Spanish Olive Growers Rail Against US 'Substantially Dependent' Finding in CVD Case at Federal Circuit
The Court of International Trade illegally applied a lower standard for its "substantially dependent" test when finding that certain subsidies apply to Spanish olive growers, improperly using a post-codification administrative decision to apply the lower standard, some Spanish olive growers argued. Filing their opening brief at the U.S. Court of Appeals for the Federal Circuit Jan. 17, the plaintiff-appellants said allowing Commerce to gauge its decisions against its own later rulings and not the unambiguous statute "would frustrate the core tenets of U.S. administrative law and allow Commerce to amend legislation through its own administrative process" (Asociacion de Exportadores e Industriales de Aceitunas de Mesa v. U.S., Fed. Cir. # 23-1162).
The case concerns the countervailing duty investigation on ripe olives from Spain, in which appellants Aceitunas Guadalquivir, Agro Sevilla and Angel Camacho served as mandatory respondents. In the investigation, Commerce found that Spanish olive growers were receiving a subsidy via the EU's Common Agricultural Policy scheme, which is administered through the government of Spain.
The appellants, led by the Asociacion de Exportadores e Industriales de Aceitunas de Mesa, initially took to CIT to contest the agency's specificity finding for the subsidy and the conclusion that the demand for certain varietals of raw olives is substantially dependent on table olives, allowing the agency to impose CV duties on the olive imports. The trade court upheld both of Commerce's positions (see 2209140052). Now at the Federal Circuit, the appellants seemingly dropped their challenge to the de jure specificity finding.
But the olive growers continued their challenge of Commerce's "substantially dependent" position. Previously, CIT ruled that the prior stage product cannot be defined as the raw agricultural product that the industry under review considers principally suitable for use in a prior stage of production of the latter-stage product, as Commerce had done. On remand, the agency revised its application of the statute, finding that ripe olives' prior stage good is table olives and dual-use raw olive varietals that are biologically distinct from other raw olives, and the latter-stage product is all table olives.
The trade court upheld this interpretation. Looking to four specific olive varietals as the prior stage product and finding that since 55.28% of them were made into table olives, the demand for these four varietals is "substantially dependent" on processed table olives. In their opening brief, the appellants said the statute's legislative history "is extremely clear regarding the nature and level of dependence required between the 'prior stage' and 'latter stage' products" before the "substantially dependent" standard can be used. Commerce's method here of using a post-codification administrative decision to apply a lower standard for proving substantial dependence is illegal and cuts against the tenets of administrative law, the appellants claimed.
The appellants cited the "incredibly precise" legislative history. Citing comments from Sen. Chuck Grassley, among others, the olive growers said duties would be imposed on the processed product when the first processing activity "added relatively little value-added to the product," and where the demand for the raw good was dependent on the demand for the processed product. The appellants said this case is a clear Chevron step-one analysis given the agency's "exhaustive discussion of this issue" in the pork from Canada and rice from Thailand cases.
"These administrative decisions reveal an analysis centered around a narrow type of industry where the demand for the prior stage product and the market for the latter stage product are inextricably linked through a single continuous line of production that causes prior stage product demand to be 'substantially dependent' on latter stage product demand," the brief said. "Commerce’s initial determination failed to apply that standard, as the Trade Court recognized. In examining and upholding Commerce’s second remand redetermination, however, the Trade Court erroneously relied on Commerce interpretations of 19 U.S.C. §1677-2(1) that occurred after codification of Commerce’s practice as it stood in 1988."
The Spanish olive growers also argued that Commerce's "substantially dependent" decision "engaged in arbitrary decision-making" since the agency narrowed the universe of the "prior stage product" on remand. "That shift, however, and the market construct Commerce adopted, cannot be reconciled with the record," the brief said. "Commerce’s primary error was its rigid approach to the link between the varietal of olive grown, or how it was grown, and its end-use (i.e. whether a specific varietal was dedicated to table olive or olive oil production). Commerce’s finding that olives were only used for one application or another was contradicted by qualitative evidence, as well as Commerce’s own quantitative evidence used to perform its analysis."