Cabinet Exporter, DOJ Debate Whether Commerce Can Use False Advertising Materials in AD Cases

The Department of Justice is debating with Chinese cabinet exporter Delian Meisen Woodworking Co. over whether the Commerce Department can construe false advertising materials as grounds to apply adverse facts available in antidumping proceedings. In an April 5 revised response revised again on May 26, DOJ argued that Meisen's inability to explain a discrepancy between its U.S. sales price and factors of production information resulting from false advertising lawfully led to Commerce applying AFA. Meisen in its corrected reply is fighting to establish that Commerce's antidumping investigations must be limited to the actual factors of production used to make the subject merchandise, lest AD proceedings be used to “take responsibility for enforcing a wide variety of U.S. laws and unfair business practices under the antidumping laws” (Dalian Meisen Woodworking Co., Ltd. v. United States, CIT #20-00109).

The dispute stems from an antidumping duty proceeding on wooden cabinets and vanities and their components from China in which Meisen was a mandatory respondent. In the underlying investigation, it was discovered that Meisen's U.S. affiliates were advertising that its birch cabinets were made of maple. Commerce, after issuing multiple questionnaires on Meisen's production, claimed that the false advertising created a control number mismatch. The agency found a discrepancy between the “purported U.S. sales price for maple cabinets, and the normal value for the birch cabinets as produced by Meisen under the factors-of-production methodology used for non-market economy countries.”

Meisen says this distinction is irrelevant and that Commerce can review only the real factors of production for a given product in an AD proceeding. If the agency had any doubt whether Meisen made and sold birch or maple cabinets, those doubts could have been assuaged upon agency verification of Meisen's submissions. DOJ countered by saying that even if it was verified that Meisen sold birch cabinets, the discrepancy resulting from the false advertising remains, but this, Meisen says, is not a matter of noncompliance, the problem that AFA intends to seek. “Indeed, the upshot of [Commerce's] theory of the case is that the entire investigation, including all of Meisen’s questionnaire responses, made no difference once the advertising discrepancy was detected,” Meisen said in a corrected reply brief.

“This argument is not supported by the statute, the regulations or common sense,” the exporter said. “If the fact that Meisen advertised birch cabinets as made of maple wood is relevant to the antidumping determination, then by extension, Meisen could not have reported its data in any manner that would have been acceptable to Commerce for purposes of calculating an actual dumping margin. Under this theory, taken to its logical conclusion, petitioners should start alleging false advertising, antitrust violations, or violations of intellectual property laws in the petition so that Commerce can simply apply AFA immediately upon initiation of a case without conducting any investigation as to whether a respondent’s actual normal value is higher than the actual U.S. sales price.”

DOJ said that the information relating to its marketing that Meisen didn't provide “was necessary for Commerce to perform its margin calculation.” Commerce can properly compare the U.S. price to the normal value for the product only by matching similar prices to similar costs, it said. “By misrepresenting the product being sold, Meisen distorted the comparison that Commerce is tasked with making,” DOJ said. “Instead, Meisen created a situation in which the information on the record related to U.S. sales price and to the factors of production are for two different products -- maple cabinets and birch cabinets.”