Dalian Meisen Woodworking Co. v. United States
| Decision Date | 18 November 2021 |
| Docket Number | Slip Op. 21-158,20-00109 |
| Parties | DALIAN MEISEN WOODWORKING CO, LTD., Plaintiff, v. UNITED STATES, Defendant, and CABINETS TO GO, LLC, Plaintiff-Intervenor, and AMERICAN KITCHEN CABINET ALLIANCE, Defendant-Intervenor. |
| Court | U.S. Court of International Trade |
[Granting Plaintiff's motion for judgment on the agency record and remanding for further administrative proceedings.]
Stephen W. Brophy, Husch Blackwell, LLP, of Washington, DC for Plaintiff. With him on the briefs were Jeffrey S. Neeley and Nithya Nagarajan.
Mark Ludwikowski, Clark Hill PLC of Washington, DC, for Plaintiff-Intervenor. With him on Plaintiff-In-tervenor's written submission were Courtney Gayle Taylor, R. Kevin Williams, and William Sjoberg.
Ioana Cristei, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice of Washington, DC, for Defendant. With her on the brief were Bryan M. Boynton Assistant Attorney General, Jeanne E. Davidson, Director, and Tara K. Hogan, Assistant Director. Of counsel on the brief was W. Mitch Purdy, Attorney, Office of Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce of Washington, DC.
Luke A. Meisner, Schagrin Associates of Washington, DC, for Defendant-Intervenor. With him on the brief was Roger B Schagrin.
Before: M. Miller Baker, Judge
It's often said that bad facts make bad law. This case, which involves the Department of Commerce's imposition of hefty antidumping duties on ersatz maple cabinets imported from China, certainly has bad facts.
Commerce's investigation revealed that a Chinese producer markets and sells its wooden cabinets in the United States as maple even though they are made of birch, a less costly grade of wood. To borrow a metaphor that could have been written for this case, the producer's advertising in the United States is a "complete fraud from bark to core." Aptix Corp. v. Quickturn Design Sys., Inc., 269 F.3d 1369, 1373 (Fed. Cir. 2001).
Less than amused, the Department applied "total adverse facts available"-trade law jargon for imposing the steepest possible antidumping duties because a producer has not been forthcoming in an investigation. Here, however, the producer did exactly what it was supposed to do: truthfully respond to Commerce's questions and otherwise fully cooperate. That the producer defrauded consumers is of no moment for antidumping purposes, as the Department lacks jurisdiction to police false advertising violations.
The court accordingly remands so that Commerce can rethink this one. In the meantime, the Federal Trade Commission, state Attorneys General, and the plaintiffs' class action bar may wish to take a close look at the producer's swindling of its U.S. customers.
The Tariff Act of 1930, as amended, provides a mechanism to combat dumping-the sale of imported merchandise in the United States at "less than its fair value." 19 U.S.C § 1673(1). Under that statute, domestic producers and other affected entities can petition Commerce and the International Trade Commission to investigate alleged dumping and its effects on U.S. industry. Hung Vuong Corp. v. United States, 483 F.Supp.3d 1321, 1334 (CIT 2020). If the Department determines that dumping is occurring, and the ITC determines that the dumping harms domestic industry, Commerce can impose antidumping duties on top of any other applicable duties. 19 U.S.C. §1673. These duties are "in an amount equal to the amount by which the normal value exceeds the export price (or the constructed export price) for the merchandise." Id.
To determine whether dumping is occurring, the Tariff Act requires the Department to make "a fair comparison . . . between the export price or constructed export price and normal value." Id. § 1677b(a). Thus, Commerce's dumping determination also establishes the amount of the applicable duty so long as other statutory conditions are satisfied.
"Normal value" is generally "the price a producer charges in its home market." U.S. Steel Corp. v. United States, 621 F.3d 1351, 1353 (Fed. Cir. 2010); see also 19 U.S.C. § 1677b(a)(1)(B)(i) (). In cases (such as this) involving imports from nonmarket economies, [1] the statute generally requires Commerce to determine normal value based on "the value of the factors of production utilized in producing the merchandise," combined with general overhead costs, profit, and certain other costs and expenses. See 19 U.S.C. § 1677b(c)(1). "Factors of production" include, but are not limited to, labor, raw material inputs, energy, and capital costs. Id. § 1677b(c)(3).
The "export price" to which Commerce compares the import's "normal value" is the foreign producer/exporter's price for unaffiliated U.S. customers. See id. § 1677a(a). The "constructed export price" that the Department alternatively uses for this comparison is the price that the foreign producer/exporter's affiliated seller in turn charges U.S. customers. See id. § 1677a(b); see also U.S. Steel Corp., 621 F.3d at 1353; Hung Vuong, 483 F.Supp.3d at 1353 n.34 (citing Mid Continent Steel & Wire, Inc. v. United States, 203 F.Supp.3d 1295, 1298-99 (CIT 2017)).[2] This case involves a constructed export price-the price the foreign producer's affiliate first charged U.S. purchasers.
To ensure that the normal value can accurately be compared to the export price or constructed export price for the same product, Commerce assigns what it calls "control numbers" to products based on "specified physical characteristics determined in each antidumping proceeding." Hung Vuong, 483 F.Supp.3d at 1340 (quoting GODACO Seafood Joint Stock Co. v. United States, 435 F.Supp.3d 1342, 1348 n.1 (CIT 2020)). "All products whose product hierarchy characteristics are identical are deemed to be part of the same control number and are regarded as identical merchandise for the purposes of comparing export prices to normal value." Id. (cleaned up) (quoting Am. Tubular Prods., LLC v. United States, Slip Op. 15-98, at 5 n.1, 2015 WL 5236010, at *2 n.1 (CIT Aug. 28, 2015)).
The Department insists that respondents tie their factors of production to control numbers because it uses them to calculate the value of the imported product "to ensure that a fair comparison is made between the U.S. price and normal value." Thuan An Prod. Trading & Serv. Co. v. United States, 348 F.Supp.3d 1340, 1353 (CIT 2018) (cleaned up). The use of a control number thus allows the Department to add up the cost of the particular factors of production used to manufacture a particular imported product and to then compare the sum of those costs to the U.S. price (export price or constructed export price) for that product.
Id. § 1677e(a)(2) (emphasis added).
Because the use of "facts otherwise available" is a means for filling in gaps in the record, see Bebitz Flanges Works Private Ltd. v. United States, 433 F.Supp.3d 1309, 1316-17 (CIT 2020), Commerce sometimes refers to using "total" or "partial" facts otherwise available. The distinction relates to whether portions of the respondent's data are usable. "Depending on the severity of a party's failure to respond to a request for information . . ., Commerce may select either partial or total [facts otherwise available]." Fresh Garlic Producers Ass'n v. United States, 121 F.Supp.3d 1313, 1324 (CIT 2015).
Once Commerce finds it necessary to resort to facts otherwise available-whether partial or total-the Department may (but need not) take the second step of determining whether the respondent "failed to cooperate by not acting to the best of its ability to comply" with Commerce's "request for information." 19 U.S.C. § 1677e(b). If the Department affirmatively determines that the respondent has failed to cooperate, it may then apply an "adverse inference" by selecting "facts otherwise available" that are most unfavorable to the respondent. See id.; see also Hung Vuong, 483 F.Supp.3d at 1336.
The statute, however, allows the use of an adverse inference only for purposes of "selecting from among the facts otherwise available." 19 U.S.C. § 1677e(b)(1)(A). This means that Commerce's use of an adverse inference in any matter is limited by how Commerce employs facts otherwise available. If Commerce applies "total" facts otherwise available, though, it may apply a correspondingly "total" adverse inference if it also determines that the respondent failed to cooperate. If the Department does this, the result is "total adverse facts available," or "total AFA."
Under the statute, Commerce "shall verify all information relied upon in making . . . a final...
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