Court Opinion

ID: 2713751
Source: CourtListenerOpinion
Date Created: 2014-08-05 20:59:44.028721+00
Date Added: 2024-06-11T10:01:35.481632
License: Public Domain

Slip Op. 13-

             UNITED STATES COURT OF INTERNATIONAL TRADE

 DONGGUAN SUNRISE FURNITURE CO.,
 LTD., TAICANG SUNRISE WOOD
 INDUSTRY CO., LTD., TAICANG
 FAIRMONT DESIGNS FURNITURE CO.,
 LTD., and MEIZHOU SUNRISE
 FURNITURE CO., LTD.,

                    Plaintiffs,

 LONGRANGE FURNITURE CO., LTD.,

                   Consolidated Plaintiff,

 COASTER COMPANY OF AMERICA, COE
 LTD., LANGFANG TIANCHENG
 FURNITURE CO., LTD., and TRADE
 MASTERS OF TEXAS, INC.,

                    Plaintiff-Intervenors,

             .v.                                 Before: Jane A. Restani, Judge

 UNITED STATES,                                  Consol. Court No. 10-00254

                    Defendant,                   Public Version

 AMERICAN FURNITURE
 MANUFACTURERS COMMITTEE FOR
 LEGAL TRADE, and VAUGHAN-BASSETT
 FURNITURE COMPANY, INC.,

                   Defendant-Intervenors.

                                  OPINION AND ORDER

[Antidumping Remand Results Remanded to Commerce.]

                                                                   Dated: September 4, 2013

            Peter J. Koenig and Christine J. Sohar Henter, Squire Sanders (US) LLP, of
Consol. Court No. 10-00254                                                                    Page 2

Washington, DC, for plaintiffs.

               Lizbeth R. Levinson and Ronald M. Wisla, Kutak Rock LLP, of Washington, DC,
for consolidated plaintiff.

              Kristin H. Mowry, Jeffrey S. Grimson, Susan L. Brooks, Jill A. Cramer, Rebecca
M. Janz, and Sarah M. Wyss, Mowry & Grimson, PLLC, of Washington, DC, for plaintiff-
intervenors Coaster Company of America and Langfang Tiancheng Furniture Co., Ltd.1

               Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director,
Patricia M. McCarthy, Assistant Director, Stephen C. Tosini, Senior Trial Counsel, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for defendant.
Of counsel on the brief was Rebecca Cantu, Attorney, Office of the Chief Counsel for Import
Administration, U.S. Department of Commerce.

             Joseph W. Dorn, Daniel L. Schneiderman, J. Michael Taylor, and Mark T.
Wasden, King & Spalding, LLP, of Washington, DC, for defendant-intervenors.

               Restani, Judge: This matter comes before the court following the court’s decision

in Dongguan Sunrise Furniture Co. v. United States, 865 F. Supp. 2d 1216 (CIT 2012)

(“Dongguan I”), and Dongguan Sunrise Furniture Co. v. United States, 904 F. Supp. 2d 1359

(CIT 2013) (“Dongguan II”), in which the court remanded Wooden Bedroom Furniture From the

People’s Republic of China: Final Results and Final Rescission in Part, 75 Fed. Reg. 50,992,

50,992 (Dep’t Commerce Aug. 18, 2010) (“Final Results”) to the U.S. Department of Commerce

(“Commerce”). For the reasons stated below, the court finds that Commerce has complied with

the court’s instructions regarding the exclusion of Insular Rattan and Native Products’ (“Insular

Rattan”) financial statement from use in the calculation of surrogate financial ratios, but that

       1
         On July 31, 2013, the court entered an order granting Mowry & Grimson, PLLC’s
motion to withdraw as counsel for COE, Ltd. and Trade Masters of Texas, Inc. Dkt. Entry No.
169. The court provided COE, Ltd. and Trade Masters of Texas, Inc. thirty days to obtain
counsel or be dismissed from the case. Id. They have failed to do so as of the date of this
opinion. Accordingly, they will be dismissed from the action.
Consol. Court No. 10-00254                                                                    Page 3

Commerce has not provided substantial evidence for its four partial adverse facts available

(“AFA”) rates assigned to Fairmont’s unreported sales of dressers, armoires, chests, and

nightstands. Thus, Commerce’s second remand results are sustained in part and remanded in

part.

                                         BACKGROUND

               The facts of this case have been documented in the court’s previous opinions. See

Dongguan I, 865 F. Supp. 2d at 1224–25; Dongguan II, 904 F. Supp. 2d at 1361–62. The court

presumes familiarity with those decisions but briefly summarizes the facts relevant to this

opinion. In the Final Results, Plaintiffs Dongguan Sunrise Furniture Co., Ltd., Taicang Sunrise

Wood Industry Co., Ltd., Taicang Fairmont Designs Furniture Co., Ltd., and Meizhou Sunrise

Furniture Co., Ltd. (collectively “Fairmont” or “Plaintiff”) received a rate of 43.23%, which was

calculated based on a rate of approximately 34% for reported sales and a partial adverse facts

available (“AFA”) rate of 216.01% for unreported sales. Final Results, 75 Fed. Reg. at 50,998;

Dongguan I, 865 F. Supp. 2d at 1234. In Dongguan I, the court sustained Commerce’s

application of a partial AFA rate when calculating Fairmont’s overall dumping rate. Dongguan I,

865 F. Supp. 2d at 1223–32. The court concluded, however, that Commerce’s selected AFA rate

of 216.01% was not supported by substantial evidence. Id. at 1233–34. The court stated that

Commerce failed to demonstrate that the 216.01% rate, which was calculated in a new shipper

review for a different entity during a different period of review (“POR”), was relevant and

reliable for Fairmont. Id. at 1233–34.

               On remand, Commerce determined four separate partial AFA rates, one for each
Consol. Court No. 10-00254                                                                  Page 4

of the four types of unreported products, by selecting the single highest CONNUM-specific

margin below 216.01% for the corresponding reported product type. Dongguan II, 904 F. Supp.

2d at 1362. Fairmont received a rate of 39.41%, which included partial AFA rates of 182.15%

for armoires, 215.51% for chests, 134.42% for nightstands, and 183.52% for dressers, which

resulted in an weighted-average rate of 39.41%. Id.

               In Dongguan II, the court found that Commerce’s selected AFA rates were not

supported by substantial evidence. Id. at 1363–64. The court stated that Commerce had failed to

demonstrate a “relationship between the AFA rates chosen and a reasonably accurate estimate of

Fairmont’s actual rate” because the rates were based on a minuscule percentage of Fairmont’s

actual sales. Id. at 1363–64. Additionally, the court noted that the weighted-average margin for

the reported sales, which constituted the vast majority of Fairmont’s POR sales, indicated that

Fairmont’s actual rate would be much lower than the AFA rates selected. Id. at 1364.

               In its second redetermination, Commerce selected the single-highest CONNUM-

specific margin below 216% where at least 0.04% of the total reported sales for that product type

were dumped at or above the selected margin. Final Results of Second Redetermination

Pursuant to Court Order (July 3, 2013) (Dkt. Entry No. 160) (“Second Remand Results”) at 11.

This approach yielded an overall rate of 41.75%, which included partial AFA rates of 189% for

armoires, 161% for chests, 140% for nightstands, and 161% for dressers.2 Id.; Analysis

Memorandum for the Final Results of Redetermination Pursuant to Second Court Remand in the

       2
          The selected AFA rates are in some cases higher than the AFA rates selected in the first
remand results because the exclusion of Insular Rattan’s financial statements from the financial
ratio calculations increased all of Fairmont’s margins. Second Remand Results at 12, n.35.
Consol. Court No. 10-00254                                                                 Page 5

2008 Antidumping Duty Review of Wooden Bedroom Furniture from the People’s Republic of

China, at 27 (July 3, 2012) (Dkt. Entry 165-2) (“Analysis Memorandum”). Plaintiff argues the

partial AFA rates are unsupported by substantial evidence and that Commerce erred in excluding

Insular Rattan’s financial statements from consideration.3 Pl. Fairmont’s Cmts. on Commerce’s

Second Remand Decision (“Pl.’s Cmts.”) at 1, 6. Intervenor Defendants continue to argue that

216.01% was the appropriate AFA rate to apply to all of Fairmont’s unreported sales. AFMC’s

Cmts. Concerning Commerce’s Final Results of Second Redetermination Pursuant to Court

Order at 1. Defendant argues that the selected partial AFA rates and the exclusion of Insular

Rattan’s financial statement comply with the court’s remand order. Def.’s Resp. to Fairmont’s

Remand Cmts. (“Def.’s Cmts.”) at 3, 9.

                       JURISDICTION AND STANDARD OF REVIEW

               The court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (2006). The court will

not uphold Commerce’s final determination in an antidumping duty 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).

       3
          There is no merit to Plaintiff’s argument that Commerce was required to rely on Insular
Rattan’s financial statement in part. See Pl.’s Cmts. at 6–8. The court previously rejected the
same arguments Fairmont raises here. Dongguan I, 865 F. Supp. 2d at 1242–43; Dongguan II,
904 F. Supp. 2d at 1365–67. The court’s decisions refer to the overall unreliability of the
statement, and thus, Fairmont’s suggestion that Commerce should exclude the profit ratio only
and consider other aspects of the financial statement is without merit. See Dongguan II, 904 F.
Supp. 2d at 1367 (noting Commerce lacked substantial evidence for its conclusion that Insular
Rattan’s statement could be considered “complete and reliable”).
Consol. Court No. 10-00254                                                                      Page 6

                                          DISCUSSION

               Plaintiffs argue that Commerce’s selected partial AFA rates are not supported by

substantial evidence and are not in accordance with law because the rates are not reasonably

accurate estimates of Fairmont’s actual rate for the unreported sales. Pl.’s Cmts. at 1. Fairmont

argues the court should remand the AFA rates for the same reasons cited in Dongguan I and

Dongguan II, namely, the “huge divergence” between the rate calculated for the reported sales

and the AFA rates, and the use of an insufficiently small percentage of sales to determine the

AFA rates. Id. Additionally, Fairmont argues Commerce’s stated rationale, that Fairmont made

sales of the unreported product types “at prices that could have resulted in margins similar to the

selected partial AFA rates,” fails because the gross prices corresponding to the sales tied to the

specific CONNUM-margins selected are significantly smaller than the average gross price of the

unreported sales. Id. at 2–6. Plaintiffs argue, therefore, that there is no evidence that the

unreported sales were made at prices that could have resulted in the rates selected. Id.

               When a party has failed to act to the best of its ability, Commerce, “in reaching

the applicable determination under this subtitle, may use an inference that is adverse to the

interests of that party in selecting from among the facts otherwise available.” 19 U.S.C.

§ 1677e(b). The statute permits Commerce to rely on an adverse inference, but the adverse

inference does not replace Commerce’s obligation to base its determinations on substantial

evidence. See 19 U.S.C. § 1516a(b)(1)(B)(i). Accordingly, even an AFA rate must be supported

by substantial evidence. See Gallant Ocean (Thail.) Co. v. United States, 602 F.3d 1319, 1325

(Fed. Cir. 2010). “Substantial evidence requires Commerce to show some relationship between
Consol. Court No. 10-00254                                                                    Page 7

the AFA rate and the actual dumping margin.” Id. In other words, Commerce must demonstrate

that its selected AFA rate is “a reasonably accurate estimate of the respondent’s actual rate, albeit

with some built-in increase intended as a deterrent to non-compliance.” Id. at 1323 (citing F.lli

De Cecco Di Filippo Fara S. Martino S.p.A. v. United States, 216 F.3d 1027, 1032 (Fed. Cir.

2000)).

               Even when a higher AFA rate is available, and can provide a stronger deterrent to

non-compliance, “Commerce may not select unreasonably high rates having no relationship to

the respondent’s actual dumping margin.” Id. (noting the purpose of an AFA rate is to provide

an incentive to cooperate, not to impose “punitive, aberrational, or uncorroborated margins”

(quoting De Cecco, 216 F.3d at 1032)); Yangzhou Bestpak Gifts & Crafts Co. v. United States,

716 F.3d 1370, 1379–80 (Fed. Cir. 2013) (“An overriding purpose of Commerce’s administration

of antidumping laws is to calculate dumping margins as accurately as possible.”). Although

Commerce may include a built-in increase for deterrence, Commerce cannot impose a deterrence

factor far beyond the amount sufficient to deter respondents from future non-compliance.

Gallant Ocean, 602 F.3d at 1324.

               Here, Commerce relied on the same methodology as in the first Remand Results,

with one modification:4 Commerce increased the percentage of sales relied on to at least 0.04%

          4
          In order to determine the AFA rates, Commerce relied on Fairmont’s reported sales
database. Second Remand Results at 11. First, Commerce considered the reported sales of each
of the four unreported product types. Id. at 10. Commerce then considered CONNUM-specific
margins for each product type that were not “atypical sales of unusual products or subject to
unusual terms of sale.” Id. at 12. Finally, Commerce selected a single CONNUM-specific
margin that represented a “sizable portion” of reported sales. Id. at 14. Although Commerce is
not required to adopt Plaintiff’s alterative methodology based on gross prices, Commerce is
                                                                                     (continued...)
Consol. Court No. 10-00254                                                                     Page 8

by quantity of the reported sales by product type, to align with the percentage relied upon in Ta

Chen. Second Remand Results at 11 (citing Ta Chen Stainless Steel Pipe, Inc. v. United States,

298 F.3d 1330 (Fed. Cir. 2002)). Commerce did not, however, make a material increase in the

percentage of sales relied on to determine the rate for armoires and nightstands, because the AFA

rates for these products were based on more than 0.04% of sales in Commerce’s first

redetermination. See Dongguan II, 904 F. Supp. 2d at 1363 n.3.5 Accordingly, Commerce again

selected the single highest CONNUM-specific margin below 216% for these two products. See

Analysis Memorandum at Attach. 3. The increase in percentages for dressers and chests were

marginal and resulted in the selection of the second highest margin below 216% for dressers and

the third highest for chests. See id. Commerce, therefore, has not attempted to significantly

change the selected rates or its methodology and instead attempts to support its original

determinations with what it suggests are new explanations. Second Remand Results at 9 (noting

the methodology applied was also used in the first redetermination).

               Commerce argues the selected rates are supported by substantial evidence for

three reasons: (1) the rates reflect Fairmont’s commercial reality because they are based on

       4
        (...continued)
required to apply its selected methodology in a reasonable manner. As explained below and in
Dongguan II, 905 F. Supp 2d at 1363–64, Commerce’s determination that between 0.14% and
0.38% of sales by quantity represent a “sizable portion” of reported sales sufficient to act as a
reasonably accurate estimate of Fairmont’s actual rate is not reasonable or supported by
substantial evidence.
       5
         The percentage of sales relied on for nightstands increased from 0.379% to 0.38%; the
percentage for armoires increased from 0.208% to 0.33%; dressers increased from 0.007% to
0.22%; and chests increased from 0.015% to 0.14%. Compare Dongguan II, 904 F. Supp. 2d at
1363 n.3 with Analysis Memorandum at Attach. 11.
Consol. Court No. 10-00254                                                                   Page 9

Fairmont’s own POR data and Fairmont experienced transaction-specific dumping margins at or

above the selected margins; (2) the percentage of sales relied on are consistent with the

percentage relied on in Ta Chen; and (3) any broader base or average of sales would eviscerate

the adverse inference. Second Remand Results at 6–15, 20–24. The court notes that it has

previously rejected the first two reasons. Dongguan I, 865 F. Supp. 2d at 1234; Dongguan II, 904

F. Supp. 2d at 1363–65. Commerce, however, articulates some new reasoning, which the court

addresses.6

       1.      Commercial Reality

               Commerce argues it need not rely on a larger percentage of sales to justify its

selected rates because an AFA rate must reflect only a company’s “commercial reality” and does

not have to be an estimate of Fairmont’s “average” experience. Second Remand Results at 21.

Commerce defines “commercial reality” as any dumping margin, including individual

transaction-specific margins, that occurred during the POR. Id. at 9 (“Each transaction . . . is

properly considered part of the company’s commercial reality.”); id. at 14 (defining commercial

reality to refer to any transaction that was commercially viable). Because Commerce defines

       6
          Commerce does not articulate any new reasoning related to Ta Chen. It is sufficient to
note that by relying exclusively on Ta Chen to determine which AFA rate to select, Commerce
assumes that a dumping margin corresponding to 0.04% of sales will always result in a rate that
is both a reasonably accurate estimate of the respondent’s actual rate for the particular respondent
and product at issue and includes a necessary, but not excessive, deterrent factor, given the other
rates imposed on similar respondents in the particular segment. There is no justification for
making such an assumption. Ta Chen has little significance outside the unique facts of that case.
Further, whatever significance 0.04% had in Ta Chen, that factual determination cannot be
applied wholesale here or anywhere else. Trade cases involve different products and different
sales contexts. Some products are very price sensitive, others are not. There is no percentage of
individual sales transactions that is automatically a reasonable percentage to rely upon.
Consol. Court No. 10-00254                                                                   Page 10

commercial reality to refer to any margin experienced by Fairmont, the term “commercial reality”

adds nothing to Commerce’s analysis, and Commerce’s position is that an AFA rate is supported

by substantial evidence as long as it is calculated from the respondent’s own POR data. Second

Remand Results at 11 (arguing an AFA rate is reasonable if it is tied to the respondent’s actual

sales and the rates here are inherently so because they are derived from actual sales).

               Commerce’s position is inconsistent with the Federal Circuit’s directives in

Gallant Ocean, which require Commerce to provide substantial evidence demonstrating a rational

relationship between the AFA rate selected and a reasonably accurate estimate of the

respondent’s actual rate. 602 F.3d at 1325. Reliance on a single CONNUM-specific margin

based on less than 0.38% of the relevant and verified record evidence, without more, does not

demonstrate a reasonably accurate estimate of Fairmont’s actual rate, regardless of whether the

margin was calculated during the POR. This is because a single sale or CONNUM-specific

margin is not generally representative of a respondent’s actual rate. See Gallant Ocean, 602 F.3d

at 1324 (noting that “one sale by itself does not always rise to the level of substantial evidence”).

In administrative reviews, Commerce determines a respondent’s rate by calculating the weighted-

average of the respondent’s dumping margins, see, e.g., 19 C.F.R. § 351.212(b)(1) (noting that

Commerce generally determines assessment rates after a review by calculating a weighted-

average of the respondent’s dumping margins), and thus, a single dumping margin calculated

during a review is not indicative of a respondent’s overall rate, especially when that dumping

margin is based on extremely small percentages (in terms of value and quantity) of reported

sales. Commerce’s methodology, in which the analysis stops once Commerce identifies an
Consol. Court No. 10-00254                                                                  Page 11

individual dumping margin that occurred during the POR, is not a reasonable attempt to estimate

Fairmont’s actual rate. See Second Remand Results at 21 (rejecting Fairmont’s proposal that

Commerce rely on a larger percentage of reported sales because “commercial reality” is not

defined by a company’s average or typical experience).

               Commerce argues Gallant Ocean’s directives are not applicable here because

Gallant Ocean was a corroboration case based on secondary information, whereas Commerce has

relied on Fairmont’s own POR data here.7 Id. at 23 (“We . . find that Gallant Ocean does not

apply to the facts present here.”). The statutorily imposed corroboration requirement for

secondary information in 19 U.S.C. § 1677e(c) did not grant Commerce a carte blanche to use

       7
          Despite disavowing Gallant Ocean’s applicability, Commerce relies extensively on the
term “commercial reality,” which originated in Gallant Ocean. Second Remand Results at 11,
22. In Gallant Ocean, the Federal Circuit stated that an AFA rate must be a “reasonably accurate
estimate of the respondent’s actual rate” and, when based on secondary information, must be tied
to the respondent’s “commercial reality.” 602 F.3d at 1323 (emphasis in original). The Federal
Circuit concluded Commerce did not demonstrate that the AFA rate in Gallant Ocean was
representative of the respondent’s commercial reality and thus, the AFA rate was not a
reasonably accurate estimate of the actual rate. Id. at 1324. Since Gallant Ocean, the Federal
Circuit and the court have used the term “commercial reality” and other similar terms to
encapsulate Commerce’s obligation to demonstrate that a particular AFA rate is a reasonable
estimate of the respondent’s actual rate. See, e.g., Changzhou Wujin Fine Chem. Factory Co. v.
United States, 701 F.3d 1367, 1379 (Fed. Cir. 2012) (noting AFA rates generally bear a
relationship to the party’s “actual business practices”); Lifestyle Enter. v. United States, 865 F.
Supp. 2d 1284, 1290 (CIT 2012) (finding an AFA rate was not corroborated when the
product-specific margins used to corroborate the rate were “outside the mainstream” of the
cooperating respondent’s normal transactions); PSC VSMPO-Avisma v. United States, 755 F.
Supp. 2d 1330, 1336–37 (CIT 2011) (finding transaction-specific margin not corroborated when
Commerce failed to demonstrate a relationship to the respondent’s “commercial reality” or
“market realities”). Thus, it is in error for Commerce to define the term “commercial reality” as
completely distinct from the requirements of Gallant Ocean.
Consol. Court No. 10-00254                                                                  Page 12

primary information8 to impose unreasonable AFA rates having no relationship to the

respondent’s actual rate. Congress imposed the corroboration requirement for secondary

information because it recognized that the “temptation by Commerce to overreach reality in

seeking to maximize deterrence” would be at its highest. Gallant Ocean, 602 F.3d at 1323.

Thus, the corroboration requirement was necessary to ensure Commerce would not “overreach

reality” and apply “unreasonable” rates. Id. (requiring Commerce to determine AFA rates

consistent with the statutory goals of accuracy and fairness, and not distinguishing between

secondary and primary information). The corroboration requirement for secondary information

did not eliminate Commerce’s general obligation to determine AFA rates that are supported by

substantial evidence, nor does it permit Commerce to overreach reality and impose unreasonable

rates as long as primary information is used. Thus, even when Commerce determines an AFA

rate from information obtained during the current review, Commerce’s determination must be

supported by substantial evidence on the record, meaning that the record as a whole demonstrates

       8
          Primary information is not defined in the statute or regulations but is generally
understood to refer to “information obtained in the course of an investigation or review.” See 19
U.S.C. § 1677e(c) (stating that when Commerce “relies on secondary information rather than on
information obtained in the course of an investigation or review” the corroboration requirement
applies (emphasis added)). Commerce suggests that in order to corroborate a rate, Commerce
must examine the “reliability and relevance” of the information on which it relies, but that this is
not required under the substantial evidence requirement. Second Remand Results at 7. Thus,
according to Commerce, if it relies on information obtained during the course of a review to
determine an AFA rate, that primary information need not be “reliable or relevant” to the
respondent’s actual rate. This is obviously incorrect as substantial evidence also requires, at a
minimum, that the information relied on by Commerce to make the determination be both
reliable and relevant to the determination at issue. This does not mean, however, that the
substantial evidence requirement and the corroboration requirement are equivalent.
Corroboration requires Commerce to establish a specific connection between the secondary
information used and the particular respondent beyond that which would be required to
demonstrate a reasonable explanation and reading of the record evidence.
Consol. Court No. 10-00254                                                                       Page 13

the rate is a reasonably accurate estimate of respondent’s actual rate, albeit with a built-in

increase for deterrence. See id. at 1325 (noting that Commerce did not support its determination

with substantial evidence when “a large body of reliable information” suggested the application

of a much lower rate). Commerce’s reliance on individual CONNUM-specific margins,

therefore, is insufficient until Commerce provides substantial evidence to demonstrate that these

particular margins represent a reasonably accurate estimate of Fairmont’s actual rate, albeit with

the built-in increase for non-compliance.

               Commerce attempts to support its selected rates by noting that Fairmont

experienced transaction-specific margins at or above the selected margins. Second Remand

Results at 12, 22.9 Margins calculated from individual transactions of all products, however, are

even less relevant to a reasonably accurate estimate of respondent’s actual rate for each product

type than CONNUM-specific margins. The dumping margin of one sale is not probative of a

respondent’s actual rate, especially when the quantity or value of that sale, relative to the total

amount of sales, is minimal. Instead of increasing the percentage of sales relied on to determine

the AFA margins, Commerce uses a smaller denominator (the Hospitality Division sales) to

       9
          Commerce notes that the simple average of the selected partial AFA rates is less than
the weighted-average margin of: (1) more than [[ ]] percent of Fairmont’s Hospitality
Division’s sales for the four unreported product types; (2) [[ ]] percent of all of Fairmont’s
reported transaction-specific margins for the four unreported product types, and (3) [[ ]] percent
of Fairmont’s sales of all product types. Second Remand Results at 22. Commerce concluded
that more accurate rates are reached when it determines the four rates, one for each product type
See Amended Final Results of Redetermination Pursuant to Court Remand (Oct. 26, 2012) (Dkt.
Entry 119) at 5. Thus, the reliability of statistics based on the average of all four product types is
unclear. If Commerce determines four separate AFA rates, it must support each rate with
substantial evidence related to each selected rate.

                                                                   Confidential Information Deleted
Consol. Court No. 10-00254                                                                  Page 14

achieve a higher percentage and argue that 0.14% to 0.33% of sales can be considered indicative

of the unreported sales. Commerce’s methodology purports to rely on sales that are not

“atypical” or “subject to unusual terms of sale.” Second Remand Results at 12. Commerce,

however, attempts to justify the selected AFA rates by comparing them to transaction-specific

margins over 216%, including margins exceeding 1,500%. Id. at 22; see Analysis Memorandum

at Attach. 13. Although Commerce notes there is no evidence to suggest these extremely high

margins are aberrant, the absence of such evidence is not substantial evidence that these

transactions are relevant to Fairmont’s actual rate, and margins this high have not been shown to

be within the mainstream of Fairmont’s reported sales.

                Moreover, it appears that under Commerce’s methodology, any CONNUM-

specific margin would be supported by substantial evidence because all CONNUM-specific

margins are based on Fairmont’s own POR data and correspond to at least some transaction-

specific margins. For example, under Commerce’s reasoning Commerce could select a

CONNUM-specific margin for armoires of 336.72%, 189.33%, 2.04% or -157.22% because all

of these margins were commercially viable during the POR and are indicative of at least some of

Fairmont’s individual transaction. See Analysis Memorandum at Attach. 10. There must be

some rational explanation, however, as to why Commerce selected 189.33% as the margin to

represent a reasonable estimate of Fairmont’s actual rate for armoires. Commerce avoids this

rational explanation and instead relies exclusively on its ability to draw an adverse inference to

select the highest rate possible.10 Without a rational explanation linking the chosen AFA rates to

       10
            Commerce states that it did not select margins over 216% to satisfy the court’s
                                                                                      (continued...)
Consol. Court No. 10-00254                                                                       Page 15

Fairmont’s actual rate, as opposed to merely linking the rate to individual POR dumping

margins, Commerce selected an “unreasonably high rate[] having no relationship to [Fairmont’s]

actual dumping margin,” contrary to the Federal Circuit’s directives. See Gallant Ocean, 602

F.3d at 1323; PAM, S.p.A. v. United States, 582 F.3d 1336, 1340 (Fed. Cir. 2009) (noting that

although “the possibility of a high AFA margin creates a powerful incentive to avoid dumping

and to cooperate in investigations, there is a limit to Commerce’s discretion.”).

       2.      Adverse Inference

               Commerce states it cannot rely on a larger percentage of sales because this would

eliminate the application of an adverse inference. Second Remand Results at 8–9, 14, 21

(rejecting the options of relying on 34%, the rate for the reported sales, relying on a larger

percentage of reported sales, or relying on an average of a larger percentage of the reported sales

by product type because all of these options would eviscerate the adverse inference). Commerce

creates a false choice between determining rates based on less than 0.5% of reported sales by

product type and rates based on 100% of all reported sales.11 This range obviously provides

Commerce with a number of options to determine a reasonable estimate of Fairmont’s actual rate

       10
         (...continued)
concern. Second Remand Results at 13. Avoiding an outright conflict with the court’s remand
directions and making a reasonable effort to apply the principles embodied therein are not the
same thing.
       11
          Commerce also argues that it cannot rely on a broader base of sales to determine the
margins because this inevitably would have included products other than the four unreported
product types and thus, would be less representative of Fairmont’s dumping practices of the four
unreported product types. Second Remand Results at 10. The court’s directive to rely on a
broader base of sales does not necessarily require consideration of all product types. Commerce
ignores the possibility of relying on a larger percentage of sales of each product type, that is,
more than 0.38% of any particular product type.
Consol. Court No. 10-00254                                                                    Page 16

based on a larger percentage of reported sales. Instead, Commerce has cherry-picked from the

available data in order to achieve the highest-rate possible, which is both results-oriented and

unreasonable. Additionally, although Commerce notes that the selected AFA rates are large

enough to deter future non-compliance, Commerce provides no explanation or evidence to

suggest that a lower rate would not also be sufficient. Such an explanation is particularly

warranted here because the selected AFA margins are many times higher than the weighted-

average margin for the reported sales, which indicates that the deterrence factor applied is far

beyond the amount necessary to defer future non-compliance. See Gallant Ocean, 602 F.3d at

1324 (noting a rate over five times the highest rate imposed on similar products is far beyond an

amount sufficient to deter future non-compliance). Even if Commerce relied on a larger

percentage of sales and discovered the resulting rates were insufficient to deter future non-

compliance, it could add an additional amount to the rate to achieve the desired deterrence factor.

Commerce provides no explanation as to what the deterrence factor is in this case and why the

particular amount applied is necessary, and thus, Commerce has no support for its position that

there is absolutely no alternative margin or increased percentage of sales that could impose a

sufficient deterrence factor.

       3.      Substantial Evidence

               None of Commerce’s new explanations justify its reliance on the minuscule

percentages of sales, and the court concludes that the selected AFA rates are not supported by

substantial evidence for the reasons above and for the same reasons explained in Dongguan II.

904 F. Supp. 2d at 1363–65. The court finds it necessary, however, to clarify what it means by
Consol. Court No. 10-00254                                                                      Page 17

substantial evidence on the record because Commerce appears to have not understood the

previous two orders. See, e.g., Second Remand Results at 8 (stating that Commerce understands

the court to mean that only the weighted-average margin for all of the reported sales, regardless

of product type, can reflect the “commercial reality” of Fairmont).

               Generally, Commerce’s ability to determine a reasonably accurate estimate of a

respondent’s actual rate is hampered by the lack of record data, hence the need for an AFA rate.

Because of this difficulty, which arises from the respondent’s own failure to cooperate,

Commerce’s discretion in determining an AFA rate is particularly great, and Commerce need

only act reasonably in light of the record evidence, or lack thereof. See De Cecco, 216 F.3d at

1032 (noting Commerce’s discretion is particularly great when determining AFA rates).

Commerce’s discretion, however, is not unbounded. Id. Here, Commerce abused its discretion

when it decided that the reported sales by product type represent the most reliable and probative

evidence as to Fairmont’s unreported sales and then chose to ignore 99% of this record evidence.

Unlike other AFA cases, which generally lack record evidence relating to the particular company,

or of sales of a particular product or customer, the record here contains verified sales data

relating to the same type of products, from the same producer, and during the same period of

time as the unreported sales. See Second Remand Results at 8–10 (noting that Fairmont’s

experience with reported sales of the four product types are more relevant to the unreported sales

than other sales data on the record).

               Despite its recognition that the reported and verified sales data for armoires,

chests, dressers, and nightstands are the most appropriate data from which to determine the
Consol. Court No. 10-00254                                                                 Page 18

partial AFA rates for each unreported product type, id. at 10, and its recognition that the more

sales relied on, the more support for a selected rate, id. at 14, Commerce ignored the majority of

the reported and verified information and instead relied on an extremely small percentage of

these sales. For example, for reported sales of armoires, the record contains 66 CONNUM-

specific margins under 216%, ranging from 189.33% to -157.22%. Analysis Memorandum at

Attach. 3. Commerce, however, based the armoire AFA rate on a single CONNUM-specific

margin, which was based on 13 out of 3,885 armoire sales, or 0.33% of total armoire sales by

quantity with margins under 216%. Id. at Attach. 3, 11. As explained above, reliance on such a

minuscule amount of sales provides very little insight into Fairmont’s “actual rate” for the

unreported armoires and ignores a large amount record evidence suggesting a much lower rate.

See id. at Attach. 3 (approximately a third, by quantity, of reported armoire sales with margins

under 216% are dumped at margins below 40%). Such a small percentage is particularly

unhelpful here because the record evidence demonstrates that Fairmont experienced a wide range

in prices, products, and dumping margins, even within each of the four product types. See, e.g.,

id. at Attach. 3 (the U.S. net price for reported sales of armoires range from $85 to $2174, normal

value ranges from $218 to $1410, and the dumping margins range from 189.33% to -157.22%).

Given that Commerce declined to consider the very evidence it identified as most indicative of

Fairmont’s actual rate for the unreported sales, and given that the disregarded record evidence

suggests a reasonably accurate estimate of Fairmont’s actual rate would be much lower,

Commerce’s determinations are not supported by substantial evidence.
Consol. Court No. 10-00254                                                                   Page 19

                                         CONCLUSION

               The court has twice informed Commerce that without a rational explanation as to

why a small percentage of sales can be considered representative of Fairmont’s actual rate,

especially given the large amount of record evidence available and the diversity in Fairmont’s

products and sales, Commerce’s reliance on minuscule percentages of sales to determine the

partial AFA rates does not constitute substantial evidence. Commerce failed to provide a rational

explanation in two attempts, and a third attempt is unnecessary. On remand, Commerce is

directed to rely on a significant portion of the available evidence, already identified by

Commerce as relevant and reliable, to determine the partial AFA rates. Commerce cannot

substitute the adverse inference for substantial evidence demonstrating that the selected rates are

related to Fairmont’s actual rate. Commerce may impose an increase to deter future non-

compliance, but it must demonstrate that the amount does not go substantially beyond what is

necessary to deter non-compliance.

               In all other respects, the Second Remand Results are sustained. Commerce shall

file its remand determination with the court within 60 days of this date (November 4, 2013). The

parties shall have 30 days thereafter to file objections (December 4, 2013) , and the Government

will have 15 days thereafter to file its response (December 19, 2013).

                                                                /s/ Jane A. Restani
                                                                  Jane A. Restani
                                                                       Judge

Dated: September 4, 2013
       New York, New York