CIT Sends Back Use of Financial Statements for Surrogate Financial Ratios in AD Review on Mattresses

The Commerce Department must reconsider its reliance on a financial statement in an antidumping review to calculate surrogate financial ratios, the Court of International Trade ruled in a confidential Nov. 28 opinion made public Dec. 7. Judge Timothy Reif directed Commerce to reconsider or further explain the agency's conclusions that the statements were complete and publicly available. However, the judge did uphold Commerce's surrogate value for pocket coil innerspring units.

Reif deferred consideration of other challenged elements of the antidumping review, including other elements of Emirates Sleep Systems' financial statements and Commerce's use of the Cohen's d test as part of its differential pricing analysis to detect "masked" dumping. The judge said that the agency may reconsider these elements of the review during the remand period.

The case concerns the 2019 administrative review of the antidumping duty order on mattresses from Vietnam in which Wanek Furniture served as a mandatory respondent. In the review, Commerce used Emirates Sleep's financial statements to calculate surrogate financial ratios over the plaintiffs' preferred financial statements, which came from Sheela Foam Limited. After the agency elected to go with Emirates Sleep's, the plaintiffs -- which include Wanek but are led by Ashley Furniture Industries -- took to the trade court, where they challenged the pick on five grounds: contemporaneity, completeness, representativeness of Emirates Sleep's operations as compared to Wanek's, public availability and the proper rejection of Sheela Foam's financial statements.

Reif sent the case back to Commerce based on the plaintiffs' challenges to the completeness of Emirates Sleep's statements and their public availability. While the judge agreed with the government that four annexes that were missing from the statements were unnecessary to calculate surrogate financial ratios, he found a fifth missing annex may have been. Commerce had said the missing fifth annex included information relating to Emirates Sleep's potential receipt of subsidies that would have distorted the surrogate financial ratio calculations, but Reif said Commerce didn't address the fact that the annex also included a section for short-term loans and advances.

"Since Commerce had no information about the item .. Commerce did not have a basis to determine whether this item constituted a market-based loan," the judge said. As such, Reif sent back consideration of Emirates Sleep's financial statements to reconsider or further explain whether they are complete.

The plaintiffs also claimed that the financial statements were not publicly available. Again, Reif sided with the plaintiffs, finding that the agency failed to address whether the version of the statements that was available in the subscription database -- the only source of the statements -- was complete, and that Commerce did not address evidence showing the plaintiffs were unable to confirm the availability of the statements from a public source that can be verified on the record.

The judge upheld the use of Indian tariff schedule subheading 7320.90.90 over subheading 9404.29.90 for pocket coil innerspring units. Commerce said that its subheading is the best available information since it covers "springs of iron or steel 'other' than 'coil spring for railways, tramways or spring pins,'" and that the plaintiffs' preferred subheading covers a different from pocket coil innerspring units. Reif agreed, finding that Commerce can use the plain meaning of a foreign tariff schedule description to find the best subheading for a specific input, and that the plaintiffs' subheading does in fact cover a different product. The judge ruled insufficient the plaintiffs' claim that use of subheading 7320.90.90 results in "aberrational" values since it results in higher prices.

The last issue decided by the judge in this case was the plaintiffs' argument that Commerce erred in excluding Ashley Furniture Industries and Ashley Furniture Trading from the separate rate given to Wanek, Millennium Furniture and Comfort Bedding -- three entities the agency collapsed into one. The plaintiffs said that since Ashley Furniture Industries and Ashley Furniture Trading are reinvoicing entities, it could appear as if they exported the goods from Wanek, Millennium and Comfort Bedding on customs forms, so Ashley Furniture Industries and Ashley Furniture Trading should be given the separate rate to ensure the respondent gets its proper rate. The judge held that neither Ashley Furniture Industries nor Ashley Furniture Trading is a foreign exporter of mattresses from Vietnam and that neither company submitted a separate rate application.

(Ashley Furniture Industries v. United States, Slip Op. 22-131, CIT #21-00283, dated 11/28/22, Judge Timothy Reif. Attorneys: Kristin Mowry of Mowry & Grimson for plaintiffs; Kara Westercamp for defendant U.S. government; Yohai Baisburd of Cassidy Levy for defendant-intervenors, led by Brooklyn Bedding)