Paper Bag Exporter Says DOJ Misunderstands Level-of-Trade Analyses

It said that the government’s response made multiple errors. In particular, the U.S. ignored the importance of one selling activity, pre-production paper bag design, as well as “qualitative metric[s]” Ditar offered demonstrating its sales were made at a different level of trade, it said.

The U.S. claimed “for the first time” in its brief that Ditar’s home market pre-production bag design was a production activity rather than a sales activity, the exporter said. But “this novel interpretation of the facts is a position that not even Commerce adopted,” it claimed.

Pre-production bag design was a process that includes, among other things, meeting with end-user customers on-site to “learn more about their needs” and explaining what sizes and types of bags best fit their needs, it said. The process also involves helping create sample artwork for the bags, mocking them up, and answering questions throughout, it said.

“Plaintiff disagrees with Commerce on the degree to which these selling functions supported the existence of a different level of trade, but even Commerce recognized that these activities constituted selling activities,” it said.

Paper bags are generally used to carry food or groceries, and customers such as restaurants order them with custom designs so they can be used as advertisements, the exporter said. It was the responsibility of Ditar’s sales staff, not its production staff, to ensure the bags fulfill this purpose, it claimed.

The exporter said it doesn’t do this with its distributor customers in the U.S. and Colombia. Instead, customers either provide their own designs without assistance from Ditar or purchase unprinted bags, it said. But Commerce found that Ditar’s artwork process was the same regardless of whether its customer was an end-use or a distributor customer, partly basing its refusal to adjust for levels of trade on that.

Commerce similarly agreed that Ditar engaged in other selling activities, warehousing and repacking, more frequently and intensively for its end-use customers, the exporter said, but wrongly disregarded evidence. And in its response brief, DOJ provided its own analysis of Ditar’s packing expenses that “makes no sense whatsoever,” falling into multiple errors -- including adding up several lines of per-kilogram packing manufacturing costs and calling them the total costs.

Ditar also said it provided quantitative evidence demonstrating that the home market sales in question were conducted on a different level of trade than its U.S. sales. In turn, the government’s arguments in its response “suggest that Defendant does not understand what the level-of-trade analysis is intended to accomplish,” it said.

The government was wrong to dismiss the quantitative metrics because “a level-of-trade focuses on selling activities rather than on individual selling expenses taken in isolation,” it said. Rather, Ditar’s quantitative data supported the qualitative information it also provided for the analysis, it claimed.

For example, it said, data on how many invoices were issued by its end user sales staff showed that they put more effort into each sale than did distributor sales staff. Similarly, evidence showed Ditar warehoused more of its products for end-use customers and turned over inventory for them “at only one-fifth of the number of days that it turned over its distributor inventory,” it said.

This is why Commerce has been requesting quantitative data for level-of-trade analyses since 2018 and did so in its initial questionnaire to Ditar for the investigation in question, the exporter said.