Trade Court Sends Back Biodiesel AD Case Over Unsubstantiated Use of Constructed Value

The Court of International Trade in a June 9 opinion made public July 1 sent back parts and upheld parts of the Commerce Department's final determination in the antidumping duty investigation on biodiesel from Indonesia. Judge Richard Eaton said that Commerce's decision to rely on constructed value based on particular market situation findings for home market sales made through Indonesia's Public Service Obligation program was valid, but that the reliance on CV for non-program sales needed to be further explained. The judge also held that the agency had to further explain its legal authority to make a CV adjustment to account for Renewable Identification Numbers (RINs) -- tradeable credits issued by the U.S. Environmental Protection Agency.

In the investigation, Commerce tapped Wilmar Trading and P.T. Musim Mas as the two mandatory respondents. The agency used the findings of the countervailing duty investigation on Indonesian biodiesel and other evidence to find that the PMS made Wilmar's home market sales data unusable, relying on CV results to determine the respondent's dumping margin. Commerce hit Musim Mas with total adverse facts available over its failure to respond to its questionnaires. In the end, the agency hit Wilmar Trading with a 92.52% dumping rate and Musim Mas with a 276.65% dumping rate.

In the corresponding CVD case at CIT, the trade court upheld Commerce's determination that direct payments made through Indonesia's Biodiesel Subsidy Fund were countervailable subsidies. Under this program, when Indonesian biodiesel producers make sales through the program, they get payments from the fund plus a government-mandated amount that program-designated purchasers paid in a government-mandated amount set to match the market price for petrodiesel -- a good cheaper than biodiesel. The second payment is referred to as the "Petrodiesel Price."

The court said that Commerce was reasonable in finding that the fund transfers were financial contributions in the form of grants, as they are distinct from the price paid by the actual purchaser. The agency then said that this scheme constituted a PMS and warranted tossing home market sales made through the program.

Eaton agreed, finding that "there can be no serious argument that the Fund Payment component of the Program pricing is competitively set." Wilmar conceded during litigation that the price paid by the purchasers was not the market price, the judge pointed out. Further, Eaton said that Commerce properly validated that the Petrodiesel Price was "significantly lower than the price for biodiesel sold outside the Program in Indonesia," and thus set by the Indonesian government.

"Because both the Fund Payment and the Petrodiesel Price are determined by the Indonesian government, the payments made for petrodiesel were not competitively set," the opinion said. "The court, therefore, sustains Commerce’s decision to exclude Wilmar’s Program sales from its normal value determination."

Turning to the non-program sales, Eaton sent back Commerce's decision to disregard them and use CV given that a PMS allegedly existed, stemming from the benefit from the program sales and an export levy on palm oil. In the CVD case, the court said that Indonesia's $50 per metric ton export levy on all exports of crude palm oil -- the main input of biodiesel -- was an indirect subsidy and thus countervailable. However, in the AD case, Eaton said that he cannot sustain the use of CV for these sales, though the conclusion was not "straightforward."

Commerce said that the benefits of the fund payments applied to all of Wilmar's domestic sales, program or not, since the grants were paid to the company, and thus all sales benefitted. "Against this backdrop, and considering the facts of record in this case, it is entirely possible that Commerce might be able to find a price effect on the non-Program sales resulting from the grants," the opinion said. "Even considering this possibility, though, Commerce has not adequately explained and supported with evidence its decision to disregard Wilmar’s non-Program sales." Eaton ruled that Commerce "merely made a claim and stated it as fact," despite the chance to cite a price effect on non-program sales resulting from program sales.

The judge said the same for Commerce's rationale for excluding non-program sales over the crude palm oil levy. "The problem is that here Commerce has failed to show just how the price paid for the biodiesel sold in non-Program sales was affected by the distorted cost of crude palm oil or that the non-Program price was not determined by the market," the opinion said. "Again, Commerce has made a statement but failed to explain and support it with substantial evidence."

Lastly, Eaton told Commerce that if it wants to keep making an adjustment to Wilmar's CV to account for RINs, it needs to explain its legal authority to do so. In the case Vicentin I, the court addressed this very issue, sending the matter back to Commerce since it could not find statutory authority for the agency's decision to adjust normal value instead of export price for RINs. In Vicentin I, Commerce accounted for RINs by decreasing export and constructed export price.

"The court finds that Commerce’s adjustment to constructed value (as normal value) is similarly unexplained here," the opinion said. "In the Final Determination, Commerce cited no provision in the statute or in its own regulations authorizing the addition of an amount to constructed value (as normal value) to account for increases in U.S. price. ... Accordingly, this issue is remanded for the Department to establish the statutory and regulatory basis for its authority to adjust constructed value (as normal value) for RINs."

(Wilmar Trading Pte Ltd. v. United States, Slip Op. 22-64, CIT Consol. #18-00121, dated 06/09/22, Judge Richard Eaton. Attorneys: Devin Sikes of Akin Gump for plaintiff Wilmar Trading; Lynn Kamarck of Hughes Hubbard for consolidated plaintiff Indonesian government; Edmund Sim of Appleton Luff for consolidated plaintiff P.T. Musim Mas; Joshua Kurland for defendant U.S. government; Myles Getlan of Cassidy Levy for defendant-intervenor National Biodiesel Board Fair Trade Coalition)