Commerce's 'More Than Half' Substantially Dependent Analysis Violates the Statute, Olive Growers Argue

Arguments from the U.S. and countervailing duty petitioner Coalition for Fair Trade in Ripe Olives related to the Commerce Department's "substantially dependent" finding in the Spanish olives CVD investigation are "part predictable and part remarkable," two Spanish olive growers and a Spanish olive trade group told the U.S. Court of Appeals for the Federal Circuit in a reply brief (Asociacion de Exportadores e Industriales de Aceitunas de Mesa v. United States, Fed Cir. # 23-1162).

While the U.S. claims that "Congress did not mean what it said," the statute "conclusively resolves the matter" in that an affirmative substantially dependent finding requires the agency to show an "inextricable linkage between prior- and latter-stage products where all or substantially all of the prior-stage product is demanded by the latter stage product along a single continuous line of production," the olive growers said.

Commerce used a "lesser, quantitative analysis in which" the agency only needed to establish that over half of the prior-stage good is consumed to make the latter-stage product. The olive growers, led by the Asociacion de Exportadores e Industrialies de Aceitunas de Mesa, said that standard does not hew to the statute, which "requires both qualitative and quantitative examination of dependence, not simple use."

The legislative history "is too old to be determinative here," the Spanish olive growers said. While the U.S. and the petitioner try to justify a "highly deferential and simplistic interpretation of 'substantially dependent'" where the agency only needs to find that more than half of the prior stage product is used to make the latter stage product, this interpretation is "so divorced from the plain meaning of 'substantially dependent'" it is unrecognizable, the brief said.

The olive growers said it is impossible to reconcile the "more than half" standard with either the "substantially" or "largely but not wholly" standard set in the statute. "A bank lending $100 would never concede that it was 'substantially' or 'largely, but not wholly' repaid if the borrower only paid back $55," the brief said. "Whatever the lower limit of 'substantially', it is not 55 percent."

Commerce found in the investigation that Spanish olive growers received a subsidy via the EU's Common Agricultural Policy scheme, which is administered through the Spanish government. The three respondents filed suit to contest the conclusion that the demand for certain raw olive varietals is substantially dependent on table olives, allowing the agency to countervail subsidies on raw olives.

After the initial remand, Commerce tweaked its substantially dependent analysis to find that ripe olives' prior stage good is table olives and dual-use raw olive varietals that are biologically distinct from other raw olives, and that the latter-stage product is all table olives. CIT sustained the remand redetermination (see 2209140052).

The olive growers argued that even using this lesser standard, the analysis fails since it is unsupported by substantial evidence. The analysis says dependence for table and mill olive types was defined by biological distinction, though for dual-use olives it was set by cultivation practices. "But once it set the foundations of its analysis on a qualitative basis, it then proceeded to ignore those foundations for its quantitative analysis when the data and evidence could not be reconciled with the desired outcome," the brief said. "Already barely meeting its 'more than half' threshold, Commerce would have never met that threshold if it performed its quantitative analysis consistent with its qualitative findings."