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CIT Says Commerce Failed to Explain Use of Mexican Surrogate Labor Data With Brazilian Inflator

The Commerce Department did not properly explain why it was appropriate to inflate a Mexican labor wage rate using Brazilian data in an antidumping duty investigation, the Court of International Trade ruled in a Sept. 13 opinion, made public Sept. 21. Commerce requested a voluntary remand in the case to further explain its decision, since it admitted to the court that it did not explain this position. Judge M. Miller Baker also sent the case back so the agency can identify the evidence in the record that supports granting Guangzhou Ulix Industrial & Trading Co. a separate rate.

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The case concerns Commerce's final determination in the antidumping duty investigation on refillable stainless steel kegs from China brought by New American Keg and American Keg Company. In March 2021, CIT remanded three aspects of the determination, including an explanation as to why Malaysian labor data, which carried signs of forced labor, was preferable to American Keg's preferred Brazilian labor data. Specifically, the court said that Commerce must explain, "apart from its talismanic invocation of its single-country surrogate and contemporaneity preferences -- why the Malaysian data under this forced labor cloud are preferable to the Brazilian dataset."

In its draft remand, Commerce swapped the Malaysian labor data for Mexican labor data. Then, in its final remand, the agency used Mexican data inflated with a Brazilian consumer price index, but it did so without explanation. American Keg continued to contest the surrogate value, and even Commerce requested a remand to further explain itself. Baker granted the request.

"Commerce used an inflator specific to a different country, a suspect choice, and it then failed to explain that choice," the opinion said. "That alone would justify remand in view of Commerce’s published guidance stating that '[t]he Department inflates the selected earnings data to the year that covers the majority of the period of the proceeding using the relevant Consumer Price Index.' ... In other words, Commerce needs to explain how the Brazilian consumer price index is relevant to Mexican data."

American Keg also argued that Commerce abused its discretion by abruptly changing course between its draft and final remand submissions. Baker disagreed, finding that although Commerce "didn't give much thought to this switch in the view of the necessity for another remand," the judge found no abuse of discretion.

In the investigation, Commerce also granted a separate rate status to Ulix. In the case's first opinion, Baker said that Commerce failed to address American Keg's evidence that Ulix's U.S. customer was affiliated with the company -- a fact that would detract from the decision to grant it separate rate status. On remand, Commerce looked at the evidence and found that the record established that the U.S. customer and a third, unnamed company are affiliated and that yet another unnamed company may be affiliated with both. However, none of this shows that there is any shared ownership between Ulix and the U.S. customer and the other companies, Commerce said.

Baker, though, again ruled that Commerce failed to find that Ulix rebutted the presumption of government control. "Because the Department found that the U.S. customer and Company A are affiliated, there needs to be affirmative evidence on the record that the latter is unaffiliated with Ulix. There is no such evidence," the opinion said. The case was again remanded to Commerce to "identify the evidence in the administrative record that supports granting Ulix a separate rate."

(New American Keg v. United States, Slip Op. 22-106, CIT #20-00008, dated 09/13/22, Judge M. Miller Baker. Attorneys: Whitney Rolig of Picard Kentz for plaintiff New American Keg; Ashley Akers for defendant U.S. government; Gregory Menegaz of deKieffer & Horgan for defendant-intervenors Ningbo Master International Trade Co. and Guangzhou Jingye Machinery Co.)