US, Chinese Wood Flooring Exporters Argue Over Calculation of Tier 2 Benchmarks

DOJ and exporters led by Baroque clashed in oral argument Sept. 26 before Court of International Trade Judge Timothy Reif over whether the Commerce Department should look to broader, less specific datasets in calculating Tier 2 world benchmark prices or to smaller, narrower ones (Baroque Timber Industries (Zhongshan) Co. v. U.S., CIT Consol. # 22-00210).

In its countervailing duty review on multilayered wood flooring on China, the department used U.N. Comtrade data to determine plywood market prices for its respondents. But that data doesn’t break out plywood by grade, and higher-quality plywood, of “A” or “B” grades, is more expensive than the type Baroque exports, of “C” and “D” grades.

Baroque argues that Commerce instead should have used data from Ghana and Peru to set its world market prices, saying that this dataset, though smaller, is more specific to its product. The Ghana data breaks out its plywood imports by grade, while the Peru data doesn't, the parties noticed.

Andrew Schutz, Baroque’s attorney, said that “Commerce is so tied” to the data provided by Comtrade or other large databases that “it’s virtually impossible to challenge it.” He argued that the statute doesn’t actually require the use of a world average to set benchmarks; rather, the benchmark is supposed to represent simply a third-country figure to be compared with the U.S. market.

In turn DOJ attorney Kelly Geddes said that the department made a reasonable decision to use the Comtrade data, meaning the court must support it.

World averages are “going to produce a more reliable average,” she pointed out. She noted that Ghana, for example, has about the same population as Texas. The department narrowed its Comtrade dataset as much as possible, she said, and the fact that the U.N. chooses not to break out plywood into grades indicates to Commerce that the overall Harmonized Tariff Schedule heading for plywood is comparable to the products at issue.

They also discussed Commerce’s rejection of an affirmation by the Chinese government that none of the respondent’s suppliers are owned by government or party officials.

Geddes said that affirmation was just a pro forma document, stamped by Baroque, that stated that the exporter’s company wasn’t influenced by government or party officials. The document didn’t even list Baroque’s name specifically, she noted.

Further, the document was provided in response to Commerce’s question about whether any party officials owned or were employed by Baroque or its suppliers, she noted -- it didn’t actually answer the question.

As a result, the department repeated the question in a supplemental questionnaire, but the Chinese government didn’t respond, she said.

Reif noted that Commerce could have done better in providing notice of deficiency to the government than just repeating the question.

“I think the two, three of you epitomize the quality of conversation that the court deeply appreciates,” Reif told Geddes and Schutz.