Lumber Liquidators 2014 Annual Report Download - page 34

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Antidumping and Countervailing Duties Investigation
In October 2010, a conglomeration of domestic manufacturers of multilayered wood flooring filed a
petition seeking the imposition of antidumping (‘‘AD’’) and countervailing duties (‘‘CVD’’) with the
United States Department of Commerce (‘‘DOC’’) and the United States International Trade Commission
(‘‘ITC’’) against imports of multilayered wood flooring from China. This ruling applies to our engineered
hardwood imported from China, which accounted for approximately 11% of our flooring purchases in 2014.
The DOC made preliminary determinations regarding CVD and AD rates in April 2011 and May 2011,
respectively. In December 2011, after certain determinations were made by the ITC and DOC, orders were
issued setting final AD and CVD rates at 3.3% and 1.5%, respectively. These rates became effective in the
form of additional duty deposits, which we have paid, and applied retroactively to the DOC preliminary
determinations of April 2011 and May 2011.
Following the issuance of the orders, a number of appeals were filed by several parties, including us,
challenging various aspects of the determinations made by both the ITC and DOC, including certain aspects
that may impact the validity of the AD and CVD orders and the applicable rates. The appeal of the CVD
order is expected to be concluded by mid-2015. On January 23, 2015, the Court of International Trade issued
a final decision rejecting the challenge of the AD rate for all but one Chinese exporter. This decision is
expected to be appealed to the Court of Appeals for the Federal Circuit later in 2015 and may take a year to
conclude.
As part of its processes in these proceedings, the DOC conducts annual reviews of the CVD and
AD rates. In such cases, the DOC will issue preliminary rates that are not binding and subject to comment
by interested parties. After consideration of the comments received, the DOC will issue final rates for the
applicable period, which may lag by a year or more. As rates are adjusted through the administrative reviews,
we adjust our payments prospectively based on the final rate.
In the first annual review in this matter, rates were modified for AD rates through November 2012 and
for CVD rates through 2011. Specifically, the AD rate was set at 5.92% and the CVD rate was set at 0.83%.
These rates are being appealed by several parties, including us. Nevertheless, at December 31, 2014, we were
paying these rates on each applicable purchase.
In January 2015, pursuant to the second annual review, the DOC issued a preliminary AD rate of 18.27%
for purchases from December 2012 through November 2013 and a preliminary CVD rate of 0.97% for
purchases in fiscal year 2012. These rates are pending final determinations by the DOC which are currently
planned to be finalized in May 2015. If these rates are confirmed, we would owe approximately $5.7 million
for shipments during the applicable time periods. If these rates remain in effect for shipments subsequent to
November 2013 (AD) and shipments subsequent to December 2012 (CVD), we would owe an additional
$6.3 million for all shipments through December 31, 2014. As this is a preliminary rate, we have not recorded
an accrual in our consolidated financial statements for the impact of higher rates for the applicable time
periods covered in the second annual review.
Based on the information available, we believe there is at least a reasonable possibility that an additional
loss may have been incurred in the range of $0 to $12.7 million.
The third annual review of the AD and CVD rates has been initiated in February 2015, with preliminary
rates expected in late 2015 or early 2016. Any change in the applicable rates as a result of the third annual
review would apply to imports occurring after the second period of review.
Other Matters
We are also, from time to time, subject to claims and disputes arising in the normal course of business.
In the opinion of management, while the outcome of any such claims and disputes cannot be predicted with
certainty, our ultimate liability in connection with these matters is not expected to have a material adverse
effect on the results of operations, financial position or cash flows.
Item 4. Mine Safety Disclosures.
None.
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