Commerce Improperly Applied 'Significant Change' Standard in Rejecting CCR, Lumber Exporter Argues

The Commerce Department's decision to reject exporter GreenFirst Forest Production's request for a changed circumstances review in a countervailing duty review was "arbitrary and capricious," GreenFirst argued in a brief at the Court of International Trade. The agency based its decision on an inapplicable practice to the case and effectively barred GreenFirst from obtaining a successor-in-interest determination despite its acquisition of Rayonier A.M. Canada's (RYAM's) lumber mills, the brief said (GreenFirst Forest Products Inc. v. United States, CIT #22-00097).

The case concerns the countervailing duty order on softwood lumber from Canada. During the investigation and the first three administrative reviews, RYAM was never individually examined but received a non-selected companies rate of 6.32%. In 2021, however, GreenFirst acquired all of RYAM's lumber and newsprint operations, leading GreenFirst to request a CCR. Commerce rejected the bid to open the review, citing its significant change practice. The agency presumed there had been a change that could've affected the nature and level of subsidization.

Under the significant change practice, Commerce can decide not to initiate successor-in-interest CCRs when evidence shows there exists significant changes that could affect the subsidy rate determined for the predecessor company. The practice is meant to stop a rate of subsidization calculated based on the unique facts of one company from being transferred to a new company without first looking at the new company's subsidy levels. There are two criteria that must be cleared before this practice is employed, though, GreenFirst argued.

The two criteria say that the subsidy rate must have been calculated based on the predecessor's specific facts and Commerce must intend to calculate an individual rate for the successor company in a later administrative review. "Here, the Department did not deny that GreenFirst satisfied the requirements for requesting a successor-in-interest CCR and there is no dispute that the Department rejected GreenFirst’s request based exclusively upon the [significant change standard]," the brief said. "However, the Department ignored that the two criteria that form the premise of its practice do not apply to GreenFirst’s request."

GreenFirst said that Commerce's standard here does not apply since RYAM's rate was not based on company-specific facts. As this is the case, there's no threat of an individually calculated rate being wrongly given to a successor company, the brief said. Further, since Commerce will not calculate a separate rate for GreenFirst in a later review, there was no justification for rejecting the CCR, GreenFirst said.

"In summary, the Department’s [significant change] practice assumes that the predecessor company was assigned a company-specific cash deposit rate and that the Department would individually examine the successor company in a subsequent administrative review to calculate a unique subsidization rate," the brief said. "This foundation does not exist here because RYAM has never been assigned a company-specific subsidization rate and GreenFirst will never be selected to receive a unique subsidization rate. Therefore, the Department’s refusal to initiate GreenFirst’s requested changed circumstances review was arbitrary and capricious because it was based upon a practice that is not applicable in this case."

In the meantime, GreenFirst "will continue to suffer real harm" as a result of this decision, the exporter told the trade court. Since RYAM and GreenFirst will not be combined for respondent selection purposes, GreenFirst will have less of a shot of being individually examined and possibly receiving a lower CVD rate, the company argued. Also, GreenFirst's is subject to the 14.19% all-others rate -- a number more than double the 6.32% non-selected companies rate.