Use of AFA in CVD Review Allowed Due to Lack of Cooperation by Chinese Government, CAFC Says

The Commerce Department can use adverse facts available over the Chinese government's failure to provide information on its electricity price-setting practices in a countervailing duty review, the U.S. Court of Appeals for the Federal Circuit said in a Jan. 28 opinion. Upholding a decision from the Court of International Trade, the Federal Circuit affirmed Commerce's CV duties for the provision of electricity for less than adequate remuneration (LTAR) after the Chinese government failed to explain price variations across different provinces.

The opinion concerns the fourth administrative review of the CVD order on solar cells from China, in which lead plaintiff Canadian Solar served as one of the mandatory respondents. In the review, as it considered the finding on electricity for LTAR, Commerce sent questionnaire to China requesting provincial price proposals, descriptions of the National Development and Reform Commission's role in electricity price-setting, and an explanation of how electricity pricing is responsive to market variables. China declined to provide complete responses to Commerce's questions.

Commerce said that since this information was "key" to its understanding of the Chinese government's role in establishing electricity prices at the local provincial level, AFA was warranted. CIT upheld this position, including the agency's stance that Canadian Solar received a regionally specific subsidy.

On appeal, Federal Circuit Judges Kimberly Moore, Raymond Clevenger and Raymond Chen upheld the lower court decision. "The record here supports Commerce’s conclusions," Chen said. "In its Remand Redetermination, Commerce sufficiently and reasonably explained that it lacked key information because the government of China failed to cooperate by not acting to the best of its ability to comply with requests for information."

The Federal Circuit said that it has upheld the use of AFA before when the Chinese government refused to provide information over how the electricity processes and costs varied among the provinces that provided electricity to industries within their areas. Canadian Solar, in its bid to counter the use of AFA, argued that Commerce ignored provincial price schedules which reveal that no region in China received subsidized electricity prices. Commerce, though, said it reached the opposite conclusion since AFA was needed to fill "two critical informational gaps" raised by the price schedules. These gaps are why the prices vary from province to province and who makes the decision to set distinct prices in each province.

"Commerce could not determine why prices vary because the government of China failed 'to demonstrate that such variances are in accordance with market principles or cost differences,'" the opinion said. "... At most, Commerce and Canadian Solar reached inconsistent conclusions based on the same evidence. This does not, however, render Commerce’s findings unsupported by substantial evidence."

Canadian Solar also argued that Commerce wrongly applied the regional subsidy program to every single region and province in China, thus negating the specificity of the supposed subsidy. "We agree with the CIT that, where documents support the inference that the central government of China was involved in provincial electricity pricing that results in regional price variability, substantial evidence supports Commerce’s finding that there is a countervailable regionally specific subsidy," the opinion said. To uphold this, the Federal Circuit looked at a 2006 CIT decision that found an electricity subsidy was sufficiently regionally specific since all eligible companies were located within the "region" of Thailand.

(Canadian Solar, et al. v. United States, Fed. Cir. #21-1434, dated 01/28/22, Judges Moore, Clevenger and Chen. Attorneys: Sarah Wyss of Mowry Grimson for plaintiffs-appellants; Justin Miller for defendant-appellee U.S. government)