Commerce Revises Surrogate MOH Overhead Ratio, Hourly Labor Rate in AD Review at CIT
The Commerce Department revised its surrogate manufacturing overhead ratio and its surrogate hourly labor rate on remand at the Court of International Trade as part of a suit on the 2017-18 review of the antidumping duty order on multilayered wood flooring from China. Per the remand results, submitted on Aug. 24, Commerce raised the dumping rate for respondent Fusong Jinglong Wooden Group Co. from zero to 2.05%, while keeping the 0% rate for Jiangsu Guyu International Trading Co. The rate for the non-individually examined companies also rose to 2.05% (American Manufacturers of Multilayered Wood Flooring v. United States, CIT # 20-03948).
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Commerce had originally used Romanian company Sigstrat's 2018 financial statements to calculate the surrogate financial ratios, coming up with a manufacturing overhead ratio of 5.8%. Petitioner American Manufacturers of Multilayered Wood Flooring claimed during the review that Commerce didn't include certain expenses in the ratios when it should have. The agency agreed, subtracting line items from the cost of goods sold that could be identified as overhead and using them as the manufacturing overhead ratio numerator. Commerce then put the COGS, adjusted for the change in finished goods, as the denominator.
The trade court said it was "unreasonable for Commerce to not have found a way to include more items in its numerator of the ratio because overhead normally includes many more items like depreciation, other materials, and third party expenses, for example" (see 2305190041). On remand, the agency recalculated the ratio to use Sigstrat's indirect production expenses figure, without energy costs, as the numerator, while relying on the remaining COGS portion as the denominator.
The agency said energy costs are likely part of the indirect production figure and not the basic activity number for two reasons. The first reason is based on a note from the financial statements that says products are valued at the "cost of materials, workforce, and indirect production costs." Since the cost of goods sold is summarized as "basic activity expenses and indirect production expenses," Commerce said that basic activity expenses only includes raw materials and direct labor, making all other production expenses a part of indirect production expenses.
The second reason is that the income statement reveals company-wide costs by nature of expense, while the notes from the financial statements "show expenses by function." Based on the figures from these statements, Commerce set the denominator, derived from basic activity expenses, to include "only raw materials and a portion of the company-wide labor expenses." The agency reclassified the energy costs in Sigstrat's indirect production expenses, including them in the denominator.
CIT also sent back Commerce's assumption of 24 working days per month as part of the surrogate labor value calculation. On remand, the agency put in information from the International Labor Organization to ultimately further justify its use of 24 working days per month. During the proceeding, though, the petitioner put Romanian-specific ILO information on the record to show that the average weekly hours actually worked was 40.7 and that there were 34 days of paid time off in Romania. Given this data, the petitioner said the 24 days per month and eight hours per day assumption was unreasonable.
Taking this data into account, Commerce recalculated the hourly labor rate based on the Romania-specific ILO data, adding the 40.7 hours figure and the total hours of paid leave and holiday hours per week to get to 45.83 total paid hours per worker per week. The agency then derived a manufacturing-specific labor rate of 10.05 Romanian leu per hour -- up from the 9.23 Romanian leu per hour used in the review's final results.