RESTANI, Judge:
This action challenges the Department of Commerce's ("Commerce") final results rendered in the fourth antidumping ("AD") duty review of certain wooden bedroom furniture ("WBF") from the People's Republic of China ("PRC"). See Wooden Bedroom Furniture From the People's Republic of China: Final Results and Final Rescission in Part, 75 Fed.Reg. 50,992, 50,992 (Dep't Commerce Aug. 18, 2010) ("Final Results"). Plaintiffs Dongguan Sunrise Furniture Co., Ltd., Taicang Sunrise Wood Industry Co., Ltd., Taicang
In January 2005, Commerce published an AD duty order on WBF from the PRC. Notice of Amended Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order: Wooden Bedroom Furniture From the People's Republic of China, 70 Fed.Reg. 329, 329 (Dep't Commerce Jan. 4, 2005). In January 2009, AFMC and others requested an administrative review of certain companies exporting WBF to the United States between January 1, 2008 and December 31, 2008, thereby triggering the fourth administrative review of WBF.
On April 20 and 21, 2009, Commerce issued the antidumping questionnaire to the three mandatory respondents and made it available to voluntary respondents, including Fairmont. Id. During April and May 2009, AFMC and all other interested parties withdrew their request for review for two of the mandatory respondents, Huafeng and Yihua, and several other companies. Id. As a result, Commerce named Fairmont as an additional mandatory respondent on May 29, 2009. Id. Aosen withdrew from participation in the review, leaving Fairmont as the only cooperating mandatory respondent. Id. Fairmont responded to Commerce's questionnaires and supplemental questionnaires between April 2009 and January 2010. Id.; Fairmont Br. 44 n. 155. In October and November 2009, Commerce verified Fairmont's responses and found that Fairmont had failed to report sales of more than twenty in-scope product models. Id. at 5954; Preliminary Analysis Memorandum (Feb. 1, 2010), C.R. 356 at 30-32.
In the February 2010 Preliminary Results, Commerce calculated the wage rate using the now invalidated regression based methodology. Preliminary Results, 75 Fed.Reg. at 5962; see 19 C.F.R. § 351.408(c)(3), abrogated by Dorbest Ltd. v. United States, 604 F.3d 1363, 1377 (Fed. Cir.2010) ("Dorbest IV"). In response to Dorbest IV, Commerce, in this proceeding, placed additional labor data on the record and requested comments from interested parties. Labor Wage Rate (July 14, 2010), P.R. 916 at 1. AFMC, Coaster, and Fairmont submitted timely comments. See P.R. 919, 920, 921, 925, 926.
In the Final Results, Commerce revised the surrogate wage rate, the brokerage and handling surrogate value, and used the financial statements of various Philippine companies to calculate surrogate values. Final Results, 75 Fed.Reg. at 50,993-94; Issues and Decision Memorandum for the Final Results of the Administrative Review of the Antidumping Duty Order on Wooden Bedroom Furniture from the People's Republic of China, A-570-890, POR 1/1/08-12/31/08, at 72 (Aug. 11, 2010) ("Issues and Decision Memorandum"), available at http://ia.ita.doc.gov/frn/summary/PRC/2010-20499-1.pdf (last visited June 5, 2012). Commerce assigned Fairmont a separate rate of 43.23%, which included the rate of 216.01% applicable to the PRC-wide entity for the unreported sales as adverse facts available ("AFA"). Final Results, 75 Fed.Reg. at 50,998.
The court has jurisdiction pursuant to 28 U.S.C. § 1581(c). The court will not uphold Commerce's final determination in an AD review if it is "unsupported by substantial evidence on the record, or otherwise not in accordance with law...." 19 U.S.C. § 1516a(b)(1)(B)(i).
Fairmont argues its partial AFA rate is contrary to law because six products are not subject merchandise, Fairmont acted to the best of its ability, and the AFA rate applied is aberrational and not a reasonably accurate estimate of Fairmont's actual dumping margin. Fairmont Br. 36-58.
Fairmont argues that six of the twenty-three products are not subject merchandise and thus, Commerce never requested information relating to these products and the information cannot be considered missing from the record.
Commerce may use facts otherwise available if "an interested party ... withholds information that has been requested by the administering authority or the Commission under this subtitle...." 19 U.S.C. § 1677e(a)(2). Commerce's Section C Questionnaire requested Fairmont to report sales data for all of its subject merchandise. Questionnaire Resp. (June 15, 2009), Confidential App. to Def.'s Resp. to Pls. Rule 56.2 Mots. ("Def.'s Confidential App.") Tab 2 at 2. Thus, whether Fairmont withheld or failed to provide requested information relating to these six products depends on whether the products are subject merchandise.
Fairmont argues the dresser and custom cabinet products
Commerce found the products were subject merchandise because the customer expectations, end-uses, and manner of display were consistent with WBF. Issues and Decision Memorandum for the Final Results of the Administrative Review of the Antidumping Duty Order on Wooden Bedroom Furniture from the People's Republic of China: Whether Certain Unreported Sales Determined to be Subject Merchandise in the Preliminary Results are Subject Merchandise, A-570-890, POR: 1/1/08-12/31/08, at 4-5 (Aug. 11, 2010), C.R. 388 ("Confidential Issues and Decision Memorandum"). Commerce relied on the products' size, functionality,
Here, the shape and functionality of the products suggests that they are dressers.
Fairmont argues that interpreting the scope language to include any subject merchandise that is combined with non-subject merchandise elements improperly expands the scope. Pl. Fairmont Reply Brief ("Fairmont Reply") 26-27. Fairmont argues section 6 of the scope should be read as the exclusive type of combination units and that if section 7 is interpreted to include any combination unit as long as some part is subject merchandise, then section 6 has no meaning. Id. at 27. Defendants argue that section 7 includes combination dresser units, even if they are not specified in the scope, as long as the combination units are otherwise consistent with the scope language. Def.'s Br. 15-16; The AFMC's Resp. in Opp'n to Resp'ts' 56.2 Mots. for J. on the Agency R. 5-6 ("AFMC's Opp. Br.").
Commerce's finding that the products are subject merchandise is supported by substantial evidence on the record. The scope's reliance on "typical" descriptions of products and the inclusion of any WBF consistent with the scope language demonstrates that a product may be subject merchandise even if it does not match the listed scope items. Final Results, 75 Fed.Reg. at 50,955 (including within the scope "other bedroom furniture consistent with the above list"). Thus, Commerce
Fairmont argues the nightstand back panel is an unfinished back panel that is excluded from the scope because it is a part that lacks the essential character of WBF. Fairmont Br. 41-43.
Commerce's decision that the back panel is subject merchandise is supported by substantial evidence. Although Fairmont argues the back panel is a separate product that can be used for a variety of furniture pieces, there is no evidence on the record to show that the back panel was used as anything other than part of a nightstand.
Even if Fairmont is correct that the back panel should be considered a spare part (and not a component), the back panel would be subject merchandise. Parts are included in the scope if they "possess the essential character of wooden bedroom furniture in an unassembled, incomplete, or unfinished form."
Fairmont argues the wall-mounted product lacks the essential character of WBF because it is mounted to the wall and does not stand with any legs, and therefore, cannot be a night "stand." Fairmont Br. 43. Fairmont argues the product is excluded under the scope language excluding "end tables, occasional tables, [and] wall systems" because it is a wall system. Id. at 43 & n. 151 (quoting Final Results, 75 Fed.Reg. at 50,995). Commerce found
Commerce's finding that the product is consistent with a nightstand is supported by substantial evidence. The scope includes "night tables, night stands" and "other bedroom furniture consistent with the above list." Final Results, 75 Fed. Reg. at 50,994-95. Although it lacks legs, the product is consistent with the description and use of a bedside table.
Fairmont disputes that it failed to act to the best of its ability when responding to Commerce's questionnaires and supplemental questionnaires. Fairmont Br. 44-45. Commerce found Fairmont failed to act to the best of its ability because it failed to report all of its sales and insisted that certain sales were out of scope, as discussed above, despite repeated questions from Commerce. Preliminary Results, 75 Fed.Reg. at 5960; Issues and Decision Memorandum 123-25. Fairmont's argument lacks merit.
Commerce is permitted to use adverse inferences when selecting from among the facts available if it finds that a party "has failed to cooperate by not acting to the best of its ability to comply with a request for information...." 19 U.S.C. § 1677e(b). Commerce must do more than merely find the party has failed to provide the information. Nippon Steel Corp. v. United States, 337 F.3d 1373, 1382 (Fed.Cir.2003). Commerce must make an objective finding that a reasonable importer would have known the requested information should be in its records. Id. at 1382-83. Commerce must also make a subjective finding that the lack of cooperation is a result of "(a) failing to keep and maintain all required records, or (b) failing to put forth its maximum efforts to investigate and obtain the requested information from its records." Id. Moreover,
Id. at 1383.
Here, Commerce found that given the explicit instructions of the Section C Questionnaire, Fairmont should have been aware of the need to provide a complete sales listing of its subject merchandise. Issues and Decision Memorandum 122. The Section C Questionnaire notified Fairmont that other companies had failed to report all sales of subject merchandise and asked Fairmont to confirm that it properly reported all of its sales of subject merchandise. Questionnaire Resp., Def.'s Confidential App. Tab 2 at 2. Fairmont confirmed that it had reported all sales of subject merchandise. Id. Thus, Fairmont knew that it should keep records of its sales and report all of its sales of subject merchandise.
Commerce's subjective finding that Fairmont failed to put forth its maximum effort because it performed a perfunctory identification of in-scope sales is also supported by the record. Fairmont does not dispute that it directed an individual clerk
Moreover, there was nothing unusual or truncated about the review process that could excuse Fairmont's failure to accurately report its sales. Fairmont asked to be reviewed and had access to Commerce's antidumping questionnaire on April 21, 2009. Preliminary Results, 75 Fed.Reg. at 5,953. Fairmont requested and received an extension to file its Section C/D questionnaire response and filed its response on June 15, 2009, two months after the questionnaire was issued. Issues and Decision Memorandum 122; see Questionnaire Resp., Def.'s Confidential App. Tab 2 at 1. Commerce then extended the deadline for the Preliminary Results from October 5, 2009 to February 1, 2010. Wooden Bedroom Furniture from the People's Republic of China: Extension of the Time Limit for the Preliminary Results of the Antidumping Duty Administrative Review, 74 Fed.Reg. 47,919, 47,919 (Dep't Commerce Sept. 18, 2009). Commerce conducted verification between October 26, 2009 and November 11, 2009, approximately six months after Fairmont first received the antidumping questionnaires. Preliminary Results, 75 Fed.Reg. at 5954. Fairmont never informed Commerce that it had difficulty responding to the questionnaires and Fairmont, particularly as a volunteer, should have been prepared to provide a full sales listing on June 15, 2009. At this time, Fairmont had only received one supplemental questionnaire on June 10, 2009. See Fairmont Br. 44 n. 155 (listing all supplemental questionnaires and number of questions). Thus, the multiple supplemental questionnaires and questions facing Fairmont in June through October cannot excuse its failure to provide an accurate sales listing on June 15.
Fairmont argues that even if it did not act to the best of its ability, Commerce can not apply adverse inferences because Commerce did not identify the deficiency in its response or give Fairmont an opportunity to remedy it. Fairmont Br. 47-48. Defendant argues that Commerce notified Fairmont of the deficiency in the June 26 and July 30 supplemental questionnaires. Def.'s Br. 22-25. Fairmont's argument lacks merit.
If Commerce determines that a response to a request for information does not comply with the request, Commerce "shall promptly inform the person submitting the response of the nature of the deficiency...." 19 U.S.C. § 1677m(d). Once Commerce identifies a deficient submission, it must, "to the extent practicable, provide that person with an opportunity to remedy or explain the deficiency in light of the time limits established for the completion of investigations or reviews under this subtitle." Id.
Here, the record shows that Commerce did not identify the deficiencies in Fairmont's sales list until verification. In the June 26 supplemental questionnaire Commerce simply stated that the products "may" be in scope. Questionnaire Resp. Letter, Def.'s Confidential App. Tab 3 at 2. Commerce did not identify the thirteen products not listed either by product code or description in the June 26 or July 30 supplemental questionnaires. Moreover, the July 30 supplemental questionnaire merely requested a clarification of a prior response by Fairmont, and did not suggest that Fairmont's response was faulty. Supplemental Questionnaire Resp., Def.'s Confidential App. Tab 6 at 2 ¶ 94. Because the evidence does not suggest that Commerce was aware of specific deficiencies earlier, the court analyzes whether Commerce was required to provide Fairmont an opportunity to remedy the deficient submissions found at verification.
Commerce is required to provide an importer the opportunity to remedy a deficient submission only "to the extent practicable" in light of the time limits for reviews. 19 U.S.C. § 1677m(d). If the submission is not received within the applicable time limits, Commerce may disregard the submission if the information cannot be verified or the party has not acted to the best of its ability in providing the information. Id. § 1677m(d)(2).
Here, in response to the deficiencies found at verification, Fairmont offered to submit the missing sales and FOP information relating to the unreported products. Fairmont Cmts. (Nov. 23, 2009), P.R. 749 at 9. Commerce declined to accept this information, stating that it lacked time to consider the information, issue any supplemental questions, and verify the information. Issues and Decision Memorandum 115. Commerce also noted that allowing a party to wait until Commerce discovers an omission would allow the party to game the system. Id.
Fairmont argues Commerce's reason for declining to consider information relating to the unreported sales is unsupported by substantial evidence because Commerce continued to accept new information, issue supplemental questionnaires, and conduct verification with another respondent through March 2010 and accepted new information. Fairmont Br. 50-51. The other respondent to which Fairmont refers,
Fairmont argues the partial AFA rate of 216.01% is not a reasonably accurate estimate of Fairmont's actual dumping margin, albeit with a built in increase, because the selected AFA rate (1) is aberrational and (2) was not adjusted based on verified record evidence. Fairmont Br. 52-56. Fairmont also challenges the rate on procedural grounds, arguing that using a rate calculated from a different respondent, as opposed to Fairmont's own data, was a change of policy without justification and Fairmont did not have an opportunity to comment on whether the other respondent was similar to Fairmont. Id. at 57. Defendants argue the AFA rate is reasonable and Fairmont had notice of the 216.01% rate and the opportunity to raise concerns in its case brief. Def.'s Br. 32; AFMC Opp. Br. 25-26. Fairmont's argument has merit.
When Commerce applies an AFA rate that was calculated for a different respondent in a prior review, as it did here, Commerce must corroborate that rate with secondary information. See 19 U.S.C. § 1677e(c). The corroboration requirement tempers Commerce's otherwise wide discretion in selecting AFA rates by "block[ing] any temptation by Commerce to overreach reality in seeking to maximize deterrence." F.lli De Cecco Di Filippo Fara S. Martino S.p.A. v. United States,
Here, Commerce found the selected partial AFA rate was reliable because it is a company-specific rate calculated in the 2004-2005 new shipper review of Shenyang Kunyu Wood Industry Co., Ltd. ("Kunyu") for WBF. Issues and Decision Memorandum 130; See Wooden Bedroom Furniture from the People's Republic of China: Preliminary Results of 2004-2005 Semi-Annual New Shipper Reviews and Notice of Final Rescission of One New Shipper Review, 71 Fed.Reg. 38,373, 38,378 (Dep't Commerce July 6, 2006). Commerce must do more however, than merely proceed with the assumption that prior calculated margins are ipso facto reliable. See Lifestyle Enter. v. United States, 844 F.Supp.2d 1283, 1287-89, n. 5 (CIT 2012) (citing Ferro Union, Inc. v. United States, 23 CIT 178, 203, 44 F.Supp.2d 1310, 1334 (1999)).
Commerce found the Kunyu rate was relevant to Fairmont because a percentage of Fairmont's sales were dumped at margins above 216%.
This is not a total AFA case where the record is devoid of all sales data, making it difficult for Commerce to determine a relevant and reliable rate for a respondent. Nor is it a case where the record contains demonstrably untrustworthy information. In these types of cases, Commerce has greater discretion in attempting to determine a relevant and reliable rate. See 19 U.S.C. § 1677e(c) (requiring Commerce to corroborate "to the extent practicable"). Here, Commerce has obtained and verified approximately 97% of Fairmont's sales data and found a rate for these sales which was in the range of 34%. Commerce has not provided record evidence to justify the difference between the rate for the reported sales and 216.01% for the unreported sales. Fairmont placed a great deal of relevant information on the record and there is no evidence that it omitted the relatively small amount of sales data for strategic reasons.
Coaster argues Commerce erred in not using wage data exclusively from the Philippines, as opposed to multiple countries, or if multiple country data are used, that Commerce erred in not using industry-specific data as opposed to economy-wide (i.e. manufacturing-sector) data.
Coaster argues that Commerce should have used labor data from the primary surrogate country,
In determining normal value for non-market economies, Commerce must use "the best available information regarding the values of such factors in a market economy country or countries considered to be appropriate by the administering authority." 19 U.S.C. § 1677b(c)(1)(B) (emphasis added). When valuing the factors of production, Commerce "shall utilize, to the extent possible, the prices or costs of factors of production in one or more market economy countries...." 19 U.S.C. § 1677b(c)(4) (emphasis added). Thus, the statute permits the use of multi-country data if Commerce finds this is possible and appropriate.
In determining that multi-country data were preferable to data from a single country, Commerce found that because there is significant variation among the wage rates of comparable market economies, reliance on wage data from a single country was unreliable and arbitrary. Issues and Decision Memorandum 152. Commerce explained that "[t]here are many socio-economic, political and institutional factors, such as labor laws and policies unrelated to the size or strength of an economy, that cause significant variances in wage levels between countries." Id. at 153.
Coaster argues Commerce erred in using aggregated manufacturing sector data, instead of data from a category more specific to the furniture industry.
The statute requires that Commerce value the factors of production, to the extent possible, by using data from economically comparable countries that are significant producers of comparable merchandise. See 19 U.S.C. § 1677b(c)(4). The statute is silent as to how the wage rate should be calculated, but Commerce must be reasonable in calculating the wage rate from the best available information under the framework of the statute. See id. § 1677b(c)(1).
In response to multiple remands during the Dorbest litigation, Commerce developed a multi-step process to calculate the wage rate. The first three steps of the Dorbest methodology do not differ from the procedures Commerce used in the instant proceedings.
Commerce attempted to justify its use of economy-wide data by stating it did not have time to adequately research this data. Coaster submitted industry-specific wage data from the Philippines in January 2010, seven months before the Final Results, and Coaster submitted industry-specific Philippines and multi-country wage data on July 19, 2010, which was the deadline set by Commerce for comments on its interim methodology. Fairmont Cmts. (Jan. 25, 2010), P.R. 803 at Ex. 14; Coaster Wage Rate Cmts. (July 19, 2010), P.R. 919 at Attach. 1; Fairmont's Wage Rate Cmts., P.R. 921 at 67-87. Commerce's argument that it did not have time to research the industry-specific data is unpersuasive
Commerce also identified several distortions in the data submitted by Fairmont. These distortions, however, do not adequately explain why Fairmont's data were not the best available information because similar distortions exist in the data used by Commerce and industry-specific data were far closer to the "comparable merchandise" data required by the statute. See 19 U.S.C. § 1677b(c)(4)(B).
Finally, Commerce found that the use of industry-specific data would result in narrowing the number of countries with available information from twenty-two to thirteen and that more data were preferable to less. Id. Although the number of countries is a relevant consideration, Commerce has not adequately explained why the decrease in countries trumps the advantages of using industry-specific data, especially in view of its shift to single country data. In the 2010 and 2011 Dorbest Remand Results Commerce relied on data from three and five countries respectively, which suggests data from thirteen countries is not too small a data set from which to calculate an accurate wage rate. Thus, the court remands for Commerce to calculate a wage rate using industry-specific data, or provide substantial evidence for why manufacturing data is preferable to a more industry-specific category, given the statutory requirement to value the factors of production based on data related to comparable merchandise.
AFMC argues that Commerce should have used relative differences in GNI
In calculating the wage rate, Commerce must use data from countries "at a level of economic development comparable to that of the nonmarket economy country...." 19 U.S.C. § 1677b(c)(4)(A). It is Commerce's practice to rely on GNI when determining whether a country is economically comparable. See Dorbest V, 755 F.Supp.2d at 1295.
Here, Commerce selected bookend countries that were evenly distributed around China's GNI, with twenty-seven countries below China's GNI and twenty-five countries above China's GNI. Labor Wage Rate, P.R. 916 at 4. Although AFMC has pointed out an alternative method for determining which countries are economically comparable that would result in a more preferable rate for AFMC, it has not shown that Commerce's methodology or the use of absolute differences is unreasonable or unsupported.
AFMC argues Commerce should not have used data from India in calculating the surrogate value for labor because the Indian data are distorted. AFMC Br. 28. Specifically, AFMC argues the data reported by India to the ILO include only those workers earning less than 1,600 rupees per month, or 6,500 rupees per month after 2005, as required by the Indian Payment of Wages Act. Id. at 28-29. AFMC argues that the data points that exceeded the reporting cap may be errors, or may include wages plus gratuities and bonuses, and that there is no explanation for why reported Indian wages nearly tripled from 2005 to 2006 other than the change in the cap in 2005. Id. at 29.
Commerce found the record evidence was insufficient to establish that the survey data were distorted by the wage cap. Issues and Decision Memorandum 159. Commerce noted that for some years before 2005, India reported a national average wage rate for manufacturing or an
Commerce's explanations are speculative and not persuasive. India information is used in numerous cases and Commerce should be able to determine if actual wage data are being reported or whether the data are artificially capped. A statute that requires a cap would taint the data. Commerce should explain whether there is such a statute and what effect it has and make a judgment accordingly without guessing as to what might explain the discrepancies.
Fairmont argues Commerce improperly relied on certain financial statements and double counted items when calculating financial ratios. Fairmont Br. 2-13. Fairmont's argument lacks merit.
Fairmont argues that Commerce should not rely on the financial statements of Diretso Design Furnitures, Inc. ("Diretso"), APY Cane, Inc. ("APY Cane"), and Interior Crafts of the Islands, Inc. ("Interior Crafts") because they are not producers of comparable merchandise.
In valuing the factors of production, Commerce must rely on the best available information from the surrogate country. 19 U.S.C. § 1677b(c)(1)(B). Commerce stated that in selecting the best available information, it uses data based on the "specificity, contemporaneity, and quality of the data." Issues and Decision Memorandum 72. Commerce selected financial statements based on whether the company:
Id. at 83-84.
Fairmont argues that Diretso is an interior design contractor and not a furniture producer. Fairmont Br. 7. Fairmont argues Diretso's production machinery and equipment costs are too small for a furniture producer, that the 98% depreciation of machinery and equipment is too high for an operating manufacturer, and that 70% of labor costs are devoted to design services.
Commerce found Diretso was a producer of WBF because its website advertises "what appear to be wooden beds and bedside tables" and described the company as a manufacturer. Issues and Decision Memorandum 95.
Commerce's finding is supported by substantial evidence on the record. Although Fairmont notes that Diretso's promotional materials state that it furnishes the houses of upper class society, Fairmont ignores the preceding statement that Diretso's "principal activity is to manufacturing [sic] furniture and furniture accessories." AFMC Cmts. (Sept. 11, 2009), P.R. 677 at Attach. 13 at 135. Additionally, although Fairmont notes that promotional materials state that "Diretso's new take in home furnishings made them a popular name in the interior design industry," Fairmont
Fairmont argues APY Cane is not a furniture producer because its raw material costs were under 10% of its sales income and its work-in-process and finished goods inventories had virtually no movement in 2008. Fairmont Br. 8. Fairmont also argues APY Cane was in financial collapse during 2008, demonstrated by a 55% drop in sales, and should therefore not be used. Id. at 8-9.
Commerce's conclusion to use APY Cane's financial statement is supported by substantial evidence on the record. APY Cane's financial statement describes its primary current business operation as manufacturing and exporting furniture and accessories. AFMC Surrogate Value Submission (March 4, 2010), P.R. 826 at 90. Commerce found that APY Cane had the type of costs indicative of a manufacturer, such as work-in-process and finished goods balances, raw materials costs, depreciation costs only for machinery and transportation, and no depreciation for an office building. Issues and Decision Memorandum 100-01. Although there was a 55% drop in sales in 2008, Commerce explained this should be viewed in the context of the international recession, and despite the drop, APY Cane had a profit in 2008. Id. at 100. Although APY Cane's statements showed low raw material costs and little movement of work-in-process and finished goods, there is an expense line for freight and handling. AFMC Surrogate Value Submission, P.R. 826 at Attach. 5-A at 97. Thus, there is not sufficient contrary evidence here to render Commerce's selection unsupported by substantial evidence.
Fairmont argues that Interior Crafts is a retailer and not a producer. Fairmont Br. 10. Fairmont relies on a statement in Interior Crafts' financial statement that states its "primary purpose is to engage in manufacturing, selling of furniture & fixtures to distribute whether wholesale or retail household furniture made of wood." Id. (emphasis in original) (quoting Interior Crafts' financial statement, P.R. 826 at 230). Fairmont argues this statement should be interpreted to mean Interior Crafts is a retailer. Id. Fairmont also argues that Interior Crafts cannot be a manufacturer because its assets are largely comprised of "Leasehold Improvements," which Fairmont states are not related to production activities. Id. at 10-11 & n. 40.
Although ambiguous, it was reasonable for Commerce to interpret the above sentence in Interior Crafts' financial statement as demonstrating that it is a manufacturer of furniture and that it distributes to both wholesalers and retailers. Commerce also relied on Interior Crafts' financial statement, its website, its product line of bedroom furniture, and its brochures to support its finding that Interior Crafts is a manufacturer. Issues and Decision Memorandum 108-09. Commerce also noted that Interior Crafts' financial statement included beginning and ending work-in-process balances and that the depreciation of machinery and tools were 60% of total depreciation costs. Id. at 109. Fairmont has not disputed this evidence and thus, there is substantial evidence on the record
Fairmont argues Commerce should have included Tequesta's financial statement in its calculation of surrogate financial ratios. Fairmont Br. 12. Commerce excluded Tequesta's statement because of the fifty-five manifests of shipments to the United States, only fourteen identify the Philippines as the country of origin and thus, Commerce found that Tequesta is primarily a reseller. Issues and Decision Memorandum 86. Fairmont argues the country of origin is irrelevant because it is not known what percentage of sales are represented by these fifty-five manifests, Tequesta's financial statements say they are a manufacturer, and because some of the entries have a different country of origin but are marked "Made in Philippines." Fairmont Br. 13. Because only some of the shipments are made in the Philippines or designate the Philippines as the country of origin, Commerce was justified in excluding Tequesta's financial statement.
AFMC argues that the financial statement of Insular Rattan should not have been used because it is missing a line item for income taxes and because the auditor was the same auditor on a financial statement that Commerce rejected in the third administrative review. AFMC Br. 5-6, 11-14. Defendant argues that it is Commerce's policy to reject incomplete financial statements only when the statement is missing critical information. Def.'s Br. 37-38.
Here, Commerce stated that it does not rely on taxes in calculating financial ratios and thus, the lack of a tax line alone does not render the statement unreliable. Issues and Decision Memorandum 88. Commerce also concluded that the lack of a tax line did not prevent it from finding that there were no subsidies because "[t]here is a large amount of information on the record regarding Insular Rattan and Petitioners have not cited to any evidence of subsidies received by Insular Rattan." Id.
The court agrees with AFMC that the missing tax line is a relevant consideration that must be explained by Commerce. Although Commerce does not use taxes directly when calculating surrogate values, Commerce sometimes relies on notes to the tax line to determine whether the entity received disqualifying subsidies. See id. at 83-84 (selecting financial statements based on whether company receives subsidies).
Fairmont argues that four companies' financial statements should not be used (Las Palmas Furniture, Inc. ("Las Palmas"), Clear Export, Heritage Muebles Mirabile Export Inc. ("Heritage"), and Interior Crafts) because these companies include certain raw materials in their factory supplies or indirect material line items, which Commerce improperly classifies as overhead, resulting in double counting.
The court finds Fairmont's evidence insufficient to establish that any of the listed items are included both in FOP and overhead. First, the financial statements cited are not for the same companies used by Commerce, and thus, cannot establish double counting.
Fairmont argues Commerce double counted by including third-party services received by Fairmont, such as subcontractor's materials, labor, and energy, in factory overhead. Fairmont Br. 6. Defendant argues Commerce merely followed its practice and there is no evidence that the third party expenses included subcontractor costs. Def.'s Br. 46.
Commerce's decision to classify "Third Party Services" as factory overhead is reasonable and supported by the evidence. Commerce stated that, consistent with its practice, because Berbenwood's financial statements account for direct labor, materials, and energy as separate line items, the third-party expenses are classified as overhead costs. Issues and Decision Memorandum 92. There is no explanation on Berbenwood's financial statement to demonstrate what is included in the "Third Party services" line and Fairmont presents no evidence to suggest that this line item includes labor costs. AFMC Rebuttal Cmts. (Jan. 14, 2010), P.R. 793 at 28. Thus, Fairmont has not shown that third-party costs are double counted.
Fairmont argues that because it did not incur any selling costs when selling to its non-Chinese affiliate, the line items relating to selling costs should be excluded from the financial statements of Diretso, APY Cane, Heritage, Interior Crafts, Clear Export, and Coast Pacific Manufacturing Corp. ("Coast Pacific"). Fairmont Br. 5.
Commerce stated it did not exclude selling costs because it is Commerce's long-standing practice to not attempt to adjust financial statements on a line-by-line basis, as this may lead to unintended distortions in the data rather than achieving greater accuracy. Issues and Decision Memorandum 77. Fairmont has not demonstrated that Commerce's policy is unlawful. Thus, it was reasonable for Commerce to decline to adjust the financial statements to match the exact expenses of Fairmont. See Magnesium Corp. of Am. v. United States, 166 F.3d 1364, 1372 (Fed.Cir.1999) (noting statutory mandate directing Commerce to use "to the extent possible" prices in comparable market economies did not require an item-by-item accounting in calculating factory overhead).
Fairmont argues Clear Export's "Import and Export Expenses," "Insurance" and "Fumigation" line items should not be classified as SG & A because these costs are already counted elsewhere in Commerce's calculations. Fairmont Br. 10. Commerce found there was nothing on the record to show that the "import and export expenses" had already been included elsewhere in the normal value calculation, and thus, classified this line item as overhead. Issues and Decision Memorandum 104. Fairmont does not provide any citation to demonstrate how these particular line items are already included in Commerce's calculations as either freight costs or brokerage and handling expenses. Thus, Fairmont has not provided sufficient evidence to show that Commerce has double counted in its calculations.
Fairmont argues that Commerce's use of data from the World Bank's Doing Business in the Philippines: Trading Across Borders ("World Bank report") to calculate a surrogate value for brokerage and handling is contrary to law.
Here, Commerce considered the deficiencies in the data, as raised by Fairmont, and reasonably concluded that the deficiencies did not outweigh the benefits of relying on the World Bank data. See Issues and Decision Memorandum 48, 50. Commerce found the World Bank data were reliable because the data were published publicly, the data were based on six sources, instead of the three sources proposed by Fairmont, the World Bank is a reputable source of data, and the data were contemporaneous, specific to the costs in question, and tax exclusive. Issues and Decision Memorandum 47-52. In contrast, the data proposed by Fairmont to calculate brokerage costs were not published publicly, included one invoice and two price quotes,
Additionally, the flaws raised by Fairmont relating to the World Bank data are not sufficient to render the data unreliable. Fairmont argues the World Bank report is unreliable because in a different proceeding, Commerce found that the verified rates of three Indian companies were far lower than the rates reported in the World Bank data for India. Fairmont Br. 14 & n. 57. Fairmont argues that because the same methodology is used in all World Bank Doing Business reports, the court should conclude that the methodology of the World Bank Doing Business in the Philippines report is invalid. Id. at 14-15. The fact that three Indian companies report different data than the World Bank report, which aggregates data from multiple companies, does not cast significant doubt on the World Bank report's methodology.
Fairmont also argues that the surrogate value here differs substantially from surrogate values calculated for other Chinese companies. As a result, Fairmont argues that Commerce's calculation is unlawful because it is inconsistent and unpredictable. Fairmont notes that Commerce has previously calculated surrogate brokerage and handling values for Chinese companies of $0.0083/kg, $0.0039/kg, and $0.0074/kg, as opposed to Fairmont's value of $0.0297/kg.
Fairmont also argues the World Bank data include costs that are not incurred by Fairmont, and thus, it would be contrary to law to apply those costs to Fairmont. Fairmont Br. 16-17. Fairmont notes that it had lower costs related to obtaining letters of credit and document services than the costs used in the World Bank report. Id. This argument is unavailing as Fairmont did not raise this argument before the agency. See Issues and Decision Memorandum 44-47. Regardless, the court does not find this sufficient to require a remand or recalculation because Commerce is not required to calculate an exact surrogate value for each respondent. See Nation Ford Chem. Co. v. United States, 166 F.3d 1373, 1377 (Fed.Cir.1999) (surrogate value process is "difficult and necessarily imprecise") (citing Sigma Corp. v. United States, 117 F.3d 1401, 1407 (Fed.Cir.1997)). Instead, Commerce must use the best available information to estimate what a Chinese company's costs would be in a market economy. Fairmont's argument that it, as a non-market participant, did not incur some costs included in the World Bank report does not suggest that the World Bank report is not the best available information.
Finally, Fairmont argues that the surrogate value is not accurate because, even though it is a per-cubic foot value, it was calculated using a twenty-foot container and then applied to Fairmont's forty-foot containers. Fairmont Br. 17-18. Fairmont argues that Commerce's assumption that the per-cubic costs do not change depending on the size of the container is erroneous because the predominate portion of brokerage and handling is professional services, which will not change based on the size of the container. Id. at 18. Fairmont argues that converting the total cost of a twenty-foot container into a per-cubic foot ratio creates a distorted value because brokerage costs are based on value, not volume, and thus, do not increase proportionally with the number of cubic feet. Id. at 18-19. This argument fails because Fairmont has not presented evidence that brokerage costs are based on value, not volume, and do not increase proportionally with the number of cubic feet.
Thus, although World Bank Doing Business in Philippines data may not be perfect, Fairmont has not shown that the World Bank data are not the best available information when compared to Fairmont's
Fairmont argues that Commerce erred by treating freight revenue as an offset to freight expenses, capping freight revenue at freight expenses.
In calculating export price and constructed export price ("U.S. price"), Commerce, consistent with § 1677a(c)(2)(A), deducts respondent's freight expenses from that price. 19 U.S.C. § 1677a(c)(2)(A).
Commerce's approach is reasonable under the statute. It accords with the statutory language, allows Commerce to accurately account for freight expenses that a respondent actually incurred, and ensures that a respondent's U.S. price is not overstated by profit earned from freight services.
Section 1677a(c)(2)(A) does not specify whether the "costs, charges, or expenses" incident to moving the subject merchandise should be calculated based on net or gross expenses. Given the silent statute, Commerce may apply its own reasonable methodology. United States v. Eurodif S.A., 555 U.S. 305, 316, 129 S.Ct. 878, 172 L.Ed.2d 679 (2009); see Fla. Citrus Mut. v. United States, 550 F.3d 1105, 1110 (Fed. Cir.2008) (applying the same reasoning to the term "import duties," which is also found in § 1677a(c)(2)(A)). Commerce has elected to adjust for net expenses. Issues and Decision Memorandum 69 ("[T]he Department now consistently applies a policy of treating freight revenue as an offset to freight costs and capping freight revenue by the amount of corresponding freight costs."). Commerce's net revenue
Fairmont also takes issue with Commerce's more general statutory construction, contending that because freight revenue is integral to the price of its subject merchandise, it should be included in U.S. price under § 1677a(a) or (b) rather than accounted for as an adjustment under § 1677a(c)(2)(A). Fairmont Br. 20. This argument overlooks the statutory requirement to adjust export price or constructed export price to permit an "apples-to-apples" comparison. In determining export or constructed export price, 19 U.S.C. § 1677a requires Commerce to make adjustments in order to properly assess the amount by which normal value exceeds the United States price. 19 U.S.C. §§ 1673, 1677a(c)-(d). Adjustments are necessary because the reported prices "represent prices in different markets affected by a variety of differences in the chain of commerce" and must be adjusted to "reconstruct the price at a specific, `common' point ..., so that value can be fairly compared on an equivalent basis." SKF USA Inc. v. INA Walzlager Schaeffler KG, 180 F.3d 1370, 1373 (Fed.Cir.1999) (quoting Smith-Corona Grp. v. United States, 713 F.2d 1568, 1572-73 (Fed.Cir.1983)). Thus, it was reasonable for Commerce not to consider freight revenue as part of the price of the subject merchandise.
The record also casts doubt on Fairmont's claim that freight revenue is inherently part of the price at which the subject merchandise is sold. The record shows that Fairmont charges separately for freight and classifies freight revenue under its own accounting code. Exhibit 6, C.R. 423 at Ex. 6 at 2, 4 ("Inland Freight" charged separately from price of merchandise on invoice); Verification Report of Fairmont Designs (Jan. 4, 2010), P.R. 773 at 6 (listing Fairmont's accounting code for "freight revenue"). Fairmont further argues that with regard to its hospitality sales, merchandise price and freight revenue are intertwined because Fairmont is able to adjust the price of the goods and freight revenue based on the customer's need. Fairmont Br. 26-27. Record evidence indicates that Fairmont rarely made this type of adjustment and that when Fairmont calculated the amount to charge for freight, it was largely concerned with freight costs. Verification Report of Fairmont Designs, P.R. 773 at 17.
Fairmont argues that freight payments are "reasonably attributable" to the subject merchandise and thus should be considered adjustments to U.S. price under 19 C.F.R. § 351.401(c). Fairmont Br. 24; Fairmont Reply 16. This claim lacks merit.
Section 351.401(c) directs Commerce to use a price in the calculation of export or constructed export price which is "net of any price adjustment, as defined in § 351.102(b), that is reasonably attributable to the subject merchandise." 19 C.F.R. § 351.401(c). Price adjustments are defined as "any change in the price charged for subject merchandise or the foreign like product, such as discounts, rebates and post-sale price adjustments, that are reflected in the purchaser's net outlay." 19 C.F.R. § 351.102(b)(38). Although the definition contains the phrase "such as" and is therefore illustrative, the purpose of the price adjustment provision is to account for any changes to the actual starting price of the subject merchandise and not to reflect any related expenses. Luoyang Bearing Corp. v. United States, 28 CIT 733, 770, 347 F.Supp.2d 1326, 1360 (2004). Thus, it was reasonable for Commerce to interpret the definition of price adjustment to not include the related freight expense.
Fairmont argues that its freight revenue is the same as selling products with cost and freight ("C & F") or delivered term sales.
Section 1677a(c)(1) lists the upward adjustments that are to be added to export price when not included in that price. This list does not include freight revenue. 19 U.S.C. § 1677a(c)(1). Thus, it is reasonable for Commerce to read the list of upward adjustments in § 1677a(c)(1) as an exclusive list that does not include freight revenue.
Further, as discussed above, record evidence indicates that Fairmont's freight revenue is separate and unique from the revenue generated from the sale of its goods. Fairmont's approach of charging separately for freight demonstrates separate strategies for collecting payment for freight and the goods sold. Unlike Fairmont's separate treatment of freight revenue, C & F prices are designed to link transportation costs with the price of the subject merchandise. Issues and Decision Memorandum 70. The purchaser makes a single payment and the exporter pays all expenses incurred in transporting the subject merchandise to the United States. The distinction between the two methods of pricing is sufficient to warrant different treatment by Commerce. If Commerce were to ignore this distinction and integrate freight revenue into U.S. price, Fairmont would be able to use profits from the
In the Preliminary Results, because Fairmont stated that freight revenue was provided based on the amount of U.S. inland freight only, Commerce capped freight revenue by the amount of U.S. inland transportation costs. Issues and Decision Memorandum 69. Fairmont argues that if Commerce continues to find that freight revenue should be capped at freight expense, then for those Hospitality Division sales for which Fairmont reported U.S. inland freight expenses in the ocean freight field, Commerce should include an estimate of the amount of the purported imbedded inland freight expenses. Fairmont Br. 30. This claim lacks merit.
Fairmont alleges that its motivation for imbedding inland freight expenses in the ocean freight field, and reporting zero in the U.S. inland freight column, was a Commerce questionnaire instruction that stated:
Antidumping Questionnaire (April 21, 2009), P.R. 445 at C-21.
Fairmont argues that by doing as Commerce requested, it has been left with an erroneous freight expense cap of zero for certain hospitality sales in which it incurred inland freight costs. Fairmont Br. 32. Although, Fairmont has put forth two methods for estimating the U.S. land freight expenses reported in the ocean freight field, Fairmont's methodology requires Commerce to estimate U.S. land freight. Id. at 32. Fairmont has failed to show that any information exists on the record to accurately disaggregate U.S. inland freight amounts from ocean freight amounts and thus, it was reasonable for Commerce to decline to make such an estimation. See 19 C.F.R. § 351.401(b)(1) ("The interested party that is in possession of the relevant information has the burden of establishing to the satisfaction of the Secretary the amount and nature of a particular adjustment....").
Fairmont asserts that Commerce failed to provide an opportunity to comment upon the decision to cap the reported freight revenue because Commerce did not specifically notify Fairmont of the issue until the Preliminary Results and because Commerce rejected factual information submitted by Fairmont. Fairmont Br. 32-33. This claim lacks merit.
Commerce has established department precedent for its practice of capping freight revenue. Issues and Decision Memorandum 68; see Issues and Decision Memorandum for the Antidumping Duty Administrative Review of Polyethylene Retail Carrier Bags from the People's Republic of China, A-570-886, AR: 8/01/06-07/31/07, at 12-14 (Feb. 4, 2009), available at http://ia.ita.doc.gov/frn/summary/PRC/E9-2930-1.pdf (last visited June 5, 2012). It was foreseeable that Commerce would continue to follow this practice in the present case.
Fairmont's rebuttal information was untimely new factual information. Pursuant to 19 C.F.R. § 351.301(b)(2), Commerce established a regulatory deadline for the submission of new factual information.
AFMC argues that Commerce abused its discretion by refusing to develop the record with necessary information from respondents and by requiring AFMC to supply conclusive proof of circumvention. AFMC Br. 16, 24. AFMC relies on the increase in shipments by Aosen,
The application of combination rates is left to the discretion of Commerce. See 19 C.F.R. § 351.107(b)(1) (Commerce "may establish" combination cash deposit rates for exporters and its supplying producers); see also Tung Mung Dev. Co. v. United States, 354 F.3d 1371, 1381 (Fed.Cir.2004) (affirming Commerce's decision to apply combination rates in light of Commerce's discretion). An agency's failure to collect pertinent data, however, in some situations may constitute an abuse of discretion. See U.S. Steel Grp. v. United States, 18 CIT 1190, 1202, 873 F.Supp. 673, 687 (1994), aff'd 96 F.3d 1352 (Fed.Cir.1996) (holding failure to investigate not an abuse of discretion when evidence of production capability did not prove company produced a certain product).
Commerce examined and verified the sales of Nanjing Nanmu and determined that the sales were actually from Nanjing Nanmu. Issues and Decision Memorandum 37. Commerce found the increase in Aosen's shipments and other shipments from producers through lower-rate companies may be explained by legitimate business
The broader issue is whether Commerce should in its short form questionnaire, which focuses on whether a respondent is to get a rate other than that of the PRC-entity, ask about shipments of subject merchandise for or by another company. Apparently this type of inquiry was included previously. The court is concerned that Commerce's answer that it cannot act because it has no circumvention data and the fact that it does not ask for the data creates a familiar geometric object. The court declines to order a new investigation here because AFMC's evidence of circumvention is largely based on its own client's general statements to a magazine. This is a troubling area, however, and Commerce should be prepared to alter its investigation techniques or explain its actions carefully in the future. It is also not a satisfactory answer that Commerce does attend to these problems in new shipper reviews.
AFMC argues that if Fairmont's separate-rate dumping margin of 43.23% is increased, Commerce should adjust the weighted-average separate-rate of the other respondents, which were calculated based on Fairmont's rate. AFMC Br. 30. Defendant argues only those respondents subject to an injunction of liquidation (Fairmont, Coaster, and Longrange) may have their rates adjusted based on any changes to Fairmont's rates. Def.'s Br. 72. Defendant's argument has merit. Domestic parties may have liquidation of entries enjoined. Zenith Radio Corp. v. United States, 710 F.2d 806, 811-12 (Fed. Cir.1983). Thus, AFMC could have preserved this relief. Further new deposit rates have already been set for the future in other reviews. In this circumstance, the court will not change rates for entries that have already been liquidated.
For the foregoing reasons, the court remands the matter for Commerce to redetermine Fairmont's AFA rate if an AFA rate is used, redetermine Fairmont's separate rate using industry-specific wage data or provide substantial evidence as to why manufacturing sector data is preferable, explain whether the Indian wage data are distorted by a reporting cap, explain why Insular Rattan's financial statement is generally reliable and usable, and provide an explanation of its zeroing practice. If Commerce calculates a different separate rate for Fairmont, Commerce shall make appropriate adjustments to the separate rates of the parties before the court in this litigation. Commerce's determination is sustained in all other respects.
Commerce shall file its remand determination with the court within 60 days of this date. The parties shall have 30 days thereafter to file objections, and the Government will have 15 days thereafter to file its response.
Final Results, 75 Fed.Reg. at 50,994-95 (footnotes containing definitions omitted).
Fairmont also argues that several other line items from several financial statements should be excluded from SG & A either because of double counting or because Fairmont does not incur the same expenses, including APY Cane's fumigation, Clear Export's fumigation and insurance, Interior Crafts' documentation, and Las Palmas' delivery expenses, importation fees, and insurance. Defendant argues the court should not address these arguments because they were not brought before the agency. Def.'s Br. 48.
In relation to other line items, Commerce stated that its policy is "to not make adjustments to the financial statements data, as doing so may introduce unintended distortions into the data rather than achieving greater accuracy.... In calculating overhead and SG & A, it is the Department's practice to accept data from the surrogate producer's financial statements in toto, rather than performing a line-by-line analysis of the types of expenses included in each category." Issues and Decision Memorandum 75 (quoting previous reviews). Commerce is not required to do a line-by-line analysis in calculating factory overhead. Magnesium Corp. of Am., 166 F.3d at 1372. Thus, the court finds Commerce did not err in including these particular line items, as exclusion may have resulted in even greater distortions in the data.
Verification Report of Fairmont Designs, P.R. 773 at 17.
