Commerce Right to Include Derivative Losses in COP During AD Review, Petitioner Tells CIT

The Commerce Department's decision to include certain derivative losses from the financial expense component of an antidumping respondent's cost of production (COP) was properly supported, the AD petitioner Domtar Corporation argued in a Sept. 29 brief at the Court of International Trade. Seeing as the respondent itself referred to the derivative losses as being related to the company's financials rather than investment activity, it was reasonable for Commerce to treat them as such, the brief said (Suzano S.A. v. United States, CIT #21-00069).

The argument comes in a case over Commerce's final results in the third administrative review of the antidumping duty order on uncoated paper from Brazil covering entries in 2018-19, wherein the plaintiff, Suzano, was as a mandatory respondent. Suzano is looking for CIT to rule that Commerce should have excluded its derivative losses from its COP either because they were actually related to separate investment activities or represented an "extraordinary" expense.

Domtar addressed both of these contentions in its brief. Peering at 2018 audited financial statements from Suzano, Domtar said that the respondent's own auditors characterized the losses as being related to the company's "borrowing and cash management activities," and not investment. Suzano countered that even though they were characterized as financial expenses, the losses were incurred in preparation for a planned investment in Fibria Celulose in 2019.

"Even if that were true, it does not mean that Suzano’s costs of raising capital and managing cash during 2018 should somehow be recharacterized for antidumping purposes as 'investment' activities rather than as financing activities," the brief said. "The loss at issue did not result from an investment in Fibria that declined in value during 2018; indeed, the investment itself did not even occur until the following year."

Suzano's "extraordinary" expense argument also fails since the losses were not classified by the respondent's auditors as "extraordinary," the brief said. Seeing as the statute requires Commerce to typically base COP on the respondent's normal records kept in accordance with generally accepted accounting practices, the agency's decision to not deduct the losses stands, Domtar argued.