In a May 22, 2018 Opinion and Order, the U.S. Court of International Trade (“CIT) upheld the U.S. Department of Commerce’s (“Commerce”) use of a Thai nail producer, rather than a Dubai producer, as a surrogate for the calculation of anti-dumping duties to be assessed on two nail producers from the United Arab Eremites (“UAE”). As a result, the nails will be assessed an 0.87% duty rate, not the 7.8% rate that the nails had been preliminary assigned.
In determining the appropriate anti-dumping duty to be assessed, Commerce had considered using, among others, the financial statements of Overseas International Steel Industry LLC (“OISI”), a Dubai-based subsidiary of one of the UAE nail producers at issue. Commerce determined, however, that the subsidiary acted as “toll processor,” meaning that it was a service provider that used subcontractors to convert raw materials to finished products, but did not actually produce nails itself. Accordingly, because OISI was not a producer, Commerce found that its financial records lacked some significant line items, including for material costs and inventory. Therefore, Commerce determined that the financial records of a Thai nail producer, L.S. Industry Co. Ltd. (“LSI”), were a more fitting basis for its calculation of a constructed value profit on which the anti-dumping duties were based. As a result of using LSI’s financial statements, the anti-dumping duty calculation fell from the 7.8% rate contained in Commerce’s preliminary determination to 0.87%.
Before the CIT, a domestic nail producer argued that Commerce had erred in its determination that OISI was not the proper analog because OISI uses the same raw materials and production process as the UAE producer and that the financial statements sufficiently reflect all necessary information, such as material costs and inventory.
The CIT determined that, even if the domestic producer’s arguments were true, there was still not a sufficient basis to overcome “the presumption of administrative regularity” that insulates Commerce’s decision making. The CIT found that Commerce had concluded that OISI was a toll producer and, therefore, did not consider its financial statements. Instead, Commerce determined that LSI’s was the best surrogate and based its well-supported analysis on LSI’s financials. Ultimately, the CIT found that there was no clear error demonstrated in the record which would warrant the Court’s substitution of its judgment for that of Commerce.