Trade Court Rejects Commerce's Failure to Verify Info It Relied on in AD Case on Thai Mattresses

The Commerce Department illegally relied on unverified data from respondent Saffron Living Co. in an antidumping duty investigation on mattresses from Thailand, the Court of International Trade ruled in a July 20 opinion. While the government claimed that because Commerce was unable to verify Saffron's information, it could use the exporter's information as facts otherwise available, Judge M. Miller Baker said this reading would "eviscerate the separate requirement" that Commerce verify all information relied on in making a final determination.

Baker also remanded Commerce's refusal to apply either transactions disregarded or major input rules in light of evidence of Saffron's substantial affiliated-party transactions, dubbing the government's defense "anemic."

In the suit, domestic mattress makers led by Brooklyn Bedding claimed, among other things, that Commerce failed to verify part of Saffron's data on which Commerce ultimately chose to rely in the AD investigation on mattresses from Thailand. In the investigation, Saffron said "it misrepresented to" CBP "both the identity of the producer and the country of origin of some of its imports." Commerce said these lies warranted total adverse facts available, initially hitting the firm with a 763.28% rate. Since it used total AFA, Commerce did not verify Saffron's information.

The agency went back on the decision to use total AFA, ultimately deciding to go with partial AFA, given that Saffron admitted its misrepresentations and was otherwise a cooperative respondent. The rate was dropped to 37.48%, and Commerce relied on some of Saffron's information even though no verification was performed. The U.S. mattress makers contested the move, arguing that Commerce was required to verify the information on which it relied.

Baker sided with the mattress makers, ruling that Commerce violated the "inexorable statutory and regulatory commands." In defense of its actions, the government said Commerce was unable to carry out verification once it determined partial AFA should be used. Baker noted, however, that Commerce did not say it couldn't conduct "any form of verification" but instead said it couldn't perform on-site verification since it used total AFA in the preliminary results. The judge said this was a "post hoc rationalization," adding that the government's arguments "would violate the harmonious-reading canon," which says the provisions of a text should be interpreted to render them compatible, not contradictory.

The mattress makers also disputed Commerce's decision to drop its longstanding practice of applying both the transactions disregarded and major input rules, especially given the evidence of Saffron's affiliated-party transactions. Baker said the government's defense was "anemic," noting the U.S. claimed that there is no statutory requirement that the agency apply either rule.

"Although Commerce was not required to apply either rule, what it could not do is depart from its undisputed practice of applying one or both rules to affiliated-party transactions without at least explaining why it was so deviating from settled practice," the opinion said. The judge ruled that an "irrational departure from" a set policy "could constitute action that must be overturned as arbitrary, capricious, or an abuse of discretion." Baker added that his remand instructions rendered it unnecessary to address the mattress maker's remaining claim, which said that Commerce denied the companies the right to comment on the failure to verify Saffron's information by "changing course in its final determination without issuing a post-preliminary determination."

(Brooklyn Bedding v. U.S., Slip Op. 23-107, CIT # 21-00285, dated 07/20/23; Judge: M. Miller Baker; Attorneys: Chase Dunn of Cassidy Levy for plaintiffs Brooklyn Bedding, et al.; Kara Westercamp for defendant U.S. government; Eric Emerson of Steptoe & Johnson for defendant-intervenor Saffron Living)