Spanish Olive Exporters Challenges Commerce's de Jure Specificity Finding of EU Ag Subsidies

The Commerce Department's finding that two EU agriculture subsidies -- the Basic Payment Scheme and sustainable land use (Greening) payments -- are de jure specific is illegal and defies a key past court ruling, exporters Agro Sevilla Aceitunas and Angel Camacho Alimentacion said in an April 6 complaint at the Court of International Trade. Building off a case currently at the trade court in which the court held that these subsidies are not de jure specific, Agro Sevilla and Camacho also challenged Commerce's definitions of "prior stage product" and "latter stage product," among other things (Agro Sevilla Aceitunas S. Coop. v. United States, CIT #22-00106).

The case concerns the second administrative review of the countervailing duty order on ripe olives from Spain. In the review, Commerce said that the EU's Common Agricultural Policy gives subsidies to Spanish olive growers. However, the CAP does not exclusively provide subsidies to Spanish olive growers. The program distributes 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 historic data regarding farming practices in the region including whether the region produced olives. Commerce used this to find that the subsidy amounts received by olive growers under BPS are directly related to the subsidy amount only olive growers received and are thus de jure specific to olive growers. In June 2021, the trade court said that this was an improper position to glean from the subsidy scheme since a de jure specific program is one where only olive growers have a right to the BPS payments (see 2106170075).

Agro Sevilla and Camacho filed their suit to piggyback on this decision and contest Commerce's de jure specific finding over BPS and Greening payments in the second CVD review of the same order. "Commerce has otherwise conceded that such payments are decoupled from production," the complaint said. "The amount of payment is solely dependent on the annual activation of the entitlement, rather than any production activity, type of product, or volume of crop produced."

In the review, Commerce said that raw olives are a "prior stage product" of ripe olives -- a step in finding that subsidies to olive growers are attributable to ripe olive producers. This position was also struck down by CIT in a previous case, leading to the plaintiffs' contesting of the agency's identical position in the second review. Under the Tariff Act of 1930, Commerce can carry over subsidies received by growers of the raw agricultural product to the producers of the processed product if the demand for the prior stage product is "substantially dependent" on the demand for the processed product and the processing operations only adds a "limited value" to the raw product.

Agro Sevilla and Camacho argue that Commerce erred when it said that the prior stage product is "both distinct from, yet merely a subset of" the "raw agricultural product" the agency identified as being raw olives. This construction "defies their proper meaning, renders these terms superfluous, and reduced the examination under Section 771B largely self-fulfilling to the extent that 'raw olives principally suitable for use in the production of table olives' are likely processed into table olives," the complaint said.