Trade Court Upholds Commerce's Surrogate Value Picks in Hardwood Plywood AD Review

The judge first addressed Commerce's decision to use its preferred method for valuing a respondent's actual inputs for log inputs as opposed to its intermediate input methodology, which resulted in values placed on Linyi Chengen's veneer consumption as opposed to its log consumption. The AD petitioner, the Coalition for Fair Trade in Hardwood Plywood, argued that the agency should have used the input methodology and contested the agency's decision not to conduct verification of the log values due to COVID-19 restrictions.

The court said that Commerce both properly relied on its preferred methodology and refused to conduct verification. "In light of the statutory deadlines and the disruption of travel due to the COVID-19 pandemic that precluded Commerce officials from conducting an on-site visit to Linyi Chengen’s facilities, the Court concludes that Commerce’s decision not to conduct verification was reasonable," the opinion said. As for the choice of methodology, Choe-Groves noted that both sides accused the other of "engaging in mere speculation" due largely to the lack of verification.

The judge said that since Commerce's determination is only based on the information before it, the court cannot find that Commerce's use of its preferred methodology was "unreasonable as applied in this instance. ... The Coalition’s essential argument, at this point, seems to be that the intermediate input methodology is 'more reasonable' than Commerce’s preferred methodology, but it is well-settled that the Court may not substitute its judgment for that of the agency when the choice is between two fairly conflicting views."

Turning to the log input surrogate values for poplar log and birch log inputs, Linyi Chengen and plaintiff Taraca challenged the use of Malaysian Global Trade Atlas data since it allegedly resulted in high volume densities of kilogram per cubic meter that were unreasonable given the density of poplar and birch. The parties floated UN Comtrade data as an alternative. Commerce, though, said that the parties' claim "assumes its own conclusion" that the UN Comtrade data is reliable while the Malaysian GTA data is flawed. Choe-Groves, though, held that Linyi Chengen's bid at showing an alternate method of "demonstrating aberrancy is not without reason," but is ultimately "insufficient to overcome Commerce's point that Linyi Chengen's calculation assumes the validity and reliability of the UN Comtrade data."

The court next discussed Linyi Chengen's challenge to Commerce's use of the Trading Economics website's Malaysian wage data to value labor surrogate values. The respondent put forth data from the Malaysian Department of Statistics (MDS) as an alternative, arguing that the data is more specific to the respondent's production process. Commerce rejected the Malaysian government data since it had technical notes that called its accuracy into question. Once again, Choe-Groves sided with the government.

"Linyi Chengen is essentially asking the Court to substitute its judgment for that of Commerce, which the Court cannot do," the opinion said. "The fact that the MDS wage data may be 'more specific' to Linyi Chengen’s production process, if Commerce does not deem it so, does not render Commerce’s selection of the Trading Economics data unreasonable, in light of the current state of the law and the uncertainty Commerce identified in this proceeding with respect to what the MDS wage data represent. The statute does not require Commerce to perfectly replicate a non-market economy respondent’s production experience."

The judge further granted the U.S. motion to strike an attachment submitted by Linyi Chengen that the government said raised new arguments and had new factual information over the challenge to the formaldehyde surrogate value. Granting the motion, Choe-Groves also addressed the respondent's other claims over the formaldehyde surrogate value. Echoing her rulings on the other issues in the case, Choe-Groves said that the challenges "amount to mere disagreement with Commerce's rational determination." As a result, the judge upheld Commerce's position.

Lastly, the court turned to Commerce's decision to use the financial statements for Focus Lumber, Fu Yee and Ta Ann to calculate financial surrogate ratios. The petitioner challenged the use of Fu Yee's financial statements, arguing that they should be tossed since the company was not profitable. Commerce disagreed and so did the court. The coalition further challenged the use of Ta Ann's financial statements, claiming that since the company received countervailable subsidies, the statements should be set aside. The court found that the coalition failed to exhaust its administrative remedies over this point.

However, Taraca challenged Commerce's decision to exclude Megamas' statements, claiming that the agency did not put forth a reasonable explanation for rejecting the company's statements where its current liabilities may exceed its current assets. "[W]hen weighing the financial statements, Commerce determined that the Megamas statement did not constitute the best available information on the record when compared to the three remaining financial statements that contained no notes of concern, and thus Commerce did not include the Megamas statement in the surrogate financial ration calculation," the judge said. Choe-Groves ended the decision by finding that, "in light of this opinion," the separate rate arguments are moot.

(Coalition for Fair Trade in Hardwood Plywood, et al. v. United States, Slip Op. 22-153, CIT Consol. #20-03930, dated 12/22/22, Judge Jennifer Choe-Groves. Attorneys: Timothy Brightbill of Wiley Rein for plaintiff Coalition for Fair Trade in Hardwood Plywood; Jeffrey Grimson for Mowry & Grimson for consolidated-plaintiffs Richmond International Forest Products, Taraca Pacific and Concannon Corp.; Gregory Menegaz of deKieffer & Horgan for consolidated-plaintiffs Xuzhou Jiangheng Wood Products Co. and Xuzhou Jiangyang Wood Industries Co. and defendant-intervenor Linyi Chengen; Sonio Orfield for defendant U.S. government)