Subsidy Not Similar Enough to China's EBCP, CIT Says in Rejecting AFA Rate

The Court of International Trade on April 10 remanded the Commerce Department's use of a 10.54% adverse facts available rate for alleged benefits exporter Yama Ribbons and Bows Co. received from China's Export Buyer's Credit Program. Judge Timothy Stanceu agreed with Yama that the agency failed to show that the subsidy program from which the rate was taken -- preferential lending rates to China's coated paper industry program -- is similar to the EBCP.

Commerce hit Yama with the 10.54% AFA rate in the 2017 countervailing duty review on narrow woven ribbons with woven selvage from China for allegedly receiving EBCP benefits due to the Chinese government's failure to submit information on the program. The trade court in 2022 sustained the use AFA for China's refusal to submit the information, yet remanded the rate itself due to issues with the methodology Commerce used for picking the rate (see 2302150052).

Sticking with the 10.54% rate, Commerce explained that it previously made a mistake in telling the court that it has a three-step process for picking AFA margins, clarifying that its process actually includes four steps.

In its original representations to the court, Commerce said in step three it uses the highest calculated rate from any non-company specific program in any CVD case involving the same country so long as that program could be used by the industry under review. On remand, the agency said that the third step of its methodology doesn't require the program to be available to the industry under review and only has the agency pick the "highest non-de minimis rate calculated for an identical or similar program in another CVD proceeding involving the same country."

Commerce said it used the rate it set on a preferential lending program taken from a CVD proceeding on coated paper from China to set the EBCP rate here. Stanceu again remanded the 10.54% rate, since there wasn't enough evidence on which the court could find that the coated paper lending rates program was similar enough to the EBCP.

Commerce said that both the EBCP and the coated paper lending program were based on the "treatment of the benefit because the credits function as short-term or medium-term loans." The judge said the record doesn't support a finding that the coated paper lending program used "government-conferred credits" that operate as short- or medium-term loans, though he noted that Yama doesn't contest that the record is sufficient to find that EBCP boosts the Chinese industry via the provision of loans with preferential interest rates.

Stanceu said he found a "terse description" of the coated paper lending program via Commerce's issues and decision memorandum from the coated paper CVD proceeding, in which the agency describes the program as involving "Policy Loans to Coated Paper Producers and Related Pulp Producers from State-Owned Commercial Banks and Government Policy Banks." However, the memo didn't show that the program used short- or medium-term loans, "as Commerce found," the court said.

Even where the memo says it does, there isn't evidence supporting that claim, the judge said. Without this evidence, the "court cannot presume that, had such evidence been placed on the record, it necessarily would not have included evidence of ways in which these two 'programs' may have been dissimilar," the opinion said. Any finding of similarity would have been speculation.

Stanceu deferred consideration of Yama's claim that the AFA rate unduly prejudices the company.

(Yama Ribbons and Bows Co. v. United States, Slip Op. 24-43, CIT # 20-00059, dated 04/10/24; Judge: Timothy Stanceu; Attorneys: Brittney Powell of Fox Rothschild for plaintiff Yama Ribbons and Bows Co.; Kara Westercamp for defendant U.S. government; Daniel Pickard of Buchanan Ingersoll for defendant-intervenor Berwick Offray)