Fine Furniture (Shanghai) Ltd. v. United States

Slip Op. 16-85
UNITED STATES COURT OF INTERNATIONAL TRADE
FINE FURNITURE (SHANGHAI)
LIMITED, ET AL.,
Plaintiffs,
and
METROPOLITAN HARDWOOD
FLOORS, INC., ET AL.,
Plaintiff-intervenors,
Before: Timothy C. Stanceu, Chief Judge
v.
Consol. Court No. 14-00135
UNITED STATES,
Defendant,
and
COALITION FOR AMERICAN
HARDWOOD PARITY,
Defendant-Intervenor.
OPINION AND ORDER
[Affirming in part, and remanding in part, a determination concluding an administrative review
of an antidumping order on multilayered hardwood flooring from the People’s Republic of
China]
Dated:September 9, 2016
Kristin H. Mowry, Mowry & Grimson, PLLC, of Washington, D.C., for plaintiff Fine
Furniture (Shanghai) Limited. With her on the brief were Jeffrey S. Grimson, Jill A. Cramer,
Sarah M. Wyss, and Daniel R. Wilson.
Gregory S. Menegaz, deKieffer & Horgan, PLLC, of Washington, D.C., for consolidated
plaintiffs Dalian Huilong Wooden Products Co. Ltd., et al. With him on the brief were J. Kevin
Horgan and John J. Kenkel.
Court No. 14-00135 Page 2
Thomas J. Trendl, Steptoe & Johnson LLP, of Washington, D.C., for consolidated
plaintiff Shanghai Lizhong Wood Products Co., Ltd./The Lizhong Wood Industry Limited
Company of Shanghai.
Jeffrey S. Neeley, Husch Blackwell LLP, of Washington, D.C., for consolidated plaintiffs
Dalian Kemian Wood Industry Co., et al.
Lizbeth R. Levinson, Kutak Rock LLP, of Washington, D.C., for consolidated plaintiff
Hangzhou Zhengtian Industrial Co., Ltd. and plaintiff-intervenors Metropolitan Hardwood
Floors, Inc., et al.
Mark Rett Ludwikowski, Sandler, Travis & Rosenberg, PA, of Washington, D.C., for
plaintiff-intervenor Lumber Liquidators Services, LLC.
Alexander V. Sverdlov, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of Washington, D.C., for defendant. With him on the brief were
Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director,
and Claudia Burke, Assistant Director. Of counsel on the brief was Shana Hofstetter, Office of
the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of
Washington, D.C.
Jeffrey Steven Levin, Levin Trade Law, P.C., of Bethesda, MD, for defendant-intervenor
Coalition for American Hardwood Parity.
Stanceu, Chief Judge: In this consolidated action, 1 plaintiff Fine Furniture (Shanghai) Limited
(“Fine Furniture”) and several other Chinese producers or exporters of multilayered wood
flooring contest an administrative decision that the International Trade Administration, U.S.
Department of Commerce (“Commerce” or the “Department”) issued to conclude the first
administrative review of an antidumping duty order on multilayered wood flooring (“subject
merchandise”) from the People’s Republic of China (“China” or the “PRC”).
1
Consolidated under Consol. Court No. 14-00135 are: Metropolitan Hardwood Floors,
Inc. et al. v. United States, Court No.14-00137; Dalian Kemian Wood Industry Co., Ltd. et al. v.
United States, Court No. 14-00138; Dalian Huilong Wooden Products Co. Ltd., et al. v. United
States, Court No. 14-00139; and Shanghai Lizhong Wood Products Co., Ltd./The Lizhong Wood
Industry Limited Co. of Shanghai v. United States, Court No. 14-00172.
Court No. 14-00135 Page 3
I. BACKGROUND
A. The Contested Decision
The published decision contested in this action (the “Amended Final Results”) is
Multilayered Wood Flooring from the People’s Republic of China: Amended Final Results of the
Antidumping Duty Administrative Review; 2011-2012, 79 Fed. Reg. 35,314 (Int’l Trade Admin.
June 20, 2014) (“Amended Final Results”).
B. Proceedings before the Department of Commerce
Commerce issued an antidumping duty order on multilayered wood flooring from China
(the “Order”) on December 8, 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). 2 On January 30, 2013,
Commerce initiated the first periodic administrative review of the Order, for the period of
May 26, 2011 through November 30, 2012 (“period of review” or “POR”). Initiation of
Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in
Part, 78 Fed. Reg. 6,291 (Int’l Trade Admin. Jan. 30, 2013).
2
The antidumping duty order (the “Order”) refers to the subject merchandise as
“multilayered wood flooring” but states that this merchandise “is often referred to by other
terms, e.g., ‘engineered wood flooring’ or ‘plywood flooring.’” 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, 76,690 (Dec. 8, 2011). The Order
defines these flooring products 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. The Order explains that
“[v]eneer is referred to as a ply when assembled in combination with a core.” Id., 76 Fed. Reg.
at 76,690 n.2.
Court No. 14-00135 Page 4
Fine Furniture, a producer and exporter of multilayered wood flooring from China, was
one of three mandatory respondents in the first administrative review. See Compl. ¶ 5
(July 7, 2014), ECF No. 9; Decision Mem. for Prelim. Results of Antidumping Duty
Administrative Review: Multilayered Wood Flooring from the People’s Republic of China,
A-570-970, ARP 11-12, at 5 (Nov. 18, 2013), available at
http://enforcement.trade.gov/frn/summary/prc/2013-28100-1.pdf (last visited Sept. 6, 2016)
(“Prelim. Decision Mem.”). The other two mandatory respondents were Armstrong Wood
Products (Kunshan) Co., Ltd. (“Armstrong”) and Nanjing Minglin Wooden Industry Co. Ltd.
(“Minglin”). Prelim. Decision Mem. 5. Zhejiang Layo Wood Industry Co., Ltd. (“Layo Wood”)
filed a request to participate as a voluntary respondent, which Commerce granted. Id.
On November 25, 2013, Commerce published the preliminary results of the review
(“Preliminary Results”). Multilayered Wood Flooring from the People’s Republic of China:
Preliminary Results of Antidumping Duty Administrative Review; 2011-2012, 78 Fed.
Reg. 70,267 (Nov. 25, 2013) (“Prelim. Results”). Commerce preliminarily determined that
imports of subject merchandise from China are being, or are likely to be, sold in the United
States at less than fair value and calculated the following preliminary dumping margins: 0.67%
for Fine Furniture; 8.85% for Layo Wood; and 8.87% for Armstrong. Id., 78 Fed. Reg.
at 70,268. Commerce determined that the third mandatory respondent, Minglin, did not sell any
subject merchandise in the United States during the period of review at less than fair value and
assigned it a de minimis margin. Id. Commerce assigned a simple average of the three rates that
were not de minimis, 4.77%, to the “separate rate” respondents, i.e., respondents that
demonstrated independence from the government of China but were not assigned individually-
determined margins. Id., 78 Fed. Reg. at 70,268-69. Exporters and producers that did not
Court No. 14-00135 Page 5
qualify for separate rate status were assigned the PRC-wide rate, 58.84%. Id., 78 Fed. Reg.
at 70,269.
On May 9, 2014, Commerce published the final results of the review (“Final Results”)
and accompanying decision memorandum (“Final Decision Memorandum”). Multilayered Wood
Flooring from the People’s Republic of China: Final Results of Antidumping Duty
Administrative Review; 2011-2012, 79 Fed. Reg. 26,712 (May 9, 2014) (“Final Results”) and
accompanying Issues and Decision Mem. for the Final Results of the 2011-2012 Antidumping
Duty Admin. Rev. of Multilayered Wood Flooring from the People’s Republic of China,
A-570-970, ARP 11-12 (May 9, 2014), available at
http://enforcement.trade.gov/frn/summary/prc/2014-10698-1.pdf (last visited Sept. 6, 2016)
(“Final Decision Mem.”). Commerce again determined that imports of subject merchandise
from China are being, or are likely to be, sold in the United States at less than fair value.
Commerce assigned Fine Furniture a dumping margin of 5.74% and assigned de minimis
margins to both Minglin and Armstrong. Final Results, 79 Fed. Reg. at 26,714. In response to
the judgment entered in Baroque Timber Industries (Zhongshan) Co., Ltd. v. United States,
38 CIT __, 971 F. Supp. 2d 1333 (2014), Commerce amended the less-than-fair-value
determination to assign Layo Wood a de minimis margin and on that basis excluded from the
Order merchandise produced and exported by Layo Wood. Id., 79 Fed. Reg. at 26,713. Because
Fine Furniture was the only respondent assigned a margin in the Final Results that was not de
minimis, Commerce assigned a margin of 5.74% to the separate rate respondents as the all-others
rate. Id., 79 Fed. Reg. at 26,714-15. The PRC-wide rate remained unchanged from the
Preliminary Results at 58.84%. Id., 79 Fed. Reg. at 26,715.
Court No. 14-00135 Page 6
Following several allegations of ministerial errors, Commerce published the Amended
Final Results on June 20, 2014. 3 See Amended Final Results, 79 Fed. Reg. at 35,314. In the
Amended Final Results, Commerce calculated a revised dumping margin of 5.92% for Fine
Furniture. Id., 79 Fed. Reg. at 35,316. Fine Furniture remained the only respondent with a
margin that was other than de minimis. See id. Commerce assigned the separate rate
respondents this revised margin, 5.92%. Id. The PRC-wide rate remained 58.84%. Id.
C. Proceedings before the Court of International Trade
Fine Furniture filed its summons on June 6, 2014 and its complaint on July 7, 2014.
Summons, ECF No. 1; Compl., ECF No. 9. The other plaintiffs in this case are Chinese
producers and/or exporters of multilayered wood flooring that participated in the underlying
administrative review and received separate rate status. Metropolitan Hardwood Floors, Inc., et
al., is both a consolidated plaintiff and a plaintiff-intervenor. Lumber Liquidators, LLC, an
importer of subject merchandise that participated in the underlying administrative review, is also
a plaintiff-intervenor. The Coalition for American Hardwood Parity, an association of U.S.
producers of multilayered wood flooring and a petitioner in the underlying investigation, is the
defendant-intervenor.
3
The ministerial errors Commerce addressed included an incorrect conversion of units in
the valuation of three of Fine Furniture’s inputs (base veneer poplar, base veneer eucalyptus, and
face veneer eucalyptus), the inclusion of the name “Double F” in the instructions sent to U.S.
Customs and Border Protection, and a correction to the names of two separate rate respondents.
See Final Results of the 2011-2012 Antidumping Administrative Review of Multilayered Wood
Flooring from the People’s Republic of China: Allegations of Ministerial Errors, A-570-970,
ARP 11-12 (June 13, 2014) (Confi. Admin.R.Doc. No. 560).
Court No. 14-00135 Page 7
Fine Furniture moved for judgment on the agency record on November 25, 2014, and
defendant responded on April 27, 2015. 4 Mot. for J. on the Agency R. Pursuant to R. 56.2 of Pl.
Fine Furniture (Shanghai) Ltd., ECF No. 58 (“Fine Furniture’s Br.”); Def.’s Resp. to Pl.’s
R. 56.2 Mot. for J. upon the Agency R., ECF No. 73 (“Def.’s Opp’n”). Fine Furniture replied on
July 27, 2015. Reply Br. in Support of R. 56.2 Mot. for J. upon the Agency R. by Pl. Fine
Furniture (Shanghai) Ltd., ECF No. 80 (“Fine Furniture’s Reply”). The court held oral argument
on January 7, 2016.
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 as amended, 19 U.S.C. § 1516a, (the “Tariff Act”),
including an action contesting a final determination concluding an administrative review of an
antidumping duty order. 5 See 19 U.S.C. § 1516a(a)(2)(B)(iii). 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 . . . .” 19 U.S.C. § 1516a(b)(1)(B)(i).
4
Plaintiffs Dalian Huilong Wooden Products Co., Ltd., et al., also filed, on
November 25, 2014, a Motion for Judgment on the Agency Record and a Memorandum of
Points and Authorities in Support but merely incorporated the claims and arguments made by
Fine Furniture and advanced no independent arguments in support of Fine Furniture’s claims.
See Mot. for J. on the Agency R., ECF No. 61; R. 56.2 Mem. in Support of Mot. for J. on the
Agency R., ECF No. 62.
5
All citations to the United States Code herein are to the 2012 edition.
Court No. 14-00135 Page 8
B. Summary of Fine Furniture’s Claims
Fine Furniture asserts five claims in contesting the Amended Final Results, arguing as to
each that the court must remand the Amended Final Results to Commerce for redetermination.
First, Fine Furniture claims that Commerce, in calculating constructed export price
(“CEP”), erred in making a deduction for a value-added tax (“VAT”) imposed by the PRC
government that exceeded the amount permissible under section 772(c)(2)(B) of the Tariff Act,
19 U.S.C. § 1677a(c)(2)(B). Fine Furniture’s Br. 10-14.
Second, Fine Furniture challenges the Department’s choice of surrogate financial
statements for use when determining the normal value of Fine Furniture’s subject merchandise
according to section 773(c) of the Tariff Act, 19 U.S.C. § 1677b(c), which governs the
calculation of normal value for goods of nonmarket economy countries. Fine Furniture argues
that Commerce chose financial statements from two Philippine companies for its calculation of
surrogate financial ratios for manufacturing overhead, general expenses, and profit that were
inferior to financial statements of other Philippine companies and therefore were not the “best
available information” as required by 19 U.S.C. § 1677b(c)(1). Id. at 14-30.
Third, Fine Furniture challenges, on various grounds, the Department’s applying a
“differential pricing” analysis in determining Fine Furniture’s weighted average dumping margin
and the Department’s applying, according to the results of that analysis, an average-to-
transaction method of calculating that margin. Id. at 30-37.
Fourth, Fine Furniture asserts that Commerce calculated an inflated surrogate value for
brokerage and handling charges by using incorrect data for container weights. Id. at 38-40.
Finally, Fine Furniture claims that Commerce failed to use the best available information
in determining a surrogate value for electricity. Id. at 40-45.
Court No. 14-00135 Page 9
C. The Court Grants in Part, and Denies in Part, Fine Furniture’s Motion for Judgment
on the Agency Record
For the reasons discussed below, the court will remand the Amended Final Results for
reconsideration of the deduction for value-added taxes, the choice of financial statements, and
the valuation of electricity. The court denies relief on Fine Furniture’s remaining claims.
1. The Deduction for Value-Added Taxes
Section 772(c)(2)(B) of the Tariff Act, 19 U.S.C. § 1677a(c)(2)(B), provides that the
price used to establish export price or constructed export price shall be reduced 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 . . . .” 19 U.S.C.
§ 1677a(c)(2)(B). Commerce treats as an “export tax” within the meaning of § 1677a(c)(2)(B) a
portion of any value-added tax imposed by China on manufacturing inputs, to account for the
share of the VAT the manufacturer pays on the inputs that is not refunded upon exportation of
the finished product. Final Decision Mem. 28 (describing China’s VAT regime as 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)). Based on record evidence,
Commerce concluded that in China “the standard VAT levy is 17 percent and the rebate rate for
subject merchandise is nine percent.” Id. Based on this conclusion, Commerce “removed from
U.S. price the difference between the rates (eight percent), which is the irrecoverable VAT as
defined under Chinese law and regulation.” Id. (footnote omitted). Because Commerce
determined the U.S. price for Fine Furniture’s subject merchandise according to the constructed
export price method, Commerce made a deduction for unrefunded (“irrecoverable”) VAT from
the starting price used to determine CEP, which was the price at which an importer affiliated
with Fine Furniture sold the subject merchandise to unaffiliated U.S. purchasers. Analysis for
Court No. 14-00135 Page 10
the Final Results of Multilayered Wood Flooring from the People’s Republic of China: Fine
Furniture (Shanghai) Limited 2-3, A-570-898, APR 11-12 (May 1, 2014), (Confi. Admin.R.Doc.
No. 539) (“Final Analysis Mem.”).
Fine Furniture does not contest either the Department’s practice of treating irrecoverable
Chinese VAT as an export tax for purposes of § 1677a(c)(2)(B) or its calculating the deduction
from the CEP starting price as the difference between the two rates, i.e., 8%. The issue Fine
Furniture raises in this case is the value to which the 8% should have been applied. Fine
Furniture argues that Commerce unlawfully calculated the export tax deduction according to a
formula that failed to comply with § 1677a(c)(2)(B) and was inconsistent with the Department’s
established practice. Fine Furniture’s Br. 10 (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, 36,482-83 (June 19, 2012)).
Fine Furniture’s subject merchandise was sold to a reseller affiliated with Fine Furniture,
Double F. Fine Furniture’s Br. 12. Double F resold the merchandise to the importer, which, as
noted above, also was affiliated with Fine Furniture. Id. Commerce stated in the Final Decision
Memorandum that “according to the Chinese tax regulations, irrecoverable VAT is calculated
based on the FOB value of the exported good” and that “Fine Furniture, however, reported VAT
based on the domestic sales value in China between Fine Furniture and its affiliated reseller.”
Final Decision Mem. 31. Commerce added that “[a]ccordingly, the domestic sales value is not
appropriate for calculating the FOB export sales value.” Id.
It appears from the record that Commerce, upon rejecting the VAT amount as reported by
Fine Furniture, recalculated the deduction from the CEP starting price as 8% of an amount it
obtained from the price at which the affiliated importer resold the subject merchandise to
Court No. 14-00135 Page 11
unaffiliated buyers in the United States, which Commerce adjusted downward. Id. at 28; Final
Analysis Mem. 3. Commerce described the downward adjustment as resulting in “an FOB export
value” that is “based on the net FOB U.S. price, exclusive of all expenses and adjustments
incurred after the merchandise left the port of exportation in China.” Final Decision Mem. 31
(citing Final Analysis Mem.).
Fine Furniture objects to the Department’s method of calculating the VAT deduction on
the ground that “Commerce rejected Fine Furniture’s true export price upon which VAT was
refunded upon export and instead recalculated VAT based on a theoretical value that was
distorted by the inclusion of mark-ups for Fine Furniture’s affiliated reseller assessed after
exportation.” Fine Furniture’s Br. 6 (citing Final Decision Mem. at Comment 3). Fine Furniture
characterizes as “false” the Department’s finding that the sales value between Fine Furniture and
its affiliated reseller is a “domestic sales value.” Id. at 11. This value, according to Fine
Furniture, is not a domestic sales value because the VAT it reported (and Commerce rejected)
was based on the invoiced value from Fine Furniture to the reseller “when the subject
merchandise left China, i.e., the true FOB export price of the goods, which accurately reflects the
amount of VAT assessed by the GOC [Government of China] pursuant to article 5 of the
Provisional Regulations on VAT of the PRC.” Id. This value, according to Fine Furniture, “is
the only VAT amount that lawfully can be deducted pursuant to the statute.” Id.
The statute provides that the starting price used to establish CEP “shall be reduced
by . . . the amount, if included in such price, of any export tax . . . . imposed by the exporting
country on the exportation of the subject merchandise to the United States.” 19 U.S.C.
§ 1677a(c)(2)(B) (emphasis added). In this way, Congress expressly limited the deduction for
export tax that Commerce is to make by the “amount” of export tax that China actually
Court No. 14-00135 Page 12
“imposed.” The Final Decision Memorandum, however, fails to reconcile the deduction for
irrecoverable VAT that Commerce calculated from the prices paid by Double F to the importer
with the amounts of irrecoverable Chinese VAT that actually were incurred. There is no
explanation in the Final Decision Memorandum of why the latter amounts may not be
ascertained from record evidence of the VAT payments on the inputs and of the VAT refund
received upon exportation of the finished goods. Fine Furniture cites record evidence from
which it claims that the export value it reported, i.e., the value in the sales by Fine Furniture to
the affiliated reseller Double F, “accurately reflects the amount of the VAT assessed” by the
Chinese government. Fine Furniture’s Br. 11 (citing Fine Furniture Sec. C & D
Questionnaire Ex. C-23, Fine Furniture Sec. C & D Questionnaire Supp. 2).
A second problem is the rationale Commerce presented in the Final Decision
Memorandum for its method of calculating the VAT deduction. Commerce relied on the finding
that the value obtained in a sale between Fine Furniture and its affiliated reseller is a “domestic
sales value” that Commerce considered “not appropriate for calculating the FOB export sales
value.” Final Decision Mem. 31. The court is not able to find substantial record evidence to
support this finding. The Final Decision Memorandum cites none, and Fine Furniture cites
record evidence to the contrary that relates to the operations of Double F. Fine Furniture’s
Br. 11.
In support of the Department’s method of basing the VAT deduction on the sale to the
affiliated importer, defendant argues that “Fine Furniture ignores a critical piece of the record:
namely, the fact that Commerce has previously determined that Fine Furniture and its affiliated
reseller are so intertwined that they should be collapsed into a single entity.” Def.’s Opp’n 19.
Defendant submits that because Fine Furniture does not challenge the decision to treat the two
Court No. 14-00135 Page 13
entities as one, Fine Furniture’s “protestations that Commerce’s decision to not use the sale
between those two companies improperly inflated Fine Furniture’s dumping margin fall flat.”
Id. at 19-20. This argument fails because it offers a rationale different than the one Commerce
expressed in the Final Decision Memorandum. Commerce rejected the use of the transactions
between Fine Furniture and Double F for use in determining the VAT deduction because it
considered them to be domestic sales transactions rather than sales for export. It did not reject
them because it considered them to be intracompany transfers rather than actual sales.
Moreover, defendant’s brief, like the Final Decision Memorandum, fails to confront the issue
presented by the limitation on the export tax deduction that Congress imposed in 19 U.S.C.
§ 1677a(c)(2)(B).
Commerce must reconsider its method of determining the export tax deduction and
ensure that whatever method it chooses to use complies with the statute and is grounded in
findings supported by substantial evidence on the record.
2. Choice of Financial Statements for Determining Surrogate “Financial Ratios”
According to section 773(c)(1) of the Tariff Act, 19 U.S.C. § 1677b(c)(1), Commerce, as
a general matter, is to determine the normal value of subject merchandise from a nonmarket
economy (“NME”) 6 country “on the basis of the value of the factors of production utilized in
producing the merchandise,” plus “an amount for general expenses and profit plus the cost of
containers, coverings, and other expenses.” Commerce typically calculates surrogate values for
factory overhead expenses, for selling, general & administrative (“SG&A”) and interest
6
A “nonmarket economy country” (“NME”) is 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.”
Court No. 14-00135 Page 14
expenses, and for profit, by calculating and applying “financial ratios” derived from the financial
statements of one or more producers of comparable merchandise in the primary surrogate
country. See 19 C.F.R. § 351.408(c)(4). Commerce chose, and none of the parties contests the
choice of, the Philippines as the primary surrogate country in this review. See Prelim. Decision
Mem. 14.
“In calculating financial ratios for the preliminary results, the Department considered 18
financial statements of Philippine producers of comparable merchandise (e.g., plywood) placed
on the record by interested parties,” and “[f]ollowing publication of the Preliminary Results,
interested parties placed an additional seven financial statements on the record for
consideration . . . .” Final Decision Mem. 21. “When selecting financial statements for purposes
of calculating surrogate financial ratios, the Department’s policy is to use data from one or more
market economy surrogate companies based on the ‘specificity, contemporaneity, and quality of
the data.’” Id. at 20. For the Final Results, Commerce concluded that four of the financial
statements on the record were specific to the product in question, contemporaneous with the
period of review, complete, accurate, and otherwise reliable: the statements from Tagum,
Richmond Plywood Corporation (“RPC”), Philippines Softwood Products, Inc. (“PSP”), and
Mount Banahaw. Id. at 21-26.
After noting that “the Department has a preference to use financial statements from
companies that are at a similar level of integration as the respondents involved in the
proceeding,” id. at 22, Commerce chose to calculate the financial ratios for Fine Furniture using
only the financial statements from the two companies it determined were integrated at the same
level as Fine Furniture: Tagum and RPC, id. at 26. From these two financial statements,
Commerce calculated separate factory overhead expenses, SG&A and interest, and profit ratios
Court No. 14-00135 Page 15
for each of the two Philippine companies and then averaged those ratios to derive a single set of
financial ratios for the calculation of the normal value of Fine Furniture’s subject merchandise.
Fine Furniture’s claim, stated generally, is that the Department’s decision to base the
financial ratios on the Tagum and the RPC financial statements was arbitrary and unsupported by
substantial evidence. As specific grounds, Fine Furniture argues that the RPC financial
statements were inaccurate and incomplete and that substantial evidence does not support the
Department’s finding to the contrary. Fine Furniture’s Br. 16-21. Second, it argues that the RPC
financial statements should not have been used because record evidence shows that RPC, unlike
Fine Furniture, is not an integrated producer. Id. at 21-22. Third, Fine Furniture argues that
Commerce erred in rejecting, for various reasons, the use of the financial statements of Mount
Banahaw, Winlex, Industrial Plywood, and Mega Plywood Corporation. Id. at 22-30.
The court must remand the Amended Final Results for reconsideration of the decision to
base Fine Furniture’s financial ratios on the financial statements of Tagum and RPC. The record
indicates that Commerce considered Mount Banahaw to be a non-integrated producer of
comparable products and used Mount Banahaw’s financial statements to determine the financial
ratios of non-integrated producers. In excluding the Mount Banahaw statements from the
calculation of Fine Furniture’s financial ratios, Commerce failed to address Fine Furniture’s
argument, which was raised in the underlying proceeding by another respondent, Layo Wood,
and adopted by Fine Furniture, that Mount Banahaw actually was an integrated producer.
Between the preliminary and final results, Layo Wood filed a brief with Commerce stating that
Commerce “should only select financial statements from companies with the same level of
integration” as the company under review and that Commerce could “choose to include Mount
Banahaw financial statements” in assessing integrated companies. Letter from deKieffer &
Court No. 14-00135 Page 16
Horgan to Dep’t Commerce re: Multilayered Wood Flooring from China: Case Br. 7-8
(Jan. 13, 2014) (Admin.R.Doc. No. 608) (“Layo Case Br.”). Layo Wood placed on the record in
preliminary surrogate value comments evidence that Mount Banahaw’s primary purpose is
“producing, manufacturing, fabricating . . . and otherwise dealing in veneer, plywood, and any
other materials used in the production, manufacturing and fabrication of veneer and plywood.”
Letter from deKieffer & Horgan to Dep’t Commerce re: Multilayered Wood Flooring from
China: Surrogate Values for the Preliminary Results Ex. 3 (Aug. 6, 2013) (Admin.R.Doc.
No. 416) (“Layo Prelim. SV Comments”). Fine Furniture incorporated the arguments made by
Layo Wood, including the argument that Mount Banahaw is an integrated producer, in its case
brief to Commerce. Letter from Mowry & Grimson re: Admin. Review of the Antidumping Duty
Order on Multilayered Wood Flooring from the People’s Republic of China: Case Br. for
Consideration Prior to Final Results 40 (Admin.R.Doc. No. 606). Fine Furniture reasserts the
argument that Mount Banahaw is an integrated producer before the court. Fine Furniture’s Br.
22-23.
As discussed previously, a decision reached in related litigation 7 shortly before the
review was completed ultimately resulted in a de minimis margin for Layo Wood in the
underlying investigation, and Commerce therefore excluded Layo Wood from the first review.
See Final Results, 79 Fed. Reg. at 26,713. In the Final Decision Memorandum, Commerce did
not address the argument that Mount Banahaw is an integrated producer. Instead, it chose the
statements of RPC and Tagum to calculate Fine Furniture’s financial ratios, concluding that these
7
See Baroque Timber Indus. (Zhongshan) Co. v. United States, 38 CIT __, 971 F. Supp.
2d 1333, 1339 n.15 (2014) appeal dismissed sub nom. Zhejiang Layo Wood Indus. Co. v. United
States, 576 F. App'x 1000 (Fed. Cir. 2014).
Court No. 14-00135 Page 17
companies “are involved in the production of veneer from log sources.” Final Decision
Mem. 26. Considering Mount Banahaw to be non-integrated, Commerce stated that it used
Mount Banahaw’s financial statement to calculate the financial ratios for two companies that
were “not involved in manufacturing veneers from purchased logs or lumber.” Id.
Commerce was obligated to consider Fine Furniture’s argument that Mount Banahaw is
an integrated producer. See SKF USA Inc. v. United States, 630 F.3d 1365, 1374 (Fed.
Cir. 2011). The court, therefore, remands the Amended Final Results for reconsideration of the
decision to base Fine Furniture’s financial ratios on the statements of RPC and Tagum.
Commerce must reconsider the matter and decide, based on findings supported by substantial
record evidence, which financial statement or statements are most appropriate for calculating
Fine Furniture’s financial ratios. The court does not consider it necessary at this time to rule on
the other grounds Fine Furniture presents as to why it considers unlawful the decision to use only
the statements of RPC and Tagum. Instead, the court will consider the Department’s new
decision after reviewing the comments of the parties. It is possible that this decision will moot
some of those grounds.
3. Use of the “Average-to-Transaction” Method to Determine Fine Furniture’s Margin Based on
a “Differential Pricing Analysis”
Fine Furniture challenges on various grounds the Department’s using an “average-to-
transaction” comparison method in calculating its dumping margin of 5.92%. Fine Furniture’s
Br. 30-37. Commerce applied the average-to-transaction method based on the results of its
“differential pricing” analysis.
Commerce ordinarily determines weighted-average dumping margins, in both
antidumping investigations and reviews of antidumping duty orders, by an “average-to-average”
Court No. 14-00135 Page 18
method of comparison, under which it compares the average normal value to the average of
export prices or constructed export prices in transactions of the subject merchandise. See Final
Decision Mem. 7. In some instances, Commerce instead applies, in whole or in part, an
“average-to-transaction” method, comparing the export prices or constructed export prices in
individual U.S. sales to an average normal value. The Department’s purpose in resorting to an
average-to-transaction comparison method is to address “potential masking of dumping that can
occur when the Department uses the average-to-average method in calculating weighted-average
dumping margins.” Prelim. Decision Mem. 16. Commerce believes this “masking” potentially
may occur where there is a pattern of export prices or constructed export prices “for comparable
merchandise that differs significantly among purchasers, regions, or time periods.” Id.
Commerce applies a “Cohen’s d test” in the first stage of its differential pricing analysis.
Id. For this review, Commerce explained that “[t]he Cohen’s d test is a generally recognized
statistical measure of the extent of the difference between the mean of a test group and the mean
of a comparison group.” Id. It further explained that “the Cohen’s d coefficient is calculated to
evaluate the extent to which the net prices to a particular purchaser, region, or time period differ
significantly from the net prices of all other sales of the comparable merchandise.” Id.
Commerce considered the difference to be significant, and thereby to have “passed” the
Cohen’s d test, if the Cohen’s d coefficient was equal to or greater than 0.8, i.e., eight-tenths of a
standard deviation. Id.
Commerce then determined whether “the value of sales to purchasers, regions, or time
periods that pass the Cohen’s d test account for 66 percent of more of the value of total sales.”
Id. If so, Commerce considered applying the average-to-transaction comparison method to all
sales of the exporter-producer. Id. If that value exceeded 33 percent but was less than 66%,
Court No. 14-00135 Page 19
Commerce considered applying the average-to-transaction comparison method to only those
sales that passed the Cohen’s d test. Id. at 16-17. “If 33 percent or less of the value of total sales
passes the Cohen’s d test, then the results of the Cohen’s d test do not support consideration of
an alternative to the average-to-average method.” Id. at 17.
For the next phase of the differential pricing analysis, Commerce determined whether
there was a “meaningful” difference in the weighted-average dumping margin when calculated
according to the average-to-transaction method (to a partial or total extent, as discussed above)
instead of the average-to-average method. If the relative change was 25 percent or more and
both rates were above the de minimis threshold, 8 Commerce considered the change meaningful
and used the average-to-transaction method, either for all U.S. sales of the exporter-producer (if
the sales value that passed the Cohen’s d test were 66% or more of total sales value) or for only
the sales that passed the Cohen’s d test (if the above-described percentage was less than 66% but
more than 33%).
For the Final Results, 9 Commerce determined that 38% of Fine Furniture’s sales passed
the Cohen’s d test. Fine Furniture Analysis Mem. 8. It further determined that had the average-
8
Commerce stated that it would use the average-to-transaction method “if . . . the
resulting weighted-average dumping margin moves above the de minimis threshold.” Decision
Mem. for Prelim. Results of Antidumping Duty Administrative Review: Multilayered Wood
Flooring from the People’s Republic of China, A-570-970, ARP 11-12, at 17 (Nov. 18, 2013),
available at http://enforcement.trade.gov/frn/summary/prc/2013-28100-1.pdf (last visited
Sept. 6, 2016) (“Prelim. Decision Mem.”).
9
For the Preliminary Results, Commerce determined that 40.90% of Fine Furniture’s
U.S. sales by value passed the Cohen’s d test. Prelim. Decision Mem. 17-18. Commerce
determined that the change was meaningful and, therefore, applied the average-to-transaction
method to those of Fine Furniture’s U.S. sales that passed the Cohen’s d test and the average-to-
average method to its remaining sales. Id. Commerce assigned Fine Furniture a preliminary
dumping margin of 0.67%. Multilayered Wood Flooring from the People’s Republic of China:
(continued . . .)
Court No. 14-00135 Page 20
to-average method been applied to all of Fine Furniture’s sales, the final dumping margin would
have been 1.13%. Id. Commerce therefore concluded that the difference was meaningful, i.e.,
25% or more, and applied the average-to-transaction method to Fine Furniture’s U.S. sales that
passed the Cohen’s d test and the average-to-average method to the remaining U.S. sales,
resulting in a weighted-average dumping margin of 5.94%. Id.
Fine Furniture claims that the Department’s application of a differential pricing analysis
and the result of that analysis, i.e., the use of the average-to-transaction method when calculating
Fine Furniture’s 5.94% dumping margin, were contrary to law. It raises several arguments in
support of this claim. Fine Furniture argues, first, that Commerce lacked the authority to apply
its differential pricing analysis (to which Fine Furniture refers as “targeted dumping”) in
administrative reviews of antidumping duty orders, as opposed to antidumping duty
investigations “and, as a result, incorrectly compared a portion of Fine Furniture’s constructed
export price (‘CEP’) sales to NV [normal value] using the average-to-transaction method.” Fine
Furniture’s Br. 30. Second, Fine Furniture argues that, even if the Department is permitted to
use a differential pricing analysis in administrative reviews, it may not apply the results of that
analysis to non-dumped sales. Id. at 33-34. Third, Fine Furniture argues that Commerce may
not use its “zeroing” methodology in applying the average-to-transaction comparison method
because Commerce, adopting a change in policy, abandoned its practice of zeroing in order to
comply with our country’s obligations arising out of World Trade Organization (“WTO”)
membership. Id. at 35-37. For the reasons discussed below, the court rejects these arguments.
(. . . continued)
Preliminary Results of Antidumping Duty Administrative Review; 2011-2012, 78 Fed.
Reg. 70,267, 70,268 (Nov. 25, 2013).
Court No. 14-00135 Page 21
a. The Department’s Authority to Use the “Average-to-Transaction” Method based upon a
Differential Pricing Analysis
Fine Furniture argues that Commerce lacks statutory authority to apply a differential
pricing analysis in reviews of antidumping duty orders because “[t]he statutory exception that
allows Commerce to conduct differential pricing analyses, and the section Commerce cites to
support its analysis in the Final Results, is [sic] an exception that applies only to investigations.”
Id. at 31. According to Fine Furniture, the absence of an exception in the provisions in the
statute addressing reviews is not a “gap in the statute” such that the statute could be interpreted
as ambiguous so as to allow Commerce to regulate to fill the gap. Id. at 31-32. Fine Furniture
maintains that “there is a purposeful inclusion of an exception in the investigation section and an
omission in the review section” signifying that Congress did not intend Commerce to have the
authority to apply differential pricing in reviews. Id. at 32 (citations omitted).
As to each exporter or producer of the subject merchandise that requests that a periodic
administrative review of an antidumping duty order be conducted under section 751 of the Tariff
Act, 19 U.S.C. § 1675, Commerce is required as a general matter to determine the normal value,
export price or constructed export price, and resulting dumping margin, for each entry of the
subject merchandise. 19 U.S.C. § 1675(a)(2)(A)(i), (ii). As provided in section 777A of the
Tariff Act, 19 U.S.C. § 1677f-1(c), Commerce as a general rule “shall determine the individual
weighted average dumping margin for each known exporter and producer of the subject
merchandise.” In subsection (d) of that section, Congress addressed the method of determining a
weighted average dumping margin in an antidumping duty investigation. The subsection
provides, as one of two ordinary methods, “comparing the weighted average of the normal values
to the weighted average of the export prices (and constructed export prices) for comparable
Court No. 14-00135 Page 22
merchandise” (i.e., the “average-to-average” method). 10 Id. § 1677f-1(d)(1)(A). The statute
allows an exception under which, in an investigation, Commerce may use an average-to-
transaction method of comparison if two requirements are met. Those requirements are that
there be “a pattern of export prices for comparable merchandise that differ significantly among
purchasers, regions, or periods of time,” id. § 1677f-1(d)(1)(B)(i), and that Commerce explain
“why such differences cannot be taken into account” using one of the two ordinary methods, id.
§ 1677f-1(d)(1)(B)(ii). 11
As Fine Furniture points out, “there is a purposeful inclusion of an exception in the
investigation section and an omission in the review section.” Fine Furniture’s Br. 32. From this
statutory structure, Fine Furniture concludes that Commerce lacks the authority to use an
10
Section 777A of the Tariff Act, 19 U.S.C. § 1677f-1(d), provides:
(A) In general – In an investigation under part II of this subtitle, the administering
authority shall determine whether the subject merchandise is being sold in the United
States at less than fair value – (i) by comparing the weighted average of the normal
values to the weighted average of the export prices . . . . or (ii) by comparing the
normal values of individual transactions to the export prices . . . . of individual
transactions for comparable merchandise.
(B) Exception – The administering authority may determine whether the subject
merchandise is being sold in the United States at less than fair value by comparing the
weighted average of the normal values to the export prices . . . . of individual
transactions if (i) there is a pattern of export prices . . . . for comparable merchandise
that differ significantly among purchasers, regions, or periods of time and (ii) the
administering authority explains why such differences cannot be taken into account
using a method described in paragraph (1)(A)(i) or (ii).
19 U.S.C. § 1677f-1(d)(1).
11
The requirement in § 1677f-1(d)(1)(B)(i) that there be a “pattern of export prices for
comparable merchandise that differ significantly among purchasers, regions, or periods of time,”
is often identified as “targeted dumping.”
Court No. 14-00135 Page 23
average-to-transaction comparison method in reviews. The problem with this conclusion is
twofold. First, as to reviews of existing antidumping duty orders, the statute not only left out any
exception to normal methods of comparison (while specifying such an exception for
investigations), it also was silent as to the general rule as to which any supposed “exception”
would apply. That is, Congress made no mention of what are to be the ordinary methods of
comparison when it is a review, as opposed to an investigation, that Commerce is conducting.
“Commerce’s decision to apply its average-to-transaction comparison methodology in the
context of an administrative review is reasonable,” and “[b]ecause Congress did not provide for a
direct methodology [in administrative reviews], Commerce properly ‘fill[ed] th[at] gap.’” JBF
RAK LLC v. United States, 790 F.3d 1358, 1364 (Fed. Cir. 2015). The second problem with Fine
Furniture’s argument is that Congress expressly contemplated that Commerce would use an
average-to-transaction method of comparison in certain administrative reviews, providing in
19 U.S.C. § 1677f-1(d)(2) that “[i]n a review under section 1675 of this title, when comparing
export prices . . . . of individual transactions to the weighted average price of sales of the foreign
like product, the administering authority shall limit its averaging of prices to a period not
exceeding the calendar month that corresponds most closely to the calendar month of the
individual export sale.” 12
12
The court notes that Commerce typically does not apply the rule of 19 U.S.C.
§ 1677f-1(d)(2) in the specific instance of an antidumping review of subject merchandise from a
nonmarket economy country (such as this one) because that rule is limited to situations in which
Commerce determines normal value by the ordinary method (using prices in comparison-market
sales of the foreign like product) and after doing so compares U.S. prices in individual
transactions of the subject merchandise to “the weighted average of sales of the foreign like
product.” Nevertheless, the existence of § 1677f-1(d)(2) refutes Fine Furniture’s contention that
Congress did not intend for Commerce to use the average-to-transaction comparison method in
administrative reviews of antidumping duty orders.
Court No. 14-00135 Page 24
b. The Application of the Average-to-Transaction Comparison Method to Non-Dumped Sales
Asserting that “most of Fine Furniture’s sales that passed the Cohen’s d test were not
dumped,” i.e., were made at prices at or above normal value, Fine Furniture argues that
Commerce acted contrary to law in applying the average-to-transaction method of comparison to
those of its sales that passed the Cohen’s d test but also were non-dumped sales. Fine Furniture’s
Br. 33. Fine Furniture offers three reasons as to why the court must disallow the Department’s
applying the average-to-transaction comparison method when the U.S. sale in question was not a
dumped sale.
Fine Furniture maintains, first, that the statute, in 19 U.S.C. § 1677f-1(d)(1)(B), requires
both the requirement of § 1677f-1(d)(1)(B)(i) and that of § 1677f-1(d)(1)(B)(ii) to be met before
Commerce may use the average-to-transaction method for specific sales. Id. at 33-34. As to its
non-dumped sales that passed the Cohen’s d test, Fine Furniture contends that Commerce failed
to establish that either requirement was met. Fine Furniture argues that, as a matter of “plain
meaning,” these two statutory requirements “relate to the sub-set of transactions alleged to be
targeted, not the entire universe of transactions.” Id. at 33. This argument fails for two reasons.
As far as “plain meaning” is concerned, the statute plainly provides that the requirements of
§ 1677f-1(d)(1)(B)(i) and § 1677f-1(d)(1)(B)(ii) are binding with respect to investigations, not
reviews (although Commerce has developed a practice under which it relies upon
§ 1677f-1(d)(1)(B) as guidance with respect to use of the average-to-transaction method in
reviews). Even were § 1677f-1(d)(1)(B) presumed, arguendo, to be binding as to reviews, the
“plain meaning” argument still would lack merit. The reference in subparagraph (i) is to “a
pattern of export prices . . . . for comparable merchandise that differ significantly among
Court No. 14-00135 Page 25
purchasers, regions, or periods of time.” 19 U.S.C. § 1677f-1(d)(1)(B)(i) (emphasis added). It is
not a reference confined to sales made at prices that are below normal value.
Fine Furniture next argues that “[t]he only reasonable interpretation of ‘targeted
dumping’ is sales that are were both targeted and dumped,” that sales that were made above the
standard deviation of the Cohen’s d test or were not dumped cannot be characterized as “targeted
dumped sales,” and that the Department’s use of the average-to-transaction method as to such
sales is “potentially unreasonable” and “unduly punitive.” Fine Furniture’s Br. 34. Citing
general discussions of “targeted dumping” in preambles to past regulatory issuances by
Commerce, id. at 33-34, Fine Furniture grounds its argument in what it believes should be the
Department’s policy as to when (if ever) the average-to-transaction method should be used in a
review. In directing attention to policy questions, Fine Furniture fails to present a plausible
reason why any valid construction of the antidumping statute would limit the use of the average-
to-transaction method in reviews in the way Fine Furniture posits.
For its argument that Commerce must limit the applicability of the average-to-transaction
method to non-dumped sales, Fine Furniture also relies upon a regulation, 19 C.F.R.
§ 351.414(f)(2) (2007), under which Commerce had provided that it “normally will limit the
application of the average-to transaction method to those sales that constitute targeted dumping,”
which the regulation had defined as “a pattern of export prices (or constructed export prices) for
comparable merchandise that differ significantly among purchasers, regions, or periods of time,”
id. § 351.414(f)(1)(i). Fine Furniture’s Br. 33-35. Citing Gold East Paper (Jiangsu) Co. v.
United States, 37 CIT __, __, 918 F. Supp. 2d 1317, 1327-28 (2013) for the holding that the
Department’s attempted withdrawal of this regulation was invalid under the Administrative
Procedure Act, Fine Furniture submits that “Commerce was obligated to apply” this regulation
Court No. 14-00135 Page 26
“in this administrative review.” Id. at 34. Fine Furniture’s reliance on 19 C.F.R. § 351.414(f)(2)
(2007) is misplaced. Even if presumed to be still valid, that regulation can have no bearing on
this case because it was expressly limited in application to antidumping investigations, not
reviews. See 19 C.F.R. § 351.414(f)(1) (2007).
c. Use of the Average-to-Transaction Method following the Change in “Zeroing” Policy
Prior to 2012, the Department’s default method of comparison in administrative reviews
was the average-to-transaction method. See Antidumping Proceedings: Calculation of the
Weighted-Average Dumping Margin and Assessment Rate in Certain Antidumping Duty
Proceedings; Final Modification, 77 Fed. Reg. 8101, 8101 (Int’l Trade Admin. Feb. 14, 2012)
(“Final Modification”). When using the average-to-transaction method to calculate a weighted
average dumping margin, Commerce, applying a practice commonly identified as “zeroing,”
treated U.S. sales made at prices above normal value as having “zero” dumping margins, rather
than negative dumping margins, and thereby did not allow these sales to offset the effect of the
positive margins of U.S. sales made at prices below normal value. Id. On February 14, 2012,
Commerce announced that to comply with WTO obligations it would adopt the average-to-
average methodology (without zeroing) as the new default comparison method for administrative
reviews. See Final Modification, 77 Fed. Reg. at 8101-02.
Fine Furniture argues that the change in policy as to the use of zeroing renders unlawful
the use of the average-to-transaction method in this review. Fine Furniture’s Br. 35 (“Despite
this change in policy to abandon its zeroing methodology, Commerce continued to use ‘zeroing’
in the Final Results by denying offsets in the average-to-transaction method and in so doing
acted contrary to law.” (footnote omitted)). As a second argument, Fine Furniture maintains that
when affirming the use of zeroing in reviews, the Court of Appeals for the Federal Circuit
Court No. 14-00135 Page 27
(“Court of Appeals”) did so in the context of a review of an antidumping duty order on subject
merchandise from a market economy country. Where, as here, the merchandise is from a
nonmarket economy country, Fine Furniture argues, “Commerce calculates the average NV that
is compared to the transaction-specific export or constructed export value of the U.S. sale using a
monthly average, but in NME cases, Commerce uses a value covering the entire period of
review, which in this case is eighteen months.” Id. at 36. According to Fine Furniture, this
longer time frame for calculating average normal value “tends to artificially drive some sales
below [fair] value and others above fair value” and “exacerbates distortions that are caused by
the use of ‘average-to-transaction’ comparisons.” Id. at 36-37. “To further zero negative
margins only piles on the unreasonableness to NME respondents.” Id. at 37.
Fine Furniture’s first argument mischaracterizes the change in policy as to the use of
zeroing in reviews. Fine Furniture submits that “Commerce has recognized that ‘the denial of
offsets [i.e., zeroing] for non-dumped comparisons in reviews {is} inconsistent with the United
States’ WTO obligations.’” Fine Furniture’s Br. 35 (quoting Final Modification, 77 Fed Reg.
at 8101-02). However, the language Fine Furniture quotes is in the context of a paragraph in
which Commerce summarized the findings of the WTO Appellate Body in several WTO
disputes and does not summarize accurately the change in policy Commerce announced. That
policy change did not abandon entirely the practice of zeroing in reviews of antidumping duty
orders but instead announced that the average-to-average comparison method would be the new
default method for these reviews. See Final Modification, 77 Fed. Reg. at 8102 (“In reviews,
except where the Department determines that application of a different comparison method is
more appropriate, the Department will compare monthly weighted-average export prices with
monthly weighted-average normal values, and will grant an offset . . . .” (emphasis added)).
Court No. 14-00135 Page 28
Fine Furniture’s second argument is also meritless. Fine Furniture cites no authority,
whether from statute, regulations, or judicial precedent, for the novel proposition that Commerce
lacks authority to apply its zeroing methodology in administrative reviews of antidumping duty
orders on merchandise from nonmarket economy countries.
The judicial precedent that exists, in which the Court of Appeals repeatedly has affirmed
the Department’s use of zeroing when applying the average-to-transaction method of comparison
in reviews, arises from market economy cases but does not provide a basis for the distinction
Fine Furniture urges the court to draw in this case. See Union Steel v. United States,
713 F.3d 1101, 1104 (Fed. Cir. 2013); see also SKF USA Inc., 630 F.3d at 1375 (holding that
Commerce had statutory authority to apply zeroing in conjunction with the average-to-
transaction methodology in administrative review of antidumping duty orders on ball bearings
from France and Germany regardless of change in policy on zeroing in investigations); Timken
Co. v. United States, 354 F.3d 1334 (Fed. Cir. 2004) (holding the Department’s zeroing practice
to be a reasonable interpretation of the statute, 19 U.S.C. § 1677(35)(A)).
In its Reply Brief, plaintiff argues that, even if permissible under Union Steel, the
Department’s use of zeroing was unlawful because Commerce failed to “explain its decision to
use zeroing” in this review. Fine Furniture’s Reply 22. An “agency must examine the relevant
data and articulate a satisfactory explanation for its action including ‘a rational connection
between the facts found and the choice made.’” Motor Vehicles Mfrs. Ass’n of U.S., Inc. v. State
Farm Mutual Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting Burlington Truck Lines v. United
States, 371 U.S. 156, 168 (1962)). Commerce stated in the Final Decision Memorandum that it
believed its use of the average-to-transaction method with zeroing was based on a permissible
interpretation of the statute, citing Union Steel, 713 F.3d at 1106, as support. Final Decision
Court No. 14-00135 Page 29
Mem. 17. Commerce specifically addressed the argument that zeroing should not be adopted in
nonmarket economy cases due to the longer period for calculation of normal value in nonmarket
economy reviews, pointing out that a longer period is also used for the normal value calculation
in constructed value cases, that “even the review underlying the Union Steel decision involved
the use of constructed value,” and that “[a]lthough the Department modified its cost-calculation
methodology in that review, the Department’s normal practice [for constructed value] is to
calculate an annual weighted average cost for the POR.” Id. Thus, Commerce provided a
satisfactory explanation for its decision to apply zeroing in this review.
4. The Surrogate Value for Brokerage & Handling
Under section 772(c)(2) of the Tariff Act, 19 U.S.C. § 1677a(c)(2)(A), Commerce is to
reduce constructed export price by “the amount, if any, included in such price, attributable to any
additional costs, charges, or expenses, and United States import duties, which are incident to
bringing the subject merchandise from the original place of shipment in the exporting country to
the place of delivery in the United States.” In calculating Fine Furniture’s constructed export
price, Commerce deducted an amount representing domestic (Chinese) brokerage and handling
(“B&H”) expenses from the gross unit price paid by Fine Furniture’s first unaffiliated purchasers
in the United States. See Prelim. Decision Mem. 19. Because it regards China as a nonmarket
economy country, Commerce calculated a surrogate value for these expenses, using for this
purpose a 2013 World Bank report, “Doing Business in the Philippines” (“Doing Business
Report”). See Final Decision Mem. 31-36. This report specifies costs associated with brokerage
and handling in the Philippines and provides rates calculated in U.S. dollars per container. See
Petitioner’s Comments on Surrogate Value Ex. 2 (May 24, 2013), (Admin.R.Doc. No. 310). The
information in the World Bank Doing Business Report is based on an assumption that a typical
Court No. 14-00135 Page 30
20-foot shipping container weighs 10,000 kg. Id. Commerce converted the per-container cost to
a per-kilogram cost before making the adjustment to constructed export price. See Final Results
Surrogate Value Mem. 2-3 (May 1, 2014), (Admin.R.Doc. No. 645).
Fine Furniture argues that the Doing Business Report was not the best available data
source on the record, for two reasons. First, Fine Furniture argues that Commerce erred in
“using a hypothetical container weight of 10,000 kilograms per 20 foot container” as provided in
the Doing Business Report “instead of the actual weight of a typical 20 foot container” in data
submitted by Fine Furniture. See Fine Furniture’s Br. 38, 40. Fine Furniture proposes that
instead Commerce should have used a per-container weight of 25,044 kg., which it describes as
the standard maximum load for a twenty foot container. See Letter from Mowry & Grimson re:
Admin. Review of the Antidumping Duty Order on Multilayered Wood Flooring from the
People’s Republic of China: Surrogate Value Comments Ex. SV-8, (May 24, 2013),
(Admin.R.Doc. No. 300).
Use of the alternative container weight proposed by Fine Furniture would not have been
justified on this record, which lacks any evidence to support a finding that containers carrying
Fine Furniture’s subject merchandise typically were filled to the maximum weight capacity of
the containers and that each container weighed more than 25,000 kg. In contrast, the record
contains actual evidence that a typical container weighs 10,000 kg., consisting of the Doing
Business Report and price quotes for two logistics companies. Final Decision Mem. 33. This
evidence provides the necessary evidentiary support for the Department’s conversion of the per-
container cost for brokerage and handling expenses to a per-kilogram cost using a 10,000 kg.
container weight.
Court No. 14-00135 Page 31
Fine Furniture also argues that Commerce should not have converted brokerage and
handling costs to a per-kilogram quantity because “information on the record shows that the
commercial reality of the [multilayered wood flooring] industry is that B&H costs are not
determined on the basis of weight.” Fine Furniture’s Br. 38-39. Fine Furniture cites an affidavit
submitted by another respondent in a brief commenting on surrogate values, to which are
attached price quotes for brokerage and handling based on a per-container cost rather than a per-
kilogram cost. See Letter from deKieffer & Horgan to Dep’t Commerce re: Resubmission of
Surrogate Values for the Final Results per the Department’s letter dated January 8, 2014 Ex. 9
(Jan. 10, 2014), (Admin.R.Doc. No. 599).
Commerce considered Fine Furniture’s argument during the review and found that the
brokerage and handling information in the Doing Business Report remained the best available
information on the record. Final Decision Mem. 33-34. Commerce stated that “upon reviewing
the referenced price quotes, we found insufficient evidence to warrant a finding that the charges
of B&H in the Philippines are exclusively on a container basis, irrespective of the weight loaded
on a container, as respondents claim.” Id. “With regard to Doing Business 2013, the Department
determined that 10,000 kg should continue to be used to calculate the B&H surrogate value
because this is the weight of the shipment in a 20-foot container for which participants in the
Doing Business 2013 survey reported B&H costs.” Id. at 35 (footnotes omitted). The
explanation of the methodology used to derive the brokerage and handling costs in the Doing
Business Report, which was placed on the record by another respondent, supports this finding,
stating: “Assumptions about the traded goods. The traded product travels in a dry-cargo, 20-
foot, full container load. It weighs 10 tons and is valued at $20,000.” See Letter from DeKieffer
& Horgan to Sec. of Commerce Pertaining to Layo Wood Surrogate Data – Part 6 Ex. 13
Court No. 14-00135 Page 32
“Trading Across Borders Methodology” (Aug. 6, 2013), (Admin.R.Doc. No. 420). Commerce,
therefore, relied on substantial record evidence in finding that it was appropriate to calculate a
surrogate value for brokerage and handling costs based on weight. The price quotes upon which
Fine Furniture bases its argument are evidence that B&H costs sometimes are paid on a per-
container basis, but Commerce permissibly found according to the record evidence as a whole
that a per-kilogram value based on the Doing Business Report data, in light of the way in which
those data were reported, was more representative of B&H costs for Philippine shipments in
general and therefore more suitable for use in calculating a B&H surrogate value.
5. The Surrogate Value for Electricity
According to section 773(c)(1) of the Tariff Act, 19 U.S.C. § 1677b(c)(1), Commerce, as
a general matter, is to determine the normal value of subject merchandise from a nonmarket
economy country “on the basis of the value of the factors of production utilized in producing the
merchandise,” plus certain additions. The statute further states 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). When choosing a source of data from the
surrogate country to value a factor of production, Commerce has a preference for data that is
“publicly available, contemporaneous with the POR, represents a broad market average, from an
approved surrogate country, tax and duty-exclusive, and specific to the input” being valued.
Prelim. Decision Mem. 13.
Fine Furniture argues that the Department’s choice of a surrogate value for electricity
was unsupported by substantial evidence because it was not the best available data source on the
record. There were two possible sources of data: data from the Philippines National Power
Court No. 14-00135 Page 33
Corporation (“NPC”) and data from the Doing Business in Camarines Sur site (“Doing
Business”). 13 See Final Decision Mem. 58-60. Commerce chose to rely on the Camarines Sur
Doing Business data, finding that they were superior to the National Power Corporation data
because the Doing Business data “reflect prices for residential, commercial and industrial users,
which offer a greater specificity than NPC.” 14 Id. at 59.
“Congress has vested Commerce with considerable discretion in selecting the ‘best
available information’ for use in valuing factors of production.” Allied Pacific Food (Dalian)
Co. Ltd. v. United States, 32 CIT 1328, 1342, 587 F. Supp. 2d 1330, 1339 (2008) (citing Nation
Ford Chem. Co. v. United States, 166 F.3d 1373, 1377 (Fed. Cir. 1999)). Nevertheless, the
Department’s findings as to the “best available information” must be supported by substantial
record evidence. Fine Furniture argues that the Doing Business data were not the best available
data on the record for three reasons: (1) they do not represent a broad market average; (2) they
are not contemporaneous with the period of review; and (3) there is no evidence on the record
that the Doing Business electricity rates were calculated exclusive of taxes and duties.
13
Respondents also proposed using data from the Manila Electricity Company
(“Meralco”) to value electricity, but the Department rejected this proposal because there was “no
source information available on the record provided by any interested party.” Issues and
Decision Mem. for the Final Results of the 2011-2012 Antidumping Duty Admin. Rev. of
Multilayered Wood Flooring from the People’s Republic of China, A-570-970, ARP 11-12, at 59
(May 9, 2014), available at http://enforcement.trade.gov/frn/summary/prc/2014-10698-1.pdf
(last visited Sept. 6, 2016).
14
The “Doing Business in Camarines Sur” data was published on the Camarines Sur
provincial government’s website, www.camarinessur.gov/ph, but is no longer publicly accessible
at that address. Petitioners submitted a screenshot of the site, accessed on August 12, 2012, to
the record. See Petitioner’s Comments on Surrogate Value, A-570-970, ARP 11-12, Ex. 1
(May 24, 2013), (Admin.R.Doc. No. 310).
Court No. 14-00135 Page 34
First, Fine Furniture argues that the National Philippines Corporation data are superior as
more broadly representative of electricity costs in the Philippines geographically because the
National Philippines Corporation data covers the main grid rates for all three main regions in the
Philippines and because the record shows there are regional differences in the pricing and
consumption of electricity. See Fine Furniture’s Br. 41-42. In contrast, the Camarines Sur
Doing Business data covered only a single region, Camarines Sur. Id. at 41. Commerce found
that the Camarines Sur data are more specific than the National Philippines Corporation data
because the former “reflect prices for residential, commercial, and industrial users” while the
latter “provide only a single effective rate based on unbundled rates for the Luzon, Mindanao and
Visayas power grids.” Final Decision Mem. 59.
Second, Fine Furniture argues that the data were not contemporaneous with the period of
review because the Doing Business site lists only a single current rate that was effective “as of”
2009. See Fine Furniture’s Br. 41. Defendant argues that Commerce “found the Doing Business
data to be contemporaneous to the period relevant here in a parallel proceeding,” specifically, the
2011-2012 administrative review of the Department’s antidumping duty order on chlorinated
isocyanurates from China. Def.’s Opp’n 34-35 (citing Decision Mem. for the Final Results of
Antidumping Duty Administrative Review: Chlorinated Isocyanurates from the People’s
Republic of China, 2011-12, A-570-898, APR 11-12, at 19 (Jan. 30, 2014), available at
http://enforcement.trade.gov/frn/summary/prc/2014-01898-1.pdf (last visited Sept. 6, 2016)
(“Chlorinated Isocyanurates Final Decision Mem.”)). In the Final Decision Memorandum of
that proceeding, Commerce stated as follows:
The Department continues to find the Camarines Sur data to be contemporaneous as
explained in the previous review, noting that the Department has found that utility rates
represent a current rate as indicated by the effective date listed for each of the rates
Court No. 14-00135 Page 35
provided. Therefore, in the Department’s estimation, the rates from the publication likely
were, absent evidence to the contrary, effective beginning in 2009, and thus continued to
represent the current rate during the POR.
Chlorinated Isocyanurates Final Decision Mem. 19.
Finally, Fine Furniture argues that the Doing Business data are inferior to the National
Philippines Corporation data because there is no record evidence that the Doing Business data
used to calculate electricity rates are exclusive of taxes or duties, which Fine Furniture submits
that the National Philippines Corporation data are, see Fine Furniture’s Br. 42, and because the
Doing Business site “provides no information regarding the source of methodology behind its
rate reporting.” Id. at 43. Here, Commerce acknowledged that Fine Furniture presented the
argument on tax and duty exclusivity yet failed to address it. See Final Decision Mem. 58-60.
Again, when a party properly raises an argument before an agency, that agency is required to
address the argument in its final decision. SKF USA Inc., 630 F.3d at 1374 (citing Timken U.S.
Corp. v. United States, 421 F.3d 1350, 1358 (Fed. Cir. 2005)). Commerce must consider on
remand the argument Fine Furniture grounds in a claimed lack of record evidence that the
Camarines Sur Doing Business rates are exclusive of taxes and duties. The court does not
consider it necessary at this time to rule on the other grounds Fine Furniture presents as to why
the Doing Business data are not the best available data on the record to value electricity as these
arguments may be rendered moot by the Department’s decision on remand.
III. CONCLUSION
For the reasons discussed in the foregoing, the court remands the Amended Final Results
published as Multilayered Wood Flooring from the People’s Republic of China: Amended Final
Results of the Antidumping Duty Administrative Review; 2011-2012, 79 Fed. Reg. 35,314
(June 20, 2014) (“Amended Final Results”) for reconsideration of the calculated deduction for
Court No. 14-00135 Page 36
value-added taxes, the choice of financial statements, and the valuation of electricity. Upon
consideration of all papers and proceedings in this case, and upon due deliberation, it is hereby
ORDERED that Fine Furniture’s motion for judgment on the agency record be, and
hereby is, granted in part and denied in part; it is further
ORDERED that the Amended Final Results be, and hereby are, set aside as unlawful and
remanded for reconsideration and redetermination in accordance with this Opinion and Order; it
is further
ORDERED that Commerce shall issue, within ninety (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 as necessary the dumping margins of Fine
Furniture and the plaintiffs who are separate rate respondents; it is further
ORDERED that plaintiffs, plaintiff-intervenors, and defendant-intervenor may file
comments on the Remand Redetermination within thirty (30) days from the date on which the
Remand Redetermination is filed with the court; and it is further
ORDERED that defendant may file a response to the comment submissions within
fifteen (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: September 9, 2016
New York, New York