CAFC Overturns AD Regulation, China Wooden Bedroom Furniture and Certain Other NME Rates Could Decline
The Court of Appeals for the Federal Circuit has invalidated the International Trade Administration’s use of labor rate data from high-income countries in valuing merchandise imported from less developed non-market economies (NMEs), overturning an ITA regulation that increased dumping rates.
Certain NME Importers Could See Lower AD Rates
The ITA will now have to find a new way to value wages for Chinese wooden bedroom furniture, which could result in lower AD rates. Other pending AD investigations involving NME countries (e.g. China, Vietnam1), as well as new cases involving NMEs, are also expected to be affected by this decision.
ITA Did Not Base Labor Rates on Comparable Economy Data
To set the market value of most of the components of the bedroom furniture from China - since it considers Chinese prices to be non-market and therefore not reliable - the ITA used published Indian input prices. For labor rates, however, the ITA did not use Indian data, but rather, following its established practice under its own regulations (at 19 CFR 351.408(c) (3)), the agency based Chinese labor costs on “regression-based rates reflective of the observed relationship between wages and national income in market economy countries,” a complex statistic blending data from 61 market economy countries, some of which have per capita incomes as high as $39,470, compared to the Chinese average of $960.
ITA’s Method Produced Unfair Results, Chinese Producers Argued
A group of Chinese producer/exporters led by Dorbest Limited argued that the ITA’s method gave a wage rate over 300% higher than the Indian surrogate wage rate, and that it violated statutory requirements to use surrogate values from market economy countries that are economically comparable to the exporting country and that are significant producers of merchandise comparable to the merchandise at issue, per 19 USC 1677b(c)(4).
CAFC Rules Statute on Economic Comparability Trumps ITA Regulation
The CIT had denied Dorbest’s arguments and upheld the ITA’s complex method, but the CAFC unexpectedly agreed with Dorbest, concluding that Congress intended to require the use of data from economically comparable countries except where such data are not available. The ITA had not shown that the use of data from such countries was not possible in this instance, the court found, noting that there were five market-economy countries with gross national incomes less than that of China and 11 with GNI between one and two times that of China.
Comparison Countries Must Also be Significant Producers
Similarly, the CAFC ruled that using labor rates from countries that are not significant producers of comparable merchandise also violates the intent of the statute, and ruled the ITA’s NME labor rates regulation unlawful on this count as well. The court therefore invalidated the regulation for both reasons and remanded the case to the CIT with instructions to require the ITA to recalculate normal value “using a method wholly in compliance with 19 USC 1677b(c)(4).”
1The current list of NME countries is: Armenia, Azerbaijan, Belarus, China, Georgia, the Kyrgyz Republic, Moldova, Tajikistan, Uzbekistan, and Vietnam. See ITT’s Online Archives or 12/10/09 News, 0912130, for BP summary of most recent ITA NME wage rate announcement.
Dorbest et al v. U.S. et al, decided May 14, 2010, available at: http://www.cafc.uscourts.gov/opinions/09-1257.pdf