Trade Court Says No Statutory Basis for Presuming NME Gov't Control in AD Cases

The Commerce Department failed to explain how its policy of presuming that exporters from non-market economies (NMEs) are controlled by the state and thus deserving of a single NME-wide antidumping rate is rooted in either the statute or Commerce's regulations, the Court of International Trade ruled in a Feb. 9 opinion. Remanding the case over questions on the policy's legal origins for a second time, Judge Richard Eaton also called into question how the NME presumption policy weighs against Commerce's legal obligation to calculate an individual rate for a mandatory respondent using its own data.

The case concerns the fifth administrative review of the AD order on multilayered wood flooring from China in which Jilin Forest Industry Jinqiao Flooring Group Co. served as a mandatory respondent. After finding that Jilin failed to rebut the presumption of government control, Commerce hit the company with the China-wide antidumping rate, leading the respondent to take its case to the trade court. In the case's first opinion, Eaton called Commerce's policy of NME presumption into question (see 2111160069).

Looking to the agency's explanation after a remand, the judge again was unconvinced that the policy of presuming that exporters from NME countries should receive the NME-wide rate had legal backing, particularly as it applies to mandatory respondents. Eaton said the statutory language requires the individual calculation of a mandatory respondent's rate. Nothing exempts Commerce from the duty to find a margin for Jilin using its own data, despite the agency's NME practice.

"While Commerce may apply facts available or adverse facts available to a mandatory respondent when certain conditions are met (e.g., to fill gaps in the record of necessary information), the statute does not indicate that Commerce can simply assign a rate to a mandatory respondent based on its relationship to an NME government," the judge said.

Eaton ruled that the NME presumption has never been fully explained and that a law has never been identified as authorizing the presumption. He said Commerce did not even attempt to rely on any court rulings granting heightened deference to government agencies, including Chevron. The judge dubbed the policy's origin a "mystery."

"Commerce’s explanation of the NME presumption found in the First Remand Results generally states how the NME presumption works, but not its source," the opinion said. "Thus, up to page fifteen of the First Remand Results, Commerce describes what the NME presumption is, and generally how it is applied, but not its statutory source. Nor does Commerce provide an explanation of what it hopes to accomplish or how the NME presumption accomplishes this unstated goal."

Looking to its own regulations, Commerce cited one that discusses AD cases with NME countries in which NME country rates are allowed to consist of a single margin applicable to all exporters. Eaton said that while the agency is right that the regulation provides for a single rate, "it is worth pointing out that the Department stops short of citing the regulation as the source of the NME presumption." This was for "good reason" too, the judge said, since the NME presumption predated the adoption of this single rate regulation and Commerce disavowed the idea that the single rate regulation has anything to do with NME presumption.

Eaton lastly addressed Commerce's claims that cases from the U.S. Court of Appeals for the Federal Circuit grant it a "broad" authority to interpret the AD statute. The judge ruled that this argument falls flat since the agency, and not the courts, "must supply these justifications," and any holdings are binding when the facts are identical. Looking to recent Supreme Court cases, Eaton also said that the idea of "broad authority" justifying Commerce's position "seems out of step with the trend in judicial rulings dealing with administrative action," and recent SCOTUS cases "also suggest that the wind is blowing against wide-ranging claims for deference."

The judge cited the Supreme Court's recent ruling in West Virginia v. EPA, in which the court said that federal action concerning major questions to the U.S. economy must be explicitly delegated by Congress. "While Jilin’s case might not present a 'major question' of doctrine on par with West Virginia v. EPA, at least there the question presented to the Supreme Court had a statutory basis. Commerce here claims no statutory basis or regulatory authority for failing to individually determine Jilin’s rate or for applying its NME presumption."

Also remanded in the case's initial decision was the question of whether Jilin deserved the China-wide rate. The respondent argued that its board of directors and management were truly controlled by an independent labor union, so it was free of government control. Commerce noted that all labor unions in China are controlled by the All-China Federation of Trade Unions, which is run by the state. The agency's defense of this finding mirrors the proceedings in a separate AD case, Zhejiang Machinery Import & Export v. U.S., which is currently before the Federal Circuit (see 2301120036).

Like in that case, Eaton found this to be enough to prove that Jilin failed to rebut the presumption of government control, so "should the use of Commerce's NME presumption survive this case with respect to Jilin, its application will not be prohibited here."

(Jilin Forest Industry Jinqiao Flooring Group Co. v. United States, Slip Op. 23-14, CIT #18-00191, dated 02/09/23, Judge Richard Eaton. Attorneys: Lizbeth Levinson of Fox Rothschild for plaintiff Jilin; Brendan Jordan for defendant U.S. government)