CIT Backs Brazil Over Malaysia for Surrogate Country in Chinese Wood Mouldings AD Case

During the investigation, the petitioner, the Coalition of American Millwork Producers, submitted surrogate value information for Brazil, urging Commerce to use Brazilian Harmonized Tariff Schedule subheadings 4407.11.00 and 4407.12.00 to value inputs of radiata pine sawnwood and fir sawnwood, respectively. For the surrogate financial ratios, the coalition floated financial statements from three Brazilian companies: Adami, Duratex and Ecuatex.

In response, respondent Fujian Yinfeng Imp & Exp Trading Co. floated Malaysia as the primary surrogate country, claiming that Commerce should use Malaysian HTS subheadings 4407.11.00 and 4407.12.00 to value the two inputs, respectively, and use the financial statements from Malaysian producers for the financial surrogate ratios. The agency picked Brazil, holding that the Brazilian Global Trade Atlas data gave better surrogate values for Yinfeng's factors of production and that the financial statements were superior. The respondent took to the trade court, where Katzmann ultimately sided with Commerce.

The judge first looked at the agency's selection of surrogate financial statements. In the investigation, Yinfeng floated 20 different Malaysian financial statements, of which Commerce said only two were suitable for further examination. The respondent said that Commerce acted against its established practice in rejecting four of the Malaysian financial statements since they didn't cover the entire investigation period. Katzmann ruled that given the case-by-case nature of Commerce's AD investigations, it's hard to "divine" rules from past agency practice, but even so, it's "reasonably discernable" that the agency was adhering to its preference for statements that cover the most months of the investigation period where all other factors are equal. With this in mind, Commerce legally rejected many of the Malaysian financial statements, the court ruled.

Katzmann also held that the agency properly picked the Brazilian financial statements from Adami and Duratex despite arguments from Yinfeng claiming it is unclear whether Adami makes the subject merchandise, the Malaysian producers are less inclusive of unrelated industries and the Brazilian manufacturers are global conglomerates that cannot represent Yinfeng. On the question of whether Adami makes subject merchandise, the order covers wood blocks, blanks and building components including wooden door parts such as frames and frame kits. Adami's financial statements say it makes money from wood processing parts such as frames, pine panels and doors, clearly evidencing that it makes subject merchandise.

The judge said that evidence backs Commerce's finding that Adami's and Duratex's operations are more limited to comparable goods and less inclusive of unrelated industries since Malaysian producers Minho and Classic Scnie are mainly holding companies with manufacturing subsidiaries. "By contrast, Commerce supportably found that the Brazilian statements -- though not unimpeachable -- are nevertheless superior because they are 'limited more to wood products and less inclusive' of unrelated industries," the opinion said.

Katzmann rejected Yinfeng's claim that since Adami and Duratex are global conglomerates with operations outside of Brazil they are not representative of the respondent. Most of the Brazilian companies' operations are meant for the Brazilian market, so "Yinfeng has not succeeded in showing that any reasonable mind would reject Duratex's financial statements simply because the company maintains some operations outside of Brazil." In all, Katzmann said that since Commerce's "best available information" analysis is fact dependent and since there is no rqeuirement that the data used be perfect, "the court here declines to 'second-guess Commerce's choice.'"

The judge turned to Commerce's pick of surrogate values for sawnwood inputs. Even though Yinfeng only uses pine and fir wood that is sawn lengthwise and Malaysian HTS subheadings cover pine and fir wood sawn lengthwise only while the Brazilian subheadings are a basket category with other wood cuts, the agency still reasonably used the Brazilian HTS subheadings. Finding that Yinfeng overstated the importance of product specificity, Katzmann upheld Commerce's finding that the Brazilian data is superior given that it is complete, publicly available, contemporaneous and specific to each input.

Commerce did not reach this conclusion erroneously, the judge ruled. "The court finds that, while perhaps of less-than-ideal clarity, Commerce’s decisional path to its determination that the Brazilian HTS are 'sufficiently specific' is reasonably discernible," the opinion said. Commerce cited HTS subheading descriptions and they both 'note' the same inputs at the same specificity such that both cover the exact specifications of the input.

The agency also appropriately weighted advantages that the Malaysian data had over the Brazilian data, including the fact that the Malaysian data was reported on a cost, insurance and freight basis so that no adjustments were needed and gave better data to value labor, truck freight, brokerage & handling and acrylic polymer. "Despite these conceded advantages," Katzmann said that Commerce properly held that Brazil was the better surrogate country due to the combination of the input data and the preference to value all factors of production from a single country.

"In the court’s assessment, Commerce committed no inherent error in weighing these additional advantages of the Malaysian data," the opinion said. "Moreover, because the court has sustained Commerce’s reliance on the Brazilian financial statements and GTA data, the court correspondingly finds that these other advantages afforded by Malaysia are insufficient to undermine Commerce’s totality-of-the circumstances selection of Brazil as the PSC."

(Fujian Yinfeng Imp & Exp Trading Co. v. United States, Slip Op. 22-151, CIT #21-00087, dated 12/21/22, Judge Gary Katzmann. Attorneys: Gregory Menegaz of deKieffer & Horgan for plaintiff Fujian Yinfeng; Iona Cristei for defendant U.S. government; Timothy Brightbill of Wiley Rein for defendant-intervenor Coalition of American Millwork Producers)