CIT Again Strikes Down AFA Over China's EBCP, Gives Commerce Another Path to Verify Non-Use

The Commerce Department cannot rely on adverse facts available in response the Chinese government's failure to provide certain information relating to its Export Buyer's Credit Program in a countervailing duty review, the Court of International Trade said in a Feb. 8 decision. Adding another to a line of decisions striking down the application of AFA in such circumstances, the court said Commerce has not shown why this information is necessary to verify that the CVD respondents, and their U.S. customers, did not use the program.

The opinion comes in a case brought by exporter Both-Well (Taizhou) Steel Fittings Co. over the first administrative review of the CVD order on forged steel fittings from China. In the review, petitioner Bonney Forge Corporation alleged that Both-Well benefited from China's EBCP, whereby China's Export-Import Bank pays U.S. customers to buy Chinese exports. Finding that it wasn't well equipped to certify whether the respondent benefited from this program, Commerce then asked the Chinese government for two pieces of information the agency deemed essential to understanding how the program works, allowing it to verify non-use.

The Chinese government did not provide the information, resulting in Commerce hitting Both-Well with an AFA countervailing duty rate of 10.54% for the use of the EBCP. The trade court has already ruled against the practice, with Commerce refusing to appeal to the U.S. Court of Appeals for the Federal Circuit. This time around was no different. Judge Claire Kelly said that the use of AFA was not warranted since Commerce failed to show why the information requested of the Chinese government was necessary to verify non-use in light of the certifications of non-use submitted by Both-Well.

"As has happened in several cases before this Court, although Commerce explains why it wants the information it seeks, it fails to explain why that information is necessary, i.e., why it is the only information that can verify the U.S. customers’ non-use certifications," Kelly said. "... Put simply, Commerce fails to show that the information it seeks is the only information it can use to verify the non-use certifications."

Kelly said that instead of asking the Chinese government for this information -- which included the identities of participating banks -- Commerce could have asked Both-Well's U.S. customers for details of how it certified non-use of the EBCP. "Presumably, the non-use certifications resulted from some meaningful review by the U.S. customers which could be confirmed with appropriate documentation," the opinion said. For instance, Commerce could have asked the U.S. customers if they knew of any third-party banks that issued the EBCP funds.

The judge told Commerce that if it wants to keep using AFA for use of the EBCP, it must try to verify the U.S. customers' non-use certifications by either asking Both-Well to have its U.S. customers explain how they verified non-use or through "some other alternative means of verifying the non-use certifications."

(Both-Well (Taizhou) Steel Fittings, Co. v. United States, Slip Op. 22-10, CIT #21-00166, dated 02/08/22, Judge Claire Kelly. Attorneys: Peter Koenig of Squire Patton for plaintiff Both-Well (Taizhou) Steel Fittings; Claudia Burke for defendant U.S. government; Roger Schagrin of Schagrin Associates for defendant-intervenor Bonney Forge Corporation)