CIT Says Commerce Can't Use Brazil as Surrogate Country Then Use Malaysian Input Data

The Commerce Department didn't properly select Brazil as the primary surrogate nation in an antidumping review while also using Malaysian data for respondent Senmao's log inputs, the Court of International Trade ruled in an Aug. 24 opinion. Judge Jennifer Choe-Groves said that in the 2019-20 AD review of multilayered wood flooring from China, Commerce failed to point to any record evidence it used in ditching Brazil's data for Malaysia's.

The agency said it doesn't carry the burden to build an adequate evidentiary record. To this, Choe-Groves said that it isn't its responsibility to sift through the record to find which documents support Commerce's decisions. Given that the agency failed to cite any evidence showing the Brazilian log inputs data was "highly questionable, inadequate or unavailable," or any data showing that the Malaysian data was the best information, the court said Commerce didn't provide a reasonable explanation for departing from its past practice of using a single surrogate nation.

Exporter Lumber Liquidators also tried to join the fight against the Malaysian data, saying it was "aberrational." However, Choe-Groves designated the argument as waived since the company didn't make the claim in its moving or reply briefs and it was raised for the first time at oral argument.

On remand, the agency also must address its decision to revise the Brazilian surrogate value data for plywood by removing a line item showing Brazilian imports of plywood from Spain. Senmao said that Commerce deviated from its established practice when it removed this line and said that the Brazilian plywood surrogate value is aberrational in the aggregate without evidence.

The judge ruled that Commerce has a standard practice of considering whether the average unit value is aberrational in the aggregate "for the economically comparable surrogate countries or as compared to historical AUVs of the surrogate country at issue." This means parties must show that the import data is aberrational in the aggregate. Since the agency only cited evidence that isn't on the record to support its decision, the court sent back the surrogate value data adjustment.

Where Choe-Groves sided with the government was on the challenges to the financial ratio calculations, which involved transport expenses and interest income. Senmao argued that Commerce's treatment of transport expenses as overhead expenses amounted to double-counting. The judge said there is an "established accounting practice to include transportation expenses as part of manufacturing overhead in the [selling, general, and administrative] expenses." Given this, the court ruled that Commerce legally treated the transport expenses line item as an overhead expense and that its decision that the raw material value likely included incoming freight in the financial ratio calculations is in "accordance with law and supported by substantial evidence."

Senamo also said Commerce incorrectly excluded certain interest income reported by Brazilian company Duratex, used as the surrogate, to offset financial expenses. The court noted that one of the central questions is whether interest income is short term or taken from current assets. The exporter said only the income for remuneration on financial investments is potentially not related to the short term, while the other line items are all short term in nature and should have been included as an offset.

Choe-Groves ruled that Commerce "excluded interest income generated from long-term financial assets because it determined based on a review of record evidence of Duratex’s financial statement that such income was related to long-term investing activities." The agency also excluded line items that it couldn't tell whether the income was long term or short term in nature. As a result, this falls under the agency's established practice, the opinion said.

The judge also discussed Commerce's refusal to grant Senmao a byproduct offset. The exporter said the decision cuts against the agency's past practice, which is to grant an offset for sales of byproducts generated during the production of the subject merchandise if the respondent can show the byproduct is either resold or has commercial value and reenters the production process. Choe-Groves didn't agree with Senmao that Commerce's past practice has the agency granting offsets despite a lack of evidence.

(Jiangsu Senmao Bamboo and Wood Industry Co. v. United States, Slip Op. 23-126, CIT # 22-00190, dated 08/25/23;, Judge: Jennifer Choe-Groves; Attorneys: Jeffrey Neeley of Husch Blackwell for plaintiff f Jiangsu Senmao Bamboo and Wood Industry; Mark Ludwikowski of Clark Hill for plaintiff-intervenor Lumber Liquidators Services; Tara Hogan for defendant U.S. government; Timothy Brightbill of Wiley Rein for defendant-intervenor American Manufacturers of Multilayered Wood Flooring)