Commerce Tries New Defense of Its Finding That an EU Ag Subsidy Is Countervailable

After two failed attempts to prove that subsidies provided by the government of Spain to olive growers are de jure specific, the Commerce Department now asserts that the subsidies are de facto specific, in remand results submitted to the Court of International Trade Nov. 3. While still disagreeing with the trade court's finding that the subsidies are not de jure specific to olive growers, Commerce nevertheless backed down and now argues for de facto specificity instead. Because the Spanish government purportedly failed to submit the information Commerce needed to hold de facto specificity on remand, the agency relied on facts otherwise available to derive the proposed countervailing duty rate.

The remand comes from a case brought by Spanish olive exporters who are challenging the countervailing duty investigation into ripe olives from Spain. In the investigation, Commerce found that Spanish olive growers were receiving a subsidy via the European Union's Common Agricultural Policy, which is administered through the Spanish government.

CIT has held twice now that this program is not specific to Spanish olive growers, making it ineligible to be a countervailable subsidy (see 2106170075). The program doles out subsidies through the Basic Payment Scheme, which provides subsidies based on "geographical indicators of farmland productivity," which is based on data provided by Spain's government. BPS relies on this data to allocate subsidies based on the productive potential of a region.

The rates don't vary with the type and amount of crop produced but instead reflect historical data regarding agricultural practices carried out in the region, including whether the region made olives. Commerce found that the grants received by the olive growers under BPS are directly related to the grant amount only live growers received, purportedly establishing de jure specificity.

CIT rejected this notion twice, most recently holding that since the law explicitly says that the subsidy program needs to limit access to it so that olive growers have an exclusive right to use the BPS payments, the program is not de jure specific. There was uniform treatment across the agricultural sector in the provision of benefits, leading to the conclusion that Commerce's review of the specificity of the subsidy does not pass muster, the judge ruled.

Now Commerce argues that the subsidies were de facto specific. To reach this new standard, the agency must establish four factors that a subsidy is de facto specific to an enterprise or industry. They include establishing that (1) the actual recipients of the subsidy are limited in number, (2) an enterprise or industry is a predominant user of the program, (3), an enterprise or industry receives a disproportionately large amount of the subsidy and (4) the manner in which the authority doles out the subsidy reveals that an enterprise or industry is favored over another.

On remand, Commerce issued supplemental questionnaires to the Spanish government on the numbers behind the assistance approved on a per industry basis. The Spanish government repeatedly responded that the BPS payments are decoupled, explaining that "it is not possible to determinate [sic] payments for the industry of table olives.... From the moment that subsidies on a sector have been decoupled (olive oil sector payments are fully decoupled since 2010); it is not possible to determine the share of this component which has been paid to a particular sector since there is no link between the specific crop and the payment."

Commerce relied on facts otherwise available provided by the CVD petitioner. The agency explained that the allegations from the petitioner are reliable, specifically the petitioner's data regarding how much money the growers receive and evidence of beneficiary programs for the growers.

"We find that the information from the petitioner that we have relied upon as facts otherwise available in our de facto analysis is reliable and relevant because independent information submitted by the [government of Spain (GOS)] in its questionnaire responses similarly show that the respondents, who operate within the olive industry, received considerably higher levels of assistance than the average," the remand results said. "Accordingly, we have corroborated the de facto information from the Petition to the extent practicable. Taken together, the information from the Petition and the information provided by the GOS support a finding that the BPS program is de facto specific."

In the remand results, Commerce also reconsidered its interpretation of a "raw agricultural product" and "prior stage product" to find that the demand for "distinct biological varietals of raw olives" is dependent on the demand for table olives. The agency needs to establish this to show that the subsidies for olive growers is in effect a subsidy on its downstream product and therefore a countervailable subsidy for the final product. In the court's last opinion on the case, the judge said that Commerce's decision to define a prior stage product as the raw agricultural product the industry considers suitable for use in the prior stage of production is an impermissible interpretation of the law that "causes the statute as a whole to become superfluous."

On remand, the agency reconsidered the meaning of "raw agricultural product" and "prior stage product" and instead found that demand for distinct biological varietals of raw olives is dependent on the demand for table olives. Commerce says this, coupled with its de facto specificity finding, permits the imposition of countervailing duties on the olives from Spain.