‘Downstream Products’ in CVD Law Doesn’t Just Mean Subject Merchandise, Petitioner Says

A manufacturer must have attributed to them all subsidies received by a cross-owned input supplier’s upstream product that is “primarily dedicated to the production of the downstream product,” a domestic petitioner said in an April 17 brief before the U.S. Court of Appeals for the Federal Circuit. It also argued that the “downstream product” doesn’t need to be “subject merchandise” (Gujarat Fluorochemicals v. U.S., Fed. Cir. # 24-1268).

In its reply brief, petitioner Daikin America again argued that the Court of International Trade shouldn’t have ordered the Commerce Department to find a subsidy received by CVD review respondent Gujarat Fluorochemicals' cross-owned input supplier, wind turbine producer Inox, couldn’t be attributed to Gujarat (see 2310160026).

The trade court held that the small amount of energy Inox provided to a nearby electric grid -- energy produced while testing new products, Gujarat claimed (see 2404010055) -- wasn’t an “upstream product” of the merchandise under review: granular polytetrafluorethylene (PTE), i.e. generic Teflon. The electricity was not “‘primarily dedicated” to Gujarat’s PTE production, especially because the exporter manufactured multiple products at its plant, the court found.

Daikin argued that the “downstream product” described by statute doesn't necessarily have to be the subject merchandise.

A “well-accepted canon” of statue interpretation is the assumption that “use of different terms within related statutes generally implies that different meanings were intended,” it said.

“The term ‘downstream product’ in the dependent clause of the cross-owned input suppler regulation cannot be automatically equated to the different term ‘subject merchandise,’ as [Gujarat] urges,” Daikin said. “When Commerce has meant to say ‘subject merchandise’ when promulgating its regulations, it has done so.”

This means that the term “downstream products” can be understood more broadly than just merchandise at question, it said.

It also pushed back on Gujarat’s argument that the use of the singular term -- “downstream product” -- indicated that Congress actually had intended “downstream product” to be subject merchandise. In similar cases, the petitioner said, CAFC has held other singular words or phrases can be understood in the plural as well, including “a foreign like product,” “latter stage product” and “product” by itself.

CIT’s primary argument in its remand order was that the CVD legislation’s preamble describes three situations in which a cross-owned input suppliers’ subsidy could be attributed to a manufacturer, none of which resembled the facts in Gujarat’s case. But one example, in which, during a CVD review of softwood lumber, a subsidy on stumpage was not directly associated with any particular downstream product but still held to be attributable, it said. In that case, downstream products were not just timber, but also “chips or other by-products,” it said.