Cabinet Exporter’s Customers Couldn’t Show They Didn’t Use EBCP, US and Petitioners Say

The Commerce Department’s verification proceedings aren't “extensive” or “onerous,” and the department “has wide latitude” in conducting them even when investigating companies not party to a CVD investigation, the U.S. and a petitioner said Feb. 5 after another remand redetermination in a Chinese EBCP case challenging several cabinet exporters’ rates rooted in adverse facts available (Dalian Meisen Woodworking Co. v. U.S., CIT # 20-00110).

China’s Export Buyer’s Credit Program has been a persistent issue for Commerce because the program targets benefits toward respondents’ customers, not the respondents themselves. If customers used it, it would be a countervailable subsidy, but the Chinese government refuses to provide use information to Commerce. The department initially decided it would hit all respondents in EBCP investigations with AFA rates; it had to walk that policy back after the courts balked (see 2306140032).

Dalian Meisen Woodworking, an exporter that received an AFA CVD rate from Commerce's investigation on wooden cabinets from China because it couldn’t show non-use of China’s EBCP program, brought its case to CIT in 2020. It was joined by The Ancientree Cabinet Co., another exporter in the same position. The case has since been remanded to Commerce twice, CIT upholding the AFA on Dalian Meisen but both times asking that the department make further attempts to verify Ancientree’s non-use to its satisfaction or, otherwise, reduce its rate (see 2305030063).

Commerce was right to find in its second redetermination that Ancientree should receive an AFA rate, the U.S. and petitioner American Kitchen Cabinet Alliance said in briefs responding to Ancientree’s remand comments (see 2401090035).

“Commerce didn't apply adverse facts available based on any failure to cooperate by Ancientree or its customers,” the government said. “Rather, Commerce applied an adverse inference in selecting among the facts available due to the government of China’s failure to cooperate. Ancientree, in turn, was unable to fill the gaps stemming from the government of China’s failure to cooperate.”

More than half of Ancientree’s customers didn't participate adequately, or at all, in Commerce’s investigation, so Commerce couldn't be sure some of them didn't use the EBCP program, it said.

“Commerce cannot rely on only a portion of a respondent’s customers to verify non-usage of the Export Buyer’s Credit Program because doing so would give respondents an incentive to evade scrutiny by providing responses only for those customers that do not use the Program,” the government said.

Commerce made Ancientree and its customers aware of the department's verification investigations in advance and told them what documents Commerce intended to inspect, the government said. Despite this, the U.S. said, customers’ responses to Commerce’s probes were inadequate. It described one scene in which Commerce officials began examining a customer’s documents. A company employee asked the government officials to leave the room, then took “several key documents that Commerce verifiers had collected as exhibits” before saying the company no longer would be participating in verification proceedings.

These weren't “expansive and onerous” proceedings that requested “highly confidential information,” the government said, citing Ancientree’s arguments. They were “reasonable and in line with its practice,” it said.

It didn't matter that the customers weren't directly parties to the CVD investigation, the government said.

“That the verifications involved unaffiliated customers does not alter Commerce’s wide latitude in determining its verification procedures,” it said. “This wide latitude is particularly applicable here given the Court’s order that Commerce attempt to verify Ancientree’s submissions ‘to the extent the Department finds appropriate.’”

Petitioner American Kitchen Cabinet Alliance agreed, saying that the Chinese government’s refusal to confirm or deny customers’ participation in EBCP despite it being in the “best position to provide such information” meant Commerce, in seeking its own verification methods, is “looking for a needle in a haystack.”

“The [government of China’s] strategy is succeeding in some cases,” it said. “After the burden of providing relevant information shifts to U.S. customers, many of them fail to provide the information or fail to cooperate fully with Commerce’s verification process. However, instead of laying the blame at the feet of the GOC, the CIT blames Commerce for being ‘unreasonable.’”