Trade Court Upholds Use of AFA Over China's EBCP but Sends Back CVD Rate

The Commerce Department must reconsider its use of adverse facts available rate for countervailing duty respondent Yama Ribbons and Bows' alleged receipt of benefits from China's Export Buyer's Credit Program, the Court of International Trade ruled in a Dec. 23 opinion. Judge Timothy Stanceu said Commerce should take another look at the 10.54% rate, saying the goal of AFA is not to use a "punitive" rate but one that encourages parties to comply with agency requests to the best of their ability. However, the judge found the use of AFA over the EBCP itself was reasonable, making Stanceu the court's third judge to buck a long line of prior CIT rulings against the use of AFA for the EBCP.

The case concerns the 2017 administrative review of the countervailing duty order on woven ribbons and woven selvedge from China. As the only exporter of subject merchandise to the U.S., Yama was tapped as the sole mandatory respondent. Yama was found to benefit from 23 subsidy programs, leading to a 31.87% CVD rate. The bulk of this margin came from three programs, with the respondent levied a 10.54% rate over the EBCP, a 17.75% margin for the provision of synthetic yarn below cost and a 0.17% rate for the provision of caustic soda below cost.

As in many past reviews, Commerce used AFA over the EBCP for the Chinese government's failure to provide two pieces of information about the program the agency deemed essential to verifying whether the respondent's customers used the EBCP. The trade court repeatedly held this could not stand as proper grounds to use adverse inferences, particularly since the respondent submitted other information that Commerce could use to verify nonuse. However, a judge at the court recently sided with the agency that the information was needed for the verification of nonuse (see 2209140029). Another judge ruled similarly Dec. 8 (see 2212160035).

Stanceu became the third judge, finding it was reasonable for Commerce to use AFA over its request for information about the EBCP from the Chinese government. The agency must have the discretion to set the scope of its inquiry "so long as it does so reasonably," the judge ruled. "But because the Chinese government made no effort to provide the requested information as it related specifically to the period of review, Commerce was within its authority in using an adverse inference that Yama benefitted from the EBCP during that period."

Yama claimed it submitted information that proved it did not benefit from the EBCP and said nothing the agency found during its on-site verification trip could reverse this finding. Stanceu was not convinced. "That argument overlooks the Department’s valid finding that the POR-specific information it requested from the GOC was missing from the record due to the failure of the Chinese government to make even a minimal effort to assist Commerce in confirming that Yama received no benefit from the EBCP during that year," the opinion said.

The judge did take issue with the 10.54% rate itself. Stanceu looked to Commerce's methodology for picking the rate, which the agency said amounted to using the "highest calculated rate from any non-company specific program in any CVD case involving the same country." Commerce said it does not use a rate from a program if the industry in the proceeding can't use the program. Under this method, the agency derived the 10.54% CVD rate from the revised rate for preferential lending to the coated paper industry in a different CVD review. However, Commerce did not "explain how this program was considered to be available to the woven ribbons industry in China and thereby conformed to the Department's own stated method."

On remand, Commerce has to "explain, specifically, why it considers the rate it chooses to be appropriate for that purpose in the special case presented here, in which an unreasonably high rate could unduly prejudice Yama, as the 'interested party' that was fully cooperative during the review."

The judge upheld Commerce's CVD rates for the provision of synthetic yarn and caustic soda. Yama challenged the agency's conclusions that the company's suppliers were Chinese government authorities. Stanceu upheld the AFA rates in this case since the Chinese government failed to provide information on the extent of any influence the Chinese Communist Party had over the suppliers.

(Yama Ribbons and Bows v. U.S., Slip Op. 22-157, CIT #20-00059, dated 12/23/22, Judge Timothy Stanceu. Attorneys: Lizbeth Levinson of Fox Rothschild for plaintiff Yama Ribbons and Bows; Kara Westercamp for defendant U.S. government; Daniel Pickard of Buchanan Ingersoll for defendant-intervenor Berwick Offray)