Trade Court Sends Back Commerce's Decision to Decline to Start Successor-in-Interest CCR in CVD Case

The Commerce Department must reconsider its decision to deny plaintiff GreenFirst Forest Products' request for a successor-in-interest changed circumstances review in a countervailing duty case, the Court of International Trade ruled in a Nov. 18 opinion. In defending its decision, Commerce cited its "significant change" practice, under which it says it will not start a CCR where there is evidence of a significant change that could have affected the nature of subsidization. Judge Claire Kelly ruled that "it is unclear" why this practice applies since the successor company did not have an individually calculated rate.

The decision concerns the countervailing duty order on softwood lumber from Canada. GreenFirst, a Canadian lumber company, challenged Commerce's decision to not conduct a successor-in-interest CCR after the company acquired lumber mills from Rayonier A.M. Canada (RYAM). GreenFirst claimed that it is the successor-in-interest to RYAM for the purpose of assigning CVD cash deposit rates and requested that Commerce assign GreenFirst the “non-selected” cash deposit rate that had been assigned to RYAM (a 7.42% CVD cash deposit rate instead of the 14.19% “all-others” rate). Commerce denied the request (see 2203280058).

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 rejecting the request to start the CCR, Commerce cited its significant change practice, which says that 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 took to the trade court to contest the decision not to open the review, arguing that the U.S. was wrong to claim that Commerce does not need to satisfy any criteria when refusing to start the CCR (see 2209200033).

In the opinion, Kelly discussed this practice, which was established in the Pasta from Turkey CVD proceeding and upheld in the CIT case Marsan Gida Sanayi ve Ticaret v. U.S. In that action, Marsan challenged the denial of its CCR request and assignment of the all-others rate, telling the court that a change in the company's ownership should not, as a significant change, automatically stop a successorship finding in a CVD case. The trade court upheld Commerce's practice here, finding that "subsidization often seeks to stabilize a company's financial position or facilitate investment," so there was sound reasoning that changes in a company's name, ownership or structure "because of corporate reorganization, merger or acquisition by another company are relevant to subsidy benefits.”

In GreenFirst's case, Commerce argued that its practice applies regardless of whether there's been an individual examination of a company. "But Commerce does not explain why applying the practice in such circumstances is reasonable," the judge said. "... Here, because RYAM was never individually examined, the court cannot discern why it would be reasonable for Commerce to apply its Pasta from Turkey practice to deny GreenFirst’s request for a CCR. On remand, Commerce must either reconsider or further explain the basis for its determination that its significant changes practice applies where the predecessor company was not individually examined."

(GreenFirst Forest Products v. United States, Slip Op. 22-126, CIT #22-00097, dated 11/18/22, Judge Claire Kelly. Attorneys: Yohai Baisburd of Cassidy Levy for plaintiff GreenFirst; Bret Vallacher for defendant U.S. government)