Antidumping Petitioner Voices Support for Commerce Surrogate Financial Ratio Calculation Method

Antidumping petitioner American Kitchen Cabinet Alliance voiced its support for the Commerce Department's remand results in Nov.10 comments submitted to the Court of International Trade. After CIT remanded the case to Commerce for its failure to address the concerns of the mandatory respondent, the agency returned with a more thorough backing of its surrogate financial ratio decision that it believes adequately addresses the respondent's concerns (see 2110130053) (The Ancientree Cabinet Co., Ltd. v. United States, CIT # 20-00114).

The case stems from an antidumping duty investigation into wooden cabinets and vanities from China in which The Ancientree Cabinet Co. was tapped to serve as a mandatory respondent. Commerce picked Romania as the surrogate country for determining normal value and used the financial statements from the Romania-based company Sigstrat.

During the investigation, the AKCA submitted a methodology to calculate surrogate financial ratios that started with the cost of goods sold (COGS) from the surrogate company Sigstrat's financial statements. Ancientree, on the other hand, submitted two methodologies for calculating the ratios, one using Sigstrat's data, starting with line items from the company's income statements, and the other that was just Commerce's methodology in prior proceedings.

Breaking with its practice in the prior proceedings, Commerce said that it prefers the methodology that starts with the COGS since it "identifies Sigstrat’s costs by function (i.e., COGS, [selling, general and administrative expenses] SG&A, etc.), not type of transaction, and allows Commerce to properly classify the costs as either manufacturing costs, operating costs (i.e., SG&A costs), or financial expenses." However, this explanation was originally not available to Ancientree, hence the litigation.

In its comments on the remand, the AKCA said that Commerce fully addressed Ancientree's argument that Commerce's calculation of the Sigstrat financial ratio was inconsistent with its calculation of the same ratio in prior proceedings. Commerce acted in line with its established practice of calculating financial ratios starting from COGS when available, and therefore, is "more precise and accurate than Ancientree’s proposed methodology of starting from various line items in the company’s income statement," the comments said.