CIT Sends Back Commerce's Use of 24 Working Days Per Month in AD Surrogate Labor Value Calculation
The Commerce Department did not offer any source to justify its use of 24 working days per month as part of its surrogate value calculation for labor in an antidumping review, the Court of International Trade ruled. Remanding parts and sustaining parts of the seventh administrative review of the AD order on multilayered wood flooring from China, Judge Richard Eaton also sent back Commerce's surrogate financial ratio calculation for manufacturing overhead. Eaton did uphold the surrogate value determination for glue, however.
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In the review, Commerce used data from the National Institute of Statistics of Romania to calculate the surrogate hourly labor value, dividing monthly average net earnings data by 24 working days per month and eight working hours per day. AD petitioner American Manufacturers of Multilayered Wood Flooring contested the agency's use of 24 working days per month, claiming that Commerce didn't have a reason to use the number.
Eaton agreed, finding that there is no information on the record showing how the 24 working days per month assumption was derived or what data was used to develop the assumption. Commerce's only defense of this number, which the court found unsatisfactory, is that it is in line with its past practice. "Thus, Commerce has not offered an adequate explanation because conclusory statements are not sufficient to support, with substantial evidence, Commerce’s decision," the opinion said.
The judge added that Commerce unreasonably rejected the petitioner's data for the calculation, which took the average annual hours actually worked per worker in OECD countries. In rejecting this data, the agency said it would use a methodology not specific to Romania and that uses secondary sources unrelated to the source used to value labor. The petitioner pointed out that this same fault applies to Commerce's data in that "nothing on the record indicates that the use of twenty-four working days per month is in any way specific to Romania."
The judge said "there appears to be no source at all for Commerce’s number," remanding the use of the 24 working days per month in the surrogate labor value calculation and the rejection of the petitioner's data.
Eaton also sent back Commerce's surrogate financial ratio for manufacturing overhead, in which the agency used a 2018 financial statement from Romanian company Sigstrat. In the calculation, the agency only put depreciation, other materials and production expenses as part of the costs of goods sold, excluding the statement's indirect production expenses entry on the grounds that these expenses could include indirect labor expenses which would have been taken into account elsewhere. As a result, the ratio's numerator only reflected less than half of what the financial statement says the total overhead costs are for Sigstrat.
The court ruled that Commerce did not substantiate its concern that including the indirect production expenses could result in double counting. Eaton said that the petitioner was right to point out that overhead normally includes many more items than the three used by Commerce, finding that it was "unreasonable for Commerce to not have found a way to include more from the universe of these items." The court noted that while the financial statement does not break down exactly what the indirect expenses entry includes, the agnecy must still explain its finding that using it may be distortive.
"Since Commerce provided no such explanation, its claim that using the indirect production expenses entry in the numerator of the manufacturing overhead ratio may be distortive is mere speculation," the judge said. "Moreover, limiting the overhead expenses in the numerator to depreciation, other materials, and third-party service expenses is unreasonable considering the universe of expenses normally thought of as overhead."
The opinion did uphold the agency's surrogate glue value. Commerce used Global Trade Atlas data on Romanian Harmonized Tariff Schedule subheading 3506.91.10 to value the glue. The petitioner said the use of this subheading was unsupported since the inputs described by the subheading could not have been used to make the product. Eaton said the petitioner misstated the record and misunderstood the HTS classification system.
Eaton said that, despite the petitioner's claims to the contrary, the record has evidence that the glue actually used by one of the respondents would be classified under the subheading, and the subheading is a "principal use provision, not an actual use provision." The judge ruled that there "is simply nothing on the record, common sense or otherwise that would indicate that glue classified under subheading 3506.91.10 could not, or would not, be used to make the mandatory respondents’ product."
(American Manufacturers of Multilayered Wood Flooring v. United States, Slip Op. 23-70, CIT # 20-03948, dated 05/05/23; Judge: Richard Eaton; Attorneys: Stephanie Bell of Wiley Rein for plaintiff petitioner; Sonia Orfield for defendant U.S. government; Stephen Brophy of Husch Blackwell for defendant-intervenors led by Jiangsu Senmao Bamboo and Wood Industry Co.; Wenhui (Flora) Ji of Mowry & Grimson for defendant-intervenor Yihua Lifestyle Technology Co.; Mark Ludwikowski of Clark Hill for defendant-intervenor Jiangsu Guyu International Trading Co.; and Ronald Wilsa of Fox Rothschild for defendant-intervenros led by Metropolitan Hardwood Floors)