Trade Court Sends Back Commerce's 'Knowledge Test' in Solar Cell Antidumping Review Case

The Court of International Trade on Dec. 19 ruled that the Commerce Department improperly excluded certain solar cell sales from consolidated antidumping duty respondent Inventec Solar Energy Corp.'s (ISEC's) dumping margin based on its finding that ISEC did not have any actual or constructive knowledge that its goods would ultimately end up in the United States. Judge Leo Gordon said that given "the totality of the record, the court cannot sustain as reasonable" the finding that ISEC did not have actual knowledge of the solar cells' destination.

The case concerns Commerce's fifth administrative review of the antidumping duty order on crystaline silicon photovoltaic products from Taiwan. For the review, Commerce picked two mandatory respondents, one of which was ISEC. The respondent claimed that some of its solar cell sales to a subcontractor of JA Solar constituted reportable U.S. sales because the company knew the goods were headed for the U.S. after assembly. Commerce disagreed and excluded those sales when calculating the export price. JA Solar took to the trade court to challenge portions of the review.

The issue in this case stems from Commerce’s “knowledge test,” in which the agency finds who first sold the merchandise with knowledge that it was going to the United States. The goal of the test is to find the likely "price discriminator," or the one committing the dumping. The knowledge test determines whether sales should be treated as U.S. sales or not. If evidence indicates that the seller knew (actual knowledge) or should have known (constructive knowledge) at the time of sale that the goods were for export to the U.S., then Commerce will include those sales in determining the export price.

In the review, Commerce declined to include ISEC's sales to JA Solar in the respondent's margin calculation on the grounds that ISEC had no actual knowledge that the goods were meant for the United States. Gordon disagreed, sending the case back to Commerce. In convincing the judge, JA Solar pointed to a host of contemporary evidence, including WeChat, text and email messages between the two companies showing an admission of actual knowledge that the goods were meant for the U.S.

Disregarding this evidence, Commerce pointed to the negotiation of the final contract terms between the two companies which left ambiguous the final destination of the goods, focusing on a "one-word change" in the contract. A draft of the contract says that ISEC's solar cells would be incorporated into modules that "shall" be shipped to the U.S. while the final contract says that the solar cells "might be used" to make modules meant for the U.S. Both parties confirmed, though, during oral argument at CIT that some of the shipments were made during the review period before the final contract. The plaintiffs said the shipments made before the final contract were sent with the express knowledge that they were going to the U.S.

"With respect to ISEC’s underlying sales that predate the adoption of the final sales contract, the contemporaneous evidence on the record appears to lead to one, and only one, reasonable conclusion, namely, that ISEC understood its solar cells to be destined for the United States," the opinion said. "In view of that, Commerce has failed to account for record evidence that detracts from its ultimate finding. Therefore, remand is warranted." The agency may also need to reevaluate its position on sales made after the final contract too, the judge ruled. Further, Gordon said that if Commerce continues to find on remand that ISEC did not have actual knowledge of the sales' final destination, "it will then need to address whether the record demonstrates that ISEC had reason to know that the United States was the ultimate destination for the subject merchandise."

(JA Solar International v. United States, Slip Op. 22-146, CXIT #21-00514, dated 12/19/22, Judge Leo Gordon. Attorneys: Bryan Cenko of Mowry & Grimson for plaintiffs JA Solar International and JA Solar USA; Joshua Kurland for defendant U.S. government)