False Advertising Immaterial to Antidumping Case, CIT Rules in Rejecting Use of AFA

That an antidumping review respondent lied in its advertisements about what its goods were made of does not warrant the application of adverse facts available, the Court of International Trade said in a Nov. 18 decision. Judge Miller Baker said that while the respondent's advertising in the U.S. is a "complete fraud from bark to core," the Commerce Department must derive the company's dumping rate from its actual costs. The judge also held that Commerce does not have the jurisdiction to "police false advertising violations" under its antidumping laws.

“Dalian Meisen is pleased by the careful analysis of the court regarding the limitations on the statutory authority of Commerce to apply AFA under these circumstances," said Jeffrey Neeley of Husch Blackwell, counsel to Meisen. "We look forward to working with Commerce to obtain an accurate dumping margin.”

The dispute stems from an antidumping duty proceeding on wooden cabinets and vanities and their components from China in which Dalian Meisen Woodworking was a mandatory respondent. The underlying investigation found that Meisen's U.S. affiliates were advertising its birch cabinets as made of maple. In its preliminary determination, Commerce said this created a control number mismatch. The agency said that Meisen failed to give complete and accurate information on its production process, withheld information, failed to give information in the manner requested and impeded the investigation.

After the preliminary findings, Commerce issued a pair of follow-up questionnaires that showed Meisen's original submissions were correct: "Meisen didn’t lie to the Department -- it lied to its U.S. customers," the judge said. This led Commerce to cite three new reasons for imposing AFA. It said Meisen withheld information to Commerce, failed to timely report this information and significantly impeded the investigation (see 2105280027).

In his remand, Baker said "the Federal Trade Commission, state Attorney General, and the plaintiffs' class action bar may wish to take a close look at the producer's swindling of its U.S. customers."

As it pertains to Meisen's alleged withholding of information, Baker said that Commerce gave only one reason that the company's actions could lead to this conclusion. The agency said Meisen gave conflicting reasons as to why its marketing materials misrepresented the type of wood it used in its cabinets. "Even accepting Commerce’s characterization, the Department lacks any authority to investigate why antidumping respondents engage in false advertising, just as it lacks the authority to ask respondents why they violate environmental or antitrust laws, or why their executives are disreputable people," the judge said. "... Commerce exceeded its regulatory writ by asking why Meisen lied."

Baker said Commerce "unreasonably" invoked Meisen's failure to timely report its information, given that the company timely responded to Commerce's questionnaires and gave information in the "form and manner requested."

The rationale warranting the most discussion from Baker was Commerce's contention that Meisen impeded the investigation by lying to its customers. The agency faulted Meisen for not flagging this false advertising in its original questionnaire, leading to Commerce wasting time on rooting it out. "The problem with this reasoning, however, is that Commerce acknowledges that Meisen fully and truthfully complied with the Department’s original questionnaires," the judge said. Also, the agency clearly showed that it understood the implications of Meisen's information due to its response to the post-preliminary questionnaires showing that it was "(understandably) appalled," the judge said.

Commerce also had argued that the false advertising effectively obscured the degree to which the company was selling its cabinets at a less than fair value. However, the statute requires the agency to use the price at which the merchandise is first sold. "A respondent’s otherwise illegal manipulation of the U.S. sales price of its products is statutorily irrelevant for antidumping purposes," the opinion said. "The law provides remedies for illegal conduct that manipulates prices, but they are outside the Tariff Act and beyond the Department’s antidumping jurisdiction."

Lastly addressing Commerce's allegation that the false advertising created a control number mismatch, Baker disagreed, saying Meisen's CONNUMs for its sales database and factors of production matched. "Rather than accepting the company’s truthful information, the Department instead refused to use that information because Meisen lied to its customers, a subject beyond Commerce’s statutory authority," the judge said.

(Dalian Meisen Woodworking Co., Ltd., et al. v. United States, Slip Op. 21-158, CIT #20-00109, dated 11/18/21, Judge Miller Baker; Attorneys: Stephen Brophy of Husch Blackwell for plaintiff Meisen; Ioana Cristei for defendant U.S. government)