CIT Tells Commerce to Explain Why PMS Adjustment Isn't Double Remedy, Given Concurrent CV Duty

The Court of International Trade sent back the Commerce Department's decision to disregard Indonesian crude palm oil prices when it calculated antidumping duty respondent Wilmar's normal value, which was based off an export levy set by the Indonesian government. In a Nov. 21 opinion made public Dec. 12, Judge Richard Eaton said if the agency sticks with the particular market situation adjustment in the AD investigation on Indonesian biodiesel, it must explain why doing so doesn't lead to a double remedy, since Commerce countervailed the export levy in the related countervailing duty investigation.

In the 75-page opinion, Eaton also took issue with Commerce's particular market situation finding regarding the Indonesian government's Biodiesel Subsidy Fund, though he sustained the cost- and sales-based PMS finding based on the export levy. The judge also upheld Commerce's decision to account for the value of Renewable Identification Numbers (RINs) by decreasing Wilmar's U.S. price, instead of increasing the company's constructed value. Lastly, Eaton upheld the use of a 276.65% total adverse facts available rate for respondent P.T. Musim Mas.

Particular Market Situation Adjustments

In 2015, the Indonesian government created the Biodiesel Subsidy Fund as part of its Public Service Obligation Program to aid the biodiesel industry. Sales made through the program let companies receive payments in addition to a government-mandated amount that program-designated purchasers paid. The payments were received in two parts: a payment from the purchaser that matched the market price for petrodiesel, a cheaper alternative, and a payment from the Indonesian government to make up the difference between the petrodiesel price and what the government set as the market price for biodiesel. Additionally, the Indonesian government set an export levy on all exports of crude palm oil -- the main input in biodiesel.

In the AD investigation, Commerce said Indonesia's program and the 2015 export levy created a sales-based PMS that rendered non-program sales outside the ordinary course of trade, mandating the use of constructed value for Wilmar. The agency also said the export levy created a cost-based PMS, which caused crude palm oil costs to inaccurately show the cost of production of biodiesel. As a result, the agency used world market prices for crude palm oil instead of domestic Indonesian crude palm oil prices when setting normal value.

Eaton found the PMS finding regarding the subsidy fund wasn't supported. Commerce said the funding mechanism suggests that Indonesia's intent is to ensure the existence and growth of the biodiesel industry, making it reasonable to find that the program payments affect the price of all sales. That the Indonesian government's "stated purpose" is to drop the domestic price of primary products to guarantee the supply of intermediate inputs below world market prices for domestic industries "does not demonstrate with substantial evidence that the non-Program sales prices were, in fact, affected by the Program," the opinion said.

Commerce also claimed that Wilmar's sales not made through the Public Service Obligation Program were not competitively set because the government redirects the supply of biodiesel from non-program customers to two program customers. The result is a market made of non-program sales that doesn't include the largest biodiesel customers, creating a PMS since the biodiesel market in Indonesia functions as a whole.

Eaton ruled that while this claim "comes awfully close to satisfying the substantial evidence standard," it "nevertheless has failed to adequately explain just how the non-Program sales prices were affected" by the redirection of the supply through the program. Mere government intervention is not enough to disregard an exporter's home market sales, the court said.

However, the judge did uphold Commerce's finding that the export levy created a cost- and sales-based PMS distortion to Wilmar's non-program sales prices and domestic crude palm oil prices. On remand in the case, Commerce calculated the difference between costs actually incurred by Wilmar and what the exporter's costs would have been in the ordinary course of trade. The agency said Wilmar's weighed-average cost for biodiesel sold in its home market likely would have increased if not for the distortion of the crude palm oil prices caused by the export levy.

While Wilmar claimed that this was a new theory Commerce wasn't allowed to raise on remand, the judge said the agency's "quantification of the difference between the costs actually incurred" and what the firm's costs would have been doesn't amount to a new theory. Instead, the agency gave substantial evidence linking the distorted costs of Indonesian crude palm oil to the price paid for Wilmar's non-Program biodiesel sales, the judge said. The average price for Wilmar's non-program sales was around the same as the non-distorted price of crude palm oil alone, merely an input of the product, the court found. As a result, the PMS findings were valid.

Eaton took issue with whether the agency was imposing a double remedy for the distortion caused by the export levy, given that Commerce countervailied the export levy in the concurrent CVD investigation on biodiesel. The judge said it is "unclear why the effects of such distortion were not remedied by the imposition of countervailing duties." Commerce's claim that the statute doesn't prohibit the concurrent PMS adjustment and CV duties "does not relieve Commerce of its obligation to explain why its chosen method is a reasonable one," the court said.

RIN Adjustment

RINs are credits issued by the EPA to biodiesel purchasers when biodiesel is imported and are often traded or sold in a secondary market, giving them value. Since there was no RIN value listed in the Indonesian biodiesel sales prices, an adjustment was needed to account for their value, Commerce found in the investigation. After its initial attempt to account for the value by increasing Wilmar's constructed value was rejected in the court's last opinion, Commerce lowered Wilmar's U.S. price instead.

The question became whether this was permitted under the proper regulatory and statutory framework. Commerce's regulations define a "price adjustment" as "a change in the price charged for subject merchandise or the foreign like product, such as a discount, rebate, or other adjustment" as shown in the purchaser's "net outlay." Commerce said that RIN values are price adjustments since the invoice price didn't show the price at which the goods were first sold since the invoice price is adjusted upward to include the value of the RINs.

Eaton agreed, finding that the U.S. Court of Appeals for the Federal Circuit came to the same conclusion in Vicentin v. U.S. In that opinion, the appellate court said the regulation permits the subtraction of RIN values due to the similarities between RINs and rebates, as well as the regulation's non-limiting language and the fact that Commerce's calculation affects the overall statutory scheme. The judge said Wilmar's claim that the Federal Circuit doesn't address the argument that RINs are actual values included in the gross or starting prices reported to Commerce misreads the opinion, which did in fact address this situation.

Adverse Facts Available

Eaton also addressed claims from Musim Mas against the use of total AFA. In the investigation, Commerce resorted to total AFA after finding the exporter failed to submit usable home market sales reconciliation cost of production data, control number (CONNUM)-specific production quantity information and estimated RIN values for the company's U.S. sales.

Regarding the home market sales reconciliation, Musim says it gave Commerce enough data to reconcile its home market sales with its general sales information. The agency said the charts the company submitted didn't have sales values that could be tied to its general leger and financial statements, adding that both reconciliations submitted by Musim Mas lacked identifiable sales values. Eaton said the company didn't explain how its submissions "could be read together" or created from the underlying information, making an AFA finding due to the company's failure to cooperate valid.

Pertaining to the CONNUM-specific production quantity data, Commerce asked for (1) cost of production figures on a weighted-average basis using CONNUM-specific production quantity as the weighing factor, (2) a description of how the firm used its normal accounting records to compute production quantity and (3) the quantity made for each of the company's five reported CONNUMs.

Musim Mas (1) didn't report the quantities for each CONNUM linked with the costs, (2) didn't address whether and how it used cost and accounting records and (3) didn't report the quantity produced for each CONNUM. Musim Mas said compliance was impossible because the company doesn't record costs on a basis to allow it to assign cost differences to each product characteristic, but Eaton said this "misses the mark" since the company failed to provide the actual information Commerce was seeking.

Related to the estimated RIN values, Musim Mas didn't dispute its failure to submit them, but said it shouldn't be penalized for failing to provide information it didn't control. While Eaton acknowledged the estimates could have been of little value to Commerce, he added that "the court cannot monitor the value of Commerce's questions beyond stating that asking for Musim Mas to provide estimated RIN values is not unreasonable."

Eaton also sustained the lofty 276.65% rate itself, which was derived from Wilmar's highest transaction-specific margin. Commerce appropriately said it couldn't use the highest petition rate, which was 28.11%, since this would reward the company for not being cooperative, nor could it use Wilmar's 92.52%, since Wilmar participated while Musim Mas didn't. “The court finds that Commerce adequately explained its decision to depart from its normal practice in this instance," the opinion said.

(Wilmar Trading Pte Ltd. v. United States , Slip Op. 23-165, CIT Consol. # 18-00121, dated 11/21/23; Judge: Richard Eaton; Attorneys: Devin Sikes of Akin Gump for plaintiffs led by Wilmar Trading Pte. Ltd.; Lynn Kamarck of Hughes Hubbard for plaintiff Government of Indonesia; Edmund Sim of Appleton Luff for consolidated plaintiff P.T. Musim Mas; Joshua Kurland for defendant U.S. government; and Myles Getlan of Cassidy Levy for defendant-intervenor National Biodiesel Board Fair Trade Coalition)