[Commerce’s Final Determination sustained.]
Dated: March 20, 2020
Susan Kohn Ross and Alesha M. Dominique, Mitchell Silberberg & Knupp LLP of
Los Angeles, CA and Washington, DC for Plaintiff Macao Commercial and Industrial
Spring Mattress Manufacturer.
Kelly A. Krystyniak, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice of Washington, DC, for Defendant United States. With her on
brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director,
Claudia Burke, Assistant Director. Of counsel was Elio Gonzalez, Attorney,
U.S. Department of Commerce, Office of Chief Counsel for Trade Enforcement and
Compliance of Washington, DC.
Yohai Baisburd, Jeffery B. Denning, and Chase J. Dunn, Cassidy Levy Kent (USA)
LLP of Washington, DC for Defendant-Intervenor Leggett & Platt, Inc.
Gordon, Judge: This action involves the U.S. Department of Commerce’s
(“Commerce”) final affirmative determination that Plaintiff Macao Commercial and
Court No. 19-00005 Page 2
Industrial Spring Mattress Manufacturer (“Plaintiff” or “Macao Commercial”) circumvented
the antidumping duty (“AD”) order on uncovered innerspring units (“innersprings” or
“innerspring units”) from the People’s Republic of China (“PRC”). See Uncovered
Innerspring Units from the People’s Republic of China, 83 Fed. Reg. 65,626 (Dep’t of
Commerce Dec. 21, 2018) (final affirm. determ. of circumvention of the AD Order) (“Final
Determination”), and the accompanying Issues and Decision Memorandum (Dep’t of
Commerce Dec. 14, 2018), available at
https://enforcement.trade.gov/frn/summary/prc/2018-27677-1.pdf (last visited this date)
(“Decision Memorandum”); see also Uncovered Innerspring Units from the People’s
Republic of China, 74 Fed. Reg. 7,661 (Dep’t of Commerce Feb. 19, 2009) (“Order”).
Before the court is Plaintiff’s motion for judgment on the agency record under
USCIT Rule 56.2. See Pl.’s Mot. for J. on the Agency R., ECF No. 29 1 (“Pl.’s Br.”); see
also Def.’s Resp. to Pl.’s Mot. for J. on the Agency R., ECF No. 34 (“Def.’s Resp.”); Def.-
Intervenor Leggett & Platt, Inc.’s Resp. Opp. Pl.’s Mot. for J. on the Agency R.,
ECF No. 36; Pl.’s Reply in Supp. Of Mot. for J. on the Agency R., ECF No. 38 (“Pl.’s
Reply”). The court has jurisdiction pursuant to Section 516A(a)(2)(B)(vi) of the Tariff Act
of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(vi) (2012), 2 and 28 U.S.C. § 1581(c)
(2012). For the reasons set forth below, the court sustains Commerce’s Final
Determination.
1
All citations to parties' briefs and the agency record are to their confidential versions
unless otherwise noted.
2
Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2012 edition.
Court No. 19-00005 Page 3
I. Background
Macao Commercial is a foreign producer and exporter of uncovered innerspring
units made from Chinese-origin materials. See Decision Memorandum at 4. During the
course of the sixth administrative review of the Order, Commerce selected Macao
Commercial as one of the two mandatory respondents subject to individual examination
during the review. Following Macao Commercial’s responses to Commerce’s original and
supplemental questionnaires, Commerce explained that it intended to evaluate whether
self-initiation of an anti-circumvention inquiry would be warranted based upon the
information submitted by Macao Commercial during the review. See Uncovered
Innerspring Units from the People’s Republic of China, 81 Fed. Reg. 62,729 (Dep’t of
Commerce Sept. 12, 2016) (final results AD admin rev.), and accompanying Issues and
Decision Memorandum at cmt. 1 (Dep’t of Commerce Sept. 6, 2016), available at
https://enforcement.trade.gov/frn/summary/prc/2016-21859-1.pdf (last visited this date).
Pursuant to 19 U.S.C. § 1677j(b), in order to prevent circumvention of an
antidumping duty order, Commerce is empowered to find certain merchandise to be within
the scope of the order if “before importation into the United States, such imported
merchandise is completed or assembled in another foreign country from merchandise
[that is subject to an existing antidumping duty order].” 19 U.S.C. § 1677j(b)(1)(B).
Commerce proceeded to self-initiate an anti-circumvention inquiry to determine whether
innersprings manufactured by Macao Commercial in Macau from raw materials
originating in China, including uncoiled steel wire, nonwoven fabric, and glue, and
exported to the United States from Macau are circumventing the Order. See Uncovered
Court No. 19-00005 Page 4
Innerspring Units from the People’s Republic of China, 81 Fed. Reg. 83,801 (Dep’t of
Commerce Nov. 22, 2016) (initiation of anticircumvention inquiry on Order).
After gathering additional information from Macao Commercial by issuing
supplemental questionnaires and conducting public and closed hearings, Commerce
determined that Macao Commercial had failed to provide necessary, requested cost
reconciliations. See Decision Memorandum at 9–12. Commerce also found that there
were discrepancies and unexplained differences with respect to Macao Commercial’s
financial statements. Id. Finding that Macao Commercial failed to cooperate to the best
of its ability, Commerce determined that the application of facts available with an adverse
inference (“AFA”) was appropriate in part. Id. at 12. Consequently, Commerce concluded
that Macao Commercial’s merchandise was subject to the Order pursuant to 19 U.S.C.
§ 1677j(b). See Final Determination.
II. Standard of Review
The court sustains Commerce’s “determinations, findings, or conclusions” unless
they are “unsupported by substantial evidence on the record, or otherwise not in
accordance with law.” 19 U.S.C § 1516a(b)(1)(B)(i). More specifically, when reviewing
agency determinations, findings or conclusions for substantial evidence, the court
assesses whether the agency action is reasonable given the record as a whole. Nippon
Steel Corp v. United States, 458 F.3d 1345, 1350–51 (Fed. Cir. 2006). Substantial
evidence has been described as “such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,
407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.
Court No. 19-00005 Page 5
197, 229 (1938)). Substantial evidence has also been described as “something less than
the weight of evidence, and the possibility of drawing two inconsistent conclusions from
the evidence does not prevent an administrative agency’s findings from being supported
by substantial evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966).
Fundamentally, though, “substantial evidence” is best understood as a word formula
connoting a reasonableness review. 3 Charles H. Koch, Jr., Administrative Law and
Practice § 9.24[1] (3d ed. 2019). Therefore, when addressing a substantial evidence issue
raised by a party, the court analyzes whether the challenged agency action “was
reasonable given the circumstances presented by the whole record.” 8A West’s Fed.
Forms, National Courts § 3.6 (5th ed. 2019).
Separately, the two-step framework provided in Chevron, U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837, 842–45 (1984), governs judicial review of
Commerce’s interpretation of the Tariff Act. See United States v. Eurodif S.A., 555 U.S.
305, 316 (2009) (An agency's “interpretation governs in the absence of unambiguous
statutory language to the contrary or unreasonable resolution of language that is
ambiguous.”).
III. Discussion
Pursuant to 19 U.S.C. § 1677j(b)(1)(B), Commerce may determine that
merchandise is circumventing an AD order where, “before importation into the United
States, such imported merchandise is completed or assembled in another foreign country
from merchandise which— (i) is subject to such order or finding, or (ii) is produced in the
foreign country with respect to which such order or finding applies.” 19 U.S.C.
Court No. 19-00005 Page 6
§ 1677j(b)(1)(B). The subsequent subsections of the statute provide factors to guide
Commerce’s anti-circumvention determinations. See 19 U.S.C. § 1677j(b)(1)(C)–(E)
(providing Commerce must assess the significance of the “process of assembly or
completion in the foreign country” and “the value of the merchandise produced in the
foreign country”).
A. Completion or Assembly Under 19 U.S.C. § 1677j(b)(1)(B)
Plaintiff’s initial challenge focuses on 19 U.S.C. § 1677j(b)(1)(B), which Commerce
applied in determining that Macao Commercial circumvented the Order as described
above. Plaintiff highlights that Commerce occasionally described Macao Commercial’s
production process as “manufacturing” instead of solely using the precise terms
“completion” or “assembly” as provided in the statute. Pl.’s Br. at 7–12. Commerce
rejected Plaintiff’s argument that that Macao Commercial’s “manufacturing” activities fell
outside the scope of § 1677j(b)(1)(B), explaining that “Macao Commercial attempts to use
semantics to draw a difference between manufacturing, on the one hand, versus
completion or assembly on the other. However, neither the statute nor the legislative
history contemplate a distinction between manufacturing and completion or assembly.”
Decision Memorandum at 13 (citing Omnibus Trade Act, Report of the Senate Finance
Committee, S. Rep. No. 100-71, at 99–101 (1987), and the Statement of Administrative
Action accompanying the Uruguay Round Agreements Act, H. Doc. No. 103-316 (1994),
at 892–95). Plaintiff maintains that Commerce erroneously interpreted § 1677j(b)(1)(B)
by concluding that the “assembly or completion” language in the statute covered Macao
Commercial’s “manufacturing” process. Id. at 11–12.
Court No. 19-00005 Page 7
Plaintiff notably fails to explain why it should prevail under the Chevron framework
that this Court uses to assess arguments challenging Commerce’s interpretation of
statutes. Rather, Plaintiff merely notes that the term “manufacturing” is absent from the
language of the statute and its legislative history. See Pl.’s Br. at 11–12. Plaintiff does not
contend that the statute unambiguously supports its position, nor does it explain how
Commerce’s interpretation of the statute is unreasonable. Id. (contending, without any
supporting citations, that “Commerce’s inconsistent language underscores its
misapplication of the statute and is further evidence of a continuing misunderstanding of
Macao Commercial’s manufacturing process. … As such, Commerce’s conclusion is
contrary to law.”). Plaintiff is correct that neither the statute, nor its legislative history, refer
to the term “manufacturing;” however, Commerce relies on legislative history for the
conclusion that Congress intended the agency to have broad discretion in interpreting
and applying the anti-circumvention statute. See Decision Memorandum at 13 (citing
Omnibus Trade Act, Report of the Senate Finance Committee, S. Rep. No. 100-71, at 99–
101 (1987)). Specifically, the cited Senate Committee Report states:
[T]hese subsections grant the Commerce department
substantial discretion in interpreting these terms, and invoking
these measures, so as to allow it flexibility to apply the
provisions in an appropriate manner, the Committee expects
the Commerce Department to use this authority to the fullest
extent possible to combat diversion and circumvention of the
antidumping and countervailing duty laws.
S. Rep. No. 100-71, at 100. Given this, Commerce reasonably rejected Plaintiff’s attempt
to elevate the agency’s use of the term “manufacturing” to escape the scope of
§ 1677j(b)(1)(B) based on nothing more than semantics.
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Plaintiff also contends that Commerce’s application of the statute is “not supported
by substantial evidence because the record evidence established that Macao
Commercial’s innersprings are not produced by a process of assembly; rather, they are
made using a sophisticated, technology-driven manufacturing process.” Pl.’s Br. at 2,
7-11. In its preliminary determination, Commerce cited to Macao Commercial’s
questionnaire response as the basis for the agency’s affirmative finding under
§ 1677j(b)(1)(B), noting that:
Macao Commercial acknowledged throughout this
proceeding that it sources materials and/or components from
China, which it uses to assemble innerspring units in Macau.
As such, the distinction Macao Commercial seems to make
between components and raw materials is not relevant.
Therefore, in accordance with section 781(b)(1)(B) of the Act,
we preliminarily find that innerspring units are assembled in
Macau by Macao Commercial from Chinese-origin materials
and/or components prior to importation into the United States.
See Uncovered Innerspring Units from the People’s Republic of China, 83 Fed. Reg.
42,254 (Dep’t of Commerce Aug. 21, 2018) (prelim affirm. determ. of circumvention of
Order) (“Preliminary Determination”), and the accompanying Issues and Decision
Memorandum at 14 (Dep’t of Commerce Aug. 9, 2018), available at
https://enforcement.trade.gov/frn/summary/prc/2018-17784-1.pdf (last visited this date)
(“Preliminary Decision Memorandum”). Plaintiff maintains that “[i]n finding the process is
an ‘assembly,’ Commerce ignored record evidence demonstrating that Macao
Commercial does not use any components such as spring coils, border rods or border
wires to make its innersprings.” Pl.’s Br. at 10. The court disagrees. It is Plaintiff, not
Commerce, that appears to be ignoring record evidence in its argumentation. Commerce
Court No. 19-00005 Page 9
cited directly to Macao Commercial’s initial questionnaire response that confirmed that
“Macao Commercial manufactures the innersprings it makes in Macao from raw materials
and consumables it receives from China.” See Preliminary Decision Memorandum at 14
n.71 (quoting Macao Commercial’s initial questionnaire response). Plaintiff highlights
other evidence in the record that suggests that Macao Commercial does not “assemble”
Chinese innerspring components; however, Plaintiff fails to demonstrate that Commerce
acted unreasonably in finding that Macao Commercial’s innerspring units are “completed
or assembled in Macau using Chinese-origin materials and/or components prior to
importation into the United States” based on the plain language of Macao Commercial’s
questionnaire response. See Decision Memorandum at 5 (citing Preliminary Decision
Memorandum at 14); see also Tianjin Wanhua Co. v. United States, 40 CIT ___, ___,
179 F. Supp. 3d 1062, 1071 (2016) (noting that plaintiff must demonstrate that its
preferred evidentiary finding is “the one and only reasonable” outcome on the
administrative record, “not simply that [its preferred finding] may have constituted another
possible reasonable choice.”). Accordingly, the court sustains as reasonable Commerce’s
determination that “the merchandise subject to this anticircumvention inquiry was
completed or assembled in Macau using Chinese-origin materials and/or components
prior to importation into the United States.” Decision Memorandum at 5.
B. Application of Partial AFA as to
19 U.S.C. §§ 1677j(b)(1)(D) & 1677j(b)(2)(E)
19 U.S.C. § 1677m(d) provides that, prior to disregarding respondent submissions
found to be deficient and applying adverse facts available (“AFA”), Commerce must:
Court No. 19-00005 Page 10
“promptly inform the person submitting the response of the nature of the deficiency and
shall, to the extent practicable, provide that person with an opportunity to remedy or
explain the deficiency in light of the time limits established for the completion of
investigations or reviews under this subtitle.” 19 U.S.C. § 1677m(d). Plaintiff argues that
Commerce did not notify Macao Commercial of any deficiencies in its questionnaire
responses until the agency issued the Preliminary Determination. See Pl.’s Br. at 12–24.
As a consequence, Plaintiff challenges Commerce’s determination to apply partial AFA
in its assessments under §§ 1677j(b)(1)(D) & 1677j(b)(2)(E) due to Macao Commercial’s
failure to submit cost reconciliations despite Commerce’s repeated requests.
Commerce explained that it had requested cost reconciliation information from
Plaintiff since the issuance of the initial questionnaire. See Decision Memorandum at 9
(quoting initial questionnaire’s request that respondents “provide complete and fully
translated documentation and worksheets supporting the quantification of the costs to
complete the production of innersprings at each stage of processing”). In response to
Commerce’s initial request, Macao Commercial provided only “an overall narrative
description and self-selected one set of production records for one shipment to use as an
example. … Moreover, while it did provide some source documents (some of which were
not completely translated), it did not provide any accounting ledgers into which these
flowed, much less demonstrate how the information from the source documents flowed
into its accounting records.” Id. Commerce then “pointed out Macao Commercial’s
deficient response and provided more explicit guidance” by issuing a supplemental
questionnaire. See id. Lastly, Commerce provided Macao Commercial with additional
Court No. 19-00005 Page 11
extensions of time and clarification as to the nature of the cost reconciliation information
the agency expected to receive; however, “Macao Commercial never provided the
requested reconciliations and stated that no such reconciliations exist in its normal books
and records.” Id.
The court cannot see any merit in Plaintiff’s argument that it did not receive “prompt
notice” of the deficiencies of its questionnaire response. Plaintiff even acknowledges that
“[i]n Question 23 of the Supplemental Questionnaire, Commerce explained that Macao
Commercial’s response to Question 28 of the Initial Questionnaire was ‘materially
deficient and incomplete,’ and repeated its request for cost information, among other
information….” Pl.’s Br. at 17. Moreover, Plaintiff notes that its counsel engaged in
telephone discussions with Commerce to fully understand Commerce’s expectations for
Plaintiff’s responses to the Supplemental Questionnaire. Id. at 17–21. However, despite
repeated clarifications and extensions from Commerce, Plaintiff only provides excuses as
to why “Macao Commercial was not able to provide the sort of reconciliation the
Commerce described.” Id. at 22. Even though Plaintiff concedes that it did not provide
information requested by Commerce in the form and manner expressly sought by the
agency, Plaintiff maintains that it “was completely unaware that its responses were
deemed deficient until Commerce issued its Preliminary Determination.” Id. at 22–23.
Commerce explained that it “expects companies to be able to produce a
reconciliation of their accounting records based on their normal books and records, upon
request.” Decision Memorandum at 9–10. Commerce further notes that it directed Plaintiff
that “if Macao Commercial does not have a cost accounting system, that it reconcile the
Court No. 19-00005 Page 12
general ledger or trial balance to the books and records normally kept by the company
which were used to derive the reported quantity of each input consumed in the production
of merchandise covered by the scope of the antidumping duty order.” Id. at 10. Commerce
fully described why the cost reconciliations it sought were vital for its anti-circumvention
determinations and why the agency could not accept Plaintiff’s claimed inability to comply
with Commerce’s request for cost reconciliations:
Reconciliations are vital to our ability to conduct a
anticircumvention inquiry, particularly verification of the cost
information relating to our analysis of the factors under
sections 781(b)(2)(E) and (b)(1)(D) of the Act. Although the
format of the reconciliation of submitted costs to actual
financial statement costs depends greatly on the nature of the
accounting records maintained by the respondent, the
reconciliation represents the starting point of a cost
verification because it assures Commerce that the respondent
has accounted for all costs before allocating those costs to
individual products. The cost reconciliations, along with their
supporting documents, show and explain the link between the
information the respondent provides in its questionnaire
responses and the books and records it maintains in the
ordinary course of business, which are critical to ascertain the
accuracy of data submitted to address the factors under
sections 781(b)(2)(E) and (b)(1)(D) of the Act. Whether or not
Macao Commercial has a sophisticated, fully-integrated
accounting system is immaterial; Commerce regularly
investigates and reviews small companies such as Macao
Commercial in its antidumping cases, requesting and
obtaining the same kind of reconciliation that Macao
Commercial failed to produce. … However, Macao
Commercial continuously failed to provide the required cost
reconciliation necessary for Commerce to analyze the
statutory circumvention criteria and conduct a verification.
Court No. 19-00005 Page 13
Decision Memorandum at 11. Given the record and Commerce’s explanation, Plaintiff’s
argument that it was “completely unaware” of the deficiency of its submissions begs
credulity.
“[T]he burden of creating an adequate record lies with interested parties and not
with Commerce.” QVD Food Co. v. United States, 658 F.3d 1318, 1324 (Fed. Cir. 2011);
see also Nan Ya Plastics Corp. v. United States, 40 CIT ___, ___, 810 F.3d 1333, 1337–
38 (2016). Macao Commercial’s failure to build an adequate record by providing full
responses to Commerce’s requests resulted in the absence of critical information on the
record, and as a result Commerce reasonably applied partial facts available pursuant to
19 U.S.C. § 1677e(a).
Plaintiff next contends that even if Commerce properly found that it was
appropriate to rely on partial facts available under 19 U.S.C. § 1677e(a), an adverse
inference was not warranted under § 1677e(b) because Macao Commercial complied
with Commerce’s requests to “the best of its ability.” See Pl.’s Br. at 24–30. Plaintiff
maintains that “Commerce applied partial AFA based solely on its conclusion that Macao
Commercial ‘did not provide the requested cost reconciliations.’” Id. at 26 (quoting
Decision Memorandum at 12) (emphasis added). Plaintiff’s argument, however,
selectively quotes Commerce’s explanation for its finding under § 1677e(b), which states
in full: “Macao Commercial failed to cooperate to the best of its ability to comply with the
requests for information because it did not provide the requested cost reconciliations,
despite receiving multiple opportunities and several extensions of time.” Decision
Memorandum at 12 (emphasis added). The omitted explanatory language is critical, as it
Court No. 19-00005 Page 14
demonstrates that Commerce’s conclusion that Plaintiff did not act to the “best of its
ability” was not merely due to the failure to submit the requested cost reconciliation
information. Rather, Commerce’s conclusion was based not only on the importance of the
specific cost reconciliation information but also on the fact that the agency had provided
Plaintiff with additional time and guidance to provide this information in the form and
manner that would suit the agency’s need, but Plaintiff nonetheless refused to provide
this crucial information. See Decision Memorandum at 11–12 (detailing “vital” nature of
cost reconciliation information and noting that Commerce’s cost reconciliation
expectations can be met by small, unsophisticated respondents like Plaintiff); see also
Sidenor Indus. SL v. United States, 33 CIT 1660, 1668–69, 664 F. Supp. 2d 1349, 1356–
59 (2009) (sustaining, in context of administrative review, Commerce’s application of AFA
due to respondent’s failure to provide requested cost reconciliations). Given this
explanation, the court sustains as reasonable Commerce’s finding that Macao
Commercial did not act to the “best of its ability” under § 1677e(b). 3
3
Plaintiff also argues that Commerce’s decision to apply partial AFA was unlawful
because Commerce failed to “conduct a separate analysis” under § 1677e(b). See Pl.’s
Br. at 27–29 (arguing that Commerce’s AFA determination was improperly based on its
“singular analysis” that Macao Commercial “did not provide the requested cost
reconciliations”). This argument rests on the same faulty premise as Plaintiff’s substantial
evidence argument (i.e., that Commerce found Plaintiff did not comply to the best of its
ability “solely” due to the failure to provide cost reconciliations). Id. Because Plaintiff’s
argument hinges on an erroneous characterization of Commerce’s finding and
explanation, the court rejects Plaintiff’s legal argument that Commerce failed to conduct
a separate analysis under § 1677e(b).
Court No. 19-00005 Page 15
C. Macao Commercial’s Manufacturing Process as “Minor or Insignificant”
under 19 U.S.C. §§ 1677j(b)(1)(C) & 1677j(b)(2)
Commerce found that Macao Commercial’s manufacturing process is “minor or
insignificant” under §§ 1677j(b)(1)(C) & 1677j(b)(2). See Pl.’s Br. at 30–43. In making its
anti-circumvention inquiry Commerce must determine whether “the process of assembly
or completion in the foreign country … is minor or insignificant.” 19 U.S.C.
§ 1677j(b)(1)(C). The statute provides five factors that Commerce must consider in
reaching its determination under § 1677j(b)(1)(C): (A) “the level of investment,” (B) “the
level of research and development,” (C) “the nature of the production process,” (D) “the
extent of production facilities,” and (E) “the value of the processing performed” in the
foreign country. See 19 U.S.C. § 1677j(b)(2).
Commerce found that the record demonstrated that Macao Commercial had made
a “significant” level of investment in Macau under the first factor, § 1677j(b)(2)(A).
Nevertheless, Commerce determined that Plaintiff had failed to provide enough evidence
on the record to obtain favorable findings as to the other four factors. See Decision
Memorandum at 5-6. Plaintiff now challenges the reasonableness of Commerce’s
findings as to the remaining four factors, §§ 1677j(b)(2)(B)–(E). See Pl.’s Br. at 30–37.
Respecting Commerce’s finding under the second factor that Macao Commercial
“has not provided evidence of a significant level of R&D expenditures in Macau to
assemble and complete innersprings,” Plaintiff argues that Commerce unreasonably
ignored “the substantial investment [Macao Commercial] made in continually upgrading
[its] machinery.” Id. at 31; see also Decision Memorandum at 13–14. Commerce
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considered Plaintiff’s argument under § 1677j(b)(2)(B) regarding Macao Commercial’s
machinery-related investments; Commerce, however, disagreed with Plaintiff, concluding
that the agency “had already accounted for such purchases under” § 1677j(b)(2)(A) and
determined that Macao Commercial “was essentially trying to double-count its machinery
purchases under two separate criteria.” Decision Memorandum at 14. Plaintiff maintains
that Commerce should have considered Plaintiff’s machinery purchases, and its affiliation
with a machine production company heavily involved with research and development of
technologies to improve the production efficiency of innerspring-making machinery, as
evidence that Plaintiff had a significant “level of research and development in the foreign
country” under § 1677j(b)(2)(B). See Pl.’s Br. at 30–33. The court disagrees.
As Commerce explained, it accounted for Macao Commercial’s investment in high-
tech machinery purchases under § 1677j(b)(2)(A). Commerce reasonably found that
considering those same purchases as evidence of Plaintiff’s investment in “research and
development” under § 1677j(b)(2)(B) would essentially “double-count” Plaintiff’s
machinery purchases in Commerce’s § 1677j(b)(2) evaluation. See Decision
Memorandum at 14. Plaintiff contends that “Commerce’s conclusion is wholly
unsubstantiated,” arguing that “Commerce failed to provide a reasoned analysis or
explanation, much less any authority whatsoever, for its conclusion that the evidence
presented in response to a circumvention inquiry can be used to analyze only one, rather
than multiple, factors under § 1677j(b)(2).” Pl.’s Br. at 33. Plaintiff’s argument
misapprehends Commerce’s obligations under the statute and the standard of review.
Plaintiff is correct that the statute does not expressly prohibit using the same evidence to
Court No. 19-00005 Page 17
analyze multiple factors under § 1677j(b)(2); however, Plaintiff cannot identify any
statutory or regulatory guidance indicating that Commerce cannot account for such
“double-counting” in its analysis of each factor. Accordingly, Commerce reasonably
refused to double-count Plaintiff’s investments in machinery in evaluating Macao
Commercial’s level of investment under § 1677j(b)(2)(A) and its level of “research and
development” under § 1677j(b)(2)(B).
With respect to the third and fourth factors, § 1677j(b)(2)(C) and § 1677j(b)(2)(D),
Commerce found that “the nature of the production process in Macau is minor and Macao
Commercial’s production facility is not extensive.” See Decision Memorandum at 13.
Commerce explained that its finding was consistent with its analysis in the Preliminary
Determination, and Commerce noted that the information on the record “indicated that
Macao Commercial uses a minimal number of upstream material inputs and a very small
workforce in a production facility of limited size.” Id. While Commerce acknowledged that
Macao Commercial’s production process was automated due to significant investments
in machinery (as the agency had found under § 1677j(b)(2)(A)), Commerce emphasized
that “a greater degree of automation does not change the fact that the production process
for manufacturing innersprings using imported raw materials, as described by Macao
Commercial, involves a limited number of both workers and inputs in a small production
area.” Id.
Plaintiff maintains that these findings are unreasonable considering “the
substantial evidence which clearly demonstrated that the nature of the innerspring-
making process is significant, and the extent of the production facilities in Macau are
Court No. 19-00005 Page 18
extensive.” Pl.’s Br. at 33. Plaintiff highlights various aspects of the record supporting its
contention that its “sophisticated technology-driven innerspring-making process” is
significant under § 1677j(b)(2)(C). Id. at 34–36. Similarly, Plaintiff describes the
information on the record indicating the significant cost and value of its production
facilities to support its position under § 1677j(b)(2)(D). Id. at 36–37. At most, the
information cited by Plaintiff indicates that Commerce could have reasonably found that
the nature of Plaintiff’s production process in Macau is significant and Macao
Commercial’s production facility is extensive. Plaintiff’s arguments, however, fail to
establish that the information on the record supported one, and only one, reasonable
conclusion (i.e., that its production process in Macau is significant and that its production
facility is extensive). See Tianjin Wanhua Co. v. United States, 40 CIT ___, ___, 179 F.
Supp. 3d 1062, 1071 (2016) (noting that plaintiff must demonstrate that its preferred
evidentiary finding is “the one and only reasonable” outcome on the administrative record,
“not simply that [its preferred finding] may have constituted another possible reasonable
choice.”). Accordingly, the court sustains Commerce’s findings under § 1677j(b)(2)(C)
and § 1677j(b)(2)(D) that the nature of Plaintiff’s production process in Macau is minor
and that its production facility is not extensive.
D. The Value of Macao Commercial’s Processing under
19 U.S.C. §§ 1677j(b)(1)(D) & 1677j(b)(2)(E)
Lastly, Plaintiff contends that Commerce improperly found that the value of the
processing performed in Macau “represents a small proportion of the value of the
merchandise imported into the United States” pursuant to the fifth factor, § 1677j(b)(2)(E).
Court No. 19-00005 Page 19
See Pl.’s Br. at 37–43. Plaintiff specifically argues that Commerce “failed to conduct a
qualitative analysis” in reaching its determination under § 1677j(b)(2)(E), and further
maintains that Commerce improperly applied partial AFA in reaching its § 1677j(b)(2)(E)
finding by relying on facts from Uncovered Innerspring Units from the People’s Republic
of China, 79 Fed. Reg. 78,794 (Dep’t of Commerce Dec. 31, 2014) (“Goldon”). Pl.’s Br.
at 39. Plaintiff repeats these same arguments in challenging Commerce’s “determination
that the value of the Chinese-origin raw materials used by Macao Commercial to
manufacture in Macau innersprings exported to the United States represents a significant
portion of the total value of the merchandise exported to the United States” pursuant to
§ 1677j(b)(1)(D). See id. at 43–45 (noting “Commerce’s decision to resort to partial AFA
and to rely on the facts of Goldon was improper for all the reasons set forth supra”).
Defendant, however, points out that Plaintiff failed to raise these issues in its case brief
before Commerce and thus failed to exhaust its administrative remedies. See Def.’s
Resp. at 26, 28. While Plaintiff notes that it made a general challenge to Commerce’s
value determinations under §§ 1677j(b)(1)(D) & 1677j(b)(2)(E) in its administrative case
brief, Plaintiff cannot dispute that it failed to raise the specific arguments challenging
Commerce’s failure to conduct a qualitative analysis and Commerce’s reliance on
Goldon. See generally Macao Commercial Case Brief at 4–5, 12–16, PD 4 274 at barcode
3753511-01, CD 304 at barcode 3753509-01. Instead, Plaintiff attempts to rely on certain
language from the court’s scheduling order as a basis for avoiding the consequences of
4
“PD” refers to a document contained in the public administrative record. “CD” refers to
a document contained in the confidential record.
Court No. 19-00005 Page 20
its failure to exhaust its administrative remedies. See Pl.’s Reply at 13–14 n.3 (citing
Scheduling Order at 2, ECF No. 26). The Scheduling Order states: “Please do not merely
cut-and-paste arguments from administrative case briefs, and think anew about the
issues against the operative standards of review the court must apply.” See Scheduling
Order at 2. Plaintiff cites the court’s encouragement for parties to “think anew about the
issues” as providing apparent permission for Plaintiff to raise new arguments that it failed
to make to Commerce in the administrative proceeding. See Pl.’s Reply at 14 n.3.
However, Plaintiff’s understanding is misplaced, as the very next sentence in the
scheduling order states: “Likewise, please make sure you have exhausted your
administrative remedies and raised the issues by presenting your arguments to the
agency in the first instance.” Scheduling Order at 2. Simply put, Plaintiff failed to present
to Commerce the specific arguments challenging Commerce’s determination under
§§ 1677j(b)(1)(D) & 1677j(b)(2)(E) that it now raises before the court. The court therefore
will disregard Plaintiff’s arguments on these issues due to a failure to exhaust its
administrative remedies as to these arguments. See Essar Steel, Ltd. v. United States,
753 F.3d 1368, 1374 (Fed. Cir. 2014).
IV. Conclusion
For the foregoing reasons, the court sustains the Final Determination. Judgment
will be entered accordingly.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: March 20, 2020
New York, New York