Ancientree Cabinet Co. v. United States, Slip Op. 21-87

• Court: U.S. Court of International Trade
• Parties: THE ANCIENTREE CABINET CO., LTD., Plaintiff, and CABINETS TO GO, LLC, Plaintiff-Intervenor, v. UNITED STATES, Defendant, and AMERICAN KITCHEN CABINET ALLIANCE, Defendant-Intervenor.
• Docket Number: Slip Op. 21-87,Court No. 20-00114
• Decision Date: 12 July 2021

THE ANCIENTREE CABINET CO., LTD., Plaintiff,
and
CABINETS TO GO, LLC, Plaintiff-Intervenor,
v.
UNITED STATES, Defendant,
and
AMERICAN KITCHEN CABINET ALLIANCE, Defendant-Intervenor.

Slip Op. 21-87
Court No. 20-00114

UNITED STATES COURT OF INTERNATIONAL TRADE

July 12, 2021

Before: Judge Gary S. Katzmann,

OPINION

Plaintiff's motion is granted, in part, and Commerce's Final Determination is remanded for further explanation.

Gregory S. Menegaz and Alexandra H. Salzman, DeKieffer & Horgan, PLLP, of Washington, D.C., argued for plaintiff. With them on the brief was J. Kevin Horgan.

Mark R. Ludwikowski, Clark Hill PLC, of Washington, D.C., argued for plaintiff-intervenor. Within him on the brief were Courtney Gayle Taylor, R. Kevin Williams and William Sjoberg.

Iona Cristei, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., argued for defendant. With her on the brief were Jeffrey Bossert Clark, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Tara K. Hogan, Assistant Director. Of Counsel Savannah Rose Maxwell, Attorney, Office of Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce.

Luke A. Meisner, Schagrin Associates, of Washington, D.C., argued for defendant-intervenor. With him on the brief were Roger B. Shagrin, Christopher T. Cloutier, and Elizabeth J. Drake.

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Katzmann, Judge: This case arises from an investigation by the U.S. Department of Commerce ("Commerce") concerning whether wooden cabinets and vanities from the People's Republic of China ("China") were being imported at less than fair value in violation of domestic statutes designed to protect American products from unfair trade. The principal questions are whether in the resulting antidumping ("AD") investigation, Commerce based both its primary surrogate country selection and surrogate factors of production ("FOP") valuations on substantial evidence and calculated the subsequent financial ratios in a way that was not arbitrary and capricious. Plaintiff, The Ancientree Cabinet Co., Ltd. ("Ancientree"), and Plaintiff-Intervenor, Cabinets to Go, LLC,¹ exporters of wooden cabinets, vanities, and components thereof from China, brought this suit against Defendant the United States ("Government") to challenge Commerce's surrogate value analysis and calculation in its Wooden Cabinets and Vanities and Components Thereof From the People's Republic of China: Corrected Notice of Final Affirmative Determination of Sales at Less Than Fair Value for, 85 Fed. Reg. 17,855 (Dep't Commerce Mar. 31, 2020); Wooden Cabinets and Vanities and Components Thereof From the People's Republic of China: Antidumping Duty Order, 85 Fed. Reg. 22,126 (Dep't Commerce Apr. 21, 2020) ("Order") (collectively, "Final Determination"). Pl.'s Mot. For J. on Agency R. and Supp. Opening Br., Sept. 11, 2020, ECF No. 27 ("Pl.'s Br."). The Government and Defendant-Intervenor

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American Kitchen Cabinet Alliance ("AKC Alliance") ask the court to sustain Commerce's determination. Def.'s Mem. in Opp'n to Pl. and Pl.-Inter.'s Rule 56.2 Mot. for J. on the Agency R., Dec. 22, 2020, ECF No. 35 ("Def.'s Br."); Def.-Inter.'s Resp. Br. in Opp'n to the Mots. For J. on the Agency R., Dec. 21, 2020, ECF No. 34 ("Def.-Inter.'s Br."). The court denies Plaintiff's motion, in part, and grants Plaintiff's motion, in part. Commerce's Final Determination is remanded for further explanation consistent with this opinion.

BACKGROUND

I. Legal Background

Congress's AD statute empowers Commerce to impose remedial duties on imported goods when those goods are sold in the United States for less than their fair market value, and when the International Trade Commission ("ITC") determines that the domestic industry is thereby "materially injured, or . . . is threatened with material injury." See 19 U.S.C. § 1673(2)(A)(i)-(ii); Diamond Sawblades Mfrs. Coal. v. United States, 866 F.3d 1304, 1306 (Fed. Cir. 2017). Dumping constitutes unfair competition because it permits foreign producers to undercut domestic companies by selling products below their fair market value. Sioux Honey Ass'n v. Hartford Fire Ins. Co., 672 F.3d 1041, 1046 (Fed. Cir. 2012). To address the harmful impact of such unfair competition, Congress enacted the Tariff Act of 1930, which empowers Commerce to investigate potential dumping and, if necessary, to issue orders instituting duties on subject merchandise. Id. at 1047. In these instances, "the amount of the [AD] duty is 'the amount by which the normal value exceeds the export price (or the constructed export price) for the merchandise.'" Shandong Rongxin Imp. & Exp. Co. v. United States, 42 CIT ___, ___, 331 F. Supp. 3d 1390, 1394 (2018) (quoting 19 U.S.C. § 1673), aff'd, 779 F. App'x 744 (Fed. Cir. 2019).

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If the exporting country is a non-market economy that provides insufficient information to determine the normal value, Commerce may use surrogate values from market economy countries for "the [FOPs] utilized in producing the merchandise and . . . for general expenses and profit plus the cost of containers, coverings, and other expenses." 19 U.S.C. § 1677b(c)(1). Section 1677b(c)(3)(A)-(D) lists the FOPs as including, but not limited to: (A) labor hours required; (B) quantities of raw materials used; (C) energy and other utilities consumed in production; and (D) capital costs and depreciation. "Once Commerce has selected and totaled the surrogate values, the agency then adds an amount designed to approximate the producing firm's noninput costs of production, which include factory overhead, selling, general, and administrative expenses, and profit." CP Kelco US, Inc. v. United States, 40 CIT ___, ___, 37 ITRD 2984, Slip Op. 16-36 at 3 (Apr. 8, 2016). To incorporate these costs, Commerce generates surrogate financial ratios from "the financial statements of other manufacturing firms" within the primary surrogate country and using "select financial statements based on which provide the 'best available information.'" Id. Commerce then uses the market economy surrogate values and financial ratios to calculate a surrogate value -- used in place of a home-market value -- for comparison to the export price. Id.

Section 1677b(c)(1) requires that Commerce value the FOPs "based on the best available information regarding the values of such factors in a market economy country." In determining which data are the best available, "Commerce has broad discretion to determine the best available information because 'best available information' is not defined by statute." QVD Food Co. v. United States, 658 F.3d 1318, 1323 (Fed. Cir. 2011) (citing Ad Hoc Shrimp Trade Action Comm. v. United States, 618 F.3d 1316, 1322 (Fed. Cir. 2010); Nation Ford Chem. Co. v. United States, 166 F.3d 1373, 1377 (Fed. Cir. 1999)); see also Lasko Metal Prods., Inc. v. United States, 43 F.3d 1442, 1446 (Fed. Cir. 1994). However, Commerce's discretion to select surrogate values is

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"curtailed by the purpose of the statute, i.e., to construct the product's normal value as it would have been if the NME country were a market economy country." Rhodia, Inc. v. United States, 25 CIT 1278, 1286, 185 F. Supp. 2d 1343, 1351 (2001) (citing Nation Ford Chem. Co., 166 F.3d at 1375). Commerce must also establish AD margins as accurately as possible. Shakeproof Assembly Components, Div. of Ill. Tool Works, Inc. v. United States, 268 F.3d 1376, 1382 (Fed. Cir. 2001).

In choosing "one or more market economy countries" to provide surrogate factor values, 19 U.S.C. § 1677b(c)(4) requires that Commerce "utilize, to the extent possible" costs of FOPs from market economy countries that are "at a level of economic development comparable to that of the nonmarket economy country, and . . . significant producers of comparable merchandise." Although Commerce "normally will value all factors in a single surrogate country," 19 C.F.R. § 351.408(c)(2), Commerce may also "mix and match" surrogate country values where a non-primary country provides values that are more accurate, Lasko Metal Prods., Inc. v. United States, 16 CIT 1079, 1082, 810 F. Supp. 314, 317 (1992), aff'd, 43 F.3d 1442 (Fed. Cir. 1994). If more than one market economy country meets the requirements to provide surrogate values, Commerce may choose a primary surrogate country based on whether the FOP data are (1) publicly available; (2) contemporaneous with the period of investigation ("POI"); (3) a broad market average covering a range of prices; (4) from an approved surrogate country; (5) specific to the input in question; and (6) tax exclusive. See Policy Bulletin 04.1: Non-Market Economy Surrogate Country Selection Process (Mar. 1, 2004), http://enforcement.trade.gov/policy/bull04-1.html (last accessed July 8, 2021) ("Policy Bulletin 04.1"); see also, e.g., Jiaxing Bro. Fastener Co. v. United States, 822 F.3d 1289, 1302 (Fed. Cir. 2016) (finding "no error in Commerce's . . . preference to appraise surrogate values from a single surrogate country" with statistics that were "specific, contemporaneous, and

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represented broad market averages"). Upon review of Commerce's choice of certain surrogate values as the best available information, the court will not determine whether the data used were actually the best available, but "whether a reasonable mind could conclude that Commerce chose the best available information." Jiaxing Bro. Fastener, 822 F.3d at 1301 (citing Zhejiang DunAn Hetian Metal Co. v. United States, 652 F.3d 1333, 1341 (Fed. Cir. 2011)); see also Maverick Tube Corp. v. United States, 857 F.3d 1353, 1359 (Fed. Cir. 2017) (citation omitted).

II. Factual Background

On March 26, 2019, Commerce initiated an AD duty investigation on the importation of wooden cabinets and vanities from China during the POI of July 1, 2018 to December 31, 2018. See Wooden Cabinets and Vanities and Components Thereof From the People's Republic of China: Initiation of Less-Than-Fair-Value...