Commerce Sticks With AFA for China's EBCP Due to Missing Information From Chinese Government

The Commerce Department continued to apply adverse facts available relating to the agency's inability to verify two mandatory respondents' non-use of China's Export Buyers Credit Program in a countervailing duty case, despite lengthy remand instructions from the Court of International Trade. Answering a series of nine questions from Judge Timothy Reif, Commerce thoroughly explained why it continues to apply AFA on this critical issue absent further collaboration with the Chinese government, in its remand results. Likening the saga over the EBCP in the court to the film Groundhog Day, Reif sought an explanation from Commerce that would firmly answer the question of whether AFA was legitimately applied on the issue (Guizhou Tyre Co. Ltd. v. United States, CIT #19-00032).

This case in particular was over the final results of the countervailing duty investigation on truck and bus tires from China in which Guizhou Tyre Co., the plaintiff, served as one of the two mandatory respondents. The other was Double Coin Holdings Ltd. In the underlying petition, it was alleged that the respondents received up to 15 different countervailable subsidies, one of which included loans through the EBCP. So, as it has done in many other CVD cases, Commerce slapped an AFA tag on the respondents' alleged use of the program due to the difficulties it had in verifying non-use and the intransigence of the Chinese government in the matter of giving Commerce certain information on how the program works. So Reif remanded this use of AFA with a host of questions, including why this information was actually necessary to prove non-use (see 2105270080).

On remand, Commerce said that AFA was appropriate because the Chinese government did not comply in helping the agency out in two key areas. China in the past has said that the program is limited to contracts exceeding $2 million, but Commerce had information showing this to no longer be the case. So, the agency wanted China to corroborate this. If it had done so, Commerce would have had a much easier go of it in verifying non-use since the world of possible loans from the EBCP would be much smaller, it clarified in the remand results.

Second, Commerce wanted information from the Chinese government about which third-party banks participated in the program. The agency had record evidence showing that it was not always the case that the program simply deposited money into participating companies' accounts with the EBCP. Sometimes the money gets dropped in accounts at other banks. So, knowing which banks participate in this scheme would be crucial to verifying non-use, the agency said. China refused to give information on the third-party banks, and without the information, Commerce believes it is impossible to properly verify non-use.

"We were disappointed to see that Commerce continues to ride the Ferris wheel on this issue despite the overwhelming court precedent, including Judge Reif’s opinion in this case," said Andrew Schutz of Grunfeld Desiderio for plaintiff Guizhou. "We are confident that the Court will once again send back this issue to Commerce, as it has done in almost 15 court decisions (starting with Guizhou Tyre v. United States, Slip Op. 18-140 in 2018), where Commerce will once again find non-use of this program 'under protest.' Since Commerce refuses to appeal these decisions to the Federal Circuit, it has no choice but to ultimately comply with this overwhelming court precedent and change its practice."

In verifying non-use, Commerce also checks in with the respondents' U.S. customers to try and figure out if the respondents participated in this program. But in Guizhou and Double Coin's case, this meant a lot of customers -- far more than Commerce believes it could get through before the statuary deadline, the agency said. Plus, Commerce even attempted to verify non-use with a more limited selection of the U.S. customers, but all the agency got were one-page self-certifications saying they didn't use the EBCP.

Nevertheless, Reif asked why Commerce couldn't just verify non-use using these certifications or other information from the customers. The agency responded by again pointing out that these were merely one-page certifications saying that the company didn't use the loan program -- not exactly suitable to verifying complete non-use, the agency said.

"Any information provided by the mandatory respondents or their U.S. customers is of minimal or no value," Commerce said. "We have noted that there may be one circumstance in which we could verify non-usage without partial responses from the [Government of China (GOC)] (specifically, in the event Commerce were provided a list of correspondent banks and we were able to review the financing of all respondents’ customers). Beyond this one scenario, Commerce will be unable to determine and verify usage/non-usage (or benefit) of this program. As such, without full cooperation from the GOC, Commerce’s only recourse is to apply AFA for this program."