Background
This case arises from an antidumping duty investigation by the U.S. Department of Commerce (“Commerce”) into certain softwood lumber products from Canada. In its initial review, Commerce calculated dumping margins using a statistical method known as the “Cohen’s d test” as part of its differential pricing analysis. This practice was challenged in a separate proceeding, and the U.S. Court of Appeals for the Federal Circuit ultimately ruled in Marmen Inc. v. United States (“Marmen III”) that Commerce’s use of the Cohen’s d test was improper.
As a result of the Marmen III decision, the Court of International Trade remanded this case back to Commerce with instructions to devise a new methodology for its differential pricing analysis that did not rely on the invalidated test. On remand, Commerce developed a new three-step analysis. The new approach replaced the Cohen’s d test with a “price difference test,” which considers a price to be “significantly” different if it deviates by more than 2% from the weighted-average price of comparable sales.
Applying this new analysis, Commerce recalculated the dumping margins for Canadian lumber producers, including Canfor Corporation and West Fraser Mills Ltd. The new calculations resulted in slightly revised weighted-average dumping margins. The Canadian government and various lumber producers (collectively, “Plaintiffs”) challenged Commerce’s new methodology, bringing the case back before the Court of International Trade.
The Court’s Holding
The U.S. Court of International Trade sustained Commerce’s remand redetermination in full, finding the new differential pricing analysis to be reasonable and in accordance with law. Judge Choe-Groves held that the proper standard for reviewing Commerce’s selection of statistical tests and numerical cutoffs is “reasonableness,” not a stricter standard proposed by the Plaintiffs.
The court rejected the Plaintiffs’ argument that the new “price difference test” was an unlawful interpretation of the statute. Plaintiffs contended that using a fixed 2% threshold to define a “significant” price difference was an inflexible bright-line rule that failed to consider the specific context of the lumber market. However, the court found Commerce’s explanation reasonable: the test is applied on a case-by-case basis because the 2% deviation is measured relative to the weighted-average price of the respondent’s own sales in each specific review. The court also found it permissible for Commerce to borrow the 2% threshold from other contexts in antidumping law, such as the de minimis standard.
Furthermore, the court upheld Commerce’s decision to use the average-to-transaction (“A-to-T”) method for calculating the final margins. The statute allows this exception to the standard average-to-average (“A-to-A”) method if there is a pattern of prices that differ significantly and Commerce explains why the A-to-A method cannot account for those differences. The court found that Commerce’s “meaningful difference test”—which compares the results of the two methods—was a valid way to demonstrate that the A-to-A method was masking targeted dumping, thus justifying the use of the A-to-T method.
Key Takeaways
- The Department of Commerce has broad discretion to select reasonable statistical tests and numerical thresholds when implementing antidumping laws.
- A “price difference test” that defines a “significant” price difference as a deviation of 2% or more from a weighted-average price is a reasonable method for Commerce to identify patterns of price differences.
- When Commerce identifies a pattern of significant price differences and shows that using the standard A-to-A calculation method results in a “meaningfully” different (e.g., non-de minimis) dumping margin than the alternative A-to-T method, it has adequately explained why the A-to-A method is insufficient and can lawfully apply the A-to-T method.
Why It Matters
This decision affirms the Department of Commerce’s authority and flexibility in policing international trade and calculating antidumping duties. After the Federal Circuit invalidated its previous “Cohen’s d” methodology, this ruling blesses Commerce’s new approach to identifying “targeted dumping,” a practice where foreign producers sell at lower prices to specific customers, regions, or time periods while offsetting those sales with higher prices elsewhere.
The court’s approval of the new “price difference test” provides Commerce with a durable and legally sound tool that will likely be applied across numerous antidumping investigations involving various industries. For the Canadian softwood lumber industry, this ruling means the continuation of antidumping duties based on a methodology that Canadian producers view as overly rigid, extending one of the most contentious and long-running trade disputes between the United States and Canada.