Commerce’s Choice of Surrogate Values Based on ‘Incorrect Assumption,’ Exporter Says on Appeal

The Commerce Department can't use prior administrative reviews as the basis for decisions when doing so goes against factual evidence, an appellee argued March 4 before the U.S. Court of Appeals for the Federal Circuit (Carbon Activated Tianjin Co. v. U.S., Fed. Cir. # 23-2135).

In a reply to opposition following its initial appellate brief, exporter Carbon Activated said that Commerce’s final results in a 2018-19 AD review on Chinese carbon activated coal had a “critical flaw.” In calculating the exporter’s input costs, it said the department used surrogate Malaysian values under the country’s tariff schedule heading for coconut shell carbmat. But the reviews’ mandatory respondents don't use coconut shell carbmat, it said -- they use coal-based carbmat. It said Commerce should instead have sought Malaysian surrogate values under that country’s broader “basket” heading for the input, which also includes other wood charcoals.

The department based its decision to use the more restrictive heading on an “incorrect finding that there was a ‘long, demonstrable history in this proceeding of using coconut-shell in the production of the subject merchandise...,’” Carbon Activated said. Commerce said in its determination that no evidence showed whether the exporter used coconut or wood-based carbmat, so it had needed to rely on precedent set by its prior reviews, Carbon Activated said.

However, Commerce shouldn't have done so this time, the exporter said.

“Contrary to the government’s assertion, there was evidence on the record addressing this issue -- namely, the evidence demonstrating that respondents did not purchase or use either one,” it said.

Carbon Activated also said that Commerce may only rely on past reviews when the record “does not contain new or additional facts.” It did in this case, it said: This review was the first in which the department had a choice between the more exclusive coconut shell carbmat heading and the basket heading.

The exporter said that it does not have to provide further evidence to justify use of the basket category, saying that defendants, by arguing otherwise, are “trying to turn the issue on its head.”

The department also wrongly justified its use of the restrictive heading by claiming wood-based carbmat is activated using chemicals, a process distinct from the steam or thermal activation processes the respondents used, the exporter said, calling that a “blatant mischaracterization of the record evidence.”

“The [International Trade Commission] did not state that wood charcoal ‘generally undergoes a chemical activation process,’ and there is no record evidence on the record of this review that wood charcoal could not be used in the respondents’ steam activation process,” it said.