Commerce Can't Use EAPA Case to Reject Third Country Sales in AD Review, CIT Rules

The Commerce Department cannot use an antidumping evasion finding to reject AD review respondent Z.A. Sea Foods Private Limited's (ZASF) Vietnamese data when calculating normal value, the Court of International Trade said in an April 19 opinion. Since ZASF is not mentioned in the Enforce and Protect Act investigation cited by Commerce as the basis for rejecting the Vietnamese data, it is not clear how the agency decided that some of ZASF's Vietnamese sales ultimately wound up in the U.S., Judge Gary Katzmann said.

ZASF challenged the final results of the antidumping duty administrative review on frozen warmwater shrimp from India in which it served as the sole mandatory respondent. When attempting to establish the company's normal value of its shrimp, Commerce determined that there were insufficient sales in the U.S. to use its American sales data. Typically, this would mean relying on ZASF's sales in a third country, with preference given to the largest third country market. In ZASF's case, this meant Vietnam.

However, Commerce refused to use ZASF's Vietnamese data and relied on constructed value instead. The agency said that there was substantial evidence to find that ZASF evaded Indian antidumping duty orders through its Vietnamese sales by commingling Indian and Vietnamese shrimp, then shipping these shrimp to the U.S. labeled as being of Vietnamese origin. This transshipping occurred at the hands of one of ZASF's customers, the Minh Phu Group, Commerce said, citing this determination from CBP's EAPA case. This decision led to the respondent's challenge where it argued that there was not enough evidence to show that ZASF's Vietnamese sales ended up in the U.S. (see 2106180040).

Katzmann sided with ZASF on this point, ruling that Commerce failed to back its point that the EAPA case established that ZASF's Vietnam sales made it to the U.S. and were thus unusable. The judge said it was unclear on what basis Commerce found that the Minh Phu Group's sales were sold in the U.S. The agency also erred when it failed to address the fact that the EAPA determination was predicate on adverse inferences given the Minh Phu Group's failure to cooperate to the best of its ability.

"While CBP did identify one exported shipment of commingled Indian- and Vietnamese-origin shrimp which was not further processed, and thus illegally evaded Commerce’s AD order on warmwater shrimp from India, it is not clear how Commerce concluded from this finding that the Minh Phu Group performed 'no' further processing on its Indian-origin shrimp," the opinion said. "... Given Commerce’s failure to address this apparently conflicting information, and to adequately explain how the cited record evidence supports its conclusion with respect to the processing of ZASF’s shrimp exports, the court cannot determine that Commerce’s findings are supported by substantial evidence."

Katzmann further rejected Commerce's basis for rejecting the Vietnam sales that was based on trade patterns. The AD petitioner said that the nature and ultimate destination of the Vietnam sales precluded their use for constructed value. But Katzmann ruled that Commerce did not substantiate these concerns, nor did it proffer any evidence of transshipment, striking down the decision to reject the Vietnamese data.

The decision was not a total loss for Commerce and the petitioner, however, as the judge upheld Commerce's interpretation of its regulatory preference to rely on constructed value and not apply a knowledge test. ZASF argued that Commerce should've conducted a knowledge test to see whether it knew if its sales to Vietnam were destined for the U.S. But the knowledge test is used to exclude from Commerce's foreign market value calculation and include in the agency's U.S. export price calculation "any sales a producer knew or should have known were for exportation to the U.S."

"Neither knowledge test is applicable here," the opinion said. "While Commerce did reject ZASF’s proffered third country sales data because it determined that the Minh Phu Group’s sales were ultimately U.S. sales, it did not treat ZASF’s Vietnamese sales as U.S. sales for purposes of export price calculation."

(Z.A. Sea Foods Private Limited, et al. v. United States, Slip Op. 22-36, CIT #21-00031, dated 04/19/22, Judge Gary Katzmann. Attorneys: Robert Gosselink of Trade Pacific for plaintiffs Z.A. Sea Foods Private Limited, et al.; Kara Westercamp for defendant U.S. government; Zachary Walker of Picard Kentz for defendant-intervenor Ad Hoc Shrimp Trade Action Committee)