Slip Op. 12- UNITED STATES COURT OF INTERNATIONAL TRADE HOME MERIDIAN INTERNATIONAL, INC. D/B/A SAMUEL LAWRENCE FURNITURE CO. and IMPORT SERVICES, INC., Plaintiffs, GREAT RICH (HK) ENTERPRISES CO., LTD., DONGGUAN LIAOBUSHANGDUN HUADA FURNITURE FACTORY, NANHAI BAIYI WOODWORK CO., LTD., and DALIAN HUAFENG FURNITURE GROUP CO., LTD., Consolidated Plaintiffs,

v. UNITED STATES, Defendant,
AMERICAN FURNITURE MANUFACTURERS COMMITTEE FOR LEGAL TRADE and VAUGHAN-BASSETT FURNITURE COMPANY, INC.,

Intervenor Defendants. Before: Jane A. Restani, Judge Consol. Court No. 11-00325 Public Version

OPINION AND ORDER [In anti-dumping duty matter Plaintiffs’ and Consolidated Plaintiffs’ motion for judgment on the agency record granted. Nanhai Baiyi Woodwork Co., Ltd.’s motion for judgment on the agency record granted. Dalian Huafeng Furniture Group Co., Ltd.’s motion for judgment on the agency record granted. Intervenor Defendants’ motion for judgment on the agency record granted in part and denied in part.] Dated: September 19, 2012Consol. C ourt No. 11-00325 Pag e 2
Kristin H. Mowry , Mowry & G rimson, PL L C, of Washington, DC, ar g ued for the plaintiffs and for

the consolidated pla intiffs, Great Rich (HK) Ente rprises Co., L td. and Dong g uan L iaobushang dun Huada Fur niture F actor

y . Wit h her on br ief we re Jeffr ey S. Grimson, J ill A. Cramer, Ke ith F. Huff man, Sara h M. Wy ss, and Susan L . Br ooks. Ned H. Ma

rshak, B ruce M. Mitchell, and Mark E . Pardo, Grunf eld Deside rio L ebowitz Si lverman & Klestadt, L L P, of New Y ork, NY, f or the c onsolidated plaintiff, Na nhai Ba iy i Woodwork Co., L td.

L izbeth R . L evinson and Ronald M. Wisla, Kutak Rock L L P, of Washington, DC, for the c onsolidated plaintiff Da lian Huaf eng Fur niture Group Co., Ltd.
J oshua E. Kur land, Trial Attorne y , Commercial L itigation B ranc h, Civil Division, U.S. Depar

tment of J ustice, of Washing ton, DC, argued for defe ndant. With hi m on the brief wer e Stuart F . Deler

y , ActingAssistant Attorney Gene ral, Jeanne E. D avidson, Direc tor, Patricia M. McCarthy , Assistant Director , and Carr ie A. Dunsmore , Trial Attorne y . Of c ounsel on the brief w as Shana H ofstetter, Attorney , Offic e of the Chief Counsel for Import Administration, Depa rtment of Commerce , of Washington, DC.
J . Michae l Taylor, King& Spalding , L L P, of Washington, DC, arg ued for intervenor

defe ndants. Wit h him on the brief we re D aniel L . Schneider man, J oseph W. Dorn, Mark T. Wasden, Pre ntiss L . Smit h, and Sara h K. Davis.
Restani, J udg e: This action cha lleng es the De partment of Commerc e’s (“Commerc e”) final re sults rendere d in the fifth antidumping ( “AD” ) duty revie w of c erta in wooden be droom furniture (“WBF ”) f rom the People’s Republic of China (“PRC”). See Wooden Be droom Fur

niture fr om the People’s Republic of China: F inal Results and Final Rescission in Part, 76 Fed. Reg . 49,729, 49,729 (De p’t Commerce Aug . 11, 2011) (“ Final Results”). Plaintiffs Home Mer idian I nternational, I nc. and I mport Services, I

nc. alongwith consolidated plaintiffs Gr eat Rich (H K) Enter prises Co., L td. and Dong g uan L iaobushang dun Huada Fur niture F actor

y (collec tively

“HMI ”) move d for judg ment on the ag ency rec ord. Mot. for J. Upon the Ag ency

R. Pursuant to Rul e 56.2 by Pls. Home Meridian Int’l, I nc. d/b/a SamuelConsol. C ourt No. 11-00325 Pag e 3

L awr ence Fur

niture Co. & Pulaski F urniture Co. & I mport Svcs., I nc. & Consol. P l. Great Rich (HK) Enterpr ises Co., L td. & Dong g uan L iaobushang dun Huada Fur niture F actor

y (“H MIBr .”). Consolidated Plainti ffs Na nhai B aiyi Woodwork Co., L td. (“Na nhai B aiyi”) a

nd Dalian Hua feng
Fur niture Group Co., Ltd. (“Hua feng ”) e ach move d for judg ment on the ag ency rec ord. Mem. of Points and Auths. in Supp. of Consol. P l. Dalian Hua fengFur niture Group Co., Ltd.’s 56.2 Mot. for J. on the Ag ency

R. (“Hua feng

Br .”); Mot. of Pl. Nanha i Ba iyi Woodwork, Co. L td. for J. on the Ag ency

R. Under USCI T Rule 56.2 (“N anhai B aiyi Br.” ). HMI adopted the a

rguments made by Huaf eng . HMIBr . 33. I nterve nor De fenda nts America

n Fur niture Manuf

actur ers Committee for L eg al Tra de and V aug han-B assett Fur niture Company , Inc. (c ollectively “AF MC”), which

wer e plaintiffs in one of

the consolidated a ctions, also moved for judg ment on the ag ency rec ord. AFMC’s Rule 56.2 B r. in Supp. of its Mot. for J . on the Ag ency R. (“AF MC Br.” ). F or the

rea sons stated below, the c ourt rema nds in part and sustains in part the F inal Results.
BACK GR OUND
I n J anuar y 2005, Commerce published a n AD duty

order on WBF f

rom the PRC. Notice of Amended F inal Deter

mination of Sales at L ess Than F air Va lue and Antidumping Duty Orde r: Wooden Be droom Fur niture F rom the People’s Republic of China, 70 Fe d. Reg . 329, 329 (De p’t Commerce J an. 4, 2005). In J anuar y 2010, AFMC and othe rs re quested a n administrative revie w of c erta in companies e x porting WBF to the United States betwee n J anuar y 1, 2009 and
Dec ember

31, 2009, there by

trig g eringthe fifth administrative r eview of WBF. Wooden

1
The subjec t mercha

ndise includes the f

ollowing items: 1 (1) Wooden beds suc h as loft beds, bunk be ds, and other be ds; (2) woode n headboa rds for (continued...)Consol. Court No. 11-00325 Page 4

Bedroom Furniture From the People’s Republic of China: Preliminary Results of Antidumping Duty Administrative Review and Intent To Rescind Review in Part, 76 Fed. Reg. 7534, 7535 (Dep’t Commerce Feb. 10, 2011) (“Preliminary Results”). After publishing a notice of initiation and receiving questionnaire responses and comments, Commerce selected one mandatory respondent: Huafeng. Id. at 7535. In November and December 2010, Commerce verified the 2
(...continued) 1 beds (whether stand-alone or attached to side rails), wooden footboards for beds, wooden side rails for beds, and wooden canopies for beds; (3) night tables, night stands, dressers, commodes, bureaus, mule chests, gentlemen’s chests, bachelor’s chests, lingerie chests, wardrobes, vanities, chessers, chifforobes, and wardrobe-type cabinets; (4) dressers with framed glass mirrors that are attached to, incorporated in, sit on, or hang over the dresser; (5) chests-on-chests, highboys, lowboys, chests of drawers, chests, door chests, chiffoniers, hutches, and armoires; (6) desks, computer stands, filing cabinets, book cases, or writing tables that are attached to or incorporated in the subject merchandise; and (7) other bedroom furniture consistent with the above list. The scope of the order excludes the following items: (1) Seats, chairs, benches, couches, sofas, sofa beds, stools, and other seating furniture; (2) mattresses, mattress supports (including box springs), infant cribs, water beds, and futon frames; (3) office furniture, such as desks, stand-up desks, computer cabinets, filing cabinets, credenzas, and bookcases; (4) dining room or kitchen furniture such as dining tables, chairs, servers, sideboards, buffets, corner cabinets, china cabinets, and china hutches; (5) other non-bedroom furniture, such as television cabinets, cocktail tables, end tables, occasional tables, wall systems, book cases, and entertainment systems; (6) bedroom furniture made primarily of wicker, cane, osier, bamboo or rattan; (7) side rails for beds made of metal if sold separately from the headboard and footboard; (8) bedroom furniture in which bentwood parts predominate; (9) jewelry armories; (10) cheval mirrors; (11) certain metal parts; (12) mirrors that do not attach to, incorporate in, sit on, or hang over a dresser if they are not designed and marketed to be sold in conjunction with a dresser as part of a dresser-mirror set; (13) upholstered beds and (14) toy boxes. Final Results, 76 Fed. Reg. at 49,730 31 (footnotes deleted). Commerce initially decided to review both Huafeng and the Dorbest Group. All review 2 requests for the Dorbest Group were withdrawn. Preliminary Results, 76 Fed. Reg. at 7535. Commerce then named Dongguan Sunrise Furniture Co., Taicang Sunrise Wood Industry Co., (continued...)Consol. Court No. 11-00325 Page 5

antidumping questionnaire and supplemental questionnaire responses of Huafeng. Id. at 7536.

In the Final Results, Commerce assigned Huafeng a separate rate of 41.75%. 3 Final Results, 76 Fed. Reg. at 49,733; see also 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 1/1/09 12/31/09 (Aug. 5, 2011) (“Issues and Decision Memorandum”), available athttp://ia.ita.doc.gov/frn/summary/prc/2011-20434-1.pdf (last visited Sept. 17, 2012). All nonmandatory respondents also received Huafeng’s separate rate of 41.75%. Final Results, 76 Fed. Reg. at 49,733. Commerce assigned the PRC-wide entity a rate of 216.01%. Id.

JURISDICTION & STANDARD OF REVIEW 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).

(...continued) 2 Ltd., and Huafeng Designs (collectively “Fairmont”) as additional mandatory respondents. Id. at 7535 36. “[A] number of interested parties withdrew their review requests, including all review requests of the mandatory respondent Fairmont.” Id. Commerce rescinded the review with respect to 119 entities, including Fairmont. Id. at 7536. The court has previously expressed its view that the selection of one respondent does not fit well with the statutory scheme. Obviously, the all others rate does not reflect a broadly based average. Here, no party challenges the selection of one respondent as unsupported by the record or per se contrary to law. Commerce amended the Final Results, but did not change the assigned dumping 3 margins. Wooden Bedroom Furniture From the People’s Republic of China: Amended Final Results of Antidumping Duty Administrative Review, 76 Fed. Reg. 57,713, 57,713 (Dep’t Commerce Sept. 16, 2011).Consol. Court No. 11-00325 Page 6

DISCUSSION I. Value of Lumber, Veneer and Plywood 4

Huafeng and HMI argue that Commerce erred when it used Philippine import data contemporaneous with the period of review (“POR”) instead of Huafeng’s market economy purchases in order to value lumber, veneer, and plywood. HMI Br. 8; Huafeng Br. 8 28. The Government contends that Commerce’s determination was proper because Huafeng’s market economy purchases were not made during the POR and therefore not the “best available information.” Def.’s Resp. to Pls.’ Rule 56.2 Mots. (“Def. Resp. Br.”) 23. Specifically, the Government argues that Commerce, in exercising its discretion to interpret its regulations, “has developed a practice, whenever possible, of using price data that are contemporaneous with the period of review . . . .” Def. Resp. Br. 23. Huafeng and HMI’s claim has merit.

In determining normal value for non-market economies, Commerce must use “the best available information . . . .” 19 U.S.C. § 1677b(c)(1)(B). When valuing factors purchased from a market economy supplier, Commerce’s regulations stipulate that: [T]he Secretary normally will use the price paid to the market economy supplier. In those instances where a portion of the factor is purchased from a market
A dumping margin is the difference between the normal value (“NV”) of merchandise 4 and the price for sale in the United States. See 19 U.S.C. § 1673e(a)(1); 19 U.S.C. § 1677(35). For merchandise exported from a non-market economy (“NME”), such as the PRC, Commerce calculates NV “on the basis of the value of the factors of production utilized in producing the merchandise and to which shall be added an amount for general expenses and profit plus the cost of containers, coverings, and other expenses.” 19 U.S.C. § 1677b(c)(1). The factors of production include, but are not limited to, labor hours, raw materials, energy and other utilities, and representative capital cost, including depreciation. Id. § 1677b(c)(3). Surrogate values from market economy countries are often used as a measure of these costs. See id. § 1677b(c)(1),(4); GPX Int’l Tire Corp. v. United States, 715 F. Supp. 2d 1337, 1347 (CIT 2010), aff’d, 666 F.3d 732 (Fed. Cir. 2011), reh’g granted, 678 F.3d 1308 (Fed. Cir. 2012).Consol. Court No. 11-00325 Page 7

economy supplier and the remainder from a nonmarket economy supplier, the Secretary normally will value the factor using the price paid to the market economy supplier. 19 C.F.R. § 351.408(c)(1). Furthermore, Commerce creates: . . . a rebuttable presumption that market economy input prices are the best available information for valuing an entire input when the total volume of the input purchased from all market economy sources during the period of investigation or review exceeds 33 percent of the total volume of the input purchased from all sources during the period. In these cases, unless case-specific facts provide adequate grounds to rebut the Department’s presumption, the Department will use the weighted-average market economy purchase price to value the entire input. Antidumping Methodologies: Market Economy Inputs, Expected Non-Market Economy Wages, Duty Drawback; and Request for Comments, 71 Fed. Reg. 61,716, 61,717 18 (Dep’t Commerce Oct. 19, 2006) (“Antidumping Methodologies”). 5

Section § 1677b “sets forth procedures in an effort to determine margins ‘as
In the past, Commerce has favored contemporaneous surrogate values over non- 5 contemporaneous market economy purchases, but it has never addressed a situation where such purchases were 100% of the actual inputs of the subject merchandise. See Issues and Decision Memorandum for the Final Determination in the Antidumping Duty Investigation of diamond sawblades and Parts Thereof from the People’s Republic of China, A-570-900 Investigation, at 75 76 (May 15, 2006), available at http://ia.ita.doc.gov/frn/summary/PRC/E6-7763-1.pdf (last visited Sept. 17, 2012) (declining to use market economy purchases where such purchases were made prior to the period of investigation); Issues and Decision Memorandum for the Final Results of Antidumping Investigation of Automotive Replacement Glass (“ARG”) Windshield from the People’s Republic of China, A-570-867, Investigation, 7/1/00-12/31/00, at Cmt. 32 (Feb. 12, 2002), available at http://ia.ita.doc.gov/frn/summary/prc/02-3383-1.txt (last visited Sept. 17, 2012) (rejecting market economy purchases because they were either insignificant or outside the period of investigation); Issues and Decision Memorandum for the 2002-03 Antidumping Duty Administrative Review: Certain Hot-Rolled Carbon Steel Flat Products from Romania, A-485-806, Admin. Rev. 2002/03, at 25 (June 6, 2005), available at http://ia.ita.doc.gov/frn/summary/romania/E5-3067-1.pdf (last visited Sept. 17, 2012) (declining to use pre-POR purchases as “a benchmark against which [to] measure the surrogate values in the instant review’s POR”). Commerce’s determinations in those proceedings were never reviewed by the court with regard to market economy purchases.Consol. C ourt No. 11-00325 Pag e 8

acc urate ly

as possible.’” L asko Metal Produc ts, I nc. v. United States, 43 F .3d 1442, 1446 (F ed. Cir. 1994) (quoting Rhone Poulenc, Inc. v. United States, 899 F .2d 1185, 1191 (F ed. Cir. 1990)) (findingthat Commerce ma y permissibly

mix methodologie s, using mar ket purc hases to value some fac tors and surr og ates to value others). “ Where we can de termine that a NME produc er’ s input prices ar e mar

ket deter mined, acc urac y , fairne ss, and pre dictability are enhanc ed by

using those price s. There fore , using sur rog ate va lues when ma

rket-ba sed value s are available would, in fac t, be contra

ry to the intent of the law.” L asko, 43 F .3d at 1446 (quoting Oscillating Fa ns and Ceiling F ans fr om the People’s Republic of China, 56 F ed. Reg . 55,271, 55,275 (De p’t Commerce O ct. 25, 1991)); se e Shakepr oof Assembly Components Div. of I ll. Tool W orks, Inc. v. United States, 268 F.3d 1376, 1379, 1383 ( Fe d. Cir. 2001) (agree ing w ith Com merc e that “the
actua l price pa id for the imports constitutes the best ava ilable information . . . .”) ; Taian Z iy ang Food Co. v. United States, 783 F . Supp. 2d 1292, 1330 (CI T 2011) (f inding that “ product specific ity ” take s prec edenc e over contempora

neity ). B ut, Comm erc e also ha s an intere st in using va lues that are contempora neous with the POR beca use Commerce must establish the value of a fa ctor of pr oduction for a specific time period in order to calculate the norma l value of imports within t hat time period a s acc urate ly as possible under 19 U .S.C. § 1677b(a)(1) (A). See Shakeproof

Assembly

Components Div. of I ll. Tool W orks, Inc. v. United States, 30 CI T 1173, 1177 (2006). The pa

rties ag ree that Huaf

engmade no mar

ket ec onomy

purcha ses of lumber during the POR. Huafe ng Br . 7. Huaf engalleg es that it purcha sed 100% of its pine, poplar, birch, e lm, and oak lumber a s well as its oak vene er f rom a mar

ket ec onomy

supplier fromConsol. C ourt No. 11-00325 Pag e 9

Dec ember

2007 to Dece mber 2008, immediately befor e the pe riod of re view which r an fr om J anuar y 2009 to Dece mber 2009. Resp. of D alian Hua fengto the Dep’ t of Commerce Antidumping Reque st for Information (“ Huaf engResp. to Request for Information”) (Jul y 12, 2010), P.R. 338, Mem. of Points and Auths. in Supp. of Rule 56.2 Mot. for J . on the Ag ency R. by Pls. Home Meridian Int’l, I nc. d/b/a Samuel L awr ence Fur niture Co. & Pulaski F urniture Co. and Import Svcs., I nc. & Consol. P l. Great Rich (HK) Ente rs. Co., L td. & Dong g uan L iaobushshang dun Huada Fur niture F actor

y (“H MIApp.”) , Tab 14, at 7, Ex . D-4. F or the fir st time, at oral a

rgument, AFMC and the Gover nment contested H uafe ng ’s alleg ations that 100% of rele vant wood input for the subje ct merc handise duringthe POR was from these marke t economy purcha ses made dur ing the prior ca lendar y ear . In the Preliminary

Results, Com merc e “did not consider ma

rket purc hases made by

Huaf engprior to the POR . . . .” Preliminary Analy sis Memo. for D alian Hua fengFur niture Group Co., Ltd. (J an. 31, 2011), P.R. 472, App. to AFMC’s Rule 56.2 Br . in Supp. of I ts Mot. for J . on the Ag ency R. (“AF MC App.”), Ta

b 18, at 3. In lieu of Hua feng ’s marke t economy purcha ses, Commerce used 2009 Philippi ne import data. I d. In the Fina l Results, C ommerce relied upon its “pr actice of using , whene ver possible, pric e data that

are contempora

neous with the per iod under c onsideration to value [Fa ctors of Produc tion] . . . .”
I ssues and De cision Memorandum 49. Commerc e explained that it treats mar ket ec onomy purcha ses the same as surrog ate va lues: Adjusted pre- POR market ec onomy purcha ses or
surrog ate va lues are used to construc t normal value “ only when ther e ar e no ac cepta ble contempora

neous [surrog ate va lues] on the recor d . . . .” I d. Commerce pointed to the statutory direc tive that normal value “shall be the price . . . at a time re asonably corr esponding to the timeConsol. Court No. 11-00325 Page 10

of the sale used to determine the export price or constructed export price . . . .” 19 U.S.C. § 1677b(a)(1)(A).

If the only wood inputs into the subject merchandise were market economy inputs, contemporaneity would not outweigh all other factors. See Lasko, 43 F.3d at 1446; Shakeproof, 268 F.3d at 1382. Commerce must look at the record. If the administrative record does not reveal whether market economy purchases were the only inputs for the relevant wood inputs, this is one factor which Commerce may weigh. Another factor is that the surrogate value data chosen by Commerce have notable flaws: 1) Commerce’s Philippine Harmonized Tariff Schedule (“HTS”) subheadings 4407.10.90, 4407.99.90, and 4408.90.90 show a significant and 6 unexplained increase over the market economy purchases made during the immediate prior calendar year, and 2) HTS subheading 4407.90.90 is a basket category that includes lumber

7 other than the poplar, birch, and elm used by Huafeng. Accuracy is important. Using the actual

Philippine HTS 4407.10.90 is “Wood sawn or chipped lengthwise, sliced or peeled, 6 whether or not planed, sanded or end-jointed, of a thickness exceeding 6 mm. Coniferous Other[.]” Letter from King & Spalding to Commerce re: Submission of Publicly Available Information to Value Factors of Production (Nov. 15, 2010), P.R. 435, Ex. 2, at 234. Philippine HTS 4407.99.90 is “Wood sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded or end-jointed, of a thickness exceeding 6 mm. Other: Other[.]” Id. at 236. Philippine HTS 4408.90.90 is “Sheets for veneering (including those obtained by slicing laminated wood), for plywood or for other similar laminated wood and other wood, sawn lengthwise, sliced or peeled, whether or not planed, sanded, spliced or end-jointed, of a thickness not exceeding 6 mm. Other Other[.]” Id. at 237. The surrogate value applied by Commerce increased the value of Huafeng’s wood input 7 by nearly [[ ]] over Huafeng’s market economy purchases from 2008. HMI Br. 20 21. AFMC has offered possible causes for this increase, but none of these were mentioned by Commerce. The AFMC’s Resp. in Opp. to Pls.’ Rule 56.2 Mots. for J. on the Agency R. (“AFMC Resp. Br.”) 5 n.3. Confidential Data DeletedConsol. Court No. 11-00325 Page 11

inputs, if available and where they yield reliable values, would seem to promote accuracy more than does using flawed surrogate values.

Here, Commerce did not examine Huafeng’s market economy purchases and therefore made no factual determination as to whether the relevant wood inputs were from market economy purchases. Commerce also did not determine whether or not such purchases were reliable indications of normal value. Commerce did not weigh the merits of using slightly non-contemporaneous market economy purchases of actual inputs versus contemporaneous surrogate values. Instead, Commerce found that accuracy could be determined solely by examining whether or not the values were from the POR. In defense of this position, Commerce stated that “using POR and pre-POR values to calculate NV may introduce distortions.” Issues and Decision Memorandum 49. Yet Commerce frequently uses non-POR values for a variety of reasons. See, e.g., infra § III(A). Where two data sets are equally accurate, Commerce may prefer the contemporaneous data set over the non-contemporaneous data set. See Shakeproof Assembly, 30 CIT at 1178 79 (finding that Commerce may prefer one surrogate value over another on the basis of contemporaneity). Commerce, however, never determined whether thetwo data sets were equally accurate because it explicitly declined to look at Huafeng’s noncontemporaneous market economy purchases. Commerce cannot create a blanket rule that prevents it from comparing the merits of contemporaneous and non-contemporaneous data, and thereby prevents Commerce from determining the best available information. 8
Huafeng and HMI argue that Commerce’s regulations mandate that Commerce use non- 8 contemporaneous market economy purchases where such purchases are the actual input for the subject merchandise even when those purchases are outside the POR. Huafeng Br. 8 11; HMI (continued...)Consol. Court No. 11-00325 Page 12
Because Commerce relied upon contemporaneity to the exclusion of all other factors and failed to make necessary factual findings, Commerce’s interpretation is not in accordance with law. The court remands this matter to Commerce to determine the wood input factor of production in accordance with the statutory or regulatory framework, as well as to make any necessary factual determinations. 9 II. Surrogate Value of Poly Foam

AFMC argues that Commerce’s decision to value poly foam as a non-cellular plastic imported under the Philippine HTS heading 3920, rather than as a cellular plastic imported under HTS heading 3921, is unsupported by substantial evidence. AFMC Br. 11. AFMC’s argument has merit.

(...continued) 8 Br. 16 18. Commerce did not address the probity of Huafeng’s market economy purchases. Issues and Decision Memorandum 51. Additionally, Commerce’s verification of Huafeng’s questionnaire responses is insufficient for the court to conclude that Commerce determined that Huafeng’s market economy purchases were the actual input for the subject merchandise. See Verification at Dalian Huafeng Furniture Group Co., Ltd. (“Huafeng Verification”), P.R. 474 (Jan. 31, 2011), HMI App., Tab 16, at 35. On remand, Commerce will have the opportunity to complete its factual determinations. Thus, the court does not resolve HMI and Huafeng’s claim that the statute and regulations mandate that Commerce accept their non-contemporaneous market economy purchases. HMI argues that Commerce erred in failing to correct a ministerial error when 9 Commerce converted the surrogate value of plywood from a volume-based price to a unit-based price. HMI Br. 30 33. Because the court remands the issue of the value of plywood to Commerce on the aforementioned grounds, the court need not reach the issue of whether this was a ministerial error. Commerce, however, should not perpetuate an error if it exists and if it continues to use the affected data. HMI also argues that Commerce should consider inflating Huafeng’s 2008 market economy purchases to 2009 levels. HMI Br. 14 15. Commerce did not consider this issue because it did not examine Huafeng’s market economy purchases. Commerce may address both issues on remand to the extent they are relevant.Consol. Court No. 11-00325 Page 13
Huafeng describes its poly foam as “packing material to protect goods in the containers.” Huafeng Resp. to Request for Information, AFMC App., Tab 6, at Ex. D-5. 10 Initially, Huafeng classified its poly foam under HTS subheading 3904.10.00, “Poly(vinyl chloride), not mixed with any other substances[.]” Asean Harmonized Tariff Nomenclature 11 (AHTN) Book, 2010 Nomenclature (“AHTN Book”), Ch. 25 40, at 39.20 39.21, available at http://www.tariffcommission.gov.ph/AHTN Chapter39.pdf (last visited Sept. 17, 2012); AFMC Br. 5. In response to Commerce’s critique that Huafeng’s suggested classification was likelyincorrect, Huafeng changed its categorization of poly foam to HTS subheading 3920.30.90, noncellular “polymers of styrene.” Resp. of Dalian Huafeng to the Dep’t of Commerce’s Sept. 21, 12 2010 Supplemental Questionnaire (“First Supplemental Resp.”) (October 12, 2010), P.R. 391, HMI App., Tab 15, at 4 5; see also AHTN Book at 39.20 39.21. Commerce asked Huafeng to explain its selection of HTS subheading 3920.30.90. Resp. of Dalian Huafeng to Questions 43- 72 of the Dep’t of Commerce’s Oct. 25, 2010 Supplemental Questionnaire (“Second Supplemental Resp.”) (Nov. 8, 2010), P.R. 429, HMI App., Tab 17, at 2 3. Huafeng responded that the “[p]oly foam reported by Dalian Huafeng consists of polyethylene, the composition of
The parties have placed the information discussed in this section in their public briefs 10 and appendices, despite their extensive use of the confidential administrative record. No party has objected. The court treats information placed on the public record as public. Philippine HTS subheading 3904.10.00 does not exist, but HTS subheading 3904.10 11 fits Huafeng’s description. HTS subheading 3904.10 consists of “Polymers of vinyl chloride or of other halogenated olefins, in primary forms Poly(vinyl chloride), not mixed with any other substances[.]” AHTN Book at 3904.10. Philippine HTS 3920.30.90 reads in full: “Other plates, sheets, film, foil and strip, of 12 plastics, non-cellular and not reinforced, laminated, supported or similarly combined with other materials Of polymers of stryene Other[.]” AHTN Book at 39.20 39.21.Consol. Court No. 11-00325 Page 14

which is shown on the [Value Added Tax (“VAT”)] invoice issued by the supplier.” Id. at 3. 13 Confused, Commerce asked a follow up question:

14 Philippine HTS 3920.20 contains non-cellular polymers of propylene. Does your poly foam consist primarily of non-cellular polymers of propylene? As stated in the previous response, Non-cellular poly vinyl chloride packing materials appear to be classified within HTS 3920.4x.xx. Please suggest an alternate HTS if necessary. Id. In response, Huafeng changed its categorization again and responded that “[p]oly foam 15 reported by Dalian Huafeng consists of polythene, which should be classified under Philippine HTS 3920.10[.]90.” Id. In the Final Results, Commerce classified poly foam as polyethylene,

The VAT invoice submitted by Huafeng showed [[ 13 ]] Second Supplemental Resp., C.R. 157, at Ex. S-96. “Polyethylene” is “a polymer of ethylene,” especially “one of a group of partially crystalline lightweight thermoplastics” with particular chemical and physical characteristics. Polyethylene, Webster’s Third New Int’l Dictionary, Unabridged, Merriam-Webster (2002), available at http://unabridged.merriam-webster.com/ (last visited Sept. 17, 2012). “Polythene” is polyethylene used as a plastic. Polythene, Webster’s Third New Int’l Dictionary, Unabridged, Merriam-Webster (2002), available at http://unabridged.merriam-webster.com/ (last visited Sept. 17, 2012). Commerce seems to have misread Huafeng’s first response to mean Huafeng 14 categorized poly foam under HTS subheading 3920.20.90, non-cellular “polymers of propylene.” The error derived from Commerce’s questionnaires, where inquiries regarding poly foam were alongside questions regarding Huafeng’s other packing materials, including packing tape. See First Supplemental Resp., P.R. 391, HMI App., Tab 15, at 4 5; Second Supplemental Resp., P.R. 429, HMI App., Tab 17, at 2 3. Huafeng chose HTS subheading 3920.20.90, polymers of propylene, for its packing tape. First Supplemental Resp., P.R. 391, HMI App., Tab 15, at 5; see also Second Supplemental Resp., P.R. 429, HMI App., Tab 17, at 3. “HTS 3920.4x.xx” refers to merchandise under HTS heading 3920 “Other plates, 15 sheets, film, foil and strip, of plastics, non-cellular and not reinforced, laminated, supported or similarly combined with other materials. Of polymers of vinyl chloride[.]” AHTN Book at 39.20 39.21. Confidential Data DeletedConsol. Court No. 11-00325 Page 15

under HTS subheading 3920.10.90. Issues and Decision Memorandum 17. Commerce found that Huafeng had twice classified its poly foam as a non-cellular plastic under HTS heading 3920. Id. Commerce determined that, “Petitioners have cited to nothing on the record contradicting Huafeng’s consistent statements that its poly foam should be classified under HTS categories for products consisting of non-cellular plastic.” Id.

Commerce’s determination relied entirely on Huafeng’s “consistency” in classification. Custom and Border Protection (“CBP”) Ruling NY J81106, stating that plastic foam is cellular polyethylene and should be classified under HTS subheading 3921.19, calls that classification into question. AFMC’s Post Preliminary Results Surrogate Value Submission (March 7, 2011), P.R. 489, AFMC App., Tab 20, at Attach. 13. Additionally, the World Customs Organization (“WCO”) Explanatory Notes state that cellular plastics include foam plastics. Id. at Attach. 14, VII 39 12. These sources support the common definition of foam in the industrial context: Foam is a “material in a lightweight cellular spongy or rigid form produced by foaming,” such as “expanded plastic.” Foam, Webster’s Third New Int’l Dictionary, Unabridged, Merriam-Webster (2002) (emphasis added), available at http://unabridged.merriam-webster.com/ (last visited Sept. 17, 2012). Huafeng has not disputed 16 these characterizations of poly foam in its briefs and did not appear at oral argument to answer any questions on this issue. HMI also did not brief the issue or respond to questions at oral argument on this issue. Given the evidence on the record, Commerce must do more than refer to
AFMC makes this argument based on an older dictionary definition of foam as “a 16 material in a lightweight cellular form resulting from introduction of gas bubbles during manufacture.” AFMC Br. 11 (citing Webster’s New Collegiate Dictionary, G. & C. Merriam Co. (1977), available at http://www.merriam-webster.com/dictionary/foam).Consol. Court No. 11-00325 Page 16

the inconsistent statements of a respondent to unseat conventional wisdom. Although Huafeng twice chose an HTS subheading which was non-cellular, Huafeng has offered three different classifications in response to Commerce’s three requests for information. Huafeng’s answers 17 were consistently unresponsive to Commerce’s questions and in tension with a CBP Ruling and the WCO Explanatory Notes.

The Government counters that “Huafeng’s responses are more specific to their own input than general dictionary definitions . . . .” Def. Resp. Br. 22. Despite Commerce’s requests for Huafeng to explain its classification, no record evidence supports the Government’s conclusion. Additionally, Commerce’s dismissal of the CBP Ruling on the basis that “the poly

18 foam under consideration was cellular and thus [inapplicable] to Huafeng’s non-cellular poly foam” fails to address AFMC’s core point: Poly foam is necessarily cellular. Issues and Decision Memorandum 17. Commerce also did not address the WCO Explanatory Notes. Id. Thus, other than Huafeng’s inconsistent responses, Commerce has provided no basis to believe that poly foam is ever non-cellular.

In the light of overwhelming evidence that poly foam is cellular, Huafeng’s word alone does not constitute substantial evidence that its poly foam is non-cellular. Thus,

Commerce’s verification required an examination of Huafeng’s poly foam. Despite the 17 back-and-forth between Huafeng and Commerce pre-dating verification, that portion of the verification report does not address poly foam. Huafeng Verification, P.R. 474, HMI App., Tab 16, at 40 41. On brief, the Government alternates between stating that Commerce valued poly foam 18 under HTS subheading 3920.30.90 and under 3920.10.90. See Def. Resp. Br. 20, 21. The court treats all these references as HTS subheading 3920.10.90 because this was Commerce’s final determination. See Issues and Decision Memorandum 17.Consol. Court No. 11-00325 Page 17

Commerce’s determination to value poly foam under HTS heading 3920 is unsupported by substantial evidence. The court remands the issue to Commerce so that it can apply the correct HTS subheading and derive the appropriate value therefrom. 19 III. Surrogate Value of Labor A. Contemporaneity of Data & Selection of Bookend Countries AFMC argues that Commerce erred when it selected the bookend countries using 2008 gross national income (“GNI”) data instead of 2009 GNI data. AFMC Br. 22. This claim has merit. In the methodology applied here Commerce selects bookend countries, two countries with the highest and lowest GNIs of countries which are economically similar to the PRC and produce comparable merchandise, in order to delineate the set of countries for wage rate calculations. Factor Valuation Memorandum (Jan. 31, 2011), App. to AFMC’s Resp. Br. in Opp’n to Pls.’ Mots. for J. on the Agency R. (“AFMC Resp. App.”), Tab 16, at Attach. III, 1. 20 Here, Commerce identified the bookend countries from the Surrogate Country Memorandum’s list of economically comparable countries. Id.; Issues and Decision Memorandum 28. At the 21

AFMC proposes HTS subheading 3921.19, “Other plates, sheets, film, foil and strip, of 19 plastics Cellular Of other plastics: Plates and sheets forms[.]” AFMC Br. 7. The court expresses no opinion as to the merit of this classification. The Factor Valuation Memorandum was not placed on the administrative record. 20 AFMC has put an excerpted version of the Factor Valuation Memorandum in its response appendix. No party has objected to this version. When determining which countries are economically similar to China, Commerce uses 21 per-capita GNI to identify countries at roughly the same level of economic development as China. Here, those countries were India, the Philippines, Indonesia, Ukraine, Thailand, and Peru. (continued...)Consol. Court No. 11-00325 Page 18

time the Surrogate Country Memorandum was drafted, only 2008 GNI data were available. Issues and Decision Memorandum 28 29. In January 2011, when Commerce identified the bookend countries, Commerce chose not to use 2009 GNI data which were also available. Commere explained that “[t]he selection of bookend countries is inextricably linked to the 2008 GNI data that was available to the Department at the time the Surrogate Country Memorandum was issued.” Id. at 28 29. Commerce added that “[t]o now reselect the bookend countries based on 2009 data . . . would result in identifying one set of economically comparable countries as a starting point for purposes of our initial surrogate country selection and a different, inconsistent, set of economically comparable countries as a starting point for purposes of our labor rate calculation.” Id. at 29.

Commerce has not explained what links the selection of possible surrogate countries to the selection of the bookend countries for the purpose of wage rate calculations. Additionally, Commerce explicitly excluded surrogate wage calculations from its SurrogateCountry Memorandum, P.R. 248, at 2, and considered the list of surrogate countries “nonexhaustive.” Id. at 1; Factor Valuation Memorandum, AFMC Resp. App. Tab 16, at Attach. III, 1, n.3; see Dorbest Ltd. v. United States, 755 F. Supp. 2d 1291, 1298 (CIT 2011) (“Dorbest V”) (finding that the surrogate country list was not exhaustive as it “allow[ed] for the possibility of introducing a more balanced range of countries from which to draw labor wage rate data”).

Commerce did not “reselect” (nor would it have been required to “reselect”) the
(...continued) 21 Request for a List of Surrogate Countries for an Administrative Review of the Antidumping Duty Order on Wooden Bedroom Furniture from the People’s Republic of China (“Surrogate Country Memorandum”) (Apr. 26, 2010), P.R. 248, at 2.Consol. Court No. 11-00325 Page 19

bookend countries, as it claims, Def. Resp. Br. 29, because selection of bookend countries took place after the 2009 GNI data were available. Furthermore, Commerce has identified no impact from selecting bookend countries that differ from those listed in the Surrogate Valuation Memorandum. See Dorbest V, 755 F. Supp. 2d at 1298 (“[T]here is no indication here that the methodology applied in Fujian Lianfu Forestry to select a primary surrogate country is similar to the methodology for determining surrogate wage rates. [Fujian Lianfu Forestry Co., Ltd. v. United States, 638 F. Supp. 2d 1325, 1348 49 (CIT 2009).]”). Finally, as the prior wood input discussion indicates, Commerce clearly places a high value on using data within the POR. See supra § I; Def. Resp. Br. 23 27; Issues and Decision Memorandum 49. Here it has ignored the fact that this is POR data.

Commerce has insufficiently explained the connection between the selection of surrogate countries and the selection of bookend countries. Absent a new and persuasiveexplanation, on these facts Commerce’s decision to reject contemporaneous data in favor of noncontemporaneous data is unreasonable. The court remands the selection of bookend countries for redetermination or further explanation.
B. Absolute/Relative Differences AFMC argues that Commerce erred when it used absolute differences in GNI rather than relative differences when selecting the range of countries considered to be economically comparable to China. AFMC Br. 27. AFMC concedes that the substantively identical issue was before the court in Dongguan Sunrise. Dongguan Sunrise Furniture Co., Ltd. v. United States, Slip Op. 2012-79, 2012 WL 2045753, at *12 (CIT June 6, 2012); see AFMC Br.Consol. Court No. 11-00325 Page 20

28. In Dongguan Sunrise, the court found that “[a]lthough 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.” Dongguan Sunrise, 2012 WL 2045753, at *12. Here, Commerce used the same methodology and explained itself in essentially the same manner. See Issues and Decision Memorandum 29. AFMC’s current arguments add nothing. The court agrees with the reasoning of Dongguan Sunrise and sustains this aspect of the determination.
IV. Financial Statements

AFMC argues that Commerce should rely on the financial statements of Kirsten, Inc. (“Kirsten”) and Cancio Associates, Inc. (“Cancio”) to establish surrogate financial ratios because Commerce erred in finding that they had significant retail operations. AFMC Br. 18, 20. AFMC also argues that Commerce should not rely on the financial statement of Insular Rattan and Native Products Corp. (“Insular Rattan”) because the financial statement does not include a line item for taxes, which is necessary to determine whether the company received tax subsidies. AFMC Br. 7 8. AFMC’s argument with regard to Insular Rattan has merit although its arguments with regard to Kirsten and Cancio do not.
A. Kirsten AFMC argues that Commerce erred in excluding Kirsten’s financial statements on the basis that Kirsten engaged in “significant retail operations” and the examined respondent did not. AFMC Br. 20 22. Specifically, AFMC argues that the absence of evidence in Kirsten’sConsol. Court No. 11-00325 Page 21

financial statements and on Kirsten’s website regarding significant retail operations casts significant doubt on Commerce’s claims that third-party websites demonstrate that Kirstin engaged in significant retail operations. Id. at 20 21.

Commerce determined that Kirsten may have significant retail operations based on Kirsten’s website, an online business directory entry for Kirsten, and photographs of the outside of one of Kirsten’s buildings. Issues and Decision Memorandum 39. Commerce found that Kirsten’s website indicated that it operated showrooms and served the local market through an entity called “CASA MUEBLES SM.” Id.; AFMC’s Post-Preliminary Results Surrogate Value Submission (May 7, 2011), P.R. 489, AFMC App., Tab 20, at Attach. 1-B. Commerce paired Kirsten’s address from an online business directory with an online picture of that address, which appeared to be located in a shopping mall. Issues and Decision Memorandum 39; Home Meridian Rebuttal Surrogate Value Submission (Mar. 17, 2011), P.R. 500, AFMC App., Tab 21, at Ex. 1. AFMC argues that because Kirsten’s financial statements do not reference the existence of retail stores or operations, instead emphasizing manufacturing and exporting, Commerce’s determination lacks substantial evidence. AFMC Br. 21. Kirsten’s website, however, clearly states that the company has four showrooms. Commerce also noted that there were “multiple 22
Although, as AFMC notes, the portion of Kirsten’s website indicating that they have 22 four showrooms was not put on the record, AFMC itself included significant other portions of the same website on the record. AFMC Br. 20; AFMC’s Post-Preliminary Results Surrogate Value Submission, P.R. 489, AFMC App., Tab 20, at Ex.1-B. The website in its current form echoes Commerce’s factual findings. Kirsten Int’l Inc., http://www.kirsten-intl.com/pages/showrooms.html (last visited Sept. 17, 2012). Additional information on the retail nature of this shopping mall exists. Whether or not the court may take judicial notice of public information readily accessible to all parties, there seems no purpose in sending back this issue for Commerce to find what it has already found. Regardless of further (continued...)Consol. C ourt No. 11-00325 Pag e 22

useable financ ial statements” on the r ecor d from other companies f

or which the re w as no indication of any

reta il activity . Thus, sufficie nt data wa s available to calculate the nec essar y financ ial ratios. I ssues and De cision Memorandum 39. AF MC’s contention relies on the principle that the silenc e of K irsten’s fina ncial stateme nts on the exi stence of re tail operations disproves Commerce ’s interpre tation of various we bsites. Comm erc e per missibl y interpre ted the

rec ord as e vidence that Kirsten likely possessed sig nificant re tail operations. Thus, Com merc e’s deter mination that Kirsten’s financ ial statements did not constitute the “best ava ilable information” f

or ca lculating surrog ate f

inancial r atios was supported by substantial evidence

. B. Cancio AFMC ar g ues that Commerce ’s exclusion of Cancio’s financ ial statements, on the basis that Cancio had r etail oper ations, is unsupported by substantial evidence . AFMC B r. 18. Specifica lly , AFMC conte nds that Cancio’s fina ncial stateme nt “conc lusively contra dicts”
Commerce’ s determination that the f inancial state ments include the re tail operations of CADI Showrooms. I d. at 19.

Commerce de termined that e x penses f or CADI Showrooms were ref

lected in Cancio’s fina

ncial stateme nts. I ssues and De cision Memorandum 43. CADI Showrooms sells Cancio’s fur

niture and a cce ssories to residential c lients and is “manag ed by Cancio Associates.”
I d. CADIShowrooms has four ma in divisi ons: Cancio Contract, CADI Offic e Sy stems, CADI Showrooms, and Cancio Export. I d.; Home Meridian Re buttal Surrog ate Va lue Submissi on,

(...continued) 2 2 supportive fa cts external to the re cord, a t this poi nt the deter

mination is sufficiently

supported by the re cord.Consol. Court No. 11-00325 Page 23

P.R. 500, AFMC App., Tab 21, at Ex. 5, 1 2. Commerce interpreted this as evidence that the entity CADI Showrooms was a retail division covered by the financial statement. Issues and Decision Memorandum 43. Commerce supported this view with evidence of Cancio’s outsized administrative rental expense (which comprised 26% of selling, general, and administrative (“SG&A”) expenses) and the fact that Cancio and CADI Showrooms shared the same office address. Id. at 43 & n.117. Commerce also noted again that “there are multiple usable financial statements on the record from other companies that do not have retail operations . . . .” Id. at 43. Accordingly, it found the volume and range of information that it used sufficient to derive the necessary financial ratios, without Cancio’s information.

Commerce’s decision that Cancio’s financial statements did not provide the “best available information” for calculating the financial ratios was reasonable based on the information available on the record. AFMC argues that a note in Cancio’s financial statements on revenue contradicts Commerce’s determination. AFMC Br. 19. The note states that “[t]his account consists of gross earnings on completed contracts amounting to P28,259,932 and P46,561,119 as of December 31, 2009 and 2008, respectively.” AFMC’s Post-Preliminary Results Surrogate Value Submission, P.R. 489, AFMC App., Tab 20, Attach. 5-A, at 18. AFMC contends that this note indicates that Cancio’s entire revenue was attributable to “completed contracts” and therefore CADI Showrooms’ revenue and expenses cannot be included in the statements because retail sales cannot be contract sales. AFMC Br. 19. AFMC fails to explain why the phrase “completed contracts” is applicable only to non-retail transactions. Why cannot retail sales also be contract sales? Examples of contractual retail sales include credit cardConsol. Court No. 11-00325 Page 24

transactions, lay-away purchases, and installment plans. Additionally, “completed contract” typically refers to the completed contract accounting method and has no bearing on the 23 relationship between a subsidiary retail operation and its parent company. Thus, Commerce’s 24 decision to exclude Cancio’s financial statements has not been significantly undermined.
C. Insular Rattan AFMC argues that Commerce erred when it used the 2009 financial statements from Insular Rattan when calculating the surrogate financial ratios for factory overhead, SG&A expenses, and profit because Insular Rattan’s financial statements fail to disclose the company’s tax expense, as required by the Philippine Accounting Standards. AFMC Br. 7 8. The parties agree that the same argument was contested in Dongguan Sunrise. AFMC Br. 17. As in the prior administrative review, Commerce defended its use of Insular Rattan’s financial statements on the basis that the statements were “affirmed by the auditor to be prepared in accordance with the GAAP of the Philippines,” Commerce “does not rely on income taxes in calculating financial ratios” and the record contained no evidence that Insular Rattan had received subsidies. Issues and Decision Memorandum 38; see Issues and Decision Memorandum for the Final Results of the Administrative Review of the Antidumping Duty Order on Wooden Bedroom Furniture from

Under the completed contract accounting method, any income/expense from a long- 23 term contract is realized only in the year that the work on the contract is completed. Spang Indus., Inc. v. United States, 791 F.2d 906, 907 (Fed. Cir. 1986). AFMC is correct in noting that Commerce neglected to respond to the “completed 24 contracts” portion of AFMC’s argument in its decision. AFMC Br. 19; AFMC Reply Br. in Supp. of Its Rule 56.2 Mot. for J. on the Agency R. (“AFMC Reply Br.”) 4. Contrary to AFMC’s fears, however, the court does not rely on the Government’s post-hoc rationalization in concluding that Commerce could exclude Cancio’s financial statements. See id. at 4 5.Consol. Court No. 11-00325 Page 25

the People’s Republic of China, A-570-890, POR 1/1/08 12/31/08, at 88 (Aug. 11, 2010), available at http://ia.ita.doc.gov/frn/summary/PRC/2010 20499 1.pdf (last visited Sept. 17, 2012). In Dongguan Sunrise, the court found Insular Rattan’s financial statements were potentially unreliable, but that “[w]ithout further information, the court cannot determine whether Commerce has decided unreasonably to use a dubious financial statement.” Dongguan Sunrise, 2012 WL 2045753, at *16. Because the facts and arguments are identical, and the court agrees with Dongguan Sunrise, the court remands for reconsideration of the use of this statement or for an explanation as to why Commerce finds that Insular Rattan’s financial statement is generally reliable and also unaffected by subsidies.
V. Combination Rates

AFMC argues that Commerce abused its discretion by refusing to develop the record with necessary information regarding circumvention in order to apply combination rates, and instead by requiring AFMC to supply conclusive proof of circumvention. AFMC Br. 29 32. AFMC relies on CBP data in the form of two sets of entry documents with sequential numbering from two different companies, and data that shows that the vast bulk of the entries were from the company with the lower rate, to argue that Commerce cannot decline to investigate in light of such prima facia evidence of circumvention. AFMC Br. 33 38. Because AFMC’s evidence 25 26
AFMC points to two entry numbers, [[ 25

(continued...) Confidential Data DeletedConsol. Court No. 11-00325 Page 26

is not “speculative”, as claimed by Commerce, and there also appears to be issue with AD circumvention with respect to WBF largely due to the large number of exporters involved and the widely varying rates applicable to the exporters, Commerce must investigate and decide whether combination rates are appropriate in the context of this subject merchandise.

It is a truism that “[t]he application of combination rates is left to the discretion of Commerce.” Dongguan Sunrise, 2012 WL 2045753, at *24 (citing 19 C.F.R. § 351.107(b)(1)); Tung Mung Dev. Co. v. United States, 354 F.3d 1371, 1381 (Fed. Cir. 2004). As the court has cautioned, however, “[a]n agency’s failure to collect pertinent data . . . in some situations may constitute an abuse of discretion.” Dongguan Sunrise, 2012 WL 2045753, at *24 (citing 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)).

(...continued) 25

]] Proprietary Information Relating to the July 11, 2011 Issues and Decision Memorandum (Aug. 5, 2011), C.R. INT_021493, at 2 3. This type of behavior is not speculative. AFMC has once again placed an article from Furniture Today on the record as evidence 26 that Commerce should have used combination rates. AFMC Br. 28. The court has repeatedly rejected this article as insufficient proof to require Commerce to apply combination rates. See Dongguan Sunrise, 2012 WL 2045753, at *24; Lifestyle Enter., Inc. v. United States, 768 F. Supp. 2d 1286, 1313 14 (CIT 2011). Commerce may choose to consider the article as somewhat supportive, even if it is insufficient by itself. Confidential Data DeletedConsol. C ourt No. 11-00325 Pag e 27

Her e, Commerce asser

ts that “the application of combination rates w ould be too larg e of a n administrative burde n to be pra cticable ,” the fa cts in the instant case do not match 2 7
with the fac ts from a prior instance where Commerce imposed c ombination rates, and “the re is 2 8

no rec ord evide nce c oncer ning spe cific pr oducer

/exporters shifting their e x ports from hig hmarg in to low-marg in exporters.” I ssues and De cision Memorandum 26.

These r easons a

re a ll unsupportive of Commerce ’s dec ision either bec ause the y

are not expl ained or

simply do not ag ree with the evidenc e of r ecor d. Be cause Commerce f ailed to investigate clea

rly raised a lleg ations as to the circ umvention of AD lawin this admini strative revie w of WBF , which we re suppor ted by appar ently

reliable rec ord evide nce, Commerc e abrog ated its duty

to ensure that exporters and produc ers do not cir cumvent AD la w. In Dong ug an Sunrise, the c ourt noted that: The broa der issue is whe ther Commerc e should in its short form questionnaire, which foc uses on whethe r a r espondent is to g et a r ate other than that of the

Commerce’ s argument that apply ing c ombination rates would be a larg e administrative 2 7 burden is irre levant if Commerc e’s inac tion permits circumvention of AD law in contra vention of the AD statute. See L ifestyle Enter., 768 F . Supp. 2d at 1314. Also, Comm erc e has not explained prec isely

why this is s uch a bur den. Commerce’ s duty

to use combination rate s or otherw ise preve nt circumve ntion of AD 2 8 law has nothingto do with whether or not the fac ts of the instant case corr espond with the fa cts in Pis tachios fr om I ran. See I ssues and De cision Memorandum for the Fina l Results of the Administrative Review of the Antidumping Duty Orde r on Certa in I n-Shell Raw Pistachios from I ran, A -507-502, AD R: 07/01/ 02-06/30/02 (Fe b. 7, 2005) at 16, available at http:// ia.ita.doc.g ov/frn/summary /iran/E5-596-1.pdf

(last visited Sept. 17, 2012); see a lso I mport Administration Pol icy

Bulletin 03.2: Combination R ates in Ne w Shipper Reviews ( Mar. 3, 2004), ava ilable at http://ia.ita.doc.g ov/policy /bull03-2.html (last visited Sept. 17, 2012) (outlining the policie s for implementation of c ombination rates whe re the sy stem is being circ umvented). F urthermor e, Commerce considere d four f actor s in that review a

nd it is unclear if Commerce considere d these fa ctors or othe rwise investig ated AF MC’s alleg ations of circ umvention.Consol. C ourt No. 11-00325 Pag e 28

PRC -entity , ask about shipments of subjec t mercha ndise for or

by another company . Appar ently

this ty pe of inquiry

was include d previously . The c ourt is conce rned that Comm erc e’s a nswer that it cannot act be cause it has no circ umvention data and the fac t that it does not ask for the data cr eate s a familiar g eometric object. The court de clines to order a new investigation here be cause AFMC’s e vidence of circ umvention is larg ely based on its own client’ s g ener al statements to a mag azine. This is a troubling a rea , howeve r, and Commerc e should be prepa

red to a lter its investigation techniques or e x plain its actions car efully in the future. It is also not a satisfactory answe r that Commerce does attend to these pr oblems in new shipper r eviews. Dong g uan Sunrise, 2012 WL 2045753, at *25. Commerce argues that this case is just l ike Dong g uan Sunrise, but, in fac t, the companies at issue were treated diffe rently . Unlike in Dong g uan Sunrise, her e Commerce did not apply the 216.01% PRC-wide rate to the company

acc used of r outing other

companies’ sales throug h its low AD rate. Additionally , in Dong g uan 2 9 Sunrise, “Commerce examined and ver ified the sale s of NanjingNanmu and de termined that the sales we re a ctually

from Na njing Na nmu.” Dong g uan Sunrise, 2012 WL2045753, at *24.
Commerce a lso found that the incre ase in Aose n’s shipments throug h lower- rate companies could be attributed to leg itimate business reasons. I d. Commerce ma de no such e ffor ts or finding s in the instant case e x cept to state in a blanket manne r that “in instance s where companies ma

y be improper ly

misreportingtheir entrie s to CBP, such instances will be r eporte d to CBP for prope r ac tion under that ag ency ’s fra ud provisions.” I ssues and De cision Memorandum 26. It is unclear whether Commerce in f

act r eporte d such instance s CBP and, if they wer e re ported, what actions wer e take n.
[[ 2 9 ]] Confidential

Data Delete dConsol. C ourt No. 11-00325 Pag e 29

Acc usations and evidenc e of c ircumvention date back to the third a dminist rative revie w of WBF , indicating an issue that see ms particular to the subject merc handise at issue in the instant case . Such behavior may be a by product of the complex network of hundre ds of Chinese exporters and pr oducer s, which may nece ssitate g reater investig ation and over sight of WBF tha n other subjec t mercha

ndise. Be cause Commerce did not collec t data re lating to the circ umvention of AD lawor otherw ise explain why such data wer e unnec essar

y in this case to
preve nt circumve ntion, Com merc e likely abused its discre tion to apply antidumping duty

reme dies itself. Thus, the issue of c ombination rates is rema nded to Commerce to investiga te and dec ide whethe r combination rates are appropr iate.
VI. Ze roing 3 0

HMIasks the cour

t to remand the issue of

zeroing so that Commerce ma y comply with the Fe dera l Circuit’s holdings in Dongbu Steel Co. v. United States, 635 F.3d 1363, 1366 (F ed. Cir. 2011) a

nd J TEKT Corp. v. United States, 642 F .3d 1378, 1383-84 (F ed. Cir. 2011);
HMIBr . 23. Be cause this iss ue wa s not raised in the brie f at the a g ency level, the c ourt first addre sses administrative exhaustion before rea chingthe merits.
A. Adm inis trat ive Exhau stion The Gove rnment ar g ues that the issue of zer oing should not be r emande d beca use HMIfailed to e x haust its administ rative r emedies. D ef. Resp. B r. 38. HMI counter s that invoking a dminist rative r emedies w ith respec t to z eroingwould have be en futile a nd the cour

t

“Z eroingis the prac tice whe reby the values of

positive dumping marg ins are use d in 3 0 calc ulating the overa ll marg in, but neg ative dumping marg ins are inc luded in the sum of marg ins as zeroes.” J TEKT, 642 F .3d. at 1383 (c iting Dongbu, 635 F.3d at 1366).Consol. Court No. 11-00325 Page 30

therefore should excuse HMI’s failure to exhaust administrative remedies. HMI Br. 28 29.

The court “shall, where appropriate, require the exhaustion of administrative remedies.” 28 U.S.C. § 2637(d). Exhaustion may be waived in certain circumstances, including where unexpected legal developments arise or a challenge to agency action would have appeared futile. Gerber Food (Yunnan) Co. v. United States, 601 F. Supp. 2d 1370, 1377 (CIT 2009) (discussing situations where waiver of the exhaustion requirement is appropriate); see Budd Co., Wheel & Brake Div. v. United States, 15 CIT 446, 452, n.2, 773 F. Supp. 1549, 1555 n.2 (1991). The futility exception requires a party to demonstrate that it would have been “required to go through obviously useless motions in order to preserve [its] rights.” Corus Staal BV v. United States, 502 F.3d 1370, 1379 (Fed. Cir. 2007) (quoting Walsh v. United States, 151 Ct. Cl. 507, 511 (1960)). The parties agree that HMI did not challenge Commerce’s use of zeroing in administrative reviews in its administrative case brief. HMI Br. 23; Def. Resp. Br. 9. Nine days after HMI submitted its administrative case brief, the Federal Circuit announced a decision requiring Commerce to explain or abandon its inconsistent use of zeroing in administrative reviews but not in investigations. See Dongbu, 635 F.3d at 1373; HMI Br. 25 26; Def. Resp. Br. 9. Following Dongbu, HMI attempted to raise the issue of zeroing on two occasions before Commerce issued its final results. See infra n. 30.

“Both Dongbu and JTEKT came as a surprise to many because a long-line of cases seemed to allow Commerce great discretion in making the [zeroing] calculation at issue.” Union Steel v. United States, 823 F. Supp. 2d 1346, 1348 (CIT 2012), appeal docketed, AppealConsol. Court No. 11-00325 Page 31

No. 2012-1248 (Fed. Cir. 2012). Considering the numerous past decisions affirming Commerce’s use of zeroing in administrative reviews, see id. at 1350 52, HMI correctly believed that challenging Commerce’s use of zeroing would have been futile. Moreover, the same day that Dongbu was issued, HMI promptly sent a letter notifying Commerce of the recent decision and indicated its intent to challenge the continued use of zeroing in administrative reviews. 31 Thus, in the instant case, HMI’s failure to exhaust administrative remedies with respect to zeroing is excused due to 1) an unexpected legal development, 2) a challenge to Commerce’s use of zeroing in administrative reviews as a practical matter appeared futile prior to Dongbu, and 3) HMI acted promptly in attempting to rectify its understandable failure to exhaust once Dongbu was issued. The Government and AFMC’s view that nothing prevented HMI from raising the issue in its administrative case brief is too narrow on these facts. See Def. Resp. Br. 41 42; AFMC Resp. Br. 17. Defendants argue that “[t]he mere fact that an adverse decision may have been likely does not excuse a party from satisfying statutory or regulatory requirements to exhaust administrative remedies.” Tianjin Magnesium Int’l Co. v. United States, 722 F. Supp. 2d 1322, 1330 (CIT 2010) (citations omitted); see also Def. Resp. Br. 42. Defendants seem

Plaintiffs sent notices of the intervening Federal Circuit decision to Commerce on 31 March 31, 2011 (the same day Dongbu was published) and June 6, 2011. See Letter from Arent Fox to Commerce re: Notice of Intervening CAFC Decision (June 6, 2011), P.R. 541; Letter from Commerce to Mowry & Grimson re: Untimely Written Argument in March 31, 2011, Letter (Apr. 5, 2011), P.R. Doc. 527, HMI App., Tab 12, at 1; see also HMI Br. 26. Commerce rejected these submissions as untimely. Letter from Commerce to Mowry & Grimson re: Untimely Written Argument in March 31, 2011, Letter (Apr. 5, 2011), P.R. Doc. 527, HMI App., Tab 12, at 1; Letter from Commerce to Arent Fox re: Untimely Written Argument in June 6, 2011, Letter (June 6, 2011), P.R. 542, HMI App., Tab 13, at 1; see also HMI Br. 25 26.Consol. Court No. 11-00325 Page 32

merely to argue that because a subsequent case questioned the validity of Commerce’s zeroing, it was not futile for HMI to make its argument to Commerce. That the law seemed to change due to a judicial opinion, however, is at the core of the recognized exceptions to the exhaustion requirement. Gerber Food, 601 F. Supp. 2d at 1377. The Federal Circuit’s decisions in Dongbu and JTEKT made a challenge to Commerce’s use of zeroing tenable, in so far as those decisions required Commerce to provide an explanation for its differing use of zeroing in ongoing administrative reviews but not in new investigations. Thus, for a variety of reasons HMI’s 32 failure to exhaust administrative remedies with respect to zeroing is excused. B. Commerce’s Explanation Having determined that the zeroing issue is properly before the court, HMI argues that the issue should be remanded to Commerce to calculate Huafeng’s dumping margin without zeroing. HMI Br. 24 25. Dongbu, however, merely requires Commerce to provide a reasonable justification for its inconsistent use of zeroing. Dongbu, 635 F.3d at 1373; see also JTEKT, 33
The Government and AFMC also argue that the court has already expressly rejected the 32 futility exception in a similar situation. Fuwei Films (Shandong) Co. v. United States, 791 F. Supp. 2d 1381, 1384 85 (CIT 2011); see also Def. Resp. Br. 42; AFMC Resp. Br. 16. In Fuwei Films, the plaintiff moved to amend its complaint to challenge Commerce’s use of zeroing after Dongbu was issued. The court held that the futility exception was inapplicable because “[t]here was nothing preventing Fuwei from asserting its rights at the administrative level.” Id. at 1385. In Fuwei Films, the court noted that had plaintiffs asserted its rights with vigor by, for example, submitting a letter to Commerce challenging the use of zeroing as “an unreasonable interpretation of the dumping statute,” Fuwei would have “created a record suitable for judicial review.” Id. In the present case, HMI promptly submitted two letters to Commerce, indicating its intent to challenge Commerce’s use of zeroing in the wake of Dongbu. HMI Br. 25 26. The facts of the present case suggest waiver of exhaustion is not inappropriate here. Several challenges to Commerce’s continued use of zeroing in administrative reviews 33 have been stayed pending the Federal Circuit’s decision in Union Steel (Fed. Cir. No. 2012- (continued...)Consol. Court No. 11-00325 Page 33

642 F.3d at 1384 85 (“In order to satisfy the requirement set out in Dongbu, Commerce must explain why . . . [it is] reasonable to continue zeroing in one phase, but not the other.”). Because Commerce’s use of zeroing was not challenged until after the briefing had concluded and Commerce declined to accept “untimely” arguments, Commerce in this administrative review provided no justification. This is very similar to the situation in Dongbu. As this matter is remanded on other grounds, this issue is also remanded to Commerce to provide an explanation for its differing use of zeroing in administrative reviews and investigations.

(...continued) 33 1248). See JTEKT Corp. v. United States, Slip Op. 2012-72, 2012 WL 2000993 (CIT June 4, 2012); JTEKT Corp. v. United States, Slip Op. 2012-73, 2012 WL 2001379 (CIT June 4, 2012); NTN Bearing Corp. of Am. v. United States, Slip Op. 2012-75, 2012 WL 1999645 (CIT June 4, 2012); SKF USA Inc. v. United States, Slip Op. 2012-74, 2012 WL 1999685 (CIT June 4, 2012); NSK Corp. v. United States, Slip Op. 2012-76, 2012 WL 1999641 (CIT June 4, 2012); NSK Bearings Eur., Ltd. v. United States, Slip Op. 2012-77, 2012 WL 2001745 (CIT June 4, 2012). The court explained its rationale for granting stays on the zeroing issue: In summary, the pending litigation in the Court of Appeals is likely to affect the disposition of plaintiffs’ claim challenging [Commerce’s] zeroing practice. While the case at bar concerns a different antidumping duty order and administrative review than are involved in Union Steel , both cases raise the same general issue of whether the Department’s application of the zeroing methodology in an administrative review of an antidumping duty order is lawful. A stay, therefore, will serve the interest of judicial economy and conserve the resources of the parties. Moreover, defendant and defendant-intervenor have failed to show, or even allege, that the proposed stay would cause them harm. NSK Corp, Slip Op. 2012-76, 2012 WL 1999641, at *1. No party to this case has requested a stay. Moreover, several unrelated issues within this case are remanded. Thus, the interests of orderliness and judicial efficiency weigh in favor of granting a remand on the zeroing issue as well. In addition, later explanations, not present here, supporting zeroing in reviews have been upheld. See Union Steel, 823 F. Supp. 2d at 1346; Far Eastern New Century Corp v. United States., Slip Op. 2012-110, 2012 WL 3715105, at *2 (CIT Aug. 29, 2012); Grobest & I-Mei Indus. (Vietnam) Co. v. United States, Slip Op. 2012-100, 2012 WL 3104900, at *6 (CIT July 31, 2012).Consol. Court No. 11-00325 Page 34

VII. Separate Rates of Other Respondents

AFMC argues that if Huafeng’s separate-rate dumping margin is increased, Commerce should adjust the weighted-average separate-rate of the other respondents, which were calculated based on Huafeng’s rate. AFMC Br. 38. The Government argues that only those respondents subject to an injunction of liquidation (Nanhai Baiyi, Great Rich (HK) Enterprise 34 Co., Ltd., Dongguan Liaobushangdun, and Huafeng) may have their rates adjusted based on any changes to Huafeng’s rates. Def. Resp. Br. 38; Pls. Home Meridian Int’l, Inc. d/b/a Samuel Lawrence Furniture Co. & Pulaski Furniture Co. & Import Svcs., Inc. & Consol. Pl. Great Rich (HK) Enterprises Co., Ltd. & Dongguan Liaobushangdun Huada Furniture Factory Reply Br. in Supp. of Rule 56.2 Mot. for J. upon the Agency R. 14. The court agrees with the reasoning in Dongguan Sunrise that the Government’s argument has merit. Dongguan Sunrise, 2012 WL 2045753, at *25. Pursuant to the statutory scheme the way to obtain a change in final assessment rates when a court decision is not in agreement with the Commerce determination is to have liquidation of relevant entries enjoined. See 19 U.S.C. § 1673b(c), (e). Domestic parties, just as respondents, 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. AFMC has not sought this relief. Accordingly, its request is denied. 35
Nanhai Baiyi argues that should Commerce recalculate Huafeng’s rate, Commerce 34 should also recalculate Nanhai Baiyi’s dumping margin. Nanhai Baiyi Br. 7 8. No party claims otherwise. Because Nanhai Baiyi was subject to suspension of liquidation, Commerce should recalculate Nanhai Baiyi’s rate to reflect any changes to Huafeng’s rate. What action Commerce may take on deposit rates when assessment rates are not 35 (continued...)Consol. C ourt No. 11-00325 Pag e 35

CONCLUSION
For the fore g oing r easons, the c ourt rema nds the matter f

or Commerce to

rec onsider or e x plain whether a surr og ate va lue or mar

ket ec onomy

purcha ses constitute the best available information for c erta in wood inputs, apply the cor rec t HTS sub-headingfor poly foam,

rec onsider or e x plain its reliance on 2008 GNI data f or labor w ag e rate ca lculations, rec onsider or explain why

I nsular Rattan’s f

inancial state ment is ge nera lly reliable and usable , obtain the

nece ssary information to decide whether combination rate s are appropr iate, and pr ovide the require d explanation of its z eroingprac tice. I f Commerce calc ulates a diff ere nt separate ra

te for Huaf eng , Commerce sha ll make appr opriate a djustment for assessment purpose s to the separ ate
rate s of the par

ties befor e the c ourt in this li tigation. Com merc e’s de termination is sustained in all other re spects.

As furthe r investig ation is ordere d, Commerce sha ll file its remand dete rmination with the court within 120 day s of this date. The pa rties shall have 30 day s therea fter to f ile objections, and the G overnme nt will have 15 day s therea fter to f ile its response.

/s/ J ane A . Restani J ane A . Restani J udg e Dated: This 19th day

of September , 2012 New Y ork, Ne w York

(...continued) 3 5 chang ed is not an issue that has be en brie fed a dequate ly befor e the c ourt and the c ourt expresses no opinion on it.