Commerce Flips Basis for AFA After Trade Court Says False Advertising Immaterial to AD Case
The Commerce Department altered the basis for its use of adverse facts available on remand at the Court of International Trade in an antidumping case after the court said that antidumping respondent Dalian Meisen Woodworking's false advertisements cannot be used as grounds for AFA. Submitting its remand results on June 6, Commerce said that after issuing a host of new questionnaires to Meisen, including a questionnaire in lieu of on-site verification, it changed its bases for AFA, now basing it on the respondent's failure to provide "critical information" in the questionnaire and all of its U.S. affiliates (Dalian Meisen Woodworking Co. v. United States, CIT #20-00109).
The case stems from an antidumping duty proceeding on wooden cabinets and vanities and their components from China. The underlying investigation found that Meisen's U.S. affiliates were falsely 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. Judge M. Miller Baker found that Meisen didn’t lie to the department, just to its U.S. customers. 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).
Nevertheless, the judge found that, while the advertising is a "complete fraud from bark to core," Commerce did not establish the proper grounds for the use of AFA (see 2111190030). Baker ruled that since the respondent never actually lied to Commerce or impeded the investigation, there are no proper grounds for the use of AFA.
On remand, Commerce relied on three elements of the company's questionnaire responses: the incompleteness of the company's U.S. sales database for purposes of reconciling data from selected resellers, reporting errors in Meisen's sales database and the company's unreported U.S. affiliates.
During the remand, Commerce looked at two of the entities under Meisen's U.S. affiliate, the J&K Companies. The agency requested source documentation backing the worksheets it used to reconcile the total sales by the two resellers during the review period to their tax returns. Commerce found Meisen's response wanting, holding that the respondent failed to respond completely and left out significant documents needed to verify the completeness of the U.S. sales database.
"Meisen was required to provide documentation that could satisfy Commerce’s requests (i.e., demonstrate, using source documentation, that the sales data reported were rooted in the J&K Companies’ books and records), and as we explain above, the Q&V reconciliation is one of the most important tasks performed at verification," the remand said. "Meisen’s failure to provide the necessary source documentation for Commerce to conduct this task not only made it impossible for Commerce to verify a substantial portion of Meisen’s U.S. sales, but it also calls into question whether the remainder of the J&K Companies’ sales are verifiable."
Commerce also pointed out multiple reporting errors committed by Meisen when it was relaying its sales database information. The agency said that the errors found in the questionnaire in lieu of on-site verification were "pervasive and significant," and thus the accuracy of its entire U.S. sales data is considered unverified. "Further, we note that, in certain instances (such as those involving Meisen’s customer code lists and Meisen’s international movement expenses), Meisen withheld information explicitly requested by Commerce," the brief said. Meisen also failed to report information on at least one affiliate that was discovered during the remand, Commerce said.