Commerce Must Satisfy Criteria Before Rejecting Successor-in-Interest CCR, Lumber Exporter Tells CIT

The U.S. was wrong to argue that the Commerce Department does not need to satisfy any criteria when refusing to start a successor-in-interest changed circumstances review, plaintiff GreenFirst Forest Products argued in a Sept. 19 reply brief at the Court of International Trade. The government ignored that both Commerce and the trade court have recognized the agency's practice of looking at whether the agency individually calculated the former company's subsidy rate to deny the successor-in-interest CCR, the plaintiff said (GreenFirst Forest v. U.S., CIT #22-00097).

The case concerns the countervailing duty order on softwood lumber from Canada. During the investigation and the first three administrative reviews, Rayonier A.M. Canada (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 to get this non-selected company rate. Commerce rejected the bid to open the review, citing its significant change practice. The agency presumed there had been a change that could have 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 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.

GreenFirst, however, argued that in a previous countervailing duty CCR on pasta from Turkey, Commerce established two criteria that must be cleared before it can deny the request to open a successor-in-interest CCR: the existing rate must have been calculated based on the specific facts of the past company, and the agency must intend to calculate an individual rate for the successor company in a later review. In its reply, the U.S. said it is unaware of any authority for the idea that it must have individually calculated the former company's subsidy rate to reject the CCR.

The plaintiff, though, said Commerce was "unambiguous" in implementing this practice when it rejected GreenFirst's CCR request. Commerce implemented the practice "because it is inappropriate to assign a subsidy rate based upon the specific factual pattern of a predecessor company to a successor company that might have a significantly different factual pattern that affects the nature and extent of that specific subsidy rate," the plaintiff's reply brief said. "An individually calculated subsidy rate is the core of the entire practice, and ignoring that foundation is arbitrary."

The U.S. said allowing it to reject a successor-in-interest CCR only for companies that have been given an individually calculated rate would open the possibility for hundreds of companies to request a CCR. GreenFirst, though, said in the five years the CVD order has been in place, only two other companies have requested a successor-in-interest CCR. "Commerce will not be burdened by applying its practice in a non-arbitrary manner," the brief said.

GreenFirst further argued that the U.S. ignores that Commerce and CIT have found that the "pasta from Turkey" practice assumes the agency will carry out a successor-in-interest analysis in a future administrative review. The U.S. said a successor-in-interest analysis should be done only in an administrative review, but Commerce never committed to doing this analysis. "The United States cannot paradoxically claim that Commerce may refuse to conduct a successor-in-interest analysis in a changed circumstances review because it must be done in an administrative review but also claim that Commerce is not required to conduct that same successor-in-interest analysis in a future administrative review," the brief said.