CIT Bucks Past Rulings, Says Commerce Legally Used AFA Over China's EBCP

The Court of International Trade, in a departure from a string of past rulings, said in a Sept. 13 opinion that the Commerce Department properly used adverse facts available over China's Export Buyer's Credit Program in a countervailing duty case. Judge M. Miller Baker ruled that Commerce "reasonably explained" why it needed key information from the Chinese government, which wasn't provided, to determine whether the CVD respondents and their U.S. customers used the EBCP. Otherwise, the attempt at verification "amounted to 'looking for a needle in a haystack with the added uncertainty that Commerce might not even be able to identify the needle when it was found,'" the judge said.

“The Coalition commends the Court for its strong opinion, both on the specific issue of the Export Buyer’s Credit Program and on the general issue of deference to the Commerce Department," said Timothy Brightbill, counsel for the petitioner Coalition of American Millwork Producers. “With regard to deference, the Court stated: ‘It isn’t the court’s job to micromanage the Commerce Department.’ We couldn’t agree more. It is important that the Court has clarified the need to defer to the agency in most situations on matters of subsidy calculations, the application of adverse facts available, and other technical or fact-specific issues.”

The case concerns the countervailing duty investigation on wood mouldings and millwork products from China. The petition alleged that the respondent, plaintiff Fujian Yinfeng Imp & Exp Trading, benefited from the EBCP -- a program wherein China's Export-Import Bank gives U.S. buyers funds to purchase Chinese-made goods. To verify whether Yinfeng and its customers used the EBCP, Commerce requested two pieces of information from the Chinese government: a threshold over which loans are made under the program and which banks participate with China's Ex-Im Bank to issue the loans.

When the Chinese government failed to provide the information, Commerce hit Yinfeng with AFA -- a move the trade court has repeatedly struck down in the past, though the U.S. has never appealed. As recently as Sept. 13, the court upheld Commerce's reversal of its reliance on AFA after finding the agency had not provided the proper grounds to use AFA (see 2209130026). CIT has ruled in the past that Commerce could have used other information on the record to verify non-use of the EBCP. The agency has used this information administratively, even in light of the Chinese government's failure to submit the requested data, to verify non-use of the EBCP (see 2110140053).

Nevertheless, Baker said that Commerce properly used AFA. The judge first noted that if the agency engages in a "fishing expedition for information" not related to the investigation, that would not be a proper use of AFA. In the present case, Baker said, Commerce "explained at length why the missing information it sought was necessary to confirm EBCP non-use by Yinfeng's customers." The agency fully explained why the list of participating banks, 2013 revisions to the program and EBCP loan documentation requirements were needed to verify non-use, the judge said.

Baker further sought to distinguish Yinfeng's case from other actions in which the trade court has struck down the use of AFA in this way by finding that Commerce's "thorough explanation" of why the missing information was needed sets it apart. "Accordingly, substantial evidence supports Commerce’s application of facts otherwise available due to the Chinese government’s stonewalling and impeding the investigation," the judge ruled. "Substantial evidence also supports the Department’s determination to apply an adverse inference in selecting that information because of that government’s failure to cooperate."

Elsewhere in the petition, it was alleged that Yinfeng received inputs from the Chinese government in the provision of acrylic primer below cost. Yinfeng argued that Commerce's inclusion of acrylic polymer in the primer program illegally expanded the scope of the primer program. Baker said Commerce properly weighed the evidence to back the agency's position acrylic polymer can be used as a stand-alone primer.

Yinfeng further challenged Commerce's move to average all freight routes on the record to set up a world market benchmark for ocean freight, arguing the agency should have solely used the respondent's submissions for ocean freight calculations. Yinfeng alleged the petitioner's data used the wrong size container, had atypical charges and focused on a non-major shipping route. Baker said the court must uphold any finding by Commerce unless it isn't backed by substantial evidence or is illegal. Commerce is granted "tremendous deference" when it "exercises its technical expertise to select and apply methodologies to implement the dictates of the trade statute," he said. As a result, the judge upheld the agency's method.

The same story unfolded for Yinfeng's challenge of Commerce's use of 2010 Thai data to calculate the cost of land. The respondent said the data was too old and Thailand isn't economically comparable to China, pushing for Malaysian data instead. "There is no doubt Commerce could have calculated the land cost benchmark differently, as Yinfeng argues," the judge said. "But Yinfeng must show more than this to overcome the deference due to Commerce on a highly technical matter," something the respondent failed to do, Baker ruled.

(Fujian Yinfeng Imp & Exp Trading v. U.S., Slip Op. 22-107, CIT #21-00088, dated 09/13/22, Judge M. Miller Baker. Attorneys: Gregory Menegaz of deKieffer & Horgan for plaintiff Yinfeng; Brian Boynton for defendant U.S. government; Timothy Brightbill of Wiley Rein for defendant-intervenor Coalition of American Millwork Producers)