Changzhou Hawd Flooring Co. v. United States , 848 F.3d 1006 ( 2017 )

United States Court of Appeals
for the Federal Circuit
______________________
CHANGZHOU HAWD FLOORING CO., LTD.,
DUNHUA CITY JISEN WOOD INDUSTRY CO.,
LTD., DUNHUA CITY DEXIN WOOD INDUSTRY
CO., LTD., DALIAN HUILONG WOODEN
PRODUCTS CO., LTD., KUNSHAN YINGYI-
NATURE WOOD INDUSTRY CO., LTD., KARLY
WOOD PRODUCT LIMITED, FINE FURNITURE
(SHANGHAI) LIMITED, LUMBER LIQUIDATORS
SERVICES, LLC, ARMSTRONG WOOD PRODUCTS
(KUNSHAN) CO., LTD.,
Plaintiffs-Appellants
HOME LEGEND, LLC,
Plaintiff
v.
UNITED STATES, THE COALITION FOR
AMERICAN HARDWOOD PARITY,
Defendants-Appellees
______________________
2015-1899, 2015-1901, 2015-1903, 2015-1904
______________________
Appeals from the United States Court of International
Trade in No. 1:12-cv-00020-DCP, Judge Donald C. Pogue.
______________________
Decided: February 15, 2017
______________________
2 CHANGZHOU HAWD FLOORING CO. v. US
JEFFREY S. GRIMSON, Mowry & Grimson, PLLC,
Washington, DC, argued for all plaintiffs-appellants.
Plaintiff-appellant Fine Furniture (Shanghai) Limited
also represented by KRISTIN HEIM MOWRY, JILL A.
CRAMER, SARAH M. WYSS.
GREGORY S. MENEGAZ, DeKieffer & Horgan, PLLC,
Washington, DC, for plaintiffs-appellants Changzhou
Hawd Flooring Co., Ltd., Dunhua City Jisen Wood Indus-
try Co., Ltd., Dunhua City Dexin Wood Industry Co., Ltd.,
Dalian Huilong Wooden Products Co., Ltd., Kunshan
Yingyi-Nature Wood Industry Co., Ltd., Karly Wood
Product Limited. Also represented by JAMES KEVIN
HORGAN, ALEXANDRA H. SALZMAN.
ARTHUR K. PURCELL, Sandler Travis & Rosenberg,
P.A., New York, NY, for plaintiff-appellant Lumber Liq-
uidators Services, LLC. Also represented by MARK
LUDWIKOWSKI, KRISTEN SMITH, Washington, DC;
MICHELLE L. MEJIA, Chicago, IL.
HAROLD DEEN KAPLAN, Hogan Lovells US LLP, Wash-
ington, DC, for plaintiff-appellant Armstrong Wood Prod-
ucts (Kunshan) Co., Ltd. Also represented by CRAIG
ANDERSON LEWIS.
TARA K. HOGAN, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washing-
ton, DC, argued for defendant-appellee United States.
Also represented by BENJAMIN C. MIZER, JEANNE E.
DAVIDSON, CLAUDIA BURKE; SHELBY ANDERSON, Office of
Chief Counsel for Trade Enforcement and Compliance,
United States Department of Commerce, Washington,
DC.
JEFFREY STEVEN LEVIN, Levin Trade Law PC, Bethes-
da, MD, for defendant-appellee The Coalition for Ameri-
can Hardwood Parity.
CHANGZHOU HAWD FLOORING CO. v. US 3
______________________
Before LOURIE, TARANTO, and CHEN, Circuit Judges.
TARANTO, Circuit Judge.
This case arises from the U.S. Department of Com-
merce’s antidumping-duty investigation of multilayered
wood flooring imports from the People’s Republic of Chi-
na. The appellants here are Chinese entities that Com-
merce found had demonstrated their independence from
the Chinese government and so deserved a “separate”
antidumping-duty rate, not the so-called China-wide rate
that applies to entities that had not shown their inde-
pendence from the Chinese government. Commerce did
not individually investigate appellants to determine firm-
specific dumping margins. Instead, it assigned them a
rate that, though not specified numerically, was declared
to be more than de minimis, even though it found zero or
de minimis dumping margins for all three of the Chinese
firms that it had individually investigated. The Court of
International Trade affirmed that determination.
Appellants contend that they are entitled to a de min-
imis rate. After the Court of International Trade ren-
dered its decision in this case, our court made clear that
the “separate rate” method used by Commerce here is a
departure from the congressionally approved “expected
method” applicable when all of the individually investi-
gated firms have a zero or de minimis rate, which is the
case here, and that certain findings are necessary to
justify such a departure. Albemarle Corp. & Subsidiaries
v. United States, 821 F.3d 1345, 1348 (Fed. Cir. 2016).
Under the “expected method,” appellants would be enti-
tled to a de minimis rate. Because Commerce did not
make the findings needed to justify departing from the
expected method, we vacate the Court of International
Trade’s judgment, and we remand.
4 CHANGZHOU HAWD FLOORING CO. v. US
I
In 2010, the Department of Commerce initiated an
antidumping-duty investigation of multilayered wood
flooring from China, based on a petition filed by the
Coalition for American Hardwood Parity under 19
U.S.C. § 1673a(b). Multilayered Wood Flooring from the
People’s Republic of China: Initiation of Antidumping
Duty Investigation, 75 Fed. Reg. 70,714 (Dep’t of Com-
merce Nov. 18, 2010). In order to select particular Chi-
nese firms to be individually investigated as mandatory
respondents, Commerce sent questionnaires to the Chi-
nese exporters and producers identified in the petition,
asking about the quantities and value of the goods at
issue sent to the United States. Id. at 70,717–18. Of the
190 recipients of the questionnaire, 80 timely responded.
Multilayered Wood Flooring from the People’s Republic of
China: Preliminary Determination of Sales at Less Than
Fair Value, 76 Fed. Reg. 30,656, 30,657 (Dep’t of Com-
merce May 26, 2011). Commerce selected “the three
largest exporters (by volume)” as mandatory respondents.
Id. at 30,658. Although several firms offered to be indi-
vidually investigated as voluntary respondents, id., the
three mandatory respondents are the only firms that
Commerce individually investigated in this investigation.
See Changzhou Hawd Flooring Co. v. United States, 44 F.
Supp. 3d 1376, 1389 n.31, 1390 (Ct. Int’l Trade 2015).
Commerce deems China to be a nonmarket economy,
and it presumes that each Chinese exporter and producer
is state-controlled, and thus covered by a single China-
wide antidumping-duty rate, but a firm may rebut the
presumption. See Changzhou Wujin Fine Chem. Factory
Co. v. United States, 701 F.3d 1367, 1370 (Fed. Cir. 2012).
Here, Commerce determined that 74 firms established
their independence from the Chinese government. See
Multilayered Wood Flooring from the People’s Republic of
China: Final Determination of Sales at Less Than Fair
Value, 76 Fed. Reg. 64,318, 64,321–22 (Dep’t of Commerce
CHANGZHOU HAWD FLOORING CO. v. US 5
Oct. 18, 2011). For those 74 firms—not individually
investigated, but not covered by the China-wide rate—
Commerce had to calculate a “separate rate.”
Commerce published its Final Determination on Oc-
tober 18, 2011, finding that the subject merchandise was
being sold at less than fair value (dumped) in the United
States. Id. at 64,318. Commerce determined that one of
the three mandatory respondents had a de minimis
dumping margin, but it assigned margins of 3.98% and
2.63% to the other two mandatory respondents. See id. at
64,323. After a voluntary remand from the Court of
International Trade, Commerce revised the mandatory
respondents’ dumping margins, finding all three to be
zero or de minimis. J.A. 101941. Commerce calculated
the “separate rate,” not by simply using the zero/de mini-
mis rates for the three mandatory respondents, but by
averaging those three zero figures with the 25.62% rate it
adopted as the China-wide rate—yielding a separate rate
of 6.41%. J.A. 101942.
On review, the Court of International Trade affirmed
the dumping margins for the mandatory respondents but
remanded for further explanation of how the separate
rate related to economic reality. Baroque Timber Indus.
(Zhongshan) Co. v. United States, 971 F. Supp. 2d 1333,
1336 (Ct. Int’l Trade 2014). On remand, Commerce
reasoned that the separate rate for the period of investi-
gation should not be drawn entirely from the three man-
datory respondents, all having a de minimis rate.
Commerce gave two reasons. First, Commerce said, “if
[any of] the 110 companies [that did not respond to the
quantity-and-value questionnaires] had chosen to cooper-
ate, the examined company’s rate would have been above
de minimis . . . and would have been assigned to the
separate rate plaintiffs as a separate rate in the Final
6 CHANGZHOU HAWD FLOORING CO. v. US
Determination.” J.A. 102099. 1 Second, merely as confir-
mation, Commerce pointed to the recent results of its first
administrative review under 19 U.S.C. § 1675, in which
Commerce found dumping even for imports made after
the announcement of the antidumping-duty order, not-
withstanding that “the discipline of an antidumping order
often results in lower or no margins . . . as companies may
change their pricing practices to eliminate the price
discrimination found in the period of investigation.” J.A.
102100. That result, Commerce said, confirmed the
likelihood that it would have found above-de minimis
dumping had it investigated more individual firms during
the investigation. Id. On that basis, although Commerce
did not reaffirm its 6.41% rate for the “separate rate” (not
individually investigated) Chinese entities, it declared
that they would be subject to a rate that it did not specify
but declared to be more than de minimis. 2
Appellants challenged that determination in the
Court of International Trade. That court affirmed, con-
1
Of the 110 entities that did not respond to the
quantity-and-value questionnaires, Commerce removed
one, located in Taiwan, from the investigation. J.A.
101424.
2 Commerce also determined that it need not calcu-
late a specific separate rate for all but one of the separate-
rate litigants (appellant Changzhou Hawd Flooring
Company) because “the rate determined in the first
administrative review supersedes the cash deposit rate
established in the final determination of the investiga-
tion.” J.A. 102100. As to Changzhou Hawd Flooring,
Commerce announced that it would conduct an individual
investigation, J.A. 102102, but it decided to delay the
actual investigation until after the Court of International
Trade reviewed the remand determination. See Chang-
zhou Hawd Flooring, 44 F. Supp. 3d at 1382 & n.13.
CHANGZHOU HAWD FLOORING CO. v. US 7
cluding that “Commerce’s determination regarding the
group . . . is based on a reasonable reading of the law and
record evidence.” Changzhou Hawd Flooring, 44 F. Supp.
3d at 1380. The court held that Commerce’s methodology
was permissible because the statute allows “any reasona-
ble method.” Id. at 1384. After one further remand,
which brought Changzhou Hawd Flooring within the
“separate rate” applicable to government-independent but
not individually investigated firms, the Court of Interna-
tional Trade entered a final judgment. Changzhou Hawd
Flooring Co. v. United States, 77 F. Supp. 3d 1351, 1359–
60 (Ct. Int’l Trade 2015). 3
Appellants, who are separate-rate entities, have time-
ly appealed the above-de minimis separate rate, arguing
for a de minimis separate rate. They assert that, alt-
hough no rate was numerically specified, the assignment
of an above-de minimis rate harms them because it sub-
jects them to the antidumping-duty order and its continu-
ing consequences, including subsequent periodic reviews
under 19 U.S.C. § 1675, whereas assigning them a de
minimis rate in this investigation would remove them
from the order and relieve them from its consequences.
See 19 C.F.R. § 351.204(e)(1) (excluding from final deter-
mination “any exporter or producer for which the Secre-
3 In Changzhou Hawd Flooring, 44 F. Supp. 3d at
1390, the court held to be arbitrary and capricious Com-
merce’s decision to conduct a full individual investigation
of Changzhou Hawd Flooring so late in the investigation.
On remand, Commerce applied the same above-de mini-
mis but unspecified separate rate to Changzhou Hawd
Flooring that it applied to the other separate-rate firms.
The Court of International Trade approved that decision.
Changzhou Hawd Flooring, 77 F. Supp. 3d at 1359.
Commerce does not challenge the rejection of its attempt
to individually investigate Changzhou Hawd Flooring.
8 CHANGZHOU HAWD FLOORING CO. v. US
tary determines an individual weighted-average dumping
margin . . . rate of zero or de minimis”); Dupont Teijin
Films USA, LP v. United States, 407 F.3d 1211, 1216
(Fed. Cir. 2005); Tung Mung Dev. Co. v. United States,
354 F.3d 1371, 1375 n.3 (Fed. Cir. 2004); see also 19
U.S.C. §§ 1673b(b)(3), 1673d(a)(4) (disregarding weighted
dumping margin that is de minimis). Commerce does not
disagree that appellants have a stake in challenging the
above-de minimis rate. We have jurisdiction under 28
U.S.C. § 1295(a)(5).
II
“Commerce’s determination will be sustained unless it
is unsupported by substantial evidence on the record, or
otherwise not in accordance with law.” Yangzhou Bestpak
Gifts & Crafts Co. v. United States, 716 F.3d 1370, 1377
(Fed. Cir. 2013); 19 U.S.C. § 1516a(b)(1)(B)(i). Appellants
argue that Commerce erred by not relying on the three
mandatory respondents’ zero/de minimis rates to generate
a de minimis “separate rate.” We agree that Commerce
has not justified its departure from that method.
In investigations involving exporters from market
economies, 19 U.S.C. § 1673d(c)(5) establishes the method
for determining the rate for entities that are not individu-
ally investigated, the so-called all-others rate. Commerce
has relied on that statutory provision in determining the
separate rate for exporters and producers from nonmarket
economies that demonstrate their independence from the
government but that are not individually investigated.
See Albemarle, 821 F.3d at 1348.
The statute says that where the “estimated weighted
average dumping margins established for all exporters
and producers individually investigated are zero or de
minimis margins, or are determined entirely under [19
U.S.C. § 1677e],” Commerce “may use any reasonable
method to establish the estimated all-others rate for
exporters and producers not individually investigated,
CHANGZHOU HAWD FLOORING CO. v. US 9
including averaging the estimated weighted average
dumping margins determined for the exporters and
producers individually investigated.” 19 U.S.C.
§ 1673d(c)(5)(B). But the Statement of Administrative
Action accompanying the Uruguay Round Agreements
Act—which Congress has deemed “authoritative,” 19
U.S.C. § 3512(d)—states that the “expected method” is to
“weight-average the zero and de minimis margins and
margins determined pursuant to the facts available,
provided that volume data is available.” Uruguay Round
Agreements Act, Statement of Administrative Action,
H.R. Rep. No. 103-316, vol. 1, at 873 (1994), reprinted in
1994 U.S.C.C.A.N. 4040, 4201 (quoted in Albemarle, 821
F.3d at 1352 & n.5). 4 If Commerce reasonably concludes
that “this method is not feasible” or would result “in an
average that would not be reasonably reflective of poten-
4 The language of “margins determined pursuant to
the facts available” refers to margins determined under
19 U.S.C. § 1677e. The statutory context, 19 U.S.C.
§ 1673d(c)(5)(B), makes clear that the language refers to
margins so determined for firms that are individually
investigated. Commerce has not suggested that, in the
present case, there are any such § 1677e-based margins to
be included in the average. Thus, only “zero and de
minimis margins” are part of the average here.
In this respect, the case is unlike Yangzhou Bestpak
Gifts & Crafts Co. v. United States, 716 F.3d 1370 (Fed.
Cir. 2013), where Commerce calculated a “separate rate”
by averaging the two individually investigated firms’
rates—one de minimis, the other a high § 1677e-based
rate. This court held Commerce’s result to be unreasona-
bly high on the record in the particular case. Id. at 1377–
81. Here, in contrast, there is no issue of an unreasonably
high average of the individually investigated firms’ rates;
as in Albemarle, 821 F.3d at 1349, the average in this case
is zero or de minimis.
10 CHANGZHOU HAWD FLOORING CO. v. US
tial dumping margins for non-investigated exporters or
producers,” it “may use other reasonable methods.” Id.
Albemarle explains that Congress thus expressed a
preference for the expected method, 821 F.3d at 1351–54,
a preference reflecting how Commerce selects mandatory
respondents, id. at 1353. Here, Commerce chose the
exporters whose quantity-and-value questionnaires
indicated that they were the largest exporters by volume,
as expressly authorized by 19 U.S.C. § 1677f-1(c)(2)
(2010). 5 Albemarle explains: “The very fact that the
statute contemplates using data from the largest volume
exporters suggests an assumption that those data can be
viewed as representative of all exporters.” 821 F.3d at
1353. “The statute assumes that, absent [evidence that
the largest exporters are not representative], reviewing
only a limited number of exporters will enable Commerce
to reasonably approximate the margins of all known
exporters.” Id. “[T]he representativeness of the investi-
gated exporters is the essential characteristic that justi-
fies an ‘all others’ rate based on a weighted average for
such respondents.” Id. (quoting Nat’l Knitwear & Sports-
wear Ass’n v. United States, 779 F. Supp. 1364, 1373–74
(Ct. Int’l Trade 1991)). And, recognizing that the pre-
sumption of representativeness may be overcome, Albe-
marle holds that, in order to depart from the expected
method, “Commerce must find based on substantial
evidence that there is a reasonable basis for concluding
that the separate respondents’ dumping is different.” Id.
Pointing to Albermarle’s observation that the manda-
tory respondents in that case accounted for “a majority of
the market,” id. at 1353, Commerce argues that Albe-
marle’s requirement of a showing of unrepresentativeness
for departing from the expected method does not apply
5 The section was amended in 2012, but the rele-
vant language is unchanged. 19 U.S.C. § 1677f-1(c)(2).
CHANGZHOU HAWD FLOORING CO. v. US 11
where the mandatory respondents do not account for “a
majority of the market.” Appellee’s Br. 22. But that
argument takes too narrow a view of Albemarle. The
court did not rely for its statutory analysis on the obser-
vation that the particular respondents accounted for a
“majority of the market.” It relied on the statutory stand-
ards for selecting mandatory respondents under § 1677f-
1(c)(2), which, the court held, make the mandatory re-
spondents representative unless evidence shows other-
wise. Albemarle, 821 F.3d at 1353. The statutory
standards—involving either a statistical sample, 19
U.S.C. § 1677f-1(c)(2)(A), or the largest exporters by
volume, id. § 1677f-1(c)(2)(B)—are not tied to a “majority”
share of a “market,” of the imports at issue, or any other
class or collection.
Thus, the mandatory respondents in this matter are
assumed to be representative. Under Albemarle, Com-
merce could not deviate from the expected method unless
it found, based on substantial evidence, that the separate-
rate firms’ dumping is different from that of the mandato-
ry respondents. But it has not done so.
Commerce did articulate a reason addressing firms
that did not respond to the quantity-and-value question-
naires: it said that those firms likely “would have cooper-
ated with the Department’s investigation if they could
have obtained a low rate.” J.A. 102119. But that ra-
tionale does not suggest the needed inference about the
separate-rate firms, all of which did respond to the ques-
tionnaires. Indeed, under Commerce’s reasoning, the
separate-rate firms’ decisions to respond to the question-
naires might suggest that they are more similar to other
firms, like the mandatory respondents, that responded.
And Commerce may have suggested the same when, in its
first “final determination,” it calculated the separate rate
by averaging the rates of the two mandatory respondents
that had margins above de minimis. Multilayered Wood
Flooring from the People’s Republic of China: Final De-
12 CHANGZHOU HAWD FLOORING CO. v. US
termination of Sales at Less Than Fair Value, 76 Fed.
Reg. at 64,322.
III
Because Commerce has not made the findings neces-
sary to justify departing from the “expected method” here,
we vacate the judgment of the Court of International
Trade, and we remand with instructions to remand to
Commerce for it to reconsider its separate-rate determi-
nation. We find it unnecessary to address appellants’
other challenges to the separate-rate determination.
Costs awarded to appellants.
VACATED AND REMANDED