Court Opinion

ID: 4518279
Source: CourtListenerOpinion
Date Created: 2020-03-20 17:03:04.412266+00
Date Added: 2024-06-11T11:49:34.034219
License: Public Domain

Slip Op. 20-37

               UNITED STATES COURT OF INTERNATIONAL TRADE

 MACAO COMMERCIAL AND INDUSTRIAL
 SPRING MATTRESS MANUFACTURER,

                        Plaintiff,

                        v.
                                                       Before: Leo M. Gordon, Judge
 UNITED STATES,
                                                       Court No. 19-00005
                        Defendant,
 and

 LEGGETT & PLATT, INC.,

                       Defendant-Intervenor.

                                        OPINION

[Commerce’s Final Determination sustained.]

                                                                 Dated: March 20, 2020

      Susan Kohn Ross and Alesha M. Dominique, Mitchell Silberberg & Knupp LLP of
Los Angeles, CA and Washington, DC for Plaintiff Macao Commercial and Industrial
Spring Mattress Manufacturer.

       Kelly A. Krystyniak, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice of Washington, DC, for Defendant United States. With her on
brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director,
Claudia Burke, Assistant Director. Of counsel was Elio Gonzalez, Attorney,
U.S. Department of Commerce, Office of Chief Counsel for Trade Enforcement and
Compliance of Washington, DC.

      Yohai Baisburd, Jeffery B. Denning, and Chase J. Dunn, Cassidy Levy Kent (USA)
LLP of Washington, DC for Defendant-Intervenor Leggett & Platt, Inc.

       Gordon, Judge:        This action involves the U.S. Department of Commerce’s

(“Commerce”) final affirmative determination that Plaintiff Macao Commercial and
Court No. 19-00005                                                                  Page 2

Industrial Spring Mattress Manufacturer (“Plaintiff” or “Macao Commercial”) circumvented

the antidumping duty (“AD”) order on uncovered innerspring units (“innersprings” or

“innerspring units”) from the People’s Republic of China (“PRC”). See Uncovered

Innerspring Units from the People’s Republic of China, 83 Fed. Reg. 65,626 (Dep’t of

Commerce Dec. 21, 2018) (final affirm. determ. of circumvention of the AD Order) (“Final

Determination”), and the accompanying Issues and Decision Memorandum (Dep’t of

Commerce              Dec.            14,           2018),           available            at

https://enforcement.trade.gov/frn/summary/prc/2018-27677-1.pdf (last visited this date)

(“Decision Memorandum”); see also Uncovered Innerspring Units from the People’s

Republic of China, 74 Fed. Reg. 7,661 (Dep’t of Commerce Feb. 19, 2009) (“Order”).

       Before the court is Plaintiff’s motion for judgment on the agency record under

USCIT Rule 56.2. See Pl.’s Mot. for J. on the Agency R., ECF No. 29 1 (“Pl.’s Br.”); see

also Def.’s Resp. to Pl.’s Mot. for J. on the Agency R., ECF No. 34 (“Def.’s Resp.”); Def.-

Intervenor Leggett & Platt, Inc.’s Resp. Opp. Pl.’s Mot. for J. on the Agency R.,

ECF No. 36; Pl.’s Reply in Supp. Of Mot. for J. on the Agency R., ECF No. 38 (“Pl.’s

Reply”). The court has jurisdiction pursuant to Section 516A(a)(2)(B)(vi) of the Tariff Act

of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(vi) (2012), 2 and 28 U.S.C. § 1581(c)

(2012). For the reasons set forth below, the court sustains Commerce’s Final

Determination.

1
  All citations to parties' briefs and the agency record are to their confidential versions
unless otherwise noted.
2
  Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2012 edition.
Court No. 19-00005                                                               Page 3

                                  I.     Background

      Macao Commercial is a foreign producer and exporter of uncovered innerspring

units made from Chinese-origin materials. See Decision Memorandum at 4. During the

course of the sixth administrative review of the Order, Commerce selected Macao

Commercial as one of the two mandatory respondents subject to individual examination

during the review. Following Macao Commercial’s responses to Commerce’s original and

supplemental questionnaires, Commerce explained that it intended to evaluate whether

self-initiation of an anti-circumvention inquiry would be warranted based upon the

information submitted by Macao Commercial during the review. See Uncovered

Innerspring Units from the People’s Republic of China, 81 Fed. Reg. 62,729 (Dep’t of

Commerce Sept. 12, 2016) (final results AD admin rev.), and accompanying Issues and

Decision Memorandum at cmt. 1 (Dep’t of Commerce Sept. 6, 2016), available at

https://enforcement.trade.gov/frn/summary/prc/2016-21859-1.pdf (last visited this date).

      Pursuant to 19 U.S.C. § 1677j(b), in order to prevent circumvention of an

antidumping duty order, Commerce is empowered to find certain merchandise to be within

the scope of the order if “before importation into the United States, such imported

merchandise is completed or assembled in another foreign country from merchandise

[that is subject to an existing antidumping duty order].” 19 U.S.C. § 1677j(b)(1)(B).

Commerce proceeded to self-initiate an anti-circumvention inquiry to determine whether

innersprings manufactured by Macao Commercial in Macau from raw materials

originating in China, including uncoiled steel wire, nonwoven fabric, and glue, and

exported to the United States from Macau are circumventing the Order. See Uncovered
Court No. 19-00005                                                                 Page 4

Innerspring Units from the People’s Republic of China, 81 Fed. Reg. 83,801 (Dep’t of

Commerce Nov. 22, 2016) (initiation of anticircumvention inquiry on Order).

       After gathering additional information from Macao Commercial by issuing

supplemental questionnaires and conducting public and closed hearings, Commerce

determined that Macao Commercial had failed to provide necessary, requested cost

reconciliations. See Decision Memorandum at 9–12. Commerce also found that there

were discrepancies and unexplained differences with respect to Macao Commercial’s

financial statements. Id. Finding that Macao Commercial failed to cooperate to the best

of its ability, Commerce determined that the application of facts available with an adverse

inference (“AFA”) was appropriate in part. Id. at 12. Consequently, Commerce concluded

that Macao Commercial’s merchandise was subject to the Order pursuant to 19 U.S.C.

§ 1677j(b). See Final Determination.

                               II.     Standard of Review

       The court sustains Commerce’s “determinations, findings, or conclusions” unless

they are “unsupported by substantial evidence on the record, or otherwise not in

accordance with law.” 19 U.S.C § 1516a(b)(1)(B)(i). More specifically, when reviewing

agency determinations, findings or conclusions for substantial evidence, the court

assesses whether the agency action is reasonable given the record as a whole. Nippon

Steel Corp v. United States, 458 F.3d 1345, 1350–51 (Fed. Cir. 2006). Substantial

evidence has been described as “such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,

407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.
Court No. 19-00005                                                                 Page 5

197, 229 (1938)). Substantial evidence has also been described as “something less than

the weight of evidence, and the possibility of drawing two inconsistent conclusions from

the evidence does not prevent an administrative agency’s findings from being supported

by substantial evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966).

Fundamentally, though, “substantial evidence” is best understood as a word formula

connoting a reasonableness review. 3 Charles H. Koch, Jr., Administrative Law and

Practice § 9.24[1] (3d ed. 2019). Therefore, when addressing a substantial evidence issue

raised by a party, the court analyzes whether the challenged agency action “was

reasonable given the circumstances presented by the whole record.” 8A West’s Fed.

Forms, National Courts § 3.6 (5th ed. 2019).

      Separately, the two-step framework provided in Chevron, U.S.A., Inc. v. Natural

Res. Def. Council, Inc., 467 U.S. 837, 842–45 (1984), governs judicial review of

Commerce’s interpretation of the Tariff Act. See United States v. Eurodif S.A., 555 U.S.
305, 316 (2009) (An agency's “interpretation governs in the absence of unambiguous

statutory language to the contrary or unreasonable resolution of language that is

ambiguous.”).

                                   III.   Discussion

      Pursuant to 19 U.S.C. § 1677j(b)(1)(B), Commerce may determine that

merchandise is circumventing an AD order where, “before importation into the United

States, such imported merchandise is completed or assembled in another foreign country

from merchandise which— (i) is subject to such order or finding, or (ii) is produced in the

foreign country with respect to which such order or finding applies.” 19 U.S.C.
Court No. 19-00005                                                                Page 6

§ 1677j(b)(1)(B). The subsequent subsections of the statute provide factors to guide

Commerce’s anti-circumvention determinations. See 19 U.S.C. § 1677j(b)(1)(C)–(E)

(providing Commerce must assess the significance of the “process of assembly or

completion in the foreign country” and “the value of the merchandise produced in the

foreign country”).

          A.     Completion or Assembly Under 19 U.S.C. § 1677j(b)(1)(B)

       Plaintiff’s initial challenge focuses on 19 U.S.C. § 1677j(b)(1)(B), which Commerce

applied in determining that Macao Commercial circumvented the Order as described

above. Plaintiff highlights that Commerce occasionally described Macao Commercial’s

production process as “manufacturing” instead of solely using the precise terms

“completion” or “assembly” as provided in the statute. Pl.’s Br. at 7–12. Commerce

rejected Plaintiff’s argument that that Macao Commercial’s “manufacturing” activities fell

outside the scope of § 1677j(b)(1)(B), explaining that “Macao Commercial attempts to use

semantics to draw a difference between manufacturing, on the one hand, versus

completion or assembly on the other. However, neither the statute nor the legislative

history contemplate a distinction between manufacturing and completion or assembly.”

Decision Memorandum at 13 (citing Omnibus Trade Act, Report of the Senate Finance

Committee, S. Rep. No. 100-71, at 99–101 (1987), and the Statement of Administrative

Action accompanying the Uruguay Round Agreements Act, H. Doc. No. 103-316 (1994),

at 892–95). Plaintiff maintains that Commerce erroneously interpreted § 1677j(b)(1)(B)

by concluding that the “assembly or completion” language in the statute covered Macao

Commercial’s “manufacturing” process. Id. at 11–12.
Court No. 19-00005                                                                          Page 7

       Plaintiff notably fails to explain why it should prevail under the Chevron framework

that this Court uses to assess arguments challenging Commerce’s interpretation of

statutes. Rather, Plaintiff merely notes that the term “manufacturing” is absent from the

language of the statute and its legislative history. See Pl.’s Br. at 11–12. Plaintiff does not

contend that the statute unambiguously supports its position, nor does it explain how

Commerce’s interpretation of the statute is unreasonable. Id. (contending, without any

supporting citations, that “Commerce’s inconsistent language underscores its

misapplication of the statute and is further evidence of a continuing misunderstanding of

Macao Commercial’s manufacturing process. … As such, Commerce’s conclusion is

contrary to law.”). Plaintiff is correct that neither the statute, nor its legislative history, refer

to the term “manufacturing;” however, Commerce relies on legislative history for the

conclusion that Congress intended the agency to have broad discretion in interpreting

and applying the anti-circumvention statute. See Decision Memorandum at 13 (citing

Omnibus Trade Act, Report of the Senate Finance Committee, S. Rep. No. 100-71, at 99–

101 (1987)). Specifically, the cited Senate Committee Report states:

               [T]hese subsections grant the Commerce department
               substantial discretion in interpreting these terms, and invoking
               these measures, so as to allow it flexibility to apply the
               provisions in an appropriate manner, the Committee expects
               the Commerce Department to use this authority to the fullest
               extent possible to combat diversion and circumvention of the
               antidumping and countervailing duty laws.

S. Rep. No. 100-71, at 100. Given this, Commerce reasonably rejected Plaintiff’s attempt

to elevate the agency’s use of the term “manufacturing” to escape the scope of

§ 1677j(b)(1)(B) based on nothing more than semantics.
Court No. 19-00005                                                                   Page 8

       Plaintiff also contends that Commerce’s application of the statute is “not supported

by substantial evidence because the record evidence established that Macao

Commercial’s innersprings are not produced by a process of assembly; rather, they are

made using a sophisticated, technology-driven manufacturing process.” Pl.’s Br. at 2,

7-11. In its preliminary determination, Commerce cited to Macao Commercial’s

questionnaire response as the basis for the agency’s affirmative finding under

§ 1677j(b)(1)(B), noting that:

              Macao Commercial acknowledged throughout this
              proceeding that it sources materials and/or components from
              China, which it uses to assemble innerspring units in Macau.
              As such, the distinction Macao Commercial seems to make
              between components and raw materials is not relevant.
              Therefore, in accordance with section 781(b)(1)(B) of the Act,
              we preliminarily find that innerspring units are assembled in
              Macau by Macao Commercial from Chinese-origin materials
              and/or components prior to importation into the United States.

See Uncovered Innerspring Units from the People’s Republic of China, 83 Fed. Reg.

42,254 (Dep’t of Commerce Aug. 21, 2018) (prelim affirm. determ. of circumvention of

Order) (“Preliminary Determination”), and the accompanying Issues and Decision

Memorandum       at   14   (Dep’t   of   Commerce      Aug.   9,   2018),      available   at

https://enforcement.trade.gov/frn/summary/prc/2018-17784-1.pdf (last visited this date)

(“Preliminary Decision Memorandum”). Plaintiff maintains that “[i]n finding the process is

an ‘assembly,’ Commerce ignored record evidence demonstrating that Macao

Commercial does not use any components such as spring coils, border rods or border

wires to make its innersprings.” Pl.’s Br. at 10. The court disagrees. It is Plaintiff, not

Commerce, that appears to be ignoring record evidence in its argumentation. Commerce
Court No. 19-00005                                                                  Page 9

cited directly to Macao Commercial’s initial questionnaire response that confirmed that

“Macao Commercial manufactures the innersprings it makes in Macao from raw materials

and consumables it receives from China.” See Preliminary Decision Memorandum at 14

n.71 (quoting Macao Commercial’s initial questionnaire response). Plaintiff highlights

other evidence in the record that suggests that Macao Commercial does not “assemble”

Chinese innerspring components; however, Plaintiff fails to demonstrate that Commerce

acted unreasonably in finding that Macao Commercial’s innerspring units are “completed

or assembled in Macau using Chinese-origin materials and/or components prior to

importation into the United States” based on the plain language of Macao Commercial’s

questionnaire response. See Decision Memorandum at 5 (citing Preliminary Decision

Memorandum at 14); see also Tianjin Wanhua Co. v. United States, 40 CIT ___, ___,

179 F. Supp. 3d 1062, 1071 (2016) (noting that plaintiff must demonstrate that its

preferred evidentiary finding is “the one and only reasonable” outcome on the

administrative record, “not simply that [its preferred finding] may have constituted another

possible reasonable choice.”). Accordingly, the court sustains as reasonable Commerce’s

determination that “the merchandise subject to this anticircumvention inquiry was

completed or assembled in Macau using Chinese-origin materials and/or components

prior to importation into the United States.” Decision Memorandum at 5.

                        B.    Application of Partial AFA as to
                      19 U.S.C. §§ 1677j(b)(1)(D) & 1677j(b)(2)(E)

       19 U.S.C. § 1677m(d) provides that, prior to disregarding respondent submissions

found to be deficient and applying adverse facts available (“AFA”), Commerce must:
Court No. 19-00005                                                                Page 10

“promptly inform the person submitting the response of the nature of the deficiency and

shall, to the extent practicable, provide that person with an opportunity to remedy or

explain the deficiency in light of the time limits established for the completion of

investigations or reviews under this subtitle.” 19 U.S.C. § 1677m(d). Plaintiff argues that

Commerce did not notify Macao Commercial of any deficiencies in its questionnaire

responses until the agency issued the Preliminary Determination. See Pl.’s Br. at 12–24.

As a consequence, Plaintiff challenges Commerce’s determination to apply partial AFA

in its assessments under §§ 1677j(b)(1)(D) & 1677j(b)(2)(E) due to Macao Commercial’s

failure to submit cost reconciliations despite Commerce’s repeated requests.

      Commerce explained that it had requested cost reconciliation information from

Plaintiff since the issuance of the initial questionnaire. See Decision Memorandum at 9

(quoting initial questionnaire’s request that respondents “provide complete and fully

translated documentation and worksheets supporting the quantification of the costs to

complete the production of innersprings at each stage of processing”). In response to

Commerce’s initial request, Macao Commercial provided only “an overall narrative

description and self-selected one set of production records for one shipment to use as an

example. … Moreover, while it did provide some source documents (some of which were

not completely translated), it did not provide any accounting ledgers into which these

flowed, much less demonstrate how the information from the source documents flowed

into its accounting records.” Id. Commerce then “pointed out Macao Commercial’s

deficient response and provided more explicit guidance” by issuing a supplemental

questionnaire. See id. Lastly, Commerce provided Macao Commercial with additional
Court No. 19-00005                                                                  Page 11

extensions of time and clarification as to the nature of the cost reconciliation information

the agency expected to receive; however, “Macao Commercial never provided the

requested reconciliations and stated that no such reconciliations exist in its normal books

and records.” Id.

       The court cannot see any merit in Plaintiff’s argument that it did not receive “prompt

notice” of the deficiencies of its questionnaire response. Plaintiff even acknowledges that

“[i]n Question 23 of the Supplemental Questionnaire, Commerce explained that Macao

Commercial’s response to Question 28 of the Initial Questionnaire was ‘materially

deficient and incomplete,’ and repeated its request for cost information, among other

information….” Pl.’s Br. at 17. Moreover, Plaintiff notes that its counsel engaged in

telephone discussions with Commerce to fully understand Commerce’s expectations for

Plaintiff’s responses to the Supplemental Questionnaire. Id. at 17–21. However, despite

repeated clarifications and extensions from Commerce, Plaintiff only provides excuses as

to why “Macao Commercial was not able to provide the sort of reconciliation the

Commerce described.” Id. at 22. Even though Plaintiff concedes that it did not provide

information requested by Commerce in the form and manner expressly sought by the

agency, Plaintiff maintains that it “was completely unaware that its responses were

deemed deficient until Commerce issued its Preliminary Determination.” Id. at 22–23.

       Commerce explained that it “expects companies to be able to produce a

reconciliation of their accounting records based on their normal books and records, upon

request.” Decision Memorandum at 9–10. Commerce further notes that it directed Plaintiff

that “if Macao Commercial does not have a cost accounting system, that it reconcile the
Court No. 19-00005                                                                 Page 12

general ledger or trial balance to the books and records normally kept by the company

which were used to derive the reported quantity of each input consumed in the production

of merchandise covered by the scope of the antidumping duty order.” Id. at 10. Commerce

fully described why the cost reconciliations it sought were vital for its anti-circumvention

determinations and why the agency could not accept Plaintiff’s claimed inability to comply

with Commerce’s request for cost reconciliations:

              Reconciliations are vital to our ability to conduct a
              anticircumvention inquiry, particularly verification of the cost
              information relating to our analysis of the factors under
              sections 781(b)(2)(E) and (b)(1)(D) of the Act. Although the
              format of the reconciliation of submitted costs to actual
              financial statement costs depends greatly on the nature of the
              accounting records maintained by the respondent, the
              reconciliation represents the starting point of a cost
              verification because it assures Commerce that the respondent
              has accounted for all costs before allocating those costs to
              individual products. The cost reconciliations, along with their
              supporting documents, show and explain the link between the
              information the respondent provides in its questionnaire
              responses and the books and records it maintains in the
              ordinary course of business, which are critical to ascertain the
              accuracy of data submitted to address the factors under
              sections 781(b)(2)(E) and (b)(1)(D) of the Act. Whether or not
              Macao Commercial has a sophisticated, fully-integrated
              accounting system is immaterial; Commerce regularly
              investigates and reviews small companies such as Macao
              Commercial in its antidumping cases, requesting and
              obtaining the same kind of reconciliation that Macao
              Commercial failed to produce. … However, Macao
              Commercial continuously failed to provide the required cost
              reconciliation necessary for Commerce to analyze the
              statutory circumvention criteria and conduct a verification.
Court No. 19-00005                                                                 Page 13

Decision Memorandum at 11. Given the record and Commerce’s explanation, Plaintiff’s

argument that it was “completely unaware” of the deficiency of its submissions begs

credulity.

       “[T]he burden of creating an adequate record lies with interested parties and not

with Commerce.” QVD Food Co. v. United States, 658 F.3d 1318, 1324 (Fed. Cir. 2011);

see also Nan Ya Plastics Corp. v. United States, 40 CIT ___, ___, 810 F.3d 1333, 1337–

38 (2016). Macao Commercial’s failure to build an adequate record by providing full

responses to Commerce’s requests resulted in the absence of critical information on the

record, and as a result Commerce reasonably applied partial facts available pursuant to

19 U.S.C. § 1677e(a).

       Plaintiff next contends that even if Commerce properly found that it was

appropriate to rely on partial facts available under 19 U.S.C. § 1677e(a), an adverse

inference was not warranted under § 1677e(b) because Macao Commercial complied

with Commerce’s requests to “the best of its ability.” See Pl.’s Br. at 24–30. Plaintiff

maintains that “Commerce applied partial AFA based solely on its conclusion that Macao

Commercial ‘did not provide the requested cost reconciliations.’” Id. at 26 (quoting

Decision Memorandum at 12) (emphasis added). Plaintiff’s argument, however,

selectively quotes Commerce’s explanation for its finding under § 1677e(b), which states

in full: “Macao Commercial failed to cooperate to the best of its ability to comply with the

requests for information because it did not provide the requested cost reconciliations,

despite receiving multiple opportunities and several extensions of time.” Decision

Memorandum at 12 (emphasis added). The omitted explanatory language is critical, as it
Court No. 19-00005                                                                  Page 14

demonstrates that Commerce’s conclusion that Plaintiff did not act to the “best of its

ability” was not merely due to the failure to submit the requested cost reconciliation

information. Rather, Commerce’s conclusion was based not only on the importance of the

specific cost reconciliation information but also on the fact that the agency had provided

Plaintiff with additional time and guidance to provide this information in the form and

manner that would suit the agency’s need, but Plaintiff nonetheless refused to provide

this crucial information. See Decision Memorandum at 11–12 (detailing “vital” nature of

cost reconciliation information and noting that Commerce’s cost reconciliation

expectations can be met by small, unsophisticated respondents like Plaintiff); see also

Sidenor Indus. SL v. United States, 33 CIT 1660, 1668–69, 664 F. Supp. 2d 1349, 1356–

59 (2009) (sustaining, in context of administrative review, Commerce’s application of AFA

due to respondent’s failure to provide requested cost reconciliations). Given this

explanation, the court sustains as reasonable Commerce’s finding that Macao

Commercial did not act to the “best of its ability” under § 1677e(b). 3

3
  Plaintiff also argues that Commerce’s decision to apply partial AFA was unlawful
because Commerce failed to “conduct a separate analysis” under § 1677e(b). See Pl.’s
Br. at 27–29 (arguing that Commerce’s AFA determination was improperly based on its
“singular analysis” that Macao Commercial “did not provide the requested cost
reconciliations”). This argument rests on the same faulty premise as Plaintiff’s substantial
evidence argument (i.e., that Commerce found Plaintiff did not comply to the best of its
ability “solely” due to the failure to provide cost reconciliations). Id. Because Plaintiff’s
argument hinges on an erroneous characterization of Commerce’s finding and
explanation, the court rejects Plaintiff’s legal argument that Commerce failed to conduct
a separate analysis under § 1677e(b).
Court No. 19-00005                                                                Page 15

  C.     Macao Commercial’s Manufacturing Process as “Minor or Insignificant”
                 under 19 U.S.C. §§ 1677j(b)(1)(C) & 1677j(b)(2)

       Commerce found that Macao Commercial’s manufacturing process is “minor or

insignificant” under §§ 1677j(b)(1)(C) & 1677j(b)(2). See Pl.’s Br. at 30–43. In making its

anti-circumvention inquiry Commerce must determine whether “the process of assembly

or completion in the foreign country … is minor or insignificant.” 19 U.S.C.

§ 1677j(b)(1)(C). The statute provides five factors that Commerce must consider in

reaching its determination under § 1677j(b)(1)(C): (A) “the level of investment,” (B) “the

level of research and development,” (C) “the nature of the production process,” (D) “the

extent of production facilities,” and (E) “the value of the processing performed” in the

foreign country. See 19 U.S.C. § 1677j(b)(2).

       Commerce found that the record demonstrated that Macao Commercial had made

a “significant” level of investment in Macau under the first factor, § 1677j(b)(2)(A).

Nevertheless, Commerce determined that Plaintiff had failed to provide enough evidence

on the record to obtain favorable findings as to the other four factors. See Decision

Memorandum at 5-6. Plaintiff now challenges the reasonableness of Commerce’s

findings as to the remaining four factors, §§ 1677j(b)(2)(B)–(E). See Pl.’s Br. at 30–37.

       Respecting Commerce’s finding under the second factor that Macao Commercial

“has not provided evidence of a significant level of R&D expenditures in Macau to

assemble and complete innersprings,” Plaintiff argues that Commerce unreasonably

ignored “the substantial investment [Macao Commercial] made in continually upgrading

[its] machinery.” Id. at 31; see also Decision Memorandum at 13–14. Commerce
Court No. 19-00005                                                                 Page 16

considered Plaintiff’s argument under § 1677j(b)(2)(B) regarding Macao Commercial’s

machinery-related investments; Commerce, however, disagreed with Plaintiff, concluding

that the agency “had already accounted for such purchases under” § 1677j(b)(2)(A) and

determined that Macao Commercial “was essentially trying to double-count its machinery

purchases under two separate criteria.” Decision Memorandum at 14. Plaintiff maintains

that Commerce should have considered Plaintiff’s machinery purchases, and its affiliation

with a machine production company heavily involved with research and development of

technologies to improve the production efficiency of innerspring-making machinery, as

evidence that Plaintiff had a significant “level of research and development in the foreign

country” under § 1677j(b)(2)(B). See Pl.’s Br. at 30–33. The court disagrees.

       As Commerce explained, it accounted for Macao Commercial’s investment in high-

tech machinery purchases under § 1677j(b)(2)(A). Commerce reasonably found that

considering those same purchases as evidence of Plaintiff’s investment in “research and

development” under § 1677j(b)(2)(B) would essentially “double-count” Plaintiff’s

machinery    purchases    in   Commerce’s     § 1677j(b)(2)   evaluation.   See   Decision

Memorandum at 14. Plaintiff contends that “Commerce’s conclusion is wholly

unsubstantiated,” arguing that “Commerce failed to provide a reasoned analysis or

explanation, much less any authority whatsoever, for its conclusion that the evidence

presented in response to a circumvention inquiry can be used to analyze only one, rather

than multiple, factors under § 1677j(b)(2).” Pl.’s Br. at 33. Plaintiff’s argument

misapprehends Commerce’s obligations under the statute and the standard of review.

Plaintiff is correct that the statute does not expressly prohibit using the same evidence to
Court No. 19-00005                                                                Page 17

analyze multiple factors under § 1677j(b)(2); however, Plaintiff cannot identify any

statutory or regulatory guidance indicating that Commerce cannot account for such

“double-counting” in its analysis of each factor. Accordingly, Commerce reasonably

refused to double-count Plaintiff’s investments in machinery in evaluating Macao

Commercial’s level of investment under § 1677j(b)(2)(A) and its level of “research and

development” under § 1677j(b)(2)(B).

       With respect to the third and fourth factors, § 1677j(b)(2)(C) and § 1677j(b)(2)(D),

Commerce found that “the nature of the production process in Macau is minor and Macao

Commercial’s production facility is not extensive.” See Decision Memorandum at 13.

Commerce explained that its finding was consistent with its analysis in the Preliminary

Determination, and Commerce noted that the information on the record “indicated that

Macao Commercial uses a minimal number of upstream material inputs and a very small

workforce in a production facility of limited size.” Id. While Commerce acknowledged that

Macao Commercial’s production process was automated due to significant investments

in machinery (as the agency had found under § 1677j(b)(2)(A)), Commerce emphasized

that “a greater degree of automation does not change the fact that the production process

for manufacturing innersprings using imported raw materials, as described by Macao

Commercial, involves a limited number of both workers and inputs in a small production

area.” Id.

       Plaintiff maintains that these findings are unreasonable considering “the

substantial evidence which clearly demonstrated that the nature of the innerspring-

making process is significant, and the extent of the production facilities in Macau are
Court No. 19-00005                                                                   Page 18

extensive.” Pl.’s Br. at 33. Plaintiff highlights various aspects of the record supporting its

contention that its “sophisticated technology-driven innerspring-making process” is

significant under § 1677j(b)(2)(C). Id. at 34–36. Similarly, Plaintiff describes the

information on the record indicating the significant cost and value of its production

facilities to support its position under § 1677j(b)(2)(D). Id. at 36–37. At most, the

information cited by Plaintiff indicates that Commerce could have reasonably found that

the nature of Plaintiff’s production process in Macau is significant and Macao

Commercial’s production facility is extensive. Plaintiff’s arguments, however, fail to

establish that the information on the record supported one, and only one, reasonable

conclusion (i.e., that its production process in Macau is significant and that its production

facility is extensive). See Tianjin Wanhua Co. v. United States, 40 CIT ___, ___, 179 F.

Supp. 3d 1062, 1071 (2016) (noting that plaintiff must demonstrate that its preferred

evidentiary finding is “the one and only reasonable” outcome on the administrative record,

“not simply that [its preferred finding] may have constituted another possible reasonable

choice.”). Accordingly, the court sustains Commerce’s findings under § 1677j(b)(2)(C)

and § 1677j(b)(2)(D) that the nature of Plaintiff’s production process in Macau is minor

and that its production facility is not extensive.

             D.      The Value of Macao Commercial’s Processing under
                       19 U.S.C. §§ 1677j(b)(1)(D) & 1677j(b)(2)(E)

       Lastly, Plaintiff contends that Commerce improperly found that the value of the

processing performed in Macau “represents a small proportion of the value of the

merchandise imported into the United States” pursuant to the fifth factor, § 1677j(b)(2)(E).
Court No. 19-00005                                                                 Page 19

See Pl.’s Br. at 37–43. Plaintiff specifically argues that Commerce “failed to conduct a

qualitative analysis” in reaching its determination under § 1677j(b)(2)(E), and further

maintains that Commerce improperly applied partial AFA in reaching its § 1677j(b)(2)(E)

finding by relying on facts from Uncovered Innerspring Units from the People’s Republic

of China, 79 Fed. Reg. 78,794 (Dep’t of Commerce Dec. 31, 2014) (“Goldon”). Pl.’s Br.

at 39. Plaintiff repeats these same arguments in challenging Commerce’s “determination

that the value of the Chinese-origin raw materials used by Macao Commercial to

manufacture in Macau innersprings exported to the United States represents a significant

portion of the total value of the merchandise exported to the United States” pursuant to

§ 1677j(b)(1)(D). See id. at 43–45 (noting “Commerce’s decision to resort to partial AFA

and to rely on the facts of Goldon was improper for all the reasons set forth supra”).

Defendant, however, points out that Plaintiff failed to raise these issues in its case brief

before Commerce and thus failed to exhaust its administrative remedies. See Def.’s

Resp. at 26, 28. While Plaintiff notes that it made a general challenge to Commerce’s

value determinations under §§ 1677j(b)(1)(D) & 1677j(b)(2)(E) in its administrative case

brief, Plaintiff cannot dispute that it failed to raise the specific arguments challenging

Commerce’s failure to conduct a qualitative analysis and Commerce’s reliance on

Goldon. See generally Macao Commercial Case Brief at 4–5, 12–16, PD 4 274 at barcode

3753511-01, CD 304 at barcode 3753509-01. Instead, Plaintiff attempts to rely on certain

language from the court’s scheduling order as a basis for avoiding the consequences of

4
 “PD” refers to a document contained in the public administrative record. “CD” refers to
a document contained in the confidential record.
Court No. 19-00005                                                                  Page 20

its failure to exhaust its administrative remedies. See Pl.’s Reply at 13–14 n.3 (citing

Scheduling Order at 2, ECF No. 26). The Scheduling Order states: “Please do not merely

cut-and-paste arguments from administrative case briefs, and think anew about the

issues against the operative standards of review the court must apply.” See Scheduling

Order at 2. Plaintiff cites the court’s encouragement for parties to “think anew about the

issues” as providing apparent permission for Plaintiff to raise new arguments that it failed

to make to Commerce in the administrative proceeding. See Pl.’s Reply at 14 n.3.

       However, Plaintiff’s understanding is misplaced, as the very next sentence in the

scheduling order states: “Likewise, please make sure you have exhausted your

administrative remedies and raised the issues by presenting your arguments to the

agency in the first instance.” Scheduling Order at 2. Simply put, Plaintiff failed to present

to Commerce the specific arguments challenging Commerce’s determination under

§§ 1677j(b)(1)(D) & 1677j(b)(2)(E) that it now raises before the court. The court therefore

will disregard Plaintiff’s arguments on these issues due to a failure to exhaust its

administrative remedies as to these arguments. See Essar Steel, Ltd. v. United States,

753 F.3d 1368, 1374 (Fed. Cir. 2014).

                                    IV.    Conclusion

       For the foregoing reasons, the court sustains the Final Determination. Judgment

will be entered accordingly.

                                                                 /s/ Leo M. Gordon
                                                              Judge Leo M. Gordon

Dated: March 20, 2020
       New York, New York