Changzhou Hawd Flooring Co. v. United States

• Decision Date: 23 January 2015
• Docket Number: Court No. 12–00020.,Slip Op. 15–07.
• Citation: 44 F.Supp.3d 1376
• Parties: CHANGZHOU HAWD FLOORING CO., LTD., et al., Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

44 F.Supp.3d 1376

CHANGZHOU HAWD FLOORING CO., LTD., et al., Plaintiffs

v.UNITED STATES, Defendant.

Slip Op. 15–07.

Court No. 12–00020.

United States Court of International Trade.

Jan. 23, 2015.

Gregory S. Menegaz and J. Kevin Horgan, deKieffer & Horgan, PLLC, of Washington, DC, for the Plaintiffs.

Kristin H. Mowry, Jeffrey S. Grimson, Jill A. Cramer, Sarah M. Wyss, and Daniel R. Wilson, Mowry & Grimson, PLLC, of Washington, DC, for Plaintiff–Intervenor Fine Furniture (Shanghai) Ltd.

H. Deen Kaplan, Craig A. Lewis, and Mark S. McConnell, Hogan Lovells U.S. LLP, of Washington, DC, for Plaintiff–Intervenor Armstrong Wood Products (Kunshan) Co., Ltd.

Mark Ludwikowski, Kristen Smith, and Lana Nigro, Sandler, Travis & Rosenberg, PA, of Washington, DC for Plaintiff–Intervenors Lumber Liquidators Services, LLC, and Home Legend, LLC.

Alexander V. Sverdlov, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for Defendant. With him on the brief were Joyce R. Branda, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel was Shana Hofstetter, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.

Jeffrey S. Levin, Levin Trade Law, P.C., of Bethesda, MD, for the Defendant–Intervenor Coalition for American Hardwood Parity.

OPINION and ORDER

POGUE, Senior Judge:

This action is again before the court following a second redetermination and a voluntary partial third redetermination. In the third redetermination, the Department of Commerce (“Commerce”) reaffirmed the second redetermination of the final results of the antidumping (“AD”) duty investigation of multilayered wood flooring from the People's Republic of China (“PRC” or “China”).¹

Still at issue are the AD duty rates assigned to eight separate rate respondents—the Plaintiffs and Plaintiff–Intervenors here (collectively, “Plaintiffs”)² —for the underlying AD duty investigation. Specifically, Plaintiffs challenge Commerce's decision to assign seven of them an unspecified, non-de minimis AD duty rate for the investigation, to provide for liquidation of their entries at the rates established for them in the first administrative review³ (as limited by the provisional measures deposit cap), and to initiate a full investigation of the remaining eighth Plaintiff, Changzhou Hawd Flooring Co. (“Changzhou Hawd”), as it has certified no shipment of subject merchandise in the first administrative review and therefore otherwise lacks any relevant calculated rate. The court has jurisdiction pursuant to § 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) (2012).⁴

As explained below, Commerce's determination regarding the group of seven Plaintiffs is based on a reasonable reading of the law and record evidence. However, the agency's decision to conduct, at this late date, a full investigation of Changzhou Hawd is arbitrary and capricious. Therefore, the court remands again for further consideration in accordance with this opinion.

BACKGROUND

Litigation of the separate rate⁵ has so far produced two court opinions,⁶ two corresponding redeterminations by Commerce, ⁷ and, most recently, a voluntary remand and redetermination by Commerce.⁸

In each successive determination, Commerce has established the separate rate in a different way. In the Final Determination, having individually investigated three fully cooperative mandatory respondents,⁹ Commerce loosely followed 19 U.S.C. § 1673d(c)(5)(A) and took a simple average¹⁰ of the two non-de minimis mandatory respondent rates (resulting in a separate rate of 3.31 percent). Final Determination, 76 Fed. Reg. at 64,321 –22. Plaintiffs challenged the determination. Compl., ECF No. 9 at ¶ 3. It was ultimately remanded on other grounds. Baroque Timber, ––– CIT ––––, 925 F.Supp.2d 1332.

In the First Redetermination, changes to the underlying surrogate values and calculation methodology resulted in all three mandatory respondents receiving AD duty rates of zero. First Redetermination, Consol. Ct. No. 12–00007, ECF No. 132, at 2, 52. Because of this, Commerce recalculated the separate rate under 19 U.S.C. § 1673d(c)(5)(B), and decided that “any reasonable method” included a simple average of the three zero mandatory rates and a rate based on adverse facts available (“AFA”).¹¹ This resulted in a higher separate rate of 6.41 percent. First Redetermination, Consol. Ct. No. 12–00007, ECF No. 132, at 27. The court found that this method, while not per se unreasonable, was unsupported by substantial evidence, because Commerce had failed to articulate a rational connection between Plaintiffs' economic reality and the use of the AFA rate in the calculation of their rate. Baroque Timber, ––– CIT ––––, 971 F.Supp.2d at 1344–45. The court accordingly remanded to Commerce for a redetermination of the separate rate. Id. at 1346.

Between the second remand and the corresponding redetermination, Commerce issued the final determination in the first administrative review following the investigation at issue here. Final Review, 79 Fed. Reg. 26,712. Because of this, in the Second Redetermination, rather than recalculate the separate rate for all separate rate respondents, Commerce inferred that, because there were 110 non-cooperative respondents in the investigation, see Part IIA, infra, the appropriate separate rate for the investigation was more than de minimis. It then assigned seven of the Plaintiffs¹² the rate calculated for them in the first administrative review (as limited by the provisional measures deposit cap). Second Redetermination, ECF No. 52, at 6–8. The remaining eighth Plaintiff, Changzhou Hawd, having certified no shipments, did not have a calculated rate for the first review. Commerce concluded that it did not have enough data on the record to calculate a rate reflective of that company's economic reality and initiated an individual investigation of this eighth respondent. Id. at 8–9.¹³

The Second Redetermination was challenged in extensive briefing before the court,¹⁴ and, at the court's suggestion, see Telephone Conf., ECF No. 79, Commerce requested a partial voluntary remand “to determine whether it should conduct a limited investigation of the eight separate rate [P]laintiffs,” rather than a full investigation of just Changzhou Hawd. Mot. for Voluntary Remand, ECF No. 92 at 1 (quotation marks omitted). The court granted the voluntary remand. Changzhou Hawd, ––– CIT at ––––, 6 F.Supp.3d at 1362. It was ultimately a futile exercise. Commerce essentially decided that it was impossible to take an approach that was both measured and fact-based, and reaffirmed its results and reasoning in the Second Redetermination. See Third Redetermination, ECF No. 107, at 17.

STANDARD OF REVIEW

The court will sustain Commerce's determinations unless they are “unsupported by substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). The court will set aside agency actions found to be arbitrary and capricious. Changzhou Wujin Fine Chem. Factory Co., Ltd. v. United States, 701 F.3d 1367, 1377 (Fed.Cir.2012) (citing Bowman Transp., Inc. v. Arkansas–Best Freight Sys., Inc., 419 U.S. 281, 284, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974) ).

DISCUSSION

I. Commerce's Methodology

Commerce generally follows 19 U.S.C. § 1673d(c)(5) to establish the separate rate. Second Redetermination, ECF No. 52, at 3; Yangzhou Bestpak Gifts & Crafts Co. v. United States, 716 F.3d 1370, 1374 (Fed.Cir.2013). Thereunder, the general rule sets the separate rate as equal “to the weighted average of the estimated weighted average dumping margins established for exporters and producers individually investigated, excluding any zero and de minimis margins, and any margins [based entirely on facts otherwise available].” 19 U.S.C. § 1673d(c)(5)(A). The exception to this rule, which applies only when all individually investigated rates are zero, de minimis, or based entirely on facts otherwise available, allows Commerce to use “any reasonable method to establish the estimated [separate rate] for exporters and producers not individually investigated.” Id. at § 1673d(c)(5)(B). “Any reasonable method” is expected to mean the average of the rates calculated for individually investigated respondents. 19 U.S.C. § 1673d(c)(5)(B) ; Uruguay Round Agreements Act, Statement of Administrative Action (“SAA”), HR. Doc. No. 103–316 (1994) at 873, reprinted in 1994 U.S.C.C.A.N. 4040, 4201.¹⁵ However, “if [the expected] method is not feasible, or if it results in an average that would not be reasonably reflective of potential dumping margins for non-investigated exporters or producers, Commerce may use other reasonable methods.” SAA at 873, reprinted in 1994 U.S.C.C.A.N. at 4201.

Here, all three individually investigated respondents had AD duty rates of zero. Second Redetermination, ECF No. 52, at 3. Commerce accordingly established the separate rate under the exception—using “any reasonable method”—rather than the rule. Id.; 19 U.S.C. § 1673d(c)(5)(B). Commerce elected not to use the expected method, or even to calculate a specific separate rate for the investigation. Rather, the agency went no further than inferring that the separate rate, on the record evidence, must be more than de minimis. Second Redetermination, ECF No. 52, at 4–7. Plaintiffs argue that this is not in accordance with law, contending Commerce must calculate a de minimis separate rate for the investigation.¹⁶

The AD statute does not speak directly to the question at issue;¹⁷ it only requires “any reasonable method to establish” the separate rate. See 19 U.S.C. § 1673d(c)(5)(B). “Any reasonable method” is a “lenient standard,” Bestpak, 716 F.3d at 1378, and “establish” is a broader term than “calculate.” The court must “leave the discretion provided by the ambiguities of [the AD] statu...