In Oral Argument, DOJ and Flooring Companies Discuss Chinese Gov't Control of Suppliers
In oral argument Jan. 16 regarding the Commerce Department's 2021 administrative review of multilayered wood flooring from China, Court of International Trade Judge Timothy Reif asked counsel for exporters and the government what documentation might be required to prove to Commerce that a private Chinese company wasn’t government-controlled (Baroque Timber Industries (Zhongshan) Co. v. United States, CIT # 24-00106).
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He also asked whether Commerce needed supporting evidence before concluding that an ambiguous international export prices dataset didn’t contain exports from China.
The parties discussed Commerce’s decision to reject an input supplier index that the Chinese government provided to show the independence of the mandatory respondents’ suppliers. Commerce found that the index wasn’t adequate because it wasn’t based on supporting government documentation “independent from company information.”
Prior to oral argument, Reif noted that Commerce applied adverse facts available in part because “[p]ublicly available information indicates” that Chinese law mandates all companies establish a Chinese Communist Party organization. He asked the parties to address how the Chinese government might administer such a policy.
Andrew Schutz, counsel for Baroque Timber Industries and Riverside Plywood, called the presumption that all Chinese companies contained a CCP organization “endlessly frustrating.”
“[Commerce] never, once, ever, [has] asked the government of China, ‘Is this accurate?’” he said. “‘Is our thought process on this correct? Is it correct that every private party or every private company has to have a primary party organization? How do you monitor that? Do you monitor that? How does that work?’”
Reif asked if Commerce was obligated to figure out how such a law would be administered. Schutz argued that the department was when its presumption of party control was “basically based on an Economist article from, like, 10 years ago” and Commerce wouldn’t accept statements to the contrary from the Chinese government for reviews and investigations.
DOJ attorney Brendon Jordan was asked whether the trade court’s decision regarding the specificity of questionnaire prompts in a prior plywood review applied to this one, too (see 2504030070). Jordan said that the situations were very similar, but argued that the Chinese government had more notice about Commerce’s intentions in this review due to the events of the previous one.
The judge also heard argument regarding Commerce’s Tier II benchmark selection. Commerce rejected a dataset from the International Tropical Timber Organization after determining it didn’t provide enough information on export destinations to let the department exclude exports from China.
In its final determination, Commerce observed that ITTO reported data for exports “to all destinations.” But the data from Peru, Brazil and Ghana all clarified that their exports’ destinations were, respectively, Mexico, the European Union and “regional markets.”
Schutz said he “appreciated” that the U.S. had since acknowledged the dataset did at least partly segregate its data by country of export, but was “surprised” that the government hadn’t requested a voluntary remand.
Commerce would address the Peruvian and Brazilian data if its determination was remanded, Jordan said.
He disagreed, however, that China could be excluded as an importer of Ghanaian plywood, saying that there was "ambiguity" as to the meaning of “regional market.” For example, the relevant data wasn’t labeled as export prices for “the regional market for Ghana,” specifically, he said.
Reif asked both parties to define Commerce’s and the respondent’s burden in the current situation -- in which no evidence indicated the relevant exports were destined for China, but no evidence detracted from it, either.
Jordan argued that the standard of review gave Commerce the choice, asking Reif to sustain it.
Schutz agreed that it was the respondents’ duty to create the record. But he said that Commerce hadn’t provided them the opportunity to address its concerns about the ITTO data, especially considering the department had used it in previous reviews. The exporters may have been able to, for instance, go to ITTO and ask if more specific data was available, he said.
And Commerce regularly uses similar data in other similar proceedings, he said. For example, it relies on London Metal Exchange data, which only offers “a spot price out of London.”
Jordan denied that this was Commerce Department practice, saying that every proceeding and every review is different.