Commerce Offers Lengthy Defense of Continued Reliance on AFA for China's EBCP
The Commerce Department stuck with its application of adverse facts available over certain countervailing duty respondents' alleged use of China's Exporter Buyer's Credit Program in its Feb. 9 remand results submitted to the Court of International Trade, responding to a series of questions the court wanted answered on why the agency's lack of certain information from the Chinese government precluded its ability to verify that the respondents didn't use the program (Cooper (Kunshan) Tire Co., Ltd., et al. v. United States, CIT #20-00113).
The case arises from the 2017 administrative review of the CVD order on passenger vehicle and light truck tires from China, where Cooper (Kunshan) Tire Co. and Shandong Longyue Rubber Co. served as the two mandatory respondents. As was its practice, Commerce applied AFA to the respondents when finding they benefitted from the EBCP because the Chinese government failed to provide two key pieces of information on how the program works so that the agency could verify non-use. The requested information concerned a threshold over which loans are made under the program and the banks that participate with China's Export-Import Bank to issue the loans -- so that the agency could verify that the respondents didn't use the program.
In a similar case in front of the same judge, Judge Timothy Reif, the court likened this practice to the film Groundhog Day. Reif issued lengthy remand instructions in the similar case (see 2105270080), but this time sought even more information from Commerce, requesting that the agency give a reason as to why one of the respondents' questionnaire responses, for instance, are unverifiable by describing step-by-step Commerce's methodology for verifying non-use.
Rather than reversing its use of AFA in the face of the judge's criticism, Commerce answered all of Reif's questions. The agency laid out its step-by-step process to show why Cooper Tire's statements couldn't be used. Commerce said it first reviews the company's balance sheets or tax returns to find its total borrowing. Next, it reviews the subledgers that break down the respondent's financing, which are tied to the company's tax returns. Commerce would then look for loans from banks involved with the EBCP. The agency would then look at specific entries from the subledgers, match their information against other data in the respondent's accounting system, then request further documents, which include loan applications and bank statements.
Cooper Tire, in its own submissions stating it didn't use the program, gave the agency its emails to U.S. customers asking them if they used the program, although the company did not send Commerce any responses. The respondent also said that it was never contacted by the Ex-Im Bank for use of the program and that it never bought export insurance, as required by the program's implementation rules.
"As can be seen from the description of verification above, a primary step in verifying use or non-use of a program is to first determine that you have a complete list of relevant transactions," Commerce said. "... There is no way that Commerce can confirm that it has been given all emails by a respondent, or even a complete subset of all emails (e.g., all emails to or from U.S. customers) and likewise there is no way for Commerce to confirm that it has been told about all interactions with the EX-IM Bank or other banks (such as the partner/correspondent banks)."
Commerce said that there is no way of verifying the respondents' answers in CVD proceedings without knowing more about the program, especially given their lack of information for their position that they would have to participate in the EBCP application or disbursement process. "Therefore, given that there is no current information on the record regarding the operation of the program, Commerce has no reliable understanding of what role – if any – the respondents might play in the EBCP."