Huzhou Muyun Wood Co., Ltd. v. United States

• Decision Date: 11 December 2017
• Docket Number: Court No. 16–00245,Slip Op. 17–162
• Citation: 279 F.Supp.3d 1215
• Parties: HUZHOU MUYUN WOOD CO., LTD., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

279 F.Supp.3d 1215

HUZHOU MUYUN WOOD CO., LTD., Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 17–162

Court No. 16–00245

United States Court of International Trade.

Dated: December 11, 2017

Gregory S. Menegaz and Alexandra H. Salzman, deKieffer & Horgan PLLC, of Washington, DC, argued for plaintiff. With them on the brief was J. Kevin Horgan. With them on the reply brief were Judith L. Holdsworth.

Tara K. Hogan, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant. With her on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the brief was Mercedes C. Morno, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce of Washington, DC.

OPINION

Katzmann, Judge:

The Trade Facilitation and Trade Enforcement Act of 2015 ("EAPA"), Pub. L. No. 114–125, 130 Stat. 122 (2016), which was signed into law on February 24, 2016, made numerous amendments to the antidumping and countervailing duty laws found under Title 19 of the United States Code.¹ Relevant here, the EAPA codified the totality of the circumstances test used by the United States Department of Commerce ("Commerce") to determine whether a transaction is bona fide for the purposes of a new shipper review, whereby a shipper seeks exemption from duty liability which would be imposed under an antidumping order and seeks an individual antidumping rate. This case raises questions of procedural fairness and substantiality of record evidence related to the application of that test.

Plaintiff Huzhou Muyun Wood Co., Ltd. ("Muyun Wood"), a Chinese exporter and producer of multilayered wood flooring, contests Commerce's rescission of its new shipper review related to the antidumping duty order on multilayered wood flooring from the People's Republic of China ("PRC"). Muyun Wood New Shipper Review Request ("NSR Request") at Ex. 1, C.R. 3 (June 22, 2015). Specifically, Muyun Wood contends that Commerce abused its discretion by placing data on the record a week before comments were due without clarifying its intended use. Further, Muyun Wood argues Commerce's determination that Muyun Wood's sale was not bona fide —and thus that the new shipper review should be rescinded—was not supported by substantial record evidence. The United States ("The Government") contends that Commerce did not abuse its discretion and that its conclusions were supported by substantial evidence.

The court concludes that Commerce abused its discretion by adding the data to the record in the manner it did. Further, Commerce's conclusion that Muyun Wood's sale was not bona fide and its rescission of Muyun Wood's new shipper review were not supported by substantial evidence. The court thus remands this case to Commerce.

BACKGROUND

I. Anti–Dumping Orders and New Shipper Reviews Generally

Dumping occurs when a foreign company sells a product in the United States for less than fair value—that is, for a lower price than it sells that product in its home market. Sioux Honey Ass'n v. Hartford Fire Ins. Co., 672 F.3d 1041, 1046 (Fed. Cir. 2012). Because such behavior can undercut American producers selling those goods at market price, Congress enacted the Tariff Act of 1930² to give Commerce a framework for detecting dumping and calculating a duty rate that offsets the dumping. Id. Either domestic producers or Commerce may initiate an investigation into potential dumping and, if appropriate, Commerce will issue an anti-dumping order which contains the duty rates for the relevant products. Id.; 19 U.S.C. §§ 1671, 1673. If a producer or exporter did not export merchandise subject to an antidumping order during the period of investigation, it may request a new shipper review. 19 U.S.C. § 1675(a)(2)(B). Commerce will conduct company-specific reviews of new exporters and producers that submit properly documented requests for review. Id. The "purpose of a new shipper review is to provide an opportunity to an exporter or producer who may be entitled to an individual antidumping rate, but was not active during the period of investigation, to be considered for such a rate." See Marvin Furniture (Shanghai) v. United States, 36 CIT ––––, ––––, 867 F.Supp.2d 1302, 1307 (2012). The provisions regarding new shipper reviews were enacted as part of the Uruguay Round Agreements Act ("URAA") to address concerns that shippers who did not export merchandise subject to an antidumping duty order were being deprived of an opportunity to have their dumping margins calculated individually. "During the negotiations, there was an attempt to exempt new shippers from duty liability by requiring an entirely new antidumping investigation along with a separate finding of injury for each new shipper." URAA, Statement of Administrative Action, H.R. Doc. No. 103–316, vol.1 at 875 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4203 ("SAA").³ Instead, "[t]he United States agreed to a more reasonable proposal ... to provide new shippers with an expedited review that will establish individual dumping margins for such firms on the basis of their own sales," and accordingly created new shipper reviews. Id.

Commerce determines the normal value, export price, and resultant dumping margin for each entry of subject merchandise to determine a company's individual rate. 19 U.S.C. § 1675(a)(2)(B)(i)–(ii). However, "any weighted average dumping margin ... shall be based solely on the bona fide sales of an exporter or producer" to the United States. 19 U.S.C. § 1675(a)(2)(B)(iv). The factors that Commerce has historically used to determine whether a sale is bona fide , discussed infra, have been codified in § 433 of the EAPA. In a bona fide analysis, Commerce does not attempt to ascertain the fair value of the merchandise, but examines each sale for its commercial reasonableness. See Hebei New Donghua v. United States, 29 CIT 603, 374 F.Supp.2d 1333 (2005). Commerce looks to the nature of the sale to make sure it was sold in a manner reasonably representative of the shipper's future commercial practice, and to ensure that the shipper is not attempting to circumvent the duty order.⁴

Commerce may rescind a review if it concludes that "there has not been an entry and sale to an unaffiliated customer in the United States of subject merchandise" during the period of review ("POR"), and that "an expansion of the normal period of review to include an entry and sale to an unaffiliated customer in the United States of subject merchandise would be likely to prevent the completion of the review within the [required] time limits." 19 C.F.R. § 351.214(f)(2). "Commerce interprets the term ‘sale’ in § 351.214(f)(2)(i) to mean that a transaction it determines not to be a bona fide sale is, for purposes of the regulation, not a sale at all;" so, if no bona fide sales occur during the POR, Commerce may rescind the NSR. Shijiazhuang Goodman Trading Co. v. United States, 40 CIT ––––, ––––, 172 F.Supp.3d 1363, 1373 (2016).

II. Muyun Wood's New Shipper Review

Muyun Wood requested a new shipper review to calculate its dumping duty for its exports during the relevant POR, under the antidumping duty order on multilayered wood flooring from the PRC, on June 22, 2015. NSR Request. Muyun Wood filed its Section A response on August 26, 2015 and Section C & D response on September 4, 2015. Muyun Wood Section A Resp., C.R. 8–10; Muyun Wood Section C & D Resp., C.R. 11–15. Commerce sent Muyun Wood the first supplemental questionnaire on October 9, 2015. Muyun Wood First Suppl. Questionnaire, P.R. 42.

Commerce placed data from the sales databases of two mandatory respondents⁵ —Dalian Dajen Wood Co., Ltd. and Jiangsu Senmao Bamboo and Wood Industry Co., Ltd. ("Senmao")—from the second administrative review ("AR2") of the multilayered wood flooring antidumping duty order. Dep't Letter: U.S. Sales Data from the AR2, P.R. 64, C.R. 52–54 (Apr. 12, 2016) ("AR2 data"). Commerce also indicated that any comments on the data had to be submitted by 5:00 PM on April 19, 2016 at the latest, and that the data constituted business propriety information and could not be shared with any party without Administrative Protective Order ("APO") access. Id.

The next day, Muyun Wood and the other participant in the new shipper review—Dongtai Zhangshi Wood Industry Co., Ltd. ("Zhangshi")—requested that Commerce clarify how it intended to use the AR2 data and issue a supplemental questionnaire. Muyun Wood Clarification Letter, P.R. 65 (Apr. 13, 2016); Zhangshi Clarification Letter, P.R. 66 (Apr. 13, 2016). Muyun Wood also asked for an extension of time to comment, "to a date after the Department has had the opportunity to issue a supplemental questionnaire to Muyun, and Muyun has had a chance to respond to the Department's supplemental questionnaire." P.R. 65. Commerce replied that it was unable to grant Muyun Wood's request for an extension of time to comment on the data "[d]ue to statutory deadlines." Dep't of Commerce Resp. to Clarification Request, P.R. 70 (Apr. 15, 2016) ("Resp. to Clarification Request"). Commerce stated that comments on the AR2 data remained due on April 19, 2016 at 5:00 PM, and indicated that the "data may be used as part of the Department's analysis in this new shipper review." Id.

Muyun Wood submitted its comments on the AR2 data on April 19, 2016. Muyun Wood Comments on AR2 Data at 1, P.R. 72 ("Muyun Wood Comments"). Muyun Wood stated that the data appeared irrelevant to its case because it included sales data from companies other than Muyun Wood for a POR earlier than the one during which Muyun Wood's sale took place. Id. Muyun Wood also noted that its Chinese counsel was unable to access the APO—and thus the AR2 data—until after the close of business on April 19, 2016. Id. at 2. Zhangshi made similar complaints in its comments on the AR2 data that same day. Zhangshi Comments on AR2...