CIT Again Remands Use of AFA Over China's EBCP, Tells Commerce to Find 'Practical Solution'

The Court of International Trade in a May 19 opinion made public May 27 again rejected the Commerce Department's use of adverse facts available over the subsidy rate for China's Export Buyer's Credit Program in a countervailing duty investigation. Judge Richard Eaton ruled that Commerce did not support its position that certain information was necessary to verify that CVD respondent Zhejiang Junyue Standard Part Co.'s U.S. customers used the program. The judge also ruled that the agency did not adequately explain its decision to triple the subsidy rate over the EBCP to account for Junyue and two of its affiliates.

The case concerns the CVD investigation into carbon and alloy steel threaded rod from China in which Junyue and plaintiff-intervenor Ningbo Zhongjiang High Strength Bolts Co. served as mandatory respondents. In the investigation, it was alleged that the respondents benefitted from the EBCP. To verify this, Commerce requested that the Chinese government provide two pieces of information that were supposedly necessary to verifying whether the respondents' U.S. customers used the program: the names of third-party banks that cooperate with the program and certain changes China made to the program in 2013.

When Commerce didn't get the information, it hit the respondents with AFA, despite the fact that the respondents submitted certifications from their U.S. customers declaring that they did not use the program. The trade court has repeatedly remanded the use of AFA in this way, but Commerce has failed to appeal the decision. In the investigation, Commerce also tripled the subsidy rate for Junyue to factor in the alleged benefits from the program for two of the respondents' affiliates.

Citing previous CIT rulings remanding the issue for lack of substantial evidence supporting AFA, Eaton sent the case back to Commerce for the same reason. The judge ruled that evidence relevant to the inquiry was on the record, including non-use declarations from the U.S. customers and screenshots of the results of searches of the Export-Import Bank's databases showing that China had no record of any EBCP loans being dispersed to the respondents, their affiliates or their U.S. customers. Eaton said there's no evidence showing Commerce sought to verify this information.

"It seems that here Commerce gave up on that duty by insisting that without the operational information that China failed to provide its 'typical non-use verification procedure' would be too burdensome to employ, if, it turned out, that more than a 'small number of loans' existed on the books of the Plaintiffs’ U.S. customers," the opinion said. "... The record does not show, and Commerce does not claim, that when deciding whether to verify the claims of non-use the Department undertook to determine the number of loans on Plaintiffs’ U.S. customers’ books during the period of investigation.

"Under these circumstances, the court cannot say that substantial evidence supports Commerce’s determination that a gap in the factual record existed as to whether Plaintiffs’ U.S. customers used the Export Buyer’s Credit Program to purchase subject merchandise exported by Plaintiffs." The judge said that at this point in the past, Commerce has dropped use of AFA, but that more recently, the agency has shown some willingness to verify non-use without the requested information from the Chinese government. So, Eaton said that on remand Commerce must either "find a practical solution to verify the non-use information on the record" including reopening the record or recalculate the CVD rates without the subsidy rate for the EBCP.

(Zhejiang Junyue Standard Part Co. v. United States, Slip Op. 22-50, CIT #20-00102, dated 05/19/22, Judge Richard Eaton. Attorneys: Alexandra Salzman of deKieffer & Horgan for plaintiff Junyue; Kavita Mohan of Grunfeld Desiderio for plaintiff-intervenor Ningbo Zhongjiang; Ashley Akers for defendant U.S. government; William Fennell of Schagrin Associates for defendant-intervenor Vulcan Threaded Products)