Yama Ribbons & Bows Co. v. United States, No. 19-00047 (Ct. Int'l Trade 2022)
Annotate this CaseThis opinion or order relates to an opinion or order originally issued on April 30, 2021.
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Slip Op. No. 22-138 UNITED STATES COURT OF INTERNATIONAL TRADE YAMA RIBBONS AND BOWS CO., LTD. Plaintiff, v. UNITED STATES, Before: Timothy C. Stanceu, Judge Court No. 19-00047 Defendant, and BERWICK OFFRAY LLC, Defendant-Intervenor. OPINION [Sustaining an agency decision following court order in a countervailing duty proceeding on narrow woven ribbons with woven selvedge from the People’s Republic of China] Dated: December 8, 2022 John J. Kenkel, deKieffer & Horgan, PLLC, of Washington, D.C., for plaintiff Yama Ribbons and Bows Co., Ltd. With him on the brief were Alexandra H. Salzman, Judith L. Holdsworth, and J. Kevin Horgan. Kara M. Westercamp, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for defendant United States. With her on the brief was Bryan M. Boynton, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of counsel on the brief was Rachel A. Bogdan, Attorney, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce. Court No. 19-00047 Page 2 Daniel B. Pickard, Buchanan Ingersoll and Rooney PC, of Washington D.C., for defendant-intervenor Berwick Offray LLC. Stanceu, Judge: Plaintiff Yama Ribbons and Bows Co., Ltd. (“Yama”) brought this action to contest a final determination the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department”) issued to conclude a review of a countervailing duty (“CVD”) order on narrow woven ribbons with woven selvedge from the People’s Republic of China (“China” or the “PRC”). The court sustains a decision Commerce issued in response to the court’s previous opinion and order. I. BACKGROUND Yama, a Chinese producer and exporter of ribbons, brought this action on April 9, 2019, to contest a published agency decision (the “Final Results”), Narrow Woven Ribbons With Woven Selvedge From the People’s Republic of China: Final Results of Countervailing Duty Administrative Review; 2016, 84 Fed. Reg. 11,052 (Int’l Trade Admin. Mar. 25, 2019) (the “Final Results”). Summons, ECF No. 1; Compl. ¶ 1, ECF No. 6. The Final Results concluded the sixth periodic administrative review of the countervailing duty order on narrow woven ribbons with woven selvedge from the People’s Republic of China (the “Order”), which Commerce initiated in November 2017 and which pertained to a period of review (“POR”) corresponding to calendar year 2016. Initiation of Antidumping and Countervailing Duty Administrative Reviews, 82 Fed. Reg. 52,268, Court No. 19-00047 Page 3 52,273 (Int’l Trade Admin. Nov. 13, 2017). Commerce accompanied the Final Results with an “Issues and Decision Memorandum.” Final Results, 84 Fed. Reg. at 11,052; Decision Memorandum for the Final Results of 2016 Countervailing Duty Administrative Review: Narrow Woven Ribbons with Woven Selvedge from the People’s Republic of China (Int’l Trade Admin. Mar. 19, 2019) (PR Doc. 117) (“I&D Mem.”). 1 Background on plaintiff’s action is provided in the court’s previous opinion and order, Yama Ribbons and Bows Co., Ltd. v. United States, 45 CIT __, __, 517 F. Supp. 3d 1325, 1326–28 (2021) (“Yama I”), and is supplemented herein. In Yama I, this court considered Yama’s motion for judgment on the agency record, submitted under USCIT Rule 56.2. Pl. Yama Ribbons and Bows Co., Ltd.’s Rule 56.2 Mot. for J. upon the Agency R. (Aug. 9, 2019), ECF No. 25; Mem. of Law in Supp. of Pl. Yama Ribbons and Bows Co., Ltd.’s 56. 2 Mot. for J. upon the Agency R. (Aug. 9, 2019), ECF No. 26 (“Pl.’s Mem.”). Granting this motion, Yama I directed that Commerce reconsider the Final Results and submit a redetermination in conformance with the court’s opinion and order. 45 CIT at __, 517 F. Supp. 3d at 1341–42. Before the court is that decision (the “Remand Documents in the original Joint Appendix (Dec. 10, 2019), ECF Nos. 34 (conf.), 35 (public), are cited herein as “CR Doc. __” and “PR Doc. __,” respectively. Public documents in the Joint Appendix for Remand (Oct. 12, 2021), ECF No. 55, are cited herein as “PPR Doc. __.” 1 Court No. 19-00047 Page 4 Redetermination”), submitted on August 13, 2021. Final Results of Redetermination Pursuant to Court Remand, ECF No. 47-1 (“Remand Redetermination”). Yama was the sole exporter or producer reviewed in the administrative proceeding at issue in this litigation. See Yama I, 45 CIT at __, 517 F. Supp. 3d at 1327. In the Final Results, Commerce determined a total net countervailable subsidy rate of 23.70% for Yama, which was the sum of subsidy rates Commerce determined for sixteen subsidy programs that Commerce considered to have benefitted Yama. Id., 45 CIT at __, 517 F. Supp. 3d at 1327–28. In this litigation, Yama is contesting the Department’s inclusion within the total net countervailable subsidy rate of three individual subsidy rates: (1) a subsidy rate of 10.54% for the “Export Buyer’s Credit Program” (“EBCP”); (2) a subsidy rate of 10.45% for the provision of synthetic yarn at what Commerce considered to be less-thanadequate-remuneration (“LTAR”); and (3) a subsidy rate of 0.26% for the provision of caustic soda at what Commerce considered to be LTAR. Id., 45 CIT at __, 517 F. Supp. 3d at 1328. In Yama I, the court ordered Commerce to reconsider all three of these individual subsidy determinations. 45 CIT at __, 517 F. Supp. 3d at 1341–42. In the Remand Redetermination, Commerce, “under respectful protest,” reversed its decision to include in the total net countervailable subsidy rate of 23.70% a subsidy rate for the Export Buyer’s Credit Program. Remand Redetermination at 9. Court No. 19-00047 Page 5 Commerce left unchanged its inclusion of the 10.45% rate for synthetic yarn and the 0.26% rate for caustic soda, determining a revised total net countervailable subsidy rate of 13.16%. Id. at 25. The court received comments from Yama supporting in part, and opposing in part, the Remand Redetermination. Comments by Yama Ribbons and Bows Co., Ltd. on Commerce’s Final Results of Redetermination Pursuant to Court Remand (Sept. 13, 2021), ECF No. 52 (“Pl.’s Comments”). Defendant responded to Yama’s comments, advocating that the court sustain the Remand Redetermination. Def.’s Resp. to Comments on Remand Redetermination (Sept. 28, 2021), ECF No. 54 (“Def.’s Resp.”). The court did not receive comments from defendant-intervenor. II. DISCUSSION A. Jurisdiction and Standard of Review The court exercises jurisdiction according to section 201 of the Customs Courts Act of 1980, 28 U.S.C. § 1581(c) 2, pursuant to which the court reviews actions commenced under section 516A of the Tariff Act of 1930, as amended (“Tariff Act”), 19 U.S.C. § 1516a, including an action contesting a final determination that Commerce All citations herein to the United States Code are to the 2018 edition. All citations to the Code of Federal Regulations are to the 2018 edition. 2 Court No. 19-00047 Page 6 issues to conclude an administrative review of a countervailing duty order. See id. § 1516a(a)(2)(B)(iii). In reviewing an agency determination, the court “shall hold unlawful any determination, finding, or conclusion found . . . to be unsupported by substantial evidence on the record, or otherwise not in accordance with law.” Id. § 1516a(b)(1). Substantial evidence refers to “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” SKF USA, Inc. v. United States, 537 F.3d 1373, 1378 (Fed. Cir. 2008) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)). B. The Export Buyer’s Credit Program The Export Buyer’s Credit Program is “an export-promoting loan program administered by the Export-Import Bank of China.” Yama I, 45 CIT at __, 517 F. Supp. 3d at 1329 (citation omitted). The court noted in Yama I that “[i]n the sixth review, Commerce included a rate for the EBCP in Yama’s overall subsidy rate without reaching a factual finding that Yama actually received a benefit from the EBCP” and that “[i]nstead, Commerce stated its primary finding in the negative: ‘In these final results, we continue to find that the information on the record does not support finding that Yama did not use the Export Buyer’s Credit program during the POR.’” Id. (citation omitted). The court’s opinion explained that “[a]t issue is the statutory requirement that Commerce, in order to impose a countervailing duty, find that an Court No. 19-00047 Page 7 authority provided a financial contribution ‘to a person and a benefit is thereby conferred,’” id. (citing 19 U.S.C. § 1677(5)(B)), and that “[r]ather than make the affirmative finding that a financial contribution was provided to Yama and a benefit was thereby conferred, Commerce inferred a contribution and benefit to Yama by invoking its ‘facts otherwise available’ authority under 19 U.S.C. § 1677e(a) and its ‘adverse inference’ authority under 19 U.S.C. § 1677e(b).” Id., 45 CIT at __, 517 F. Supp. 3d at 1329–30. “When using both provisions, Commerce refers to ‘adverse facts available,’ or ‘AFA.’” Id., 45 CIT at __, 517 F. Supp. 3d at 1330 n.4. The court held in Yama I that “[t]here was no evidence on the record of the review to support a finding that any U.S. customer of Yama used the EBCP, and the record contained evidence refuting any such finding.” Id., 45 CIT at __, 517 F. Supp. 3d at 1335. The court directed that “[o]n remand, Commerce must consider the record evidence fairly and impartially and reach a new determination on whether Yama benefitted from the EBCP.” Id. In the Remand Redetermination, Commerce decided, based on the record evidence, that Yama did not use the EBCP. It explained that decision in this way: Consistent with Yama Ribbons [“Yama I”], we have reconsidered our determination, based on the application of AFA, that Yama used and benefited from the EBCP during the POR. We also considered the record evidence which Yama and the GOC [government of China] provided regarding Yama’s and its customers’ non-use of the EBCP. Upon reexamination of the record evidence, we have complied with the Court’s Court No. 19-00047 Page 8 ruling and now find that Yama did not use this program during the POR, under respectful protest. Our findings with respect to the financial contribution and specificity determinations made in the Final Results remain unchanged. Specifically, in accordance with the Court’s remand order, we are relying on Yama and the GOC’s [government of China’s] statements on the record that none of Yama’s customers used the program during the POR, as well as Yama’s customers’ declarations of non-use to determine that Yama did not use the EBCP during the POR, under respectful protest. Remand Redetermination at 9 (footnotes omitted). One of the statements Commerce made is that “[o]ur findings with respect to the financial contribution and specificity determinations made in the Final Results remain unchanged.” Id. (footnote omitted). As to the Department’s finding “with respect to the financial contribution,” id., this statement is inconsistent with the court’s ruling. In Yama I, the court expressly disallowed the Department’s finding based on an adverse inference that Yama received a financial contribution from the Export Buyer’s Credit Program. The court ruled that “the record evidence does not support a finding that the information Commerce lacked as a result of non-cooperation by the Chinese government prevented Commerce from relying upon or verifying the information Yama provided to show the absence of a benefit from the EBCP.” Yama I, 45 CIT at __, 517 F. Supp. 3d at 1330. The court sustains the Department’s new determination that Yama did not benefit from the EBCP, which is supported by substantial evidence on the record of the Court No. 19-00047 Page 9 review. For the reason the court has stated, the court does not sustain the entirety of the Department’s discussion of this new determination in the Remand Redetermination. C. Yama’s Purchases of Synthetic Yarn and Caustic Soda A countervailable subsidy potentially may exist under the Tariff Act where an “authority,” which is defined in 19 U.S.C. § 1677(5)(B) as a “government of a country or any public entity within the territory of the country,” confers a benefit upon a person by providing goods “for less than adequate remuneration,” id. § 1677(5)(E)(iv). In order to be countervailable, any such subsidy also must satisfy the “specificity” requirement set forth in the statute. Id. § 1677(5)(A), (5A). 1. The Department’s LTAR Determinations in the Final Results Addressing Yama’s Synthetic Yarn and Caustic Soda Inputs For the Final Results, Commerce imposed countervailing duties on Yama’s exported ribbons upon determining that Yama’s suppliers of synthetic yarn and caustic soda were government authorities that conferred a benefit upon Yama by providing these production inputs for less than adequate remuneration. As it did with respect to the EBCP, Commerce imposed these countervailing duties by using “facts otherwise available” and “adverse inferences” under 19 U.S.C. § 1677e(a) and (b), respectively, finding that the government of China failed to cooperate when it did not respond to certain of its inquiries. Court No. 19-00047 Page 10 Although the Chinese government reported in questionnaire responses that none of the eight suppliers to Yama of synthetic yarn, nor the sole supplier of caustic soda, was a state-owned enterprise or otherwise majority-owned by the Chinese government, see Yama I, 45 CIT at __, 517 F. Supp. 3d at 1336 (citation omitted), Commerce drew the adverse inference that these suppliers were “authorities” within the meaning of 19 U.S.C. § 1677(5) upon a finding that the government of China failed to cooperate when it did not act to the best of its ability in responding to the Department’s requests for information on whether any owners, directors, or senior managers of Yama’s suppliers of synthetic yarn or caustic soda were government or Chinese Communist Party (“CCP”) officials, or whether any of these suppliers had a CCP organization. See id., 45 CIT at __, 517 F. Supp. 3d at 1336–37. Commerce concluded, further, that subsidies provided to Yama by the sales of these two suppliers at LTAR were “specific” by relying on its prior practices and by adopting various adverse inferences. See id., 45 CIT at __, 517 F. Supp. 3d at 1337–39. These included the adverse inference that “Chinese prices from transactions involving Chinese buyers and sellers are significantly distorted by the involvement of the GOC.” I&D Mem. at 11 (footnote omitted). Determining what it considered to be adequate remuneration, Commerce calculated the subsidy rates, 10.45% for synthetic yarn and 0.26% for caustic soda, for inclusion in the total net countervailable subsidy rate of 23.70%. Court No. 19-00047 Page 11 2. The Court’s Order of Remand in Yama I on the LTAR Determinations for Synthetic Yarn and Caustic Soda Contesting the Department’s decisions on synthetic yarn and caustic soda, Yama challenged the use of facts otherwise available and adverse inferences, including the Department’s drawing the adverse inferences that the specificity requirement of the Tariff Act had been satisfied with respect to both inputs. Id., 45 CIT at __, 517 F. Supp. 3d at 1335 (citation omitted). In the alternative, Yama claimed that Commerce erred in its treatment of ocean freight and value-added tax (“VAT”) in calculating the subsidy rates for the two inputs. Id. (citation omitted). Because Yama I remanded the Final Results to Commerce to reconsider the use of facts otherwise available with adverse inferences, it did not reach Yama’s alternative claim at that time. Without deciding the question of whether Commerce, as an adverse inference, permissibly deemed Yama’s suppliers to be “authorities,” the court reasoned that even were the court to presume, arguendo, that the suppliers were authorities, the court could not sustain the Department’s decision to impose countervailing duties upon Yama’s exports for these programs as presented in the Final Results. Id., 45 CIT at __, 517 F. Supp. 3d at 1338–39. In the Final Results, Commerce had relied solely upon its prior (fifth) review (for calendar year 2015) and adverse inferences in analyzing whether the “specificity” requirement for a countervailable subsidy had been met in the sixth review. See I&D Mem. at 13 (finding specificity based on the GOC’s failure to provide Court No. 19-00047 Page 12 requested information); see also Remand Redetermination at 9–10 (“Commerce’s longstanding practice is not to reexamine the specificity of a subsidy that it has previously found to be countervailable unless new evidence challenges such a finding.”) (footnote omitted). Yama I concluded that this analysis was not sufficient to support the Department’s adverse inferences of a government program or programs benefitting a limited or preferred group of purchasers of yarn or caustic soda. 45 CIT at __, 517 F. Supp. 3d at 1340. In the sixth review, there was record evidence, not addressed by Commerce in the Final Results, consisting of the government of China’s response to the Department’s first supplemental questionnaire, which told Commerce that no program existed that provided either synthetic yarn or caustic soda for lessthan-adequate remuneration, that the government does not regulate the pricing of those products, and that the provision of synthetic yarn is dictated by market forces and not by any plan that sets production levels. Yama I, 45 CIT at __, 517 F. Supp. 3d at 1339 (citations omitted). Yama I concluded that “Commerce acted unlawfully in deciding to include subsidy rates related to Yama’s synthetic yarn and caustic soda inputs without considering all relevant record evidence, in particular the uncontradicted record evidence that no programs existed during the POR that provided these inputs at LTAR.” Id., 45 CIT at __, 517 F. Supp. 3d at 1341. Further, the court held that Court No. 19-00047 Page 13 Commerce “did not conduct an analysis sufficient to support an adverse inference that any such programs would have met the specificity requirement of the Tariff Act so as to result in countervailable subsidies.” Id. The court ordered Commerce to reconsider its LTAR determinations “and take the corrective action that is necessary to fulfill the requirements of the statute.” Id., 45 CIT at __, 517 F. Supp. 3d at 1342. 3. The Department’s Adverse Inferences that the Suppliers of Synthetic Yarn and Caustic Soda Were “Authorities” As discussed above, Yama I deferred considering Yama’s challenge to the Department’s treating Yama’s suppliers of synthetic yarn and caustic soda as “authorities” for purposes of the countervailing duty provisions of the Tariff Act. It did so pending the Department’s conducting a new analysis of the “specificity” issue as to these two inputs. Because Commerce now has addressed the specificity issue in its Remand Redetermination through a new analysis (addressed later in this Opinion), the court now turns to Yama’s challenge to the Department’s determinations, based on facts otherwise available and adverse inferences, that each of the suppliers was an authority within the meaning of that term as defined 19 U.S.C. § 1677(5). It is uncontested that the Chinese government did not provide Commerce the requested information on whether any owners, directors, or senior managers of Yama’s eight suppliers of synthetic yarn or of the sole supplier of caustic soda were government Court No. 19-00047 Page 14 or CCP officials, or whether any of these suppliers had a CCP organization. Commerce explained that: While the GOC provided a long narrative explanation of the role of the CCP, when asked to identify any owners, members of the board of directors, or managers of the input suppliers who were government or CCP officials during the POR, the GOC explained that there is “no central informational database to search for the requested information,” and directed Commerce to obtain this information directly from Yama’s privately-owned suppliers. I&D Mem. at 12 (quoting Countervailing Duty Supplemental Questionnaire Response 30 (Apr. 20, 2018) (PR Docs. 35–37) (CR Docs. 16–18) (footnotes omitted) (“GOC Additional Questionnaire Resp.”)). Yama argued, first, that the Chinese government acted to the best of its ability in responding to the inquiry. Pl.’s Mem. 37. The court disagrees. Even if it is presumed, arguendo, that the GOC did not have immediate access to a means of obtaining the requested information, the GOC’s response that Commerce should obtain the information from Yama’s suppliers reveals the GOC’s unwillingness to pursue other means, including, if necessary, inquiring of the suppliers itself, to obtain the information Commerce sought. The statute, in 19 U.S.C. § 1677e(b), requires an interested party to act to the best of its ability in responding to a Departmental information request. Commerce permissibly found on the record evidence that the Chinese government, in this instance, had not done so. Court No. 19-00047 Page 15 Arguing to the contrary, Yama submits that the Tariff Act, in 19 U.S.C. § 1677m(c), required Commerce to find that the GOC “complied with the statutes” when it was unable to submit the information in the requested time and manner, together with a full explanation, and suggested alternate forms in which the Department could obtain the information. Pl.’s Mem. 37. Yama’s argument fails to address the express requirements of § 1677m(c). To qualify for the exception specified thereunder, an interested party from which the information is requested must suggest “alternative forms in which such party is able to submit the information . . . .” 19 U.S.C. § 1677m(c) (emphasis added). The GOC did not suggest that it could provide the requested information in some other form and instead suggested that Commerce look elsewhere. It is well established (and Yama does not contest) that Commerce may seek the information it needs from the exporting government in a countervailing duty proceeding and, in appropriate circumstances, may invoke its authority under 19 U.S.C. § 1677e(b), even if the result is a collateral adverse effect upon a cooperating party. See Fine Furniture (Shanghai) Ltd. v. United States, 748 F.3d. 1365, 1372–73 (Fed. Cir. 2014). Commerce should seek to avoid this adverse effect if the necessary information is present elsewhere on the record, see Changzhou Trina Solar Energy Co. v. United States, 42 CIT __, __, 352 F. Supp. 3d 1316, 1325 (2018), but that was not the situation here. Court No. 19-00047 Page 16 Therefore, the GOC’s suggestion that the information request be redirected to Yama’s suppliers did not negate the Department’s authority to draw an adverse inference from the failure of the Chinese government to lend its full cooperation. Finally, Yama argues that there are no “‘facts otherwise available’ on the record suggesting that CCP’s involvement in a private company is sufficient to transform the company into a government authority” and that the record evidence is that the Chinese government “is prohibited by law from interfering in the ordinary business operations and management of a company.” Pl.’s Mem. 41–42. The court rejects this argument. The implied premise of Yama’s argument is that Commerce lacked authority to pursue its inquiries as to whether, or how, the presence of government or CCP officials, or a CCP organization, in any specific supplier of Yama allowed meaningful government control over that company. Yama’s argument, which refers to the responses the government of China put on the record, speaks in generalities about the role of the CCP in Chinese private companies in general. It does not speak to the individual situations presented by the record facts of this case, which involved a failure to cooperate on the part of the government of China with respect to information about the governance of the specific suppliers. Had the GOC acted to the best of its ability in responding to the inquiry about whether government or CCP officials are present in any of Yama’s privately-owned input suppliers as owners, managers, or directors, Court No. 19-00047 Page 17 Commerce may have been in a position to make further inquiries, and learn details, as to the functions such individuals, if reported to be present in a supplier company, had the authority to perform. In short, the government of China, by declining to provide, or even endeavor to provide, the requested information concerning CCP members in the ownership or management structure of these companies, effectively cut off the Department’s ability to investigate the matter further. As the authority granted in 19 U.S.C. § 1677e signifies, Congress intended for Commerce, not an interested party, to control the scope of the inquiry so that Commerce freely may perform its statutory function. While Yama points to generalized record evidence that it argues could support a finding that CCP presence did not amount to government control, Commerce was not required to make such a finding, given that the Department’s investigative ability was hindered by the GOC’s failure to cooperate on the question of a possible CCP presence in the suppliers. Commerce, therefore, acted within its statutory authority when it drew two adverse inferences as to Yama’s suppliers: first, that CCP officials were present in each, and second, that these officials had authority to control company operations. See I&D Mem. at 12 (emphasis added) (“As AFA, we find that CCP officials are present in each of Yama’s privately-owned input suppliers as individual owners, managers and members of the boards of directors, and that this Court No. 19-00047 Page 18 gives the CCP, as the government, meaningful control over the companies and their resources.”). 4. The Department’s Inclusion of Ocean Freight and VAT in the “Benchmark” for Synthetic Yarn and Caustic Soda Addressing the essential statutory element of specificity, Yama I did not reach Yama’s claim that Commerce erred in its treatment of ocean freight and value-added tax in conducting its adequacy-of-remuneration analysis. The court addresses that claim now. To determine whether the prices Yama paid for synthetic yarn and caustic soda in China constituted adequate remuneration, Commerce applied its regulation, 19 C.F.R. § 351.511. Under the “tier-one” method set forth in the regulation, 19 C.F.R. § 351.511(a)(2)(i), Commerce measures the adequacy of remuneration by comparing the government price to a “comparison” price (also called a “benchmark” price), which under the tier-one method is a market-determined price obtained from actual transactions within the exporting country. Because Commerce considered transactions within China not to be market-determined and therefore not usable for that purpose, it proceeded to calculate, as a “tier-two” benchmark, “a world market price where it is reasonable to conclude that such price would be available to purchasers in the country in question.” Id. § 351.511(a)(2)(ii). For tier-one and tier-two benchmarks, the Commerce regulations direct that “the Secretary will adjust the comparison price to Court No. 19-00047 Page 19 reflect the price that a firm actually paid or would pay if it imported the product. This adjustment will include delivery charges and import duties.” Id. § 351.511(a)(2)(iv). Commerce stated in the Issues and Decision Memorandum that it added “freight, import duties, and VAT to the world prices in order to estimate what a firm would have paid if it imported the product.” I&D Mem. at 13. Yama claims that “[t]he tier 2 benchmark prices the Department used are not appropriate because they included ocean freight and VAT and are inconsistent with the prevailing market conditions.” Pl.’s Mem. 43. In support of this claim, Yama cites 19 U.S.C. § 1677(5)(E)(iv), for which the statute directs Commerce to determine adequacy of remuneration “in relation to prevailing market conditions for the good or service being provided or the goods being purchased in the country which is subject to the investigation or review.” 3 19 U.S.C. § 1677(5)(E). The provision adds that 3 Yama also quotes a World Trade Organization Appellate Body Report, arguing that: [T]he prominence of domestic supply in the market relative to import supply is an important consideration when determining the generally applicable delivery charges for the good in question in the country of provision. Such charges should not be determined simply on the basis that the comparison price used as a benchmark was derived from import prices or “world export” prices. (continued. . . .) Court No. 19-00047 Page 20 “[p]revailing market conditions include price, quality, availability, marketability, transportation, and other conditions of purchase or sale.” 19 U.S.C. § 1677(5)(E). Yama argues that the obligation to determine adequacy of remuneration in relation to prevailing market conditions requires that “[u]nder the circumstances, the Department’s regulation on the use of delivered prices cannot be read in a vacuum” and that Commerce should not adjust a benchmark for ocean freight and import VAT when doing so is “contrary to ‘prevailing market conditions.’” Pl.’s Mem. 44. Yama’s argument is unconvincing. Missing are any specifics, drawn from record evidence or elsewhere, as to how the Department’s including delivery charges such as ocean freight in the benchmark price, which Commerce was directed to do by 19 C.F.R. § 351.511(a)(2)(ii) (“This adjustment will include delivery charges and import duties” (emphasis added)), should be found to be contrary to “prevailing market conditions” in the situations the two inputs presented. Nor does Yama claim that the regulation, on its face, is contrary to 19 U.S.C. § 1677(5)(E). With particular respect to the Department’s adding input VAT to the import price, Yama argues that including input VAT was incorrect. Yama gives as its reason Mem. of Law in Supp. of Pl. Yama Ribbons and Bows Co., Ltd.’s 56. 2 Mot. for J. upon the Agency R. 45–46 (Aug. 9, 2019), ECF No. 26 (quoting Appellate Body Report, United States—Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India, ¶¶ 4.249 & 4.306, WTO Doc. WT/DS436/AB/R (adopted Dec. 8, 2014)). Court No. 19-00047 Page 21 that in China, input VAT is credited against output VAT and rebated to the exporter “up to the input VAT amount paid on the previously purchased raw material” such that “VAT is not part of the cost of the raw material because it will either be offset against output VAT or rebated upon exportation.” Pl.’s Mem. 46–47. At oral argument held on February 13, 2020, the court inquired about the Department’s treatment of VAT when applying the tier-two benchmark method of 19 C.F.R. § 351.511(a)(2)(ii). Defendant responded in a written submission. Def.’s Resp. to the Court’s Request for Suppl. Briefing (Mar. 16, 2020), ECF No. 41. Citing detailed record evidence, defendant explained that it included VAT when determining the price Yama paid for synthetic yarn and caustic soda and, to achieve an “apples to apples” comparison, also included VAT in each benchmark price. Id. at 2. The submission informs the court that Commerce used this same method for ocean freight. Id. Yama submitted a reply to defendant’s submission. Pl.’s Reply to Def.’s Resp. to the Court’s Request for Suppl. Briefing (Mar. 23, 2020), ECF No. 42. In its entirety, plaintiff’s submission states: “Plaintiff Yama Ribbons and Bows Co., Ltd., concurs with the government’s response to the Court dated March 16, 2020. Yama has no further comments.” Id. In declining to comment, Yama leaves unanswered the question of why the court must hold that the Department’s “apples to apples” comparison method Court No. 19-00047 Page 22 of addressing ocean freight and VAT failed to satisfy the requirements of 19 U.S.C. § 1677(5)(E). For the reasons stated above, the court does not find merit in Yama’s claim that Commerce acted contrary to law in its treatment of ocean freight and VAT in calculating the subsidy rates for synthetic yarn and caustic soda. 5. The Department’s Decisions on Synthetic Yarn and Caustic Soda in the Remand Redetermination In the Remand Redetermination, Commerce stated that “[w]e have reevaluated the information on the record regarding the Synthetic Yarn and Caustic Soda for LTAR subsidies and addressed the ‘specificity’ requirement in the statute, pursuant to the Court’s instructions,” adding that, after doing so, “Commerce finds that these subsidies meet the specificity requirements of the Act.” Remand Redetermination at 10. The following provisions in the Tariff Act are pertinent to the specificity issue presented by this case: Where there are reasons to believe that a subsidy may be specific as a matter of fact, the subsidy is specific if one or more of the following factors exist: (I) The actual recipients of the subsidy, whether considered on an enterprise or industry basis, are limited in number. (II) An enterprise or industry is a predominant user of the subsidy. Court No. 19-00047 (III) An enterprise or industry receives a disproportionately large amount of the subsidy. (IV) The manner in which the authority providing the subsidy has exercised discretion in the decision to grant the subsidy indicates that an enterprise or industry is favored over others. Page 23 In evaluating the factors set forth in subclauses (I), (II), (III), and (IV), the administering authority shall take into account the extent of diversification of economic activities within the jurisdiction of the authority providing the subsidy, and the length of time during which the subsidy program has been in operation. 19 U.S.C. § 1677(5A)(D)(iii). Commerce based both of its specificity determinations, i.e., for synthetic yarn and for caustic soda, solely on the first factor (subclause (I)). Remand Redetermination at 22. For purposes of the Remand Redetermination, Commerce placed new information on the record, consisting of a new subsidies allegation (“NSA”) that the petitioner (Berwick Offray LLC, the defendant-intervenor in this litigation) submitted in the previous administrative review of the Order, and the Department’s decision memorandum in response to the NSA. Id. at 7 (identifying as new record information Placing Documents on the Record (Int’l Trade Admin. May 14, 2021) (PPR Docs. 1–5) (“2015 NSA Information”)). In its specificity analysis, Commerce also noted the Chinese government’s response to the Department’s requests, submitted during the sixth review, for lists of the industries that purchase synthetic yarn and caustic soda, with volume and value Court No. 19-00047 Page 24 data on such purchases, and related information, including the resource or classification scheme the government normally relies upon to define industries and classify companies within an industry. Id. at 14. Considering the Chinese government’s first reply unresponsive to the inquiry, Commerce again asked for the information, and the government of China replied that it did not maintain the requested information. Id. In the Remand Redetermination, Commerce concluded that necessary information was missing from the record and that the use of facts otherwise available therefore was warranted, as well as an adverse inference for its finding that the Chinese government failed to cooperate by not acting to the best of its ability in providing requested information. Id. at 14–15. For synthetic yarn, Commerce relied on exhibits to the NSA to reach a finding that “synthetic yarn is used solely by the textiles industry in China.” Id. at 15 (citing 2015 NSA Information, Attach. I at Ex. II-E & II-P). From this finding, Commerce reasoned as follows: “In past cases, Commerce has found that when use of an input was limited to eight industries, the industries were limited in number in China, and thus, the subsidy was de facto specific.” Id. (footnote omitted). Commerce went on to conclude that “[c]onsequently, we find that the use of synthetic yarn by one industry (the textiles industry) is limited in number and, as a result, the Provision of Synthetic Yarn for LTAR program is de facto specific under section 771(5A)(D)(iii)(I) of the Act Court No. 19-00047 Page 25 [19 U.S.C. § 1677(5A)(D)(iii)(I)].” Id. at 15–16. For caustic soda, Commerce again relied on the NSA submission to conclude that “caustic soda is used by only a limited number of industries (i.e., chemicals, pulp and paper, aluminum, food, water treatment, and textiles) in China.” Id. at 16 (citing 2015 NSA Information, Attach I. at Ex. III-B & III-H). Commerce considered six industries to be sufficiently “limited in number” within the meaning of 19 U.S.C. § 1677(5A)(D)(iii). 6. Yama’s Objections to the Remand Redetermination Yama argues that the Department’s use of facts otherwise available and adverse inferences was impermissible because this Court’s previous order “determined that the GOC fully answered the relevant questions and the administrative record is complete in that regard, leading to no finding of a subsidy predicated on substantial evidence on the record.” Pl.’s Comments 3. In a similar vein, Yama argues that the specificity issue in this case is “moot” because “[o]nce the Court determined that the GOC answered the question about any law, plan, or policy regarding LTAR, the inquiry should have ended.” Id. at 5. Yama misreads the court’s decision in Yama I. Contrary to the assertion that the specificity issue is moot, the court ordered Commerce, upon reconsidering the Final Results, to reexamine the issue of specificity. Had the court ruled as Yama asserts, it effectively would have ruled that no countervailing duties were lawful in this case—a Court No. 19-00047 Page 26 result the court did not reach. Moreover, while the administrative record may have been described as “complete” as of the time of issuance of the Final Results, Commerce reopened the record to place new information on the record and used that information in its analysis of the specificity issue. Yama argues that the Department’s use of information from a prior review in the specificity analysis was improper. Id. at 6–7. The court disagrees. Having directed Commerce to conduct an analysis of the specificity issue as to both inputs, the court sees nothing improper in the Department’s reopening the record to admit the NSA information. Commerce concluded from the NSA information that the textiles industry was the sole user of synthetic yarn in China. Yama placed no information on the record that could call this finding (which seems intuitively obvious) into question. Nor did Yama place any information on the record that would detract from the Department’s finding, also based on the NSA information, that only six industries in China used caustic soda. Rather than question the two findings before the court, Yama argues that Commerce incorrectly was “looking at specific inputs, such as synthetic yarn and caustic soda,” “rather than looking at LTAR overall,” adding that “[i]t is not the input that is important to the question of specificity but the overall ‘program’ law, plan, or policy.” Id. at 7. In Yama’s view, “[f]or decades, Commerce has gone unchallenged in Court No. 19-00047 Page 27 its framing of the specificity question to ensure that no industry in China can win this argument,” which it considers “neither reasonable nor fair.” Id. A flaw in Yama’s position is the statute itself. The Tariff Act considers a subsidy to be de facto specific if “[t]he actual recipients of the subsidy, whether considered on an enterprise or industry basis, are limited in number.” 19 U.S.C. § 1677(5A)(D)(iii)(I). While the “textiles industry” in China would appear to be a broad category composed of many individual industries, the statute speaks to this issue as well, instructing that “any reference to an enterprise or industry is a reference to a foreign enterprise or foreign industry and includes a group of such enterprises or industries.” Id. § 1677(5A)(D)(iii). Even a broad, multifaceted industrial category such as the “textiles industry” may be considered a single recipient such that a subsidy may qualify as “specific.” On the record of this case, Yama’s assertion that the issue of specificity depends on “the overall ‘program’ law, plan, or policy,” as opposed to the “input,” Pl.’s Comments 7, is also unconvincing. The Tariff Act directs that “in evaluating the factors [for determining specificity as a matter of fact] set forth in subclauses (I), (II), (III), and (IV), the administering authority shall take into account . . . the length of time during which the subsidy program has been in operation.” 19 U.S.C. § 1677(5A)(D)(iii) (emphasis added). But as the court explains below, the record, considered as a whole and as Court No. 19-00047 Page 28 enlarged during the remand proceeding, permissibly allowed Commerce, based on findings from actual evidence and on adverse inferences, to conclude that a subsidy “program” (a term not defined in the statute) existed during the POR that provided synthetic yarn and caustic soda for less-than-adequate remuneration and to determine that the specificity requirement was met. From actual record evidence (as opposed to adverse inferences), Commerce reached valid findings that the prices at which Yama was able to buy synthetic yarn and caustic soda were less than the Department’s tier-two benchmarks. Yama’s only challenges to the benchmarks concerned ocean freight and VAT (which the court rejected, as discussed previously). Thus, the record permissibly allowed Commerce to find that Yama was able to purchase the two inputs for less than it could have obtained them as imports into China. See I&D Mem. at 13 (explaining that Commerce added freight, import duties, and VAT to world prices in order to estimate what a firm would have paid if it imported the product). The record also contained information submitted by the government of China concerning the percentage of Chinese production of both synthetic yarn and caustic soda that was by producers in China in which the government maintained a majority ownership. See GOC Additional Questionnaire Response at 32, 53. While the GOC informed Commerce that none of Yama’s suppliers of these two inputs were Court No. 19-00047 Page 29 government-owned, Commerce acted within its authority in drawing an adverse inference of government control of these firms’ operations from the GOC’s noncooperation in responding to the question of CCP presence, as the court discussed previously. That non-cooperation denied Commerce access to information from which it could assess “the length of time during which the subsidy program has been in operation.” 19 U.S.C. § 1677(5A)(D)(iii). Yama objects that “Commerce cannot hold the GOC accountable for information it does not possess,” Pl.’s Comments 6, but its objection is centered on the GOC’s providing only some, but not all, of the information on the industrial sectors consisting of synthetic yarn and caustic soda producers and, specifically, the GOC’s claim that Article 25 of the Statistics Law of China did not allow public disclosure of the names of the specific synthetic yarn and caustic soda producers in which it maintained an ownership interest. See I&D Mem. at 10. But as the court’s review of the specificity analysis shows, the GOC’s refusal to provide the names of those companies was not instrumental in the adverse inferences that controlled the outcome of that analysis, which were the adverse inferences concerning CCP participation in, and effective government control of, Yama’s synthetic yarn and caustic soda suppliers. In summary, the record revealed the percentage of Chinese production of both synthetic yarn and caustic soda that was by producers in China in which the Court No. 19-00047 Page 30 government maintained a majority ownership and demonstrated that Yama was able to obtain these two inputs for less than what it would have paid had it imported them. To this record evidence is added the adverse inferences that Yama’s suppliers were subject to operational control of the Chinese government. Commerce, therefore, permissibly concluded that the domestic prices for the two inputs in China were distorted by the government’s influence. With what evidence it was able to obtain, and with the adverse inferences Commerce had authority to draw, Commerce also could conclude, permissibly, that the government’s role in the LTAR sales of the inputs amounted to government “programs” that were in existence during the POR. In holding that the Final Results did not conduct an adequate analysis of specificity, Yama I was critical of the Department’s failure in the Issues and Decision Memorandum to address, or even mention, the Chinese government’s questionnaire responses indicating the lack of a government program to provide synthetic yarn or caustic soda at LTAR. Yama I, 45 CIT at __, 517 F. Supp. 3d at 1340. Commerce now has addressed this evidence as part of its specificity analysis. See Remand Redetermination at 13. Yama argues that “[t]he whole purpose of this LTAR exercise is to determine whether the GOC has attempted to manipulate the market, either production quantity or prices, for synthetic yarn and caustic soda.” Pl.’s Comments 8. This formulation is not quite correct. On the issue of de facto specificity as determined according to Court No. 19-00047 Page 31 19 U.S.C. § 1677(5A)(D)(iii), the question is whether Commerce permissibly could conclude on this record, based on its findings and its adverse inferences, whether the government’s influence did affect the market. Even if the government of China’s statement that it did not maintain what it considered to be a “program” or “programs” for the supplying of these inputs is taken at face value, it still would leave the issue of specificity unresolved. On this record, Commerce acted within its statutory authority in identifying a government role in the production and sale of each of these inputs, which Commerce permissibly found to be sold for LTAR, that amounts to the existence of “programs” for purposes of 19 U.S.C. § 1677(5A), regardless of whether the government of China would consider them to be such. Finally, Yama argues that “there was neither explicit nor implicit authority for Commerce to add to the record” and that the information added “simply supports Commerce[’s] impermissible attempt at a post hoc rationalization.” Pl.’s Comments 9. Plaintiff submits that Yama I held that it was the Department’s “analysis that was lacking, not the data.” Id. (emphasis in original). Because, as the court discussed above, Yama I remanded the Final Results for the conducting of a new specificity analysis, Commerce had implicit authority to reopen the record in an effort to obtain data it considered necessary to its doing so. Because the Remand Redetermination is a new Court No. 19-00047 Page 32 determination, based on an enlarged record and new reasoning, it cannot accurately be described as a post hoc rationalization. III. CONCLUSION For the reasons discussed previously, the court sustains the Department’s decision in the Remand Redetermination not to impose countervailing duties upon Yama with respect to the Export Buyer’s Credit Program. For reasons also discussed above, the court concludes that the Remand Redetermination remedied the deficiencies the court identified in Yama I with respect to the Department’s analysis of the provision of synthetic yarn and caustic soda for LTAR and reached results supported by substantial record evidence. The court will enter judgment sustaining the Remand Redetermination. /s/ Timothy C. Stanceu Timothy C. Stanceu, Judge Dated: December 8, 2022 New York, New York
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