PT. Zinus Glob. Indonesia v. United States

Slip Op. 23-
UNITED STATES COURT OF INTERNATIONAL TRADE
PT. ZINUS GLOBAL INDONESIA,
Plaintiff,
and
BROOKLYN BEDDING, LLC,
CORSICANA MATTRESS COMPANY,
ELITE COMFORT SOLUTIONS, FXI, INC.,
INNOCOR, INC., KOLCRAFT
ENTERPRISES INC., LEGGETT & PLATT,
INCORPORATED, INTERNATIONAL
BROTHERHOOD OF TEAMSTERS, AND
UNITED STEEL, PAPER AND FORESTRY,
RUBBER, MANUFACTURING, ENERGY,
ALLIED INDUSTRIAL AND SERVICE
WORKERS INTERNATIONAL UNION,
AFL-CIO,
Consolidated Plaintiffs,
Before: Jennifer Choe-Groves, Judge
v.
Consol. Court No. 21-00277
UNITED STATES,
Defendant,
and
BROOKLYN BEDDING, LLC,
CORSICANA MATTRESS COMPANY,
ELITE COMFORT SOLUTIONS, FXI, INC.,
INNOCOR, INC., KOLCRAFT
ENTERPRISES INC., LEGGETT & PLATT,
INCORPORATED, INTERNATIONAL
BROTHERHOOD OF TEAMSTERS, AND
UNITED STEEL, PAPER AND FORESTRY,
RUBBER, MANUFACTURING, ENERGY,
ALLIED INDUSTRIAL AND SERVICE
WORKERS INTERNATIONAL UNION,
AFL-CIO,
Defendant-Intervenors.
Consol. Court No. 21-00277 Page 2
OPINION AND ORDER
[Sustaining in part and remanding in part the U.S. Department of Commerce’s
final affirmative determination of sales at less than fair value on mattresses from
Indonesia.]
Dated: March 20, 2023
J. David Park, Henry D. Almond, Daniel R. Wilson, Leslie C. Bailey, Kang Woo
Lee, and Gina Marie Colarusso, of Arnold & Porter Kaye Scholer, LLP,
Washington, D.C., for Plaintiff PT. Zinus Global Indonesia. With them on the
brief were Phyllis L. Derrick and Eric Johnson.
Yohai Baisburd, Jeffery B. Denning, Chase J. Dunn, and Nicole Brunda, of
Cassidy Levy Kent (USA) LLP, Washington, D.C., for Consolidated Plaintiffs and
Defendant-Intervenors Brooklyn Bedding, LLC, Corsicana Mattress Company,
Elite Comfort Solutions, FXI, Inc., Innocor, Inc., Kolcraft Enterprises Inc., Leggett
& Platt, Incorporated, International Brotherhood of Teamsters, and United Steel,
Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service
Workers International Union, AFL-CIO.
L. Misha Preheim, Assistant Director, and Kara M. Westercamp, Trial Attorney,
Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of
Washington, D.C., for Defendant United States. With them on the brief were
Brian M. Boynton, Principal Deputy Assistant Attorney General, and Patricia M.
McCarthy, Director. Of counsel on the brief was David W. Richardson, Senior
Counsel, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S.
Department of Commerce.
Choe-Groves, Judge: Plaintiff PT. Zinus Global Indonesia (“Plaintiff” or
“Zinus Indonesia”) challenges the final affirmative determination of the U.S.
Department of Commerce (“Commerce”) in the antidumping duty investigation on
mattresses from Indonesia. Mattresses from Indonesia (“Final Determination”), 86
Consol. Court No. 21-00277 Page 3
Fed. Reg. 15,899 (Dep’t of Commerce Mar. 25, 2021) (final affirmative
determination of sales at less than fair value). Before the Court is Plaintiff’s Rule
56.2 Motion for Judgment Upon the Agency Record of Plaintiff PT. Zinus Global
Indonesia (“Plaintiff’s Motion”). Pl.’s R. 56.2 Mot. J. Agency R., ECF Nos. 22,
23. Defendant United States and Consolidated Plaintiffs and Defendant-
Intervenors Brooklyn Bedding, LLC, Corsicana Mattress Company, Elite Comfort
Solutions, FXI, Inc., Innocor, Inc., Kolcraft Enterprises, Inc., Leggett & Platt, Inc.,
the International Brotherhood of Teamsters, and the United Steel, Paper and
Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers
International Union, AFL-CIO (collectively, “Brooklyn Bedding”) oppose
Plaintiff’s Motion. Brooklyn Bedding’s Resp. Br. Opp’n Pl.’s Mot. J. Agency R.
(“Brooklyn Bedding’s Resp.”), ECF Nos. 29, 30; Def.’s Resp. Pl.’s Mots. J.
Agency R. (“Def.’s Resp.”), ECF Nos. 33, 34. Also before the Court is Brooklyn
Bedding’s Motion for Judgment on the Agency Record (“Brooklyn Bedding’s
Motion”). Brooklyn Bedding’s Mot. J. Agency R., ECF Nos. 24, 25. Plaintiff and
Defendant oppose Brooklyn Bedding’s Motion. Pl.’s Resp. Br. Opp’n Consol.
Pl.’s Mot J. Agency R. (“Pl.’s Resp.”), ECF Nos. 31, 32; Def.’s Resp.
For the reasons discussed below, the Court grants in part and remands in part
Plaintiff’s Motion and grants in part and remands in part Brooklyn Bedding’s
Motion.
Consol. Court No. 21-00277 Page 4
ISSUES PRESENTED
This case presents the following issues:
1. Whether Commerce’s use of a quarterly ratios sales methodology and
rejection of Zinus Indonesia’s proposed first-in-first-out methodology
for determining the quantity of Indonesian mattresses sold during the
period of investigation was supported by substantial evidence;
2. Whether Commerce’s use of Emirates Sleep Systems Private’s
financial statements rather than the financial statements of Indonesian
producers in the calculation of constructed value was supported by
substantial evidence;
3. Whether Commerce’s calculation of a profit cap was in accordance
with the law;
4. Whether Commerce’s adjustments to the reported sales deductions of
Zinus, Inc. (“Zinus U.S.”) were supported by substantial evidence;
5. Whether Commerce’s decision to adjust selling expenses attributable
to Zinus, Inc. (“Zinus Korea”) to account for actual selling expenses
only was supported by substantial evidence;
6. Whether Commerce’s use of Indonesian Global Trade Atlas (“GTA”)
import data to value input purchase transactions involving an
Consol. Court No. 21-00277 Page 5
affiliated supplier in a non-market economy was supported by
substantial evidence and in accordance with the law; and
7. Whether Commerce’s decision to not require Zinus Indonesia to
submit a U.S. sales reconciliation was supported by substantial
evidence.
BACKGROUND
On March 30, 2020, an antidumping duty petition concerning imports of
mattresses from Cambodia, Indonesia, Malaysia, Serbia, Thailand, the Republic of
Turkey, and the Socialist Republic of Vietnam was filed with Commerce by
Brooklyn Bedding, LLC, Corsicana Mattress Company, Elite Comfort Solutions,
FXI, Inc., Innocor, Inc., Kolcraft Enterprises, Inc., Leggett & Platt, Inc., the
International Brotherhood of Teamsters, and the United Steel, Paper and Forestry,
Rubber, Manufacturing, Energy, Allied Industrial and Service Workers
International Union, AFL-CIO. Antidumping Countervailing Duty Pet.
(“Petition”) (Mar. 31, 2020), PR 1–4, CR 1–10.1 In response to the Petition,
Commerce initiated on April 24, 2020 an antidumping investigation on mattresses
imported from Indonesia. Mattresses from Cambodia, Indonesia, Malaysia, Serbia,
Thailand, the Republic of Turkey, and the Socialist Republic of Vietnam, 85 Fed.
1Citations to the administrative record reflect the public record (“PR”) and
confidential record (“CR”) document numbers filed in this case, ECF Nos. 39, 40.
Consol. Court No. 21-00277 Page 6
Reg. 23,002 (Dep’t of Commerce Apr. 24, 2020) (initiation of less-than-fair-value
investigations). The period of investigation was January 1, 2019 through
December 31, 2019, the four most recent financial quarters prior to the filing of the
March 2020 Petition. Id. at 23,003; Commerce’s Decision Mem. Prelim.
Affirmative Determination and Postponement Final Determination Less-Than-
Fair-Value Investigation Mattresses from Indonesia (“Preliminary Determination
Memo” or “PDM”) at 5, PR 226; see also 19 C.F.R. § 351.204(b)(1). Zinus
Indonesia was selected as the sole mandatory respondent in the investigation. See
Less-Than-Fair-Value Investigation Mattresses Indonesia Respondent Selection
Mem. (“Selection Memo”), PR 66, CR 32.
Prior to the investigation, Zinus Korea and Zinus U.S. participated in an
antidumping duty investigation covering mattresses produced in the People’s
Republic of China (“China”). See Mattresses from the People’s Republic of China
(“Mattresses from China”), 84 Fed. Reg. 56,761 (Dep’t of Commerce Oct. 23,
2019) (final affirmative determination of sales at less than fair value, and final
affirmative determination of critical circumstances, in part). Commerce requested
that Zinus Indonesia place on the record certain business proprietary information
submitted by Zinus Xiamen in the Mattresses from China investigation. See
Commerce’s Request Additional Information at 3, PR 207.
Consol. Court No. 21-00277 Page 7
On November 3, 2020, Commerce published its preliminary determination.
Mattresses from Indonesia (“Preliminary Determination”), 85 Fed. Reg. 69,597(Dep’t of Commerce Nov. 3, 2020) (preliminary affirmative determination of sales
at less than fair value, postponement of final determination, and extension of
provisional measures); see also PDM. In the Preliminary Determination,
Commerce applied a quarterly ratios sales methodology proposed by Brooklyn
Bedding to determine the quantity of Zinus Indonesia’s U.S. sales. See PDM at 9–
10; see also Commerce’s Prelim. Determination Margin Calculation Zinus
Indonesia at 1–3 (Oct. 27, 2020), PR 229, CR 258.
In calculating constructed value profit and selling expenses in the
Preliminary Determination, Commerce used the financial statements of Emirates
Sleep Systems Private (“Emirates”), a producer that manufactured mattresses in
India. PDM at 13. Commerce’s calculation did not include the costs of certain
inputs purchased by Zinus Indonesia from two affiliated Chinese suppliers. PDM
at 12; Commerce’s Cost Calculation Mem. (Oct. 27, 2020) at 1–2, PR 231, CR
262. Commerce calculated the cost of inputs using the average of GTA data for
Brazil, Indonesia, Malaysia, Mexico, Romania, Russia, and Turkey. Commerce’s
Cost Calculation Mem. at 1–2, Att. 2a. Commerce also calculated constructed
export price based on Zinus U.S.’ expenses, increasing the starting price by the
amount of billing adjustments and making deductions for rebates, movement
Consol. Court No. 21-00277 Page 8
expenses, and selling expenses. PDM at 10. Commerce calculated a dumping
margin of 2.61 percent for Zinus Indonesia. Preliminary Determination, 85 Fed.
Reg. at 69,598.
Following the Preliminary Determination, Commerce issued supplemental
questionnaires to Zinus Indonesia. Commerce’s Post-Prelim. Supp. Questionnaire
(Dec. 2, 2020), PR 249, CR 267. The parties to the investigation submitted
additional briefing. Zinus Indonesia’s Admin. Case Br. (Feb. 10, 2021), PR 275,
CR 292; Brooklyn Bedding’s Admin. Case Br. (Feb. 9, 2021), PR 274, CR 291;
Brooklyn Bedding’s Rebuttal Admin. Case Br. (Feb. 16, 2021), PR 276, CR 293;
Zinus Indonesia’s Rebuttal Admin. Case Br. (Feb. 17, 2021), PR 277, CR 294.
Commerce published its Final Determination on March 25, 2021. See Final
Determination, 86 Fed. Reg. at 15,899; Issues and Decision Memo Final
Affirmative Determination Less-Than-Fair-Market Value Investigation Mattresses
from Indonesia (“IDM”), ECF No. 15-4.
In the Final Determination, Commerce continued to apply the quarterly
ratios methodology for assigning country of origin to mattresses sold from Zinus
U.S.’ constructed export price inventory and continued to calculate constructed
value profit and selling expenses based on the financial statements of Emirates.
IDM at 8–9, 20–25. Commerce also made adjustments to constructed export price
sales based on sales deductions of Zinus U.S. and Best Price Mattress, Inc. (“Best
Consol. Court No. 21-00277 Page 9
Price Mattress”), an affiliated company, during the period of investigation. Id. at
15. Zinus Indonesia’s antidumping margin was calculated at 2.22 percent. Final
Determination, 86 Fed. Reg. at 15,900.
The antidumping duty order was published on May 14, 2021. Mattresses
from Cambodia, Indonesia, Malaysia, Serbia, Thailand, the Republic of Turkey,
and the Socialist Republic of Vietnam (“Antidumping Duty Order”), 86 Fed. Reg.
26,460 (Dep’t of Commerce May 14, 2021) (antidumping duty orders and
amended final affirmative antidumping determination for Cambodia). Zinus
Indonesia timely filed this action. See Summons, ECF No.1; Compl., ECF No. 5.
JURISDICTION AND STANDARD OF REVIEW
The Court has jurisdiction pursuant to Section 516A(a)(2)(B)(i) of the Tariff
Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(i), and 28 U.S.C. § 1581(c).
The Court will hold unlawful any determination found to be unsupported by
substantial evidence on the record or otherwise not in accordance with the law. 19
U.S.C. § 1516a(b)(1)(B)(i).
DISCUSSION
I. Legal Framework
Commerce imposes antidumping duties on foreign goods if “(1) it
determines that the merchandise ‘is being, or is likely to be, sold in the United
States at less than its fair value,’ and (2) the International Trade Commission
Consol. Court No. 21-00277 Page 10
determines that the sale of the merchandise at less than fair value materially
injures, threatens, or impedes the establishment of an industry in the United
States.” Diamond Sawblades Mfrs. Coal. v. United States, 866 F.3d 1304, 1306
(Fed. Cir. 2017). Antidumping duties are calculated as the difference between the
normal value of subject merchandise and the export price or the constructed export
price of the subject merchandise. 19 U.S.C. § 1673.
Normal value is ordinarily determined using the sales price of the subject
merchandise in the seller’s home market. 19 U.S.C. § 1677b(a)(1)(B)(i). If
Commerce determines that normal value cannot be reliably calculated using home
market or third-country sales, Commerce may use the subject merchandise’s
constructed value as an alternative to normal value. Id. § 1677b(a)(4). The
method for calculating constructed value is defined by statute. Id. § 1677b(e).
When calculating constructed value, Commerce must utilize the respondent’s
actual selling, general, and administrative expenses, and profits in the respondent’s
home market or a third-country market. Id. § 1677b(e)(2)(A). If Commerce
cannot rely on those data, it may look to:
(i) the actual amounts incurred and realized by the specific exporter or
producer being examined in the investigation or review for selling,
general, and administrative expenses, and for profits, in connection
with the production and sale, for consumption in the foreign country,
of merchandise that is in the same general category of products as the
subject merchandise,
Consol. Court No. 21-00277 Page 11
(ii) the weighted average of the actual amounts incurred and realized
by exporters or producers that are subject to the investigation or review
(other than the exporter or producer described in clause (i)) for selling,
general, and administrative expenses, and for profits, in connection
with the production and sale of a foreign like product, in the ordinary
course of trade, for consumption in the foreign country, or
(iii) the amounts incurred and realized for selling, general, and
administrative expenses, and for profits, based on any other reasonable
method, except that the amount allowed for profit may not exceed the
amount normally realized by exporters or producers (other than the
exporter or producer described in clause (i)) in connection with the sale,
for consumption in the foreign country, of merchandise that is in the
same general category of products as the subject merchandise.
Id. § 1677b(e)(2)(B).
Commerce must also calculate export price or constructed export price
(collectively, “U.S. price”). Export price is:
the price at which the subject merchandise is first sold (or agreed to be
sold) before the date of importation by the producer or exporter of the
subject merchandise outside of the United States to an unaffiliated
purchaser in the United States or to an unaffiliated purchaser for
exportation to the United States,
subject to certain adjustments. Id. § 1677a(a). Constructed export price is:
the price at which the subject merchandise is first sold (or agreed to be
sold) in the United States before or after the date of importation by or
for the account of the producer or exporter of such merchandise or by a
seller affiliated with the producer or exporter, to a purchaser not
affiliated with the producer or exporter,
subject to certain adjustments. Id. § 1677a(b). The price used to calculate export
price and constructed export price is reduced by commissions, selling expenses,
Consol. Court No. 21-00277 Page 12
further manufacturing expenses, and the profit allocated to these expenses. Id.
§ 1677a(d).
II. Quantity of Mattresses Methodology
During the period of investigation, Zinus U.S. purchased mattresses
produced in Indonesia and three other countries, which were comingled in
warehouses maintained by Zinus U.S. or third parties. IDM at 8; Zinus Indonesia’s
Section A Questionnaire Resp. (Jun. 19, 2020) at A-5–A-6, PR 97–102, CR 36–39.
Zinus Indonesia reported to Commerce that Zinus Korea was able to track the
country of origin for mattresses sold and shipped directly to unaffiliated United
States customers, but Zinus U.S. did not track the country of origin for sales of
mattresses held in its United States warehouses. IDM at 8; Zinus Indonesia’s
Section A Questionnaire Resp. at A-4–A-7.
In order to calculate a quantity of subject mattresses sold from its United
States inventory, Zinus Indonesia advocated for Commerce to adopt a first-in-first-
out methodology, which Zinus Indonesia used in its responses. IDM at 8; see also
Zinus Indonesia’s Section A Questionnaire Resp. at A-6–A-7; Zinus Indonesia’s
Supp. Section C Questionnaire Resp (Sept. 21, 2020). at SC1-10–SC1-11, PR 193,
CR 167. In support of this methodology, Zinus Indonesia provided Commerce
with a monthly breakdown of mattresses imported into the United States, which
identified imports by country of origin, month, and model. See Zinus Indonesia’s
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Second Supp. Section C Questionnaire Resp. (Sept. 28, 2020), Ex. SC2-1, PR 200,
CR 214. Brooklyn Bedding argued during the administrative investigation that the
first-in-first-out methodology was distortive of total constructed export price
inventory sales and proposed that Commerce apply a quarterly ratios methodology
in which the quantity of mattresses purchased by Zinus U.S. for each quarter under
review was apportioned based on country. IDM at 8; Brooklyn Bedding’s Pre-
Prelim. Cmts. (Oct. 9, 2020) at 610, 1517, PR 210, CR 219. The percentage
assigned to Indonesia-origin mattresses was applied to Zinus U.S.’ total sales for
the corresponding quarter. IDM at 9; PDM at 10; see also Brooklyn Bedding’s
Pre-Prelim. Cmts. at 15.
In the Preliminary Determination, Commerce adopted the quarterly ratios
methodology. PDM at 10. In discussing the first-in-first-out methodology,
Commerce stated that “[q]uestions remain about the accuracy of this methodology
with respect to [constructed export price] sales reporting” and that Commerce
would “continue to examine this issue for purposes of the final determination.” Id.
In the Final Determination, Commerce continued to apply the quarterly ratios
methodology, finding it to be the preferrable methodology because “it applies
quarterly ratios grounded in purchase data to the full universe of Zinus U.S.’ sales
from inventory during the [period of investigation], it is neutral in terms of
Consol. Court No. 21-00277 Page 14
determining which sales to report as subject merchandise sales,” and “is less
susceptible to manipulation.” IDM at 89.
Plaintiff argues that Commerce erred in adopting a quarterly ratios
methodology for determining the quantity of subject constructed export price
inventory sales over Plaintiff’s proposed first-in-first-out methodology. Pl.’s
Mem. Supp. Pl.’s Mot. J. Agency R. (“Pl.’s Br.”) at 12–26, ECF Nos. 22-1, 23-1.
Plaintiff presents two arguments. Id.
First, Plaintiff contends that Commerce’s decision to adopt the quarterly
ratios methodology proposed by Brooklyn Bedding over the first-in-first-out
methodology proposed by Plaintiff was not supported by substantial evidence. Id.
at 15–20. Plaintiff argues that Commerce failed to address the merits of the first-
in-first-out methodology and misconstrued the record evidence in weighing the
reimbursement of warranty claims and the payment of commissions. Id. at 16–19.
Plaintiff contends that it provided evidence on the record demonstrating that the
first-in-first-out methodology was accurate, reasonable, and “vastly superior to
[the] quarterly import ratios, which do not correlate to the model- and time-specific
import patters [sic] and result in widespread distortions and inaccuracies.” Id. at
18–19. Plaintiff further argues that Commerce acted unreasonably in rejecting the
first-in-first-out methodology without soliciting additional information and
documentation related to Commerce’s concerns. Id. at 19–20. Plaintiff contends
Consol. Court No. 21-00277 Page 15
that record evidence demonstrated that commissions and warranties were not paid
on subject mattresses during the period of investigation because Zinus Indonesia
did not use selling agents for the subject mattresses and warranties were not
offered, only “defective allowances.” Id. at 16–17.
Defendant and Brooklyn Bedding raise multiple arguments in opposition to
Plaintiff’s position. First, Defendant and Brooklyn Bedding contend that Plaintiff
was given an opportunity to defend the first-in-first-out methodology and failed to
carry its burden of convincing Commerce. Brooklyn Bedding’s Resp. at 12–17;
Def.’s Resp. at 24–25. Specifically, issues regarding the first-in-first-out
methodology were raised by Brooklyn Bedding during the investigation and
Commerce solicited responses to two questionnaires following the Preliminary
Determination. Brooklyn Bedding’s Resp. at 12–17; Def.’s Resp. at 24. Second,
Defendant and Brooklyn Bedding argue that Plaintiff did not adequately explain
how the first-in-first-out methodology functions or address record evidence that the
methodology was distortive. Def.’s Resp. at 22–23; Brooklyn Bedding’s Resp. at
14–17. Third, Defendant and Brooklyn Bedding argue that Plaintiff’s opposition
to Commerce’s focus on the payment of warranties and commissions ignores the
relevant point of whether Plaintiff was capable of tracking the country of origin for
constructed export price inventory sales. Def.’s Resp. at 23–24; Brooklyn
Bedding’s Resp. at 17–19. Regardless of whether commissions were paid and if
Consol. Court No. 21-00277 Page 16
certain payments were classified as “warranties” or “defective allowances,”
Defendant and Brooklyn Bedding contend that the record did not explain how
Zinus U.S. could seek reimbursement from its suppliers or grant commissions on
non-subject merchandise without tracking the country of origin. Def.’s Resp. at
23–24; Brooklyn Bedding’s Resp. at 17–19.
Second, Plaintiff argues that even if Commerce’s use of the quarterly ratios
methodology was supported by substantial evidence, the inclusion of mattresses
still in-transit from Indonesia to the United States at the end of the period of
investigation was unreasonable. Pl.’s Br. at 21–26. Plaintiff contends that
Brooklyn Bedding’s calculations, which were adopted by Commerce, were based
on the quantity of mattresses shipped from Indonesia and not the quantity of
mattresses that entered the United States during the period of investigation. Id. at
21–23. Plaintiff submitted evidence showing that mattresses were sold by Zinus
Korea to Zinus U.S. using free on board shipping terms, under which title passed
from Zinus Korea to Zinus U.S. at the time of shipment. Zinus Indonesia’s Second
Supp. Section C Questionnaire Resp. at 1–2. Plaintiff contends that any
identification of constructed export price inventory sales must be limited to the
inventory actually received by Zinus U.S. and that substantial record evidence does
not support the inclusion of in-transit mattresses. Pl.’s Br. at 23–25. Plaintiff also
argues that Commerce failed to consider and address Plaintiff’s arguments
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regarding the inclusion of in-transit mattresses or to explain its reasoning for
adopting the figures offered by Brooklyn Bedding. Id. at 25–26.
Brooklyn Bedding argues that Plaintiff has provided no factual or legal
support for its position that mattresses in-transit could not have been sold from
Zinus U.S.’ inventory. Brooklyn Bedding’s Resp. at 22. Defendant and Brooklyn
Bedding contend that record evidence demonstrates that sales were made of
mattresses before the mattresses entered the United States. Id. at 22–23; Def.’s
Resp. at 26. Brooklyn Bedding notes that Zinus Korea never took physical
possession of mattresses before shipment to Zinus U.S. and that “back-to-back”
sales were reported using a date based on shipment from Indonesia to the United
States. Brooklyn Bedding’s Resp. at 23. Brooklyn Bedding also notes that
Plaintiff has offered no internal policy precluding the sale of mattresses before
importation, which is seemingly permitted under Plaintiff’s accounting practices.
Id. at 24. Defendant and Brooklyn Bedding cite the language of 19 U.S.C.
§ 1677a(b), which defines “constructed export price,” and contemplates sales to
purchasers within the United States before the physical importation of goods. Id.
at 23; Def.’s Resp. at 26; see also 19 U.S.C. § 1677a(b).
In determining whether subject merchandise was sold at less than fair value,
Commerce compares “the export price or constructed export price and normal
value.” 19 U.S.C. § 1677b(a). Because Zinus Indonesia did not have home market
Consol. Court No. 21-00277 Page 18
or third country sales, normal value was based on constructed value. Id.
§ 1677b(a)(1); see also Zinus Indonesia’s Notification Non-Viable Home Market
(May 28, 2020), PR 82; PDM at 8–9, 12–13. Constructed export price is the price
at which subject merchandise is first sold in the United States by a seller affiliated
with the producer or exporter to a non-affiliated purchaser. 19 U.S.C. § 1677a(b).
Calculation of constructed export price requires Commerce to identify sales
of subject merchandise in the United States during the period of investigation. See
id. The relevant statutes and regulations provide little guidance on how to allocate
merchandise within an inventory that comingles subject and non-subject
merchandise. Commerce has discretion in determinations “involv[ing] complex
economic and accounting decisions of a technical nature.” See Fujitsu Gen. Ltd. v.
United States, 88 F.3d 1034, 1039 (Fed. Cir. 1996) (citation omitted). Commerce
still “must [ ] explain [cogently] why it has exercised its discretion in a given
manner.” See Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463
U.S. 29, 48 (1983) (citation omitted). The methodology adopted by Commerce
must be a reasonable means of effectuating the statutory purpose. Tri Union
Frozen Prods., Inc. v. United States, 40 CIT __, __, 163 F. Supp. 3d 1255, 1301
(2016), aff’d, 741 F. App’x 801 (Fed. Cir. 2018) (citing Ceramica Regiomontana,
S.A. v. United States, 10 CIT 399, 404–05, 636 F. Supp. 961, 966 (1986), aff’d,
810 F.2d 1137, 1139 (Fed. Cir. 1987)). A party proposing a methodology bears the
Consol. Court No. 21-00277 Page 19
burden of establishing that the allocation is “as specific a basis as is feasible,
and . . . does not cause inaccuracies or distortions.” 19 C.F.R. § 351.401(g)(2); see
also Koyo Seiko Co. v. United States, 551 F.3d 1286, 1293 (Fed. Cir. 2008)
(importer has the burden to prove its proposed methodology is “calculated on as
specific a basis as is feasible” and is free of distortions). The Court will affirm
Commerce’s choice of a methodology even if substantial evidence supports
multiple options. See Fujitsu Gen. Ltd., 88 F.3d at 1044.
Commerce has discretion in selecting the methodology for allocating goods
in an investigation but must base its methodology on the best available information
in order to establish antidumping margins as accurately as possible. Tri Union
Frozen Prods., 40 CIT at __, 163 F. Supp. 3d at 1267; see also Shakeproof
Assembly Components, Div. of Ill. Tool Works, Inc. v. United States, 268 F.3d
1376, 1382 (Fed. Cir. 2001). Commerce justified its adoption of the quarterly
ratios methodology by explaining that the methodology “applies quarterly ratios
grounded in purchase data to the full universe of Zinus U.S.’ sales from inventory
during the [period of investigation],” “is neutral in terms of determining which
sales to report as subject merchandise sales,” and “is less susceptible to
manipulation.” IDM at 9. In support of its determination, Commerce stated that it
agreed with Brooklyn Bedding’s Pre-Preliminary Comments regarding the
accuracy of the quarterly ratios methodology. Id. (citing Brooklyn Bedding’s Pre-
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Prelim. Cmts. at 15–17). In the cited submission, Brooklyn Bedding explained the
process of calculating the quarterly ratios methodology as beginning with
quantities reported in Zinus Indonesia’s Section C Questionnaire Response and
adjusting the quantities to reflect the total number of mattresses shipped by Zinus
Indonesia to Zinus Korea during the period of investigation based on Zinus
Korea’s sales reconciliation. Brooklyn Bedding’s Pre-Prelim. Cmts. at 15. Using
these figures, Brooklyn Bedding calculated the ratios of Indonesian-origin
mattresses to the total product shipped for each quarter and applied the ratios to the
constructed export price inventory reported by Zinus Indonesia. Id. Brooklyn
Bedding explained that the quarterly ratios methodology was more accurate and
less susceptible to variation than a first-in-first-out approach or last-in-last-out
approach. Id. at 16–17.
With respect to the alternative first-in-first-out methodology proposed by
Plaintiff, Commerce explained that the first-in-first-out methodology did “not
accurately or appropriately capture a sufficient number of sales of subject
merchandise” and there were inconsistencies between Plaintiff’s ability to offer
warranties and commissions and Plaintiff’s claimed inability to track the country of
origin for mattresses sold. IDM at 9. In questioning the reliability of Zinus
Indonesia’s reporting, Commerce determined that the first-in-first-out
methodology:
Consol. Court No. 21-00277 Page 21
[did] not accurately or appropriately capture a sufficient number of
sales of subject merchandise. To come to any other conclusion would
be inconsistent with the commercially realistic business practices of a
multinational company engaged in the production and sale of a
consumer product such as mattresses that provides commissions on
certain sales from its inventory.
Id.The Court concludes that Commerce expressed reasonable concerns
regarding the accuracy of the first-in-first-out methodology. The Court notes that
Commerce was not required to adopt the first-in-first-out methodology proposed
by Plaintiff over the valid alternative quarterly ratios methodology. See Fujitsu
Gen. Ltd., 88 F.3d at 1044. Commerce explained that the quarterly ratios
methodology was preferable because it was grounded in Zinus U.S.’ purchase data,
was applied to the totality of the subject mattresses available for sale during the
period of investigation, and was neutral in determining which sales to designate as
subject merchandise. IDM at 9 (citing Brooklyn Bedding’s Pre-Prelim. Cmts. at
1517). In the absence of accurate records maintained by Zinus Indonesia and
Zinus U.S., the Court concludes that Commerce’s use of the quarterly ratios
methodology was reasonable because Commerce determined that it more
accurately identified the quantity of subject mattresses sold than the alternate
proposed method that Commerce deemed questionable. The Court sustains
Commerce’s use of the quarterly ratios methodology.
Consol. Court No. 21-00277 Page 22
Plaintiff argues that if the Court were to sustain the use of the quarterly
ratios methodology, it should remand this case to Commerce with instructions to
exclude from the constructed export price calculation mattresses that had not yet
arrived in the United States at the end of the period of investigation. Pl.’s Br. at
21–26. Plaintiff contends that Commerce’s inclusion of mattresses in-transit from
Indonesia at the end of the period of investigation was unsupported by record
evidence that demonstrated that mattresses classified as in-transit could not have
been shipped to customers during the period of investigation. Id. Brooklyn
Bedding and Defendant argue that Commerce was correct to include mattresses in-
transit because the relevant statute contemplates sales before importation into the
United States and the record supports that mattresses were sold to United States
customers despite being classified as in-transit. Brooklyn Bedding’s Resp. at
2224; Def.’s Resp. at 2627.
Section 1677a(b) of title 19 defines “constructed export price” as:
the price at which the subject merchandise is first sold (or agreed to be
sold) in the United States before or after the date of importation by or
for the account of the producer or exporter of such merchandise or by a
seller affiliated with the producer or exporter, to a purchaser not
affiliated with the producer or exporter, as adjusted under subsections
(c) and (d).
Consol. Court No. 21-00277 Page 23
19 U.S.C. § 1677a(b) (emphasis added). This statutory definition expressly
contemplates the potential for goods to be sold in the United States before physical
importation. Id.
Commerce acknowledged Zinus Indonesia’s objection to the inclusion of
mattresses still in-transit from Indonesia at the end of the period of investigation
but did not provide express reasons for or specific record evidence in support of
rejecting the argument, stating only that “[w]e therefore agree with the petitioners
that the quarterly ratio sales reporting methodology used in the Preliminary
Determination, along with the quantity of mattresses that Zinus U.S. purchased
from [Zinus Korea], is preferable in this case.” IDM at 89. Though inclusion of
goods sold or agreed to be sold in-transit prior to importation might be permissible
under 19 U.S.C. § 1677a(b), Commerce failed to provide sufficient explanation or
citations to record evidence to support its inclusion of in-transit pre-importation
goods sold in this case. The Court remands to Commerce for further consideration
and explanation of its determination to include mattresses in-transit in the
calculation of constructed export price.
III. Constructed Value Profit Calculations
Commerce based the calculation of normal value on constructed value. IDM
at 21. Because Zinus Indonesia lacked a viable home or third-country market,
Commerce calculated constructed value profit and selling expenses under 19
Consol. Court No. 21-00277 Page 24
U.S.C. § 1677b(e)(2)(B), which provides three methods:
(i) the actual amounts incurred and realized by the specific exporter or
producer being examined in the investigation or review for selling,
general, and administrative expenses, and for profits, in connection
with the production and sale, for consumption in the foreign country,
of merchandise that is in the same general category of products as the
subject merchandise,
(ii) the weighted average of the actual amounts incurred and realized
by exporters or producers that are subject to the investigation or review
(other than the exporter or producer described in clause (i)) for selling,
general, and administrative expenses, and for profits, in connection
with the production and sale of a foreign like product, in the ordinary
course of trade, for consumption in the foreign country, or
(iii) the amounts incurred and realized for selling, general, and
administrative expenses, and for profits, based on any other reasonable
method, except that the amount allowed for profit may not exceed the
amount normally realized by exporters or producers (other than the
exporter or producer described in clause (i)) in connection with the sale,
for consumption in the foreign country, of merchandise that is in the
same general category of products as the subject merchandise.
19 U.S.C. § 1677b(e)(2)(B). Commerce eliminated options (i) and (ii) because
“[Zinus Indonesia did] not have sales of the general category of merchandise in the
home market and there [were] no other respondents being investigated in this
proceeding” and applied option (iii). IDM at 21; see also Zinus Indonesia’s
Notification Non-Viable Home Market.
Commerce considered financial statements for eight companies provided by
the parties to the investigation: PT Graha Seribusatu Jaya (“Graha”), an Indonesian
producer of mattresses; PT Ecos Jaya Indonesia (“Ecos”), an Indonesian producer
Consol. Court No. 21-00277 Page 25
of mattress and sleep products; PT Inocycle (“Inocycle”), an Indonesian producer
of non-woven and staple fiber and materials recycling; PT Chitose International
(“Chitose International”), an Indonesian producer of furniture for homes, schools,
restaurants, and hospitals; PT Boston Furniture Industries (“Boston Furniture”), an
Indonesian producer of wood furniture and special construction or repairs; Luxury
Sleep Products, a Malaysian producer of bedroom furniture; Slarafija Trade, a
Serbian producer of mattresses; and Emirates, an Indian producer of mattresses.
IDM at 21–24. Upon consideration of the submitted financial statements,
Commerce selected Emirates to be the best available surrogate for calculating
constructed value profit. Id. at 25.
Commerce also determined that it was unable to calculate a profit cap in
accordance with section 1677b(e)(2)(B)(iii) “because the record [did] not contain
any information for making such a calculation.” Id. at 25. Noting that Commerce
may apply section 1677b(e)(2)(B)(iii) on the basis of facts available, Commerce
determined Emirates to be “the best option for determining the profit cap as facts
available” and adopted Emirates’ profit information as a “reasonable profit cap.”
Id. Plaintiff challenges Commerce’s (A) use of Emirates financial statements as
surrogate date; (B) rejection of Indonesian manufactures in selecting surrogate
financial data; and (C) calculation, or lack of calculation, of the statutorily required
profit cap. Pl.’s Br. at 26–36.
Consol. Court No. 21-00277 Page 26
A. Emirates Sleep Systems Private Limited
Plaintiff argues that Commerce’s selection of Emirates as a surrogate data
source was unsupported because Emirates’ financial statement was not specific to
the subject merchandise, the respondent, foreign market, or period of investigation.
Pl.’s Br. at 30; see Brooklyn Bedding’s Submission Concerning Constructed Value
Profit Selling Expenses (Aug. 17, 2020) at Att. 2-B (“Emirates’ Financial
Statement”), PR 154, CR 136. Specifically, Plaintiff points to Emirates’ lack of
sales in Indonesia and Emirates’ lack of business operations, products, and a
customer base similar to that of Zinus Indonesia. Pl.’s Br. at 29. Plaintiff also
notes that Emirates generated roughly 25 percent of its revenue through the sale of
services and had missing annexures from its financial statements. Id. at 29–30.
Brooklyn Bedding argues that Commerce’s use of Emirates was permissible
under 19 U.S.C. § 1677b(e)(2)(B) and consistent with existing precedent.
Brooklyn Bedding’s Resp. at 38. Brooklyn Bedding argues that Commerce has
greater freedom in selecting a surrogate under 1677b(e)(b)(iii) than under
subsections (i) and (ii). Id. at 38–39. Brooklyn Bedding also disputes Plaintiff’s
contentions regarding the portion of Emirates’ business related to services, noting
that Commerce determined the services in question to be of a nature appropriate
for a company engaged in the manufacture and sale of mattresses. Id. at 39–40.
Brooklyn Bedding highlights that Commerce addressed the issue of Emirates’
Consol. Court No. 21-00277 Page 27
missing annexures at the time of the Final Determination and determined Emirates’
Financial Statement to be complete. Id. at 40.
Defendant contends that Commerce’s use of Emirates’ Financial Statement
was supported by the record. Def.’s Resp. at 39–40. Defendant argues that
Commerce was not required to select a company from Indonesia and acted within
its authority in selecting financial statements deemed more accurate and reliable,
even when the financial statements were not fully contemporaneous. Id. at 40–44.
In selecting a surrogate data source, Commerce considered four criteria:
(1) similarity of the potential surrogate companies’ business operations
and products to the respondent’s business operations and products;
(2) the extent to which the financial data of the surrogate company
reflect sales in the home market and do not reflect sales to the United
States; (3) the contemporaneity of the data to the [period of
investigation]; . . . [and (4)] the extent to which the customer base of
the surrogate company and that of the respondent are similar.
IDM at 22; see also Mid Continent Steel & Wire, Inc. v. United States (“Mid
Continent II”), 941 F.3d 530, 542–43 (Fed. Cir. 2019) (concluding that
Commerce’s analysis applying the four part framework was a reasonable
interpretation of the statute). Commerce also reviewed the provided financial
statements to ensure that they “(1) reflect[ed] a net profit; (2) [were] complete (i.e.,
all of the financial statements [were] included with the auditor’s report showing an
unqualified opinion and all accompanying footnotes were provided); and (3)
[were] fully translated.” IDM at 22. Based on these criteria, Commerce
Consol. Court No. 21-00277 Page 28
eliminated all financial statements other than those of Emirates and Inocycle. Id. at
23.
In comparing the financial statements of Emirates and Inocycle, Commerce
noted that “[t]he specific language of both the preferred and alternative methods
[(19 U.S.C. § 1677b(e)(2)(A) & (B))] appear to show a preference that the profit
and selling expenses reflect: (1) production and sales in the foreign country; and
(2) the foreign like product, i.e., the merchandise under consideration.” Id. at 23.
Emirates is an Indian-based manufacturing company that primarily manufactures
mattresses, bases, and other sleep-related products and derives the majority its
revenue from manufacturing mattresses. Id. at 23–24; Emirates’ Financial
Statement. Inocycle is an Indonesian-manufacturer that derives six percent of its
revenue from the production of mattresses. IDM at 23; Zinus Indonesia’s
Constructed Value Profit Submission at Ex. 3 (“Inocycle’s Financial Statement”),
PR 156–63, CR 137–44.
In its administrative case brief before Commerce, Zinus Indonesia argued
that Emirates’ Financial Statement was not sufficiently contemporaneous to the
period of investigation. Zinus Indonesia’s Admin. Case Br. at 33–38. That a
financial statement does not fully overlap the period of investigation does not
defeat its contemporaneity for purposes of section 1677b(e)(b)(iii). See DuPont
Teijin Films China Ltd. v. United States, 38 CIT 1282, 129192, 7 F. Supp. 3d
Consol. Court No. 21-00277 Page 29
1338, 1349 (2014) (Commerce’s decision to rely on data that overlapped with two
months only of the period of investigation was reasonable). Commerce may opt to
prioritize factors such as accuracy or reliability over contemporality as long as the
adopted financial statement overlaps with the period of investigation. See Qingdao
Sea-Line Trading Co., Ltd. v. United States, 766 F.3d 1378, 1386 (Fed. Cir. 2014)
(Commerce’s decision to use more accurate but less contemporaneous data was
reasonable). In this case, the period of investigation was January 1, 2019 through
December 31, 2019. IDM at 2. Emirates’ Financial Statement covered fiscal year
April 2018 through March 2019. See Emirates’ Financial Statement at 1. Because
Emirates’ Financial Statement overlapped the first three months of the period of
investigation, the Court concludes that Commerce was reasonable in its
determination that the financial statement was sufficiently contemporaneous.
Commerce considered Zinus Indonesia’s argument that Emirates was not a
comparable business because 23.29 percent of its revenue was derived from
advertising, marketing, and promotional services. IDM at 24; see Emirates’
Financial Statement at Annexure A. Emirates was “a manufacturing company
basically into the manufacturing of all types and kinds of mattresses, bases, and
other sleep related products and systems. The company [was] also into trading
both wholesale and retail, of such manufactured products. The company
provide[d] advertising, marketing, and promotional services to its holding
Consol. Court No. 21-00277 Page 30
company.” Emirates’ Financial Statement at Independent Auditor’s Report, note 1.
Commerce observed that the majority of Emirates’ activities related to the
manufacturing of mattresses and concluded that “marketing, promotion, and
trading activities related to mattresses and sleep systems [was] a completely
appropriate activity for a company engaged in the manufacturing and sale of
mattresses.” IDM at 24. Commerce also determined that the record did not
include any evidence suggesting that the expenses related to these activities was
not properly included in Emirates’ profit calculation. Id. Commerce limited its
calculation of constructed value selling expenses to transportation expenses and
excluded costs associated with retail, marketing, advertising services, and
commissions. Id.Emirates’ business activities related to the wholesale and retail sale of
mattresses and the majority of Emirates’ business activities were the same as those
of Zinus Indonesia. IDM at 2325; see also PDM at 13. The only other candidate
determined acceptable by Commerce, Inocycle, was predominantly engaged in the
processing of non-woven fibers and the manufacture of artificial stable fibers.
IDM at 2325; see Inocycle’s Financial Statement. Inocycle’s manufacture of
homeware products, including pillows, bolsters, mattresses, blankets, carpets,
mattress protectors, and bed cover sets for sale in the Indonesian market was a
minority of its business operations. IDM at 2324; see Inocycle’s Financial
Consol. Court No. 21-00277 Page 31
Statement. The Court concludes that Commerce’s determination that the products
and business operations of Emirates were sufficiently similar to those of Zinus
Indonesia, and were preferable over Inocycle, was reasonable and supported by the
record.
Missing from Emirates’ Financial Statement were annexures referenced in
the auditor’s notes. IDM at 25; see Emirates’ Financial Statement at Independent
Auditor’s Report, notes 6, 8, 12, 13. In a footnote in its administrative case brief,
Zinus Indonesia argued before Commerce that the missing annexures rendered the
financial statement incomplete. IDM at 25; Zinus Indonesia’s Admin. Case Br. at
36, n.51. Commerce reviewed Emirates’ Financial Statements, including the
Independent Auditor’s Report. IDM at 24–25; Emirates’ Financial Statement at
Independent Auditor’s Report. Upon its review, Commerce determined that the
information provided for Emirates included a full audit report, each of the financial
statements, and all of the accompanying footnotes. Id. at 25. Commerce also
determined that none of the referenced annexures referred to information that
would call into question the amounts on the income statement or the related profit
and selling expenses and that the annexures were referenced in the auditor’s notes
that already detailed the corresponding balance sheet items. Id.; see Emirates’
Financial Statement at Independent Auditor’s Report, notes 6, 8, 12, 13.
Consol. Court No. 21-00277 Page 32
Commerce reasonably rejected Plaintiff’s annexure argument because
Emirates provided a full audit report, financial statements, and accompanying
footnotes and none of the missing annexures called into question the reflected
profit and selling expenses. IDM at 25. Because the annexures did not undermine
the reliability or accuracy of Emirates’ Financial Statement, the Court concludes
that Commerce’s acceptance of the financial statements was reasonable.
As Commerce determined, Emirates was a mattress producer with similar
business operations, products, and customer base to Zinus Indonesia. Id. at 25.
Commerce reasonably determined that Emirates’ financial documents were
sufficiently contemporaneous to the period of investigation and the record did not
include any reason to question the financial documents’ reliability or accuracy. Id.
at 24. Commerce’s determination that Emirates provided the best option for
calculating constructed value was consistent with its established criteria. The
Court concludes that Commerce’s choice of Emirates as an acceptable surrogate
data source was supported by substantial evidence.
B. PT Graha Seribusatu Jaya and PT Ecos Jaya Indonesia
Plaintiff argues that Commerce erroneously rejected the financial statements
of two Indonesian mattress producers, Graha and Ecos. Pl.’s Br. at 31–34.
Commerce considered Graha’s 2018 and 2019 financial statements. IDM at 23;
see Zinus Indonesia’s Constructed Value Profit Submission at Ex. 1; Brooklyn
Consol. Court No. 21-00277 Page 33
Bedding’s Submission Concerning Constructed Value Profit Selling Expenses at
Att. 1; Graha’s Section A Questionnaire Resp. (Jun. 19, 2020) at Ex. A-27–A32,
PR 103, CR 44. Commerce rejected Graha’s 2018 financial statement as not
contemporaneous to the period of investigation and Graha’s 2019 financial
statement as not audited. IDM at 23. Plaintiff contends that even if Commerce’s
rejection of Graha’s 2019 financial statement as incomplete was reasonable,
Commerce should have adopted Graha’s 2018 financial statement over Emirates’
2018–2019 financial statement because the specificity of Graha’s information for
the Indonesian market should have outweighed the limited contemporaneity of the
three months of overlap of Emirates’ Financial Statement with the period of
investigation. Pl.’s Br. at 32–33. Commerce considered and rejected Ecos’ 2019
financial statement because it contained a qualified opinion by the auditor relating
to estimated future liabilities pertaining to post-employment benefit obligations.
Id. at 22; see Zinus Indonesia’s Constructed Value Profit Submission at Ex. 2.
Plaintiff argues that Commerce failed to consider the significance of the auditor’s
comment on the calculation of Ecos’ profit and the auditor’s indication that Ecos
would meet its obligations. Id. at 33–34.
Brooklyn Bedding and Defendant contend that Commerce’s rejection of the
financial statements of Graha as not contemporaneous and unaudited was
consistent with Commerce’s established practice and that the applicable statute
Consol. Court No. 21-00277 Page 34
does not impose an obligation on Commerce to prioritize geographic proximity.
Brooklyn Bedding’s Resp. at 41; Def.’s Resp. at 44–45. Brooklyn Bedding and
Defendant also argue that Commerce’s rejection of Ecos’ financial statements
because of a qualified auditor’s report was consistent with Commerce’s existing
practice of not looking beyond surrogate financial statements and was reasonable
in light of Commerce’s inability to seek clarification from the company or auditor.
Brooklyn Bedding’s Resp. at 42–43; Def.’s Resp. at 45–46. Brooklyn Bedding
and Defendant do not agree with Plaintiff’s suggestion that the qualification was
trivial and unable to adversely affect the dumping margin calculation, and they
note that Commerce addressed the point in the Final Determination. Brooklyn
Bedding’s Resp. at 42–43; Def.’s Resp. at 45–46. Finally, Brooklyn Bedding notes
that Plaintiff advanced no arguments before the Court rebutting Commerce’s
analysis rejecting the other considered Indonesia companies: Inocycle, Chitose
International, and Boston Furniture. Brooklyn Bedding’s Resp. at 43.
Commerce is tasked with approximating a respondent’s home market
experience and selecting data that permits it “to estimate, reasonably and fairly, a
profit rate that [the respondent] would have realized from sales in its home
market.” Mid Continent Steel & Wire, Inc. v. United States (“Mid Continent I”),
41 CIT __, __, 203 F. Supp. 3d 1295, 1310 (2017). As discussed above,
Commerce identified multiple factors that it considered in determining what
Consol. Court No. 21-00277 Page 35
surrogate financial information to use in its calculation, including the
contemporaneity of the available financial information with the period of
investigation. IDM at 22; see Mid Continent II, 941 F.3d at 542–43. The
administrative record included two financial statements for Graha covering the
year ending on December 31, 2018 and the year ending on December 31, 2019.
See Graha’s Section A Questionnaire Resp. at Exs. A-27–A-28; Zinus Indonesia’s
Constructed Value Profit Submission at Ex. 1A. Commerce disregarded Graha’s
2018 financial statement as not contemporaneous with the period of investigation.
IDM at 23.
Commerce rejected Graha’s 2019 financial statement because it was not
audited and Ecos’ financial statement because its audit included a qualified
opinion. Id. Commerce noted that the qualification in Ecos’ financial statement,
which concerned a deviation from the requirements of the generally accepted
accounting principles (“GAAP”) of Indonesia, had the potential to impact the
constructed value calculation. Id. Because an audit supports the reliability of the
financial data, Commerce was within its discretion to favor an audited opinion over
an unaudited opinion. See SeAH Steel VINA Corp. v. United States, 41 CIT __,
__, 269 F. Supp. 3d 1335, 1351–52 (2017). Similarly, Commerce was within its
discretion to favor an unqualified auditor’s opinion over a qualified auditor’s
Consol. Court No. 21-00277 Page 36
opinion. See Golden Dragon Precise Copper Tube Grp., Inc. v. United States, 40
CIT __, __, 2016 WL 4442163, at *5 (2016).
In selecting a constructed value surrogate, Commerce was tasked with
comparing the options presented and their “comparative deficiencies.” See Mid
Continent II, 941 F.3d at 544 (in determining a surrogate for constructed value,
“[t]he size of any subsidies would obviously be relevant, as would the comparative
deficiencies of the alternative sources.”). Plaintiff argues that Commerce, despite
the deficiencies in the reported data of Graha and Ecos, should have prioritized the
manufacturers from Indonesia over an out-of-country manufacturer in order to
reach a more accurate constructed value calculation. Though option (ii) of
§ 1677b(e)(2)(B) contains a geographic restriction for data from the home country
market, no similar restriction is included in option (iii). Compare 19 U.S.C.
§ 1677b(e)(2)(B)(ii) with id. § 1677b(e)(2)(B)(iii); see also Thai I-Mei Frozen
Foods Co. v. United States, 31 CIT 334, 345–46, 477 F. Supp. 2d 1332, 1343
(2007). In fact, to impose such a requirement on section (iii) would effectively
nullify the language “any other reasonable method.” The language of the statute
provides Commerce with discretion to weigh the individual factors and to identify
the best available information. Because Commerce is not required to select a
manufacturer from the respondent’s home market and the record supports the
rejection of the financial statements provided for Graha and Ecos, the Court
Consol. Court No. 21-00277 Page 37
concludes that Commerce’s determination was reasonable and supported by
substantial evidence.
C. Profit Cap
Commerce determined that the record did not contain information necessary
to calculate a profit cap as required by 19 U.S.C. § 1677b(e)(2)(B)(iii). IDM at 25.
In the alternative, Commerce applied facts available and adopted Emirates’ profit
information as a profit cap for the Final Determination. Id. Using Emirates’
information, a constructed value profit rate of 18.36 percent was calculated. See
PDM at 13; Prelim. Cost Calculation Mem. at 2, PR 231, CR 262; Final Cost
Calculation Mem. at 1–2, PR 286, CR 295.
Plaintiff contends that Commerce’s failure to apply a profit cap in
accordance with section 1677b(e)(2)(B)(iii) caused the calculation of constructed
value to be unlawful. Pl.’s Br. at 34–36. Plaintiff argues that Commerce could
have utilized the financial records of the considered Indonesian companies to
establish a profit cap and that the information provided by Ecos suggests that the
ceiling for profit in the Indonesian market for mattresses was only 10.78 percent.
Id. at 34. In recognizing a profit rate of 18.36 percent, Plaintiff argues, Commerce
ignored its obligation to apply an accurate and representative profit cap. Id. at 34–
35.
Consol. Court No. 21-00277 Page 38
Brooklyn Bedding and Defendant dispute Plaintiff’s argument that
Commerce failed to apply a profit cap in accordance with section
1677b(e)(2)(B)(iii) and note that Commerce did apply a profit cap based on the
financial statements of Emirates. Brooklyn Bedding’s Resp. at 44; Def.’s Resp. at
47. Defendant contends that it would have been inappropriate for Commerce to
use the rejected financial statements of the Indonesian companies because usable
information existed on the record in the form of Emirates’ Financial Statement.
Def.’s Resp. at 47–48. Brooklyn Bedding and Defendant contend that Commerce
complied with its statutory obligations in establishing a profit cap and that the use
of Emirates’ profit data was supported by substantial evidence on the record.
Brooklyn Bedding’s Resp. at 44–47; Def.’s Resp. at 48.
Section 1677b(e)(2)(B)(iii) of title 19 instructs that if Commerce relies on
“any other reasonable method” for determining a respondent’s expenses and profits
in calculating constructed value, the amount allowed for profit is limited to “the
amount normally realized by exporters or producers . . . in connection with the
sale, for consumption in the foreign country, of merchandise that is in the same
general category of products as the subject merchandise.” 19 U.S.C.
§ 1677b(e)(2)(B)(iii). This section requires that Commerce apply an “upward limit
for profit commonly termed the ‘profit cap.’” SeAH Steel Corp. v. United States,
45 CIT __, __, 513 F. Supp. 3d 1367, 1398 (2021) (quoting Atar S.r.l. v. United
Consol. Court No. 21-00277 Page 39
States, 730 F.3d 1320, 1322 (Fed. Cir. 2013)). The statute provides that the profit
cap should be based on the profit on sales in the foreign country of merchandise in
the same general category of products as the subject merchandise. 19 U.S.C.
§ 1677b(e)(2)(B)(iii). Commerce cannot sidestep its obligation without providing
an adequate explanation. Husteel Co. v. United States, 39 CIT __, __, 98 F. Supp.
3d 1315, 1348 (2015). When Commerce determines that it cannot calculate a
profit cap because the record lacks relevant information of sales in respondent’s
home country of merchandise in the same general category of the subject
merchandise by home country producers, it must attempt to calculate a profit cap
based on facts available. Id.As an initial matter, Plaintiff’s argument is incorrect that Commerce did not
calculate a profit cap. In the Final Determination, Commerce determined that it
was:
unable to calculate the amount realized by exporters or producers in
connection with the sale, for consumption in the foreign country, of the
merchandise in the same general category of products as the subject
merchandise (i.e., the “profit cap”), in accordance with section
773(e)(2)(B)(iii) of the Act, because the record does not contain any
information for making such a calculation.
IDM at 25. In order to establish a profit cap, Commerce resorted to facts available.
Id. Commerce determined that the financial statements of Indonesian
manufacturers on the record could not be used because “[n]one of the suggested
Consol. Court No. 21-00277 Page 40
financial statements reflect profit only on sales of the general category of products
in the foreign country under investigation.” Id. After eliminating the Indonesian
companies, Commerce concluded that Emirates provided the best available
information and that Emirates’ profits served as a reasonable profit cap. Id.The record included financial statements from five Indonesian producers:
Graha, Ecos, Inocycle, Chitose, and Boston Furniture. Graha’s Section A
Questionnaire Resp. at Ex. A-27–A-28; Zinus Indonesia’s Constructed Value
Profit Submission at Exs. 2–5. Chitose was an Indonesian producer of multiple
types of furniture for use in homes, schools, and hospitals. IDM at 22; see Zinus
Indonesia’s Constructed Value Profit Submission at Ex. 4. Boston Furniture was
an Indonesian producer of wood furniture and special construction or repairs. IDM
at 22; see Zinus Indonesia’s Constructed Value Profit Submission at Ex. 5.
Commerce determined that both Chitose and Boston Furniture produced goods not
comparable to Zinus Indonesia. IDM at 23. Similarly, mattress manufacture and
sales represented only a minority of Inocycle’s business, which was predominantly
dedicated to the production of fiber. Id.; see Zinus Indonesia’s Constructed Value
Profit Submission at Ex. 3. Commerce acknowledged that Graha’s financial
statements might have reflected the necessary production and sales in Indonesia,
but the statements suffered from a lack of contemporaneity and a lack of an
Consol. Court No. 21-00277 Page 41
accompanying audit, and it was unclear if Graha made sales predominantly to the
United States. IDM at 25, n.153.
Plaintiff argues that Commerce should have adopted the profit information
of Ecos in determining a profit cap, despite the qualified opinion of the auditor.
Pl.’s Br. at 34–35. Commerce disregarded the financial statement of Ecos because
it contained a qualified audit. IDM at 22–23. The qualification was due to Ecos
not calculating its estimated liabilities for post-employment employee benefits in
accordance with Indonesian accounting standards. Id.; see also Zinus Indonesia’s
Constructed Value Profit Submission at Ex. 2. Plaintiff contends that Ecos’
employment benefit liability was understated and translated into an overstatement
of profits. Pl.’s Br. at 33–34; see also Zinus Indonesia’s Admin. Case Br. at 39–
40. Plaintiff argues that if Commerce had used the financial statements of Ecos, it
would have calculated a profit cap of 10.78 percent, which should represent the
ceiling for Indonesian profit rates. Pl.’s Br. at 34; see also Zinus Indonesia’s
Admin. Case Br. at 42–43. Plaintiff contends that Commerce’s calculation of an
18.36 percent profit rate using Emirates’ data was unreasonable. Pl.’s Br. at 34–
35.
The Court notes that Plaintiff has not provided record support for its
assertion that the 10.78 percent profit rate derived from Ecos’ data is more
representative of the Indonesian market than the 18.36 percent profit rate derived
Consol. Court No. 21-00277 Page 42
from Emirates’ data, beyond Plaintiff’s preference for Ecos’ financial report that
Commerce determined to be flawed. Commerce expressly disagreed with Zinus
Indonesia’s contention that the qualified opinion would not impact the calculation
of period costs, revenues, expenses, cash flow, profits, or selling expenses, and
concluded that because the opinion relates to future obligations, Ecos’ qualified
financial report could either increase or decrease the current costs of Ecos. IDM at
23. Even if Emirates’ profit rate was higher than those of the other companies
considered, Commerce identified reasonable grounds for determining that the
profit rates of the Indonesian companies did not represent merchandise in the same
general category of the subject merchandise.
Based on its review of the financial statements on the record, Commerce
determined that Emirates provided the best available option for the profit cap using
facts available. Id. at 25. The Court observes that Commerce chose between
several imperfect options. The Court does not review whether Commerce used the
best available information, but rather whether Commerce’s determination of the
best available information was reasonable. See Zhejiang DunAn Hetian Metal Co.
v. United States, 652 F.3d 1333, 1341 (Fed. Cir. 2011). Because Commerce
examined numerous financial statements on the record and explained its
determination sufficiently, Commerce has satisfied its statutory requirement to
apply a profit cap and has articulated a reasonable justification for using Emirates’
Consol. Court No. 21-00277 Page 43
profit data. The Court sustains Commerce’s use of Emirates’ Financial Statement
for the calculation of constructed value and the profit cap.
IV. Adjustment to Zinus U.S.’ Report of Sales Deductions
During the investigation, Brooklyn Bedding alleged that Zinus Indonesia
attempted to mask dumping of subject mattresses by shifting sales deductions to
non-subject merchandise sold through Best Price Mattress. See Brooklyn
Bedding’s Pre-Prelim. Cmts. at 2–3. Commerce determined that “questions remain
as to the commercial practicality of [Zinus Indonesia’s] reporting of its sales
practices with regard to commissions and certain other sales allowances” and that a
price adjustment to U.S. sales was appropriate. IDM at 13–14. Commerce
calculated the adjustment by combining the sales deductions, net of discounts, and
returns of Zinus U.S. and Best Price Mattress, and dividing the sum by the
combined gross sales of Zinus U.S. and Best Price Mattress. Id. at 15. Commerce
applied the resulting ratios to the gross unit price of all constructed export price
sales. Id. Plaintiff contends that Commerce’s application of the price adjustment
was unlawful and unsupported by the record. Pl.’s Br. at 36–46.
A. Facts Available
Plaintiff argues that Commerce unlawfully relied upon facts available in
reaching its determination to apply the adjustment to Zinus U.S.’ constructed
export price sales prices without satisfying the statutory prerequisites. Pl.’s Br. at
Consol. Court No. 21-00277 Page 44
36, 39–41. Plaintiff alleges that Commerce could not have relied on facts available
because Zinus Indonesia provided all requested information relating to sales
allowances, commissions, and deductions, and Commerce did not advise Zinus
Indonesia of any reporting deficiencies prior to the Final Determination. Id. at 38,
39–41.
Brooklyn Bedding and Defendant contend that Plaintiff claims incorrectly
that Commerce relied on facts available in its determination to apply the price
adjustment. Brooklyn Bedding’s Resp. at 25, 2930; Def.’s Resp. at 3132.
Brooklyn Bedding and Defendant assert that Commerce instead adjusted its
methodology. Brooklyn Bedding’s Resp. at 27, 3034; Def.’s Resp. at 3132.
Brooklyn Bedding argues that Commerce was not required to solicit additional
information because Commerce’s use of the phrase “questions remain” did not
relate to necessary information missing from the record. Brooklyn Bedding’s
Resp. at 2526, 2930.
Commerce may apply “facts available” if:
(1) necessary information is not available on the record, or
(2) an interested party or any other person—
(A) withholds information that has been requested by the
administering authority or the Commission under this subtitle,
(B) fails to provide such information by the deadlines for
submission of the information or in the form and manner
Consol. Court No. 21-00277 Page 45
requested, subject to subsections (c)(1) and (e) of section 1677m
of this title,
(C) significantly impedes a proceeding under this subtitle, or
(D) provides such information but the information cannot be
verified as provided in section 1677m(i) of this title.
19 U.S.C. § 1677e(a). The statute provides two paths through which Commerce
can rely on facts otherwise available. The first is when information is absent from
the administrative record, regardless of the reason for the absence. Id.
§ 1677e(a)(1). The second requires a party’s act or omission to negatively impact
the administrative record or impede the proceeding. Id. § 1677e(a)(2). Before
Commerce can rely on facts otherwise available, it must notify the party
responsible for submitting the relevant information of the deficiency and afford, to
the extent practicable, the party an opportunity to cure the deficiency. Id.
§ 1677m(d).
Plaintiff alleges that Commerce’s use of Best Price Mattress’ cost data
constituted a facts available approach to the assessment of the price adjustment.
Pl.’s Br. at 3941; Pl.’s Reply Br. Supp. R. 56.2 Mot. J. Agency R. (“Pl.’s Reply”)
at 2223, ECF Nos. 37, 38. Plaintiff has not identified what facts Commerce
relied upon that were not in the administrative record. Commerce issued
supplemental questionnaires following the Preliminary Determination that included
requests for information on commission costs for Zinus Indonesia, Zinus U.S., and
Consol. Court No. 21-00277 Page 46
Zinus Korea; sales and business records of Zinus U.S. and Best Price Mattress;
changes in commissions practices following the Mattresses from China
investigation; and tracking inventory and country of origin. See Zinus Indonesia’s
Post-Prelim. Supp. Questionnaire Resp. (Dec. 15, 2020), PR 256, CR 271;
Commerce’s Post-Prelim. Supp. Questionnaire in-lieu of Verification (Jan. 19,
2021), PR 262; CR 277. Commerce acknowledged that Zinus Indonesia fully
responded to the questionnaires but determined that “questions remain as to the
commercial practicality of Zinus’ reporting of its sales practices with regard to
commissions and certain other sales allowances.” IDM at 14; see also Zinus
Indonesia’s Post-Prelim. Supp. Questionnaire Resp. (Dec. 15, 2020), PR 256, CR
271; Zinus Indonesia’s Supp. Verification Questionnaire Resp. (Jan 28, 2021), PR
269; CR 27879, 281.
Commerce identified multiple elements of Zinus Indonesia’s responses that
it found inconsistent or suspicious:
First, with respect to [constructed export price] inventory sales, as noted
above in Comment 1, it is not clear how Zinus is able to identify which
of the non-subject mattresses it sold from inventory earned
commissions if it does not know the country of origin of the
merchandise sold out of inventory. In our Post-Preliminary
Supplemental Questionnaire, we asked Zinus to explain why the
company apparently changed its selling practices with respect to
commissions on U.S. sales of the subject merchandise though Zinus
U.S. since the time of the Mattresses from China investigation. In
response, Zinus stated that “Zinus U.S.’s customers to whom it paid a
commission in the China investigation simply did not purchase
Consol. Court No. 21-00277 Page 47
Indonesian mattresses during the [period of investigation], and thus did
not earn commissions under the terms of the agreements based on sales
of subject mattresses.” However, Zinus did not explain why some of
Zinus U.S.’s customers would agree to purchase mattresses of
Indonesian origin on which they would earn no commissions when they
could receive commissions from Zinus U.S. on mattresses
manufactured in other countries.
Moreover, in its response to our Post-Preliminary Supplemental
Questionnaire, Zinus also stated that Zinus U.S. sold subject
merchandise to corporate customers whose affiliates purchased
nonsubject merchandise from both Zinus U.S. and [Best Price Mattress]
and earned commissions on these sales. Furthermore, for a particular
customer, Zinus stated that, as of March 2019 (i.e., a month before
Zinus U.S. began purchasing mattresses from Zinus), it no longer paid
commissions to this customer and that Zinus began selling Indonesian
mattresses to this customer in November 2019. Zinus again did not
explain why it ceased paying commissions to this customer or whether
the sourcing of the mattresses had any influence on this decision.
The fact that [Best Price Mattress’] financial statements on the record
show disproportionate changes between [Best Price Mattress’] overall
sales deductions and its revenues between 2018 and 2019 raises further
questions about the reliability of Zinus’ reporting with respect to its
sales practices regarding the payment of commissions. For these
reasons, we find it appropriate to make an adjustment to the prices of
Zinus’ [constructed export price] sales to ensure that all sales
allowances and deductions are accounted for in the margin calculation.
IDM at 14. Commerce did not indicate that it was looking beyond the information
on the administrative record to make its determination. In fact, during the
investigation, Brooklyn Bedding argued for the application of facts otherwise
available before Commerce, Brooklyn Bedding’s Admin. Case Br. at 13–17; IDM
Consol. Court No. 21-00277 Page 48
10–11, but Commerce declined to adopt this proposal in the Final Determination.
IDM at 14–15.
The Court observes that Commerce’s reference to the phrase “questions
remain” did not relate to factual information missing from the record but to “the
commercial practicality” of Zinus Indonesia’s reporting. IDM at 14. Because no
factual information was absent from the record necessary for Commerce to reach
its determination to apply an adjustment, Commerce did not unlawfully apply facts
otherwise available and was not required to solicit additional information.
B. Reasonableness of Commerce’s Adjustment
Plaintiff contends that Commerce’s application of the price adjustment was
unsupported by the record. Plaintiff argues that Commerce was provided with all
of Zinus Indonesia’s requested sales and rebate information, but that Commerce
disregarded this evidence and concluded without support that Zinus U.S. shifted
expenses to Best Price Mattress. Pl.’s Br. at 4144. Plaintiff challenges
Commerce’s characterization that Best Price Mattress’ financial statements showed
disproportionate changes in sales deductions and revenue between 2018 and 2019
and that these changes suggested impropriety. Id. at 42. Plaintiff argues that the
sales deductions and revenue of Best Price Mattress were irrelevant to the matter
before Commerce and should not have been considered in applying the adjustment.
Id. Even if the information was relevant, Plaintiff contends that it does not call
Consol. Court No. 21-00277 Page 49
into question the reliability of Zinus Indonesia’s reporting. Id. at 43–44. Plaintiff
further contends that Commerce should alter its calculation to consider only
mattress-specific sales information and not company-wide sales information. Id. at
45–46.
Brooklyn Bedding and Defendant contend that Commerce’s determination
to apply a price adjustment was reasonable and supported by evidence, suggesting
that Zinus Indonesia shifted costs between Zinus U.S. and Best Price Mattress in
order to lower Zinus Indonesia’s dumping margin. Brooklyn Bedding’s Resp. at
27–36; Def.’s Resp. at 2730. Brooklyn Bedding argues that Commerce has broad
discretion in imposing adjustments and that Commerce acted reasonably based on
the record evidence. Brooklyn Bedding’s Resp. at 27, 3034. Defendant argues
that the record reflected suspicious changes in Zinus U.S. and Best Price Mattress’
commissions policy and payments between the Mattresses from China
investigation and the period of investigation. Def.’s Resp. at 2829. Defendant
asserts that Zinus Indonesia’s claimed inability to track country of origin is
inconsistent with Zinus Indonesia’s claim that commissions were only paid on non-
subject merchandise. Def.’s Resp. at 31. Brooklyn Bedding and Defendant also
contend that Plaintiff’s implication that its customers agreed to purchase subject
mattresses on which no commissions were offered when those customers could
have earned commissions on non-subject mattresses is commercially impractical.
Consol. Court No. 21-00277 Page 50
Id. at 2930; see Brooklyn Bedding’s Resp. at 27. Defendant further argues that
Commerce did not disregard certain sales data but determined that the data did not
reflect a proper allocation based on other record evidence. Def.’s Resp. at 3233.
Brooklyn Bedding and Defendant assert that Commerce acted within its
available discretion in using company-wide data, rather than mattress-specific data,
and that the use of company-wide data was reasonable. Brooklyn Bedding’s Resp.
at 3436; Def.’s Resp. at 33–34. Defendant asserts that Plaintiff’s suggestion to
use only mattress-specific sales is not practical because Commerce used the total
sales deductions and sales of both Zinus U.S. and Best Price Mattress in order to
put the companies in an equivalent position. Def.’s Resp. at 33. Defendant
contends that artificially reducing the denominator of the ratio to only Zinus U.S.’
sales of subject mattresses would distort the allocation. Id.
In calculating constructed export price, Commerce makes a deduction of
costs and expenses related to selling subject merchandise in the United States. 19
U.S.C. § 1677a(d)(1). The statute is silent as to how Commerce is to calculate
those expenses and Commerce has discretion in developing methodologies for
administering antidumping laws. See Vicentin S.A.I.C. v. United States, 44 CIT
__, __, 466 F. Supp. 3d 1227, 1238 (2020). The methodology adopted by
Commerce must be reasonable and not distortive, but Commerce need not exclude
all non-subject merchandise. United States Steel Corp. v. United States, 34 CIT
Consol. Court No. 21-00277 Page 51
252, 257, 712 F. Supp. 2d 1330, 1337 (2010); Acciai Speciali Terni S.p.A. v.
United States, 25 CIT 245, 277–78, 142 F. Supp. 2d 969, 1000–01 (2001); see also
19 C.F.R. § 351.401(g)(4).
The adjustment methodology adopted by Commerce combined Zinus U.S.’
and Best Price Mattress’ 2019 sales deductions, net of discounts, and returns, and
divided the sum by the companies’ combined gross sales. IDM at 15; Final Sales
Calculation Mem. at 5–6, Att. 2, PR 287, CR 296. The resulting ratio was applied
to all gross sales made by Zinus U.S. IDM at 15; Final Sales Calculation Mem. at
5–6. This methodology was designed to “tak[e] into consideration the sales
deduction experience of both [Zinus U.S. and Best Price Mattress] during the
[period of investigation].” IDM at 15.
Commerce agreed with Brooklyn Bedding that a price adjustment was
appropriate because evidence showed that Zinus Indonesia was:
masking dumping of Indonesian mattresses during the [period of
investigation] by shifting sales deductions that would have been
incurred by Zinus U.S. for sales of Indonesian mattresses to sales of
non-subject merchandise made through a different affiliated reseller,
[Best Price Mattress], the U.S. reseller at issue in the Mattresses from
China investigation.
IDM at 13; see also Brooklyn Bedding’s Post-Prelim. Cmts. (Nov. 19, 2020) at
79, PR 240, CR 265; Brooklyn Bedding’s Admin. Case Br. at 711. Commerce’s
Consol. Court No. 21-00277 Page 52
discussion of this issue focused on reported commissions paid by Zinus U.S. and
Best Price Mattress. IDM at 1314.
During the Mattresses from China investigation, commissions were paid on
the sales of mattresses to certain United States customers. See Brooklyn Bedding’s
Post-Prelim. Cmts. at 79; Zinus Indonesia’s Resp. Brooklyn Bedding’s Post-
Prelim. Cmts. (Nov. 30, 2020) at 46, PR 243, CR 266; see also Zinus Indonesia’s
Sub. Zinus Xiamen’s Proprietary Info. Mattresses from China Investigation (Oct.
14, 2020), PR 212, CR 22227, 247. During the period of investigation, only
Zinus Korea, Zinus U.S., and Keetsa made sales of subject mattresses to the United
States, though Best Price Mattress continued to sell other mattresses produced by
Zinus affiliates. Zinus Indonesia’s Section A Questionnaire Resp. at A-1A-2, A-
8A-9. Zinus Indonesia claimed that commissions were paid only on non-subject
mattresses during the period of investigation. See Zinus Indonesia’s Resp.
Brooklyn Bedding’s Post-Prelim. Cmts. at 56. In response to Commerce’s
request to explain the change in commissions policy between the Mattresses from
China investigation, which covered January through June 2018, and the period of
investigation, Zinus Indonesia stated that “Zinus U.S.’ customers to whom it paid a
commission in the China investigation simply did not purchase Indonesian
mattresses during the [period of investigation], and thus did not earn commissions
Consol. Court No. 21-00277 Page 53
under the terms of the agreements based on sales of subject mattresses.” IDM at
1314; Zinus Indonesia’s Post-Prelim. Supp. Questionnaire Resp. at 4. Commerce
also noted one instance in which Zinus U.S. ceased paying commissions without
explanation to a particular customer shortly before that customer began to purchase
subject mattresses. IDM at 14; Zinus Indonesia’s Post-Prelim. Supp.
Questionnaire Resp. at 5.
Corresponding to the apparent change in commissions policy, Commerce
observed disproportionate changes between Best Price Mattress’ sales deductions
and revenues between 2018 and 2019. IDM at 14. Commerce noted that these
discrepancies called into question Zinus Indonesia’s reporting with regard to Zinus
Indonesia’s sales practices. Id. (citing Zinus Indonesia’s Post-Prelim. Supp.
Questionnaire Resp. at 11). Plaintiff argues that Best Price Mattress’ sales
information for 2018 and 2019 was irrelevant to Commerce’s considerations
because Best Price Mattress was not involved in the manufacture and sale of the
subject mattresses. Pl.’s Br. at 42; Pl.’s Reply at 2123. Best Price Mattress, like
Zinus U.S., was wholly-owned by Zinus Korea and was involved in the selling of
mattresses to customers in the United States. See IDM at 13–14; Zinus
Indonesia’s Section A Questionnaire Resp. at A-9, Ex. A-3. Because Zinus U.S.
and Best Price Mattress shared a common parent and were involved in similar or
identical sales of mattresses in the United States under the direction of that parent,
Consol. Court No. 21-00277 Page 54
it was reasonable for Commerce to include Best Price Mattress in its consideration
of whether Zinus U.S. was shifting costs in order to mask dumping.
Plaintiff contends that even if Commerce’s consideration of Best Price
Mattress was appropriate, the record did not support Commerce’s conclusion that
costs were being shifted. Pl.’s Br. at 42–44. Commerce relied on information
contained in a chart titled “Total Sales of [Best Price Mattress] by Product Group”
included in Zinus Indonesia’s Post-Preliminary Supplemental Questionnaire
Response. IDM at 14; Zinus Indonesia’s Post-Prelim. Supp. Questionnaire Resp.
at 11. The chart reflected a sizable disparity between the change in total sales
claimed by Best Price Mattress between 2018 and 2019 and the change in sales
deductions during the same period. IDM at 14; see Zinus Indonesia’s Post-Prelim.
Supp. Questionnaire Resp. at 11. Citing to Zinus Indonesia’s Ministerial Error
Comments, Plaintiff alleges that Commerce mischaracterized the chart data in light
of other information on the record. Pl.’s Br. at 44 (citing Zinus Indonesia’s
Ministerial Error Cmts. (Mar. 30, 2021), PR 293, CR 299).
The record included two relevant sources of Best Price Mattress’ financial
information in 2018 and 2019: Best Price Mattress’ June 2018 Balance Sheet and
Best Price Mattress’ 2019 Financial Statement. Zinus Indonesia’s Supp. Section A
Questionnaire Resp. at Ex. SA-4c (“Best Price Mattress’ 2019 Financial
Statement”), PR 165, CR 154; Zinus Indonesia’s Sub. Zinus Xiamen’s Proprietary
Consol. Court No. 21-00277 Page 55
Info. Mattresses from China Investigation at Att. 1, Ex. A-10m (“Best Price
Mattress’ 2018 Balance Sheet”). Plaintiff contends that a review of these
documents showed that Best Price Mattress’ commission payments fell as a
percentage of both merchandise sales and total revenue between 2018 and 2019,
eliminating Commerce’s reasoning for applying the price adjustment. Pl.’s Br. at
4344; see also Zinus Indonesia’s Ministerial Error Cmts. at 1115.
The Court observes that Commerce’s determination regarding the
inconsistencies in Best Price Mattress’ reported sales deductions and revenues
between 2018 and 2019 was based on Zinus Indonesia’s submission in direct
response to Commerce’s request for information regarding the change in Best Price
Mattress’ sales between 2018 and 2019. See IDM at 14; Zinus Indonesia’s Post-
Prelim. Supp. Questionnaire Resp. at 1011. The Total Sales of Best Price
Mattress by Product Group chart included in Zinus Indonesia’s response to
Commerce showed a significant change between the period of investigation and
the prior year. IDM at 14; Zinus Indonesia’s Post-Prelim. Supp. Questionnaire
Resp. at 11. Commerce did not discuss the other sources of Best Price Mattress’
financial information available on the record, but those sources covered different
durations of time and treated “sales deductions” differently than the Total Sales of
Best Price Mattress by Product Group chart. Compare Zinus Indonesia’s Post-
Prelim. Supp. Questionnaire Resp. at 11, with Best Price Mattress’ 2018 Balance
Consol. Court No. 21-00277 Page 56
Sheet, and Best Price Mattress’ 2019 Financial Statement. Because Commerce’s
decision to apply a price adjustment was based on record information provided by
Zinus Indonesia in response to Commerce’s inquiry into Best Price Mattress’ 2018
and 2019 sales experience, the Court concludes that Commerce’s determination
was supported by substantial record evidence.
Plaintiff argues that if Commerce’s application of the price adjustment was
correct, it should still be required to revise its calculation to consider only mattress-
specific sales and not company-wide sales. Pl.’s Br. at 45–46. In Commerce’s
calculation, the adjustment to U.S. sales deduction was represented as the variable
DEDUCT and served as the denominator in the ratio applied to the gross unit price
of all sales made by Zinus U.S. Final Sales Calculation Mem. at 2, 6, Att. 2; see
IDM at 15. The calculation of the DEDUCT variable incorporated total sales by
Zinus U.S. and Best Price Mattress, including non-mattress merchandise. IDM at
15; Final Sales Calculation Mem. at Att. 2.
Commerce has discretion in the methodology it adopts in calculating
adjustments under 19 U.S.C. § 1677a(d) but the chosen methodology must be
reasonable. United States Steel Corp., 34 CIT at 257, 712 F. Supp. 2d at 1337.
Commerce made an adjustment with a goal of “ensur[ing] that all sales allowances
and deductions [were] accounted for in the margin calculation.” IDM at 14.
Commerce expressly rejected a methodology proposed by Brooklyn Bedding
Consol. Court No. 21-00277 Page 57
because it used the sales deductions of only one company. Id. at 14–15.
Commerce instead “calculated a different adjustment that [took] into consideration
the sales deduction experiences of both [Zinus U.S. and Best Price Mattress]
during the [period of investigation].” Id. at 15.
Selling expenses, such as commissions, are costs incurred by a company as a
whole and are typically not distinguishable to a singular product. In fact, though
the 2018 and 2019 financial statements provided by Zinus Indonesia for Best Price
Mattress treated commissions differently, neither separated commissions paid or
other sales expenses by type of merchandise. See Best Price Mattress’ 2018
Balance Sheet; Best Price Mattress’ 2019 Financial Statement; Zinus Indonesia’s
Post-Prelim. Supp. Questionnaire Resp. at Ex. SQ-2. Commerce’s methodology
used the combined sales deductions, net of discounts, and returns of Zinus U.S. and
Best Price Mattress as its numerator. IDM at 15. Reducing the denominator to
consider only sales related to mattresses would create a distortion to the allocation.
The Court concludes that Commerce’s inclusion of Zinus U.S.’ and Best Price
Mattress’ company-wide sales was reasonable and supported by substantial
evidence. The Court sustains Commerce’s price adjustment.
V. Zinus Korea’s Selling Expenses
Brooklyn Bedding contends that Commerce failed to consider record
evidence of Zinus Korea’s selling activities and argues for an adjustment to U.S.
Consol. Court No. 21-00277 Page 58
price to account for Zinus Korea’s selling expenses. Brooklyn Bedding’s Mem.
Points Law Fact Supp. R. 56.2 Mot. J. Agency R. (“Brooklyn Bedding’s Br.”) at
8–22, ECF No. 24, 25. Zinus Indonesia and Defendant argue that Commerce
properly limited the selling expenses attributable to Zinus Korea’s actual selling
expenses. Def.’s Resp. at 48–52; Pl.’s Resp. Br. Opp’n Brooklyn Bedding’s Mot.
J. Agency R. (“Pl.’s Resp.”) at 13–28, ECF Nos. 31, 32.
Commerce considered Zinus Korea to be an affiliate of Zinus Indonesia and
determined that Commerce’s practice is to not view price markups between
affiliates as commissions and to not deduct those adjustments from U.S. price.
IDM at 32; see also Oil Country Tubular Goods from Mexico, 64 Fed. Reg. 13,962(Dep’t of Commerce Mar. 23, 1999) (final results of antidumping duty admin.
review) and accompanying Issues and Decision Mem. at cmt. 4. Commerce
determined that it is Commerce’s practice to deduct only the actual expenses
incurred by the affiliate. IDM at 32. Commerce must consistently apply
methodologies across administrative reviews and provide a reasoned explanation
for deviating from its past practice. Polyethylene Retail Carrier Bag Comm. v.
United States, 29 CIT 1418, 1447 (2005).
Commerce stated that its calculation included three categories of selling
expenses for Zinus Korea: advertising expenses, rebates, and bank charges. IDM
at 32 n.213. Commerce explained that this information was solicited by
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Commerce and was considered “consistent with respect to [Zinus Korea’s]
reportedly limited role as an invoicing party in Zinus’ U.S. sales process.” Id. at
32; see Commerce’s Initial Section C Questionnaire at C-21, PR 67. Brooklyn
Bedding contends that Commerce failed to consider record evidence demonstrating
that Zinus Korea had more than a minimal role in the selling of subject mattresses.
Brooklyn Bedding’s Br. 12–16. Commerce’s determination is not supported by
substantial evidence when Commerce fails to consider and address record evidence
that clearly supports an alternative result. See SeAH Steel VINA Corp. v. United
States, 40 CIT __, __, 182 F. Supp. 3d 1316, 1336 (2016).
Commerce stated that Zinus Indonesia reported Zinus Korea’s actual
expenses incurred on behalf of U.S. sales in the U.S. sales database, but Commerce
did not cite any record evidence to support this statement. IDM at 32. Commerce
stated that Zinus Indonesia reported that Zinus Korea’s general and administrative
expenses were an element of Zinus Indonesia’s expenses, citing Zinus Indonesia’s
questionnaire response at SD-25 and exhibit SD-25. IDM at 32. Commerce
determined that “the reporting of such expenses [was] also consistent with respect
to Zinus [Korea]’s reportedly limited role as an invoicing party in Zinus’ U.S. sales
process,” without citing any evidence to support this statement. Id. Notably, the
Court observes that Commerce did not provide an explanation or cite record
Consol. Court No. 21-00277 Page 60
evidence to support its determination that Zinus Korea had a limited role as an
invoicing party in Zinus U.S.’ sales process.
Brooklyn Bedding contends that Commerce ignored potentially contrary
evidence on the record showing that Zinus Korea engaged in more significant
selling activities than the preparation of invoices. Brooklyn Bedding’s Br. at 16–
17. During the administrative proceeding, Brooklyn Bedding identified several
facts within the record supporting its contention. For example, Brooklyn Bedding
noted that Zinus Korea and Zinus U.S. shared a common senior official. Brooklyn
Bedding’s Admin. Case Br. at 23–38; see also Zinus Indonesia’s Section A
Questionnaire Resp. at Ex. A-6. In a chart of office locations provided to
Commerce, the functions of both Zinus Korea and Zinus U.S. were identified as
“Sale and Marketing.” Brooklyn Bedding’s Admin. Case Br. at 23; Zinus
Indonesia’s Section A Questionnaire Resp. at Ex. A-4. In its Section A
Questionnaire Resp., Zinus Indonesia advised Commerce that “[w]ith respect to
business relationships among the companies, [Zinus Korea] as the parent company,
and its wholly/majority owned subsidiaries, closely coordinate[d] with one another
to manage global manufacturing, operational, and sales activities.” Brooklyn
Bedding’s Admin. Case Br. at 24; Zinus Indonesia’s Section A Questionnaire
Resp. at Ex. A-11. Zinus Indonesia also asserted in a response to Commerce
“[a]gain, as Zinus has made clear throughout its responses . . . the Zinus entities
Consol. Court No. 21-00277 Page 61
actually making the U.S. sales to unaffiliated customers reported in the sales
database are [Zinus Korea] or Zinus U.S.” Brooklyn Bedding’s Admin. Case Br.
at 24; Zinus Indonesia’s 8/20 Rebuttal Cmts. at 5, PR 166, CR 158.
Brooklyn Bedding also suggests that record evidence showed that Zinus
Korea was directly responsible for handling sales to unaffiliated customers of
mattresses purchased from Zinus Indonesia. Brooklyn Bedding’s Br. at 14–16; see
Zinus Indonesia’s Section A Questionnaire Resp. at Exs. A-7b (purchase order
from customer to Zinus Korea), A-9 (master sales agreement); Zinus Indonesia’s
Supp. Section A Questionnaire Resp. at Ex. SA-8A (purchase order from customer
to Zinus Korea and purchase order from Zinus Korea to Zinus Indonesia).
Commerce acknowledged Brooklyn Bedding’s arguments in the final
determination but did not discuss or consider any of the identified facts or
arguments. See IDM at 30–32.
Commerce determined that Zinus Indonesia provided all requested
information relating to Zinus Korea’s selling expenses, but Commerce failed to
provide sufficient explanations or citations to record evidence to support
Commerce’s determination that Zinus Korea had a minimal role in the U.S. sales
of mattresses. Moreover, the Court agrees with Defendant-Intervenors that
Commerce did not discuss or consider record evidence suggesting that Zinus
Korea’s role in the sale of the subject mattress was potentially more significant
Consol. Court No. 21-00277 Page 62
than the mere processing of invoices. Because Commerce did not support its
statements with sufficient citations to record evidence and did not consider
potentially contrary record evidence concerning Zinus Korea’s selling activities,
the Court concludes that Commerce’s determinations regarding Zinus Korea’s
selling activities and adjustments to U.S. price to account for Zinus Korea’s selling
expenses were not supported by substantial evidence.
Brooklyn Bedding also argues that Commerce failed to apply appropriate
accounting rules to Zinus Korea’s financial information. Brooklyn Bedding’s Br.
at 17–19. Commerce normally calculates costs and expenses using the records of
the party if those records are maintained in accordance with GAAP. See 19 U.S.C.
§ 1677b(f)(1); Husteel Co. v. United States, 45 CIT __, __, 520 F. Supp. 3d 1296,
1306 (2021). Commerce may depart from this practice if it determines that the
GAAP-compliant records do not “reasonably reflect the costs associated with the
production and sale of the merchandise.” 19 U.S.C. § 1677b(f)(1); Husteel Co., 45
CIT at __, 520 F. Supp. 3d at 1306.
The Korean-version International Financial Reporting Standards (“K-IFRS”)
Part 1115 provides:
An entity is an agent if the entity’s performance obligation is to arrange
for the provision of the specified good or service by another party. . . .
When (or as) an entity that is an agent satisfies a performance
obligation, the entity recognises revenue in the amount of any fee or
commission to which it expects to be entitled in exchange for arranging
Consol. Court No. 21-00277 Page 63
for the specified goods or services to be provided by the other party.
An entity’s fee or commission might be the net amount of consideration
that the entity retains after paying the other party the consideration
received in exchange for the goods or services to be provided by that
party.
K-IFRS, Part 1115; Zinus Indonesia’s Section C Supp. Resp. at SC2-5, PR 199,
CR 213. Brooklyn Bedding contends that under K-IFRS, Zinus Korea qualified as
an agent and that Commerce was obligated to include commissions received for its
role in selling the subject mattresses in calculating selling expenses. Brooklyn
Bedding’s Br. at 18–19. Specifically, Brooklyn Bedding contends that any markup
to the price of mattresses sold by Zinus Korea that would normally be excluded
from Zinus Korea’s actual expenses should be included. Id.
Commerce did not address Brooklyn Bedding’s arguments on the
application of K-IFRS to Zinus Korea’s selling expenses and it is unclear how
Commerce accounted for costs considered “commissions and fees” in Zinus
Korea’s reporting. Because Commerce did not provide any explanation, the Court
remands this issue to Commerce for further consideration of record evidence or
explanation regarding the extent of Zinus Korea’s involvement in the sale of
subject mattresses and the application of K-IFRS.
VI. GTA Import Data Pursuant to the Transactions Disregarded Rule
When calculating cost of production for purposes of normal value,
Commerce may adjust prices between affiliates under the “transactions
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disregarded” rule, which permits prices of inputs from affiliated suppliers “if, in
the case of any element of value required to be considered, the amount
representing that element does not fairly reflect the amount usually reflected in
sales of merchandise under consideration in the market under consideration.” 19
U.S.C. § 1677b(f)(2). Commerce’s practice is to adjust the price of the transferred
input or service to reflect the market price. See Rebar Trade Action Coal. v.
United States, 42 CIT __, __, 337 F. Supp. 3d 1251, 1259 (2018). In order to
determine “the amount usually reflected in sales of merchandise under
consideration in the market under consideration,” Commerce looks to any
purchases of the same inputs or services by the respondent from an unaffiliated
supplier and any sales by the supplier of the same inputs or services to an
unaffiliated buyer. See Unicatch Indus. Co. v. United States, 45 CIT __, __, 539 F.
Supp. 3d 1229, 124849 (2021); Diamond Sawblades Mfrs. Coal. v. United States,
38 CIT __, __, 2014 WL 5463307 at *2 n.4 (Oct. 29, 2014). If such transactions
are not available, the statute provides that Commerce may consider “information
available as to what the amount would have been if the transaction had occurred
between persons who are not affiliated.” 19 U.S.C. § 1677b(f)(2).
During the period of investigation, Zinus Indonesia received inputs from
affiliated suppliers in China. IDM at 16–17; see Final Cost Calculation Mem. at
Att. 1a. The majority of these inputs were received only from affiliated suppliers.
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IDM at 16–17; see Final Cost Calculation Mem. at Att. 1a; Zinus Indonesia’s
Supp. Section D Resp. at Ex. SD-8 (schedule of inputs purchased from affiliated
suppliers by item code). In the Preliminary Determination, for those inputs that
Zinus Indonesia received from both affiliated and unaffiliated suppliers,
Commerce analyzed the prices paid for the same inputs from the unaffiliated
suppliers. See Prelim. Cost Calculation Mem. at 1–2. Commerce continued this
approach in the Final Determination. See Final Cost Calculation Mem. at 1–2.
Commerce was faced with a challenge in analyzing the remaining
transactions that were only sourced from affiliates in China. Because China is a
non-market economy, Commerce stated that it was not able to consider the
affiliated suppliers’ cost of production. IDM at 17. In order to make a
determination based on information available, Commerce solicited surrogate input
price information. Id. Commerce determined that GTA import data was the most
reliable information for Commerce’s purposes because it was “readily available
and reasonably specific to the voluminous number of affiliated [non-market
economy] inputs.” Id. Commerce requested GTA data from countries considered
economically similar to China: Brazil, Malaysia, Mexico, Romania, Russia, and
Turkey. Id. At Commerce’s request, Zinus Indonesia also placed GTA data for
Indonesia on the record. Id.; Zinus Indonesia’s Section D Supp. Resp. at SD6–
SD13, Exs. SD-8, SD-9, PR 196, CR 204–05. In the Preliminary Determination,
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Commerce calculated and applied an average of the market prices of GTA import
data for Brazil, Malaysia, Mexico, Romania, Russia, and Turkey. IDM at 17–18;
Prelim. Cost Calculation Mem. at 1–2. In the Final Determination, Commerce
changed its approach and considered only GTA data from Indonesia. IDM at 18.
Commerce explained its change in approach by citing 19 U.S.C.
§ 1677b(f)(2), which states that “[a] transaction . . . between affiliated persons may
be disregarded if . . . the amount representing that element does not fairly reflect
the amount usually reflected in sales of merchandise under consideration in the
market under consideration.” Id. (quoting 19 U.S.C. § 1677b(f)(2)). Commerce
interpreted this language to direct it to consider only the market under
investigation—Indonesia—when testing an affiliated supplier’s price against a
market price. IDM at 18. Brooklyn Bedding argues that Commerce’s
determination under the Transactions Disregarded Rule is not in accordance with
the law and not supported by substantial evidence. Brooklyn Bedding’s Br. at 27–
37.
Brooklyn Bedding draws a distinction between the two sentences of 19
U.S.C. § 1677b(f)(2). Id. The first sentence reads “[a] transaction directly or
indirectly between affiliated persons may be disregarded if, in the case of any
element of value required to be considered, the amount representing that element
does not fairly reflect the amount usually reflected in sales of merchandise under
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consideration in the market under consideration.” 19 U.S.C. § 1677b(f)(2)
(emphasis added). The second sentence reads: “[i]f a transaction is disregarded
under the preceding sentence and no other transactions are available for
consideration, the determination of the amount shall be based on the information
available as to what the amount would have been if the transaction had occurred
between persons who are not affiliated.” Id. (emphasis added). Brooklyn Bedding
argues that the first sentence relates to situations in which the considered inputs
were provided by both affiliated and unaffiliated suppliers and “instructs
Commerce to use the values of ‘sales of merchandise under consideration in the
market under consideration’ when such data is available on the record.” Brooklyn
Bedding’s Br. at 29. The second sentence concerns situations in which unaffiliated
transactions are not available and “instructs Commerce to determine a market price
based on ‘the information available as to what the amount would have been if the
transaction had occurred between persons who are not affiliated.’” Id. Brooklyn
Bedding contends that the phrase “in the market under consideration” used in the
first sentence should not be read to limit the “information available” under the
second sentence. Id. at 30.
Brooklyn Bedding argues that applying Commerce’s limitation to only the
country under investigation was inconsistent with prior investigations in which
Commerce adopted a broader reading of “information available,” see Heavy
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Walled Rectangular Welded Carbon Steel Pipes and Tubes from the Republic of
Korea, 86 Fed. Reg. 35,060 (Dep’t of Commerce July 1, 2021) (final results of
antidumping duty admin. review: 2018–2019) and accompanying Issues and
Decisions Mem. at cmt. 7 (interpreting “information available” to include “an
affiliate’s total cost of providing the service [or input]”), and in which it considered
costs of production for affiliates located in a different country from the respondent,
see Stainless Steel Sheet and Strip in Coils from Mexico, 70 Fed. Reg. 3677 (Dep’t
of Commerce Jan. 26, 2005) (final results of antidumping duty admin. review) and
accompanying Issues and Decisions Mem. at cmt. 14 (using cost of production of a
United States affiliate to estimate market value transactions with a Mexican
respondent in the context of the major input rule, 19 U.S.C. § 1677b(f)(3)).
Brooklyn Bedding’s Br. at 30. Brooklyn Bedding contends further that
Commerce’s approach in this case was inconsistent with its practice of relying on a
supplier’s cost of production when unaffiliated transaction data was not available.
Id. at 31–32 (citing Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from France, Germany, Italy, Japan, Singapore, and the United
Kingdom, 62 Fed. Reg. 2081 (Dep’t of Commerce Jan. 15, 1997) (final results of
antidumping duty admin. review) and accompanying Issues and Decisions Mem. at
sec. d, cmt. 1).
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Plaintiff and Defendant disagree with Brooklyn Bedding’s proposed
bifurcation of the statutory language. Pl.’s Resp. at 32; Def.’s Resp. at 57–59.
Plaintiff argues for an interpretation of the statute in which the first and second
sentences are read together to allow “Commerce to craft a surrogate price based on
information available from the same market, in the absence of identical inputs
purchased in that market from unaffiliated suppliers.” Pl.’s Resp. at 32. Plaintiff
contends “that the statute directs [Commerce] to assess whether the input
purchases reflected market value in Indonesia.” Id. at 32–33. Plaintiff asserts that
Commerce has previously read 19 U.S.C. § 1677b(f)(2) to create a preference for
the price that a respondent paid to an unaffiliated supplier. Id. at 33 (citing Certain
Cut-To-Length Carbon-Quality Steel Plate Products from Korea, 64 Fed. Reg.
73,196 (Dep’t of Commerce Dec. 29, 1999) (notice of final determination of sales
at less than fair value); Low Enriched Uranium from France, 70 Fed. Reg. 54,359(Dep’t of Commerce Sept. 14, 2005) (notice of final results of antidumping duty
admin. review) and accompanying Issues and Decisions Mem. at cmt. 3).
Defendant argues that reading “in the market under consideration” into the second
sentence of the provision allows Commerce to determine the amounts paid by the
manufacturer of the subject merchandise and furthers the goal of the provision to
allow Commerce to determine the manufacturing and cost experience of the
respondent to determine if dumping has occurred. Def.’s Resp. at 58–59.
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This court has considered the Transactions Disregarded Rule as follows:
Commerce has expressed a preference for how to establish market
value. First, it looks at whether respondent purchased the input from
an unaffiliated supplier; if unavailable, it looks to sales of the input
between an affiliate supplier and an unaffiliated party, and as a final
resort, to a reasonable source for market value available on the record.
Rebar Trade Action Coal. v. United States, 43 CIT __, __, 398 F. Supp. 3d 1359,
1372 (2019) (internal citation omitted). The Court has specified that when
resorting to a “reasonable source for market value,” if “a market price is not
available, Commerce has developed a consistent and predictable approach whereby
it may use an affiliate’s total cost of providing the [good or service] as information
available for a market price.” Best Mattresses Int’l Co. Ltd. v. United States
(“Best Mattresses”), 47 CIT __,__ , 2023 WL 2198803, at *21 (2023) (quoting
Heavy Walled Rectangular Welded Carbon Steel Pipes and Tubes from the
Republic of Korea, 86 Fed. Reg. 35,060 and accompanying Issues and Decisions
Mem. at cmt. 24). The Court has explained that the phrase “market under
consideration” is purposefully broad to allow Commerce to choose a market that
allows for a “reasonable source for market value” to confirm that the affiliated
prices reflect arm’s length transactions. Id. at __ , 2023 WL 2198803, at *21
(citing Rebar Trade Action Coal., 43 CIT at __, 398 F. Supp. 3d at 1372 and
Diamond Sawblades Mfrs. Coal., 38 CIT at __, 2014 WL 5463307, at *2 n.2).
Here, Commerce determined that “the statute indicates that the item being tested
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should reflect a market price in the country under consideration, which is Indonesia
in the instant case.” IDM at 18. The Court concludes that Commerce’s
interpretation of “market under consideration” as only the market under
investigation is unreasonably narrow and not in accordance with the law. Similar
to Best Mattresses, in which the Court noted that the “holding does not prevent
Commerce from selecting Cambodia as the ‘market under consideration’ for
purposes of the Transactions Disregarded Rule on remand,” Best Mattresses, 47
CIT at__ , 2023 WL 2198803, at *21, here Commerce might choose Indonesia as
the “market under consideration” on remand after the agency explains its
reasoning.
The Court concludes that Commerce’s determination regarding the
Transactions Disregarded Rule was not in accordance with the law or supported by
substantial evidence, and remands for Commerce to provide further explanation or
to reconsider whether Commerce’s selection of Indonesia constituted a reasonable
method to confirm that the affiliated prices reflect arm’s length transactions under
19 U.S.C. § 1677b(f)(2).
VII. Sales Reconciliation
Brooklyn Bedding argues that Commerce erred in not requiring Zinus
Indonesia to submit a sales reconciliation of its reported U.S. sales and its audited
financial statement. Brooklyn Bedding’s Br. at 33–42. Plaintiff and Defendant
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argue that Brooklyn Bedding waived this argument by failing to raise it in the
administrative case brief. Pl.’s Resp. at 38; Def.’s Resp. at 61–62.
Commerce issued to Zinus Indonesia its standard antidumping questionnaire,
which requested that Zinus Indonesia provide “a reconciliation of the sales
reported in your U.S. sales databases to the total sales listed in your financial
statements (profit and loss/income statement).” Commerce’s Initial Section C
Questionnaire at C-4. In response, Zinus Indonesia provided only reconciliations
for Zinus Korea and Zinus U.S. Zinus Indonesia’s Section C Questionnaire Resp.
at C-7, Exs. C-2A, C-2B, PR 119–20, CR 117–20. During the investigation,
Brooklyn Bedding raised the lack of Zinus Indonesia’s U.S. sales reconciliation
multiple times. Brooklyn Bedding’s Deficiency Cmts. re Zinus Section C
Questionnaire Resp. at 3–5, 26, PR 147, CR 130–31; Brooklyn Bedding’s Resp.
Zinus Cmts. at 4–5, PR 170, CR 161; Brooklyn Bedding’s Post-Prelim. Cmts. at
11–13. Brooklyn Bedding did not raise this argument in its administrative case
brief. See Brooklyn Bedding’s Admin. Case Br.
A party is generally prohibited from raising arguments with the Court that
were not first raised with the administrative agency. See Rhone Poulenc, Inc. v.
United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990); Dillinger France S.A. v.
United States, 42 CIT __, __, 350 F. Supp. 3d 1349, 1371–72 (2018); see also 28
U.S.C. § 2637(d) (“In any civil action not specified in this section, the Court of
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International Trade shall, where appropriate, require the exhaustion of
administrative remedies.”). Commerce’s regulations provide parties to an
antidumping investigation an opportunity to raise arguments through
administrative case briefs. 19 C.F.R. § 351.309. The regulation is clear that
administrative case briefs “must present all arguments that continue in the
submitter's view to be relevant to [Commerce’s] final determination or final
results, including any arguments presented before the date of publication of the
preliminary determination or preliminary results.” Id. § 351.309(c)(2).
In its Reply Brief filed in this case on appeal, Brooklyn Bedding argues that
the futility exception should excuse its failure to exhaust administrative remedies.
Brooklyn Bedding’s Reply Br. (“Brooklyn Bedding’s Reply”) at 16–20, ECF No.
35, 36. The futility exception is narrow and “requires a party to demonstrate that
exhaustion would require it to go through obviously useless motions in order to
preserve its rights.” Zhongce Rubber Grp. Co. v. United States, 42 CIT __, __,
352 F. Supp. 3d 1276, 1279 (2018). When additional comment would serve no
purpose, exhaustion is not required. Brooklyn Bedding raised the issue of Zinus
Indonesia’s U.S. sales reconciliation multiple times throughout the administrative
process and Commerce was put on notice of the issue. Brooklyn Bedding also
notes that briefing before Commerce was completed after verification and 30 days
before the statutory deadline for Commerce’s final determination. Brooklyn
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Bedding’s Reply at 16, 19. Nonetheless, Brooklyn Bedding could have raised the
issue in its administrative case brief, the Court is not convinced that doing so
would have been a fruitless endeavor, and the Court concludes that Brooklyn
Bedding has not met the stringent requirements to apply the narrow exception to
administrative exhaustion. Because Brooklyn Bedding failed to raise its argument
in its administrative case brief, Brooklyn Bedding’s arguments are waived in this
Court by the failure to exhaust its administrative remedies.
Defendant contends that even if the issue were not waived, the argument is
unconvincing. Def.’s Resp. at 6263. Brooklyn Bedding argues that in not
requiring Zinus Indonesia to submit a U.S. sales reconciliation, Commerce broke
from a “longstanding practice” of requiring named parties to submit a
reconciliation of U.S. sales. Brooklyn Bedding’s Br. at 37. It is true that
Commerce must provide consistent treatment across investigations or provide an
explanation for deviating from established practice. See Save Domestic Oil, Inc. v.
United States, 357 F.3d 1278, 1283–84 (Fed. Cir. 2004). Commerce routinely
requests sales reconciliations in its antidumping questionnaire. See Commerce’s
Initial Section C Questionnaire at C-4. Brooklyn Bedding has not demonstrated
that Commerce has an established practice of requiring a named party to provide a
reconciliation when alternate reconciliations are provided by affiliates responsible
for selling the subject merchandise in the United States. In this case, Zinus
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Indonesia advised Commerce that sales of the subject mattresses within the United
States were performed by Zinus Korea and Zinus U.S. See Zinus Indonesia’s
Section C Questionnaire Resp. at C-7; see also Zinus Indonesia’s 8/20 Rebuttal
Cmts. at 5. Zinus Indonesia provided U.S. sales reconciliations for these entities.
Zinus Indonesia’s Section C Questionnaire Resp. at Exs. C-2A, C-2B. These
reconciliations provided the information requested by Commerce, “a reconciliation
of the sales reported in your U.S. sales databases to the total sales listed in your
financial statements (profit and loss/income statement).” See Commerce’s Initial
Section C Questionnaire at C-4. Zinus Indonesia notes that in the Mattresses from
China investigation, similar to this case, Commerce was satisfied with only
reconciliations from Zinus Korea and Zinus U.S. and did not require a separate
reconciliation from the named respondent. Pl.’s Resp. at 39; see also Zinus
Indonesia’s Sub. Zinus Xiamen’s Proprietary Info. Mattresses from China
Investigation.
Aside from the administrative exhaustion issue, the Court is not convinced
that Commerce deviated from its established practice in not requiring Zinus
Indonesia to provide a financial reconciliation. Commerce was reasonable in not
requiring Zinus Indonesia to provide a reconciliation of its U.S. sales when
reconciliations were provided for Zinus Korea and Zinus U.S. that supplied the
information sought by Commerce. Nonetheless, the Court holds that Commerce’s
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determination to not require Zinus Indonesia to file a U.S. sales reconciliation is
not properly before the Court due to Brooklyn Bedding’s waiver of the issue
through its failure to exhaust its administrative remedies.
CONCLUSION
Accordingly, it is hereby
ORDERED that Plaintiff’s motion for judgment on the agency record is
granted in part and remanded in part; and it is further
ORDERED that Brooklyn Bedding’s motion for judgment on the agency
record is granted in part and remanded in part; and it is further
ORDERED that the Court sustains Commerce’s use of a quarterly ratios
methodology to determine the quantity of subject mattresses sold; and it is further
ORDERED that the Court sustains Commerce’s determination to use
Emirates Sleep Systems Private’s financial information in calculating constructed
value; and it is further
ORDERED that the Court sustains Commerce’s calculation and application
of a profit cap; and it is further
ORDERED that the Court sustains Commerce’s adjustment to reported
sales deductions of Zinus U.S.; and it is further
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ORDERED that the Final Determination is remanded to Commerce to
reconsider consistent with this opinion the inclusion of mattresses in-transit from
Indonesia at the end of the period of investigation; and it is further
ORDERED that the Final Determination is remanded to Commerce to
reconsider consistent with this opinion Commerce’s adjustments to the selling
expenses of Zinus Korea to account for actual selling expenses; and it is further
ORDERED that the Final Determination is remanded to Commerce to
reconsider consistent with this opinion Commerce’s application of the Transactions
Disregarded Rule; and it is further
ORDERED that that this case shall proceed according to the following
schedule:
(1) Commerce shall file its remand determination on or before May 19,
2023;
(2) Commerce shall file the administrative record on or before June 2, 2023;
(3) Comments in opposition to the remand determination shall be filed on or
before July 18, 2023;
Consol. Court No. 21-00277 Page 78
(4) Comments in support of the remand determination shall be filed on or
before August 17, 2023; and
(5) The joint appendix shall be filed on or before August 31, 2023.
/s/ Jennifer Choe-Groves
Jennifer Choe-Groves, Judge
Dated: March 20, 2023
New York, New York