US Defends Use of AFA to Find Flooring Exporter's Suppliers Were Chinese Gov't Authorities

The U.S. in a June 25 brief defended the Commerce Department's finding that 16 of exporter Baroque Timber Industries (Zhongshan) Co.'s input suppliers are government authorities based on adverse facts available, which was used due to the Chinese government's failure to provide adequate information (Baroque Timber Industries (Zhongshan) Co. v. United States, CIT # 23-00136).

In the 2020 review of the countervailing duty order on multilayered wood flooring from China, Commerce considered all of Baroque's input suppliers to be government authorities, countervailing all input purchases from the entities. Baroque filed suit, claiming that Commerce ignored evidence that the suppliers were wholly owned by individuals and not government authorities (see 2308010050).

In its reply, the government said Baroque "fails to appreciate the distinction between government ownership and government control and fails to acknowledge the record evidence showing Commerce’s repeated requests to the GOC to supply information on" the involvement of the Chinese Communist Party (CCP).

The U.S. described the information the Chinese government failed to provide as its basis for using AFA. During the review, Commerce asked the Chinese government to identify any individual owners, members of the board of directors or senior managers who were government or CCP officials. Beijing responded that there are none, nor is there a central database to search for that information. The agency said this information wasn't usable and decided to send the Chinese government a supplemental questionnaire.

The follow-up questionnaire asked the Chinese state to reconcile its initial statement with a CCP opinion document saying that CCP committees at all levels must implement ideological work in the private sector. Commerce also asked about the CCP Constitution's requirement that a branch or committee be established in any enterprise with three or more party members regardless of state ownership.

The U.S. told the Court of International Trade that the government of China provided "deficient" responses and that it "responded evasively to Commerce's specific questions and argued in its response that the CCP is not a government authority." Instead of answering, the Chinese state "came up with a host of reasons to justify its refusal to provide such information," the brief said.

While Baroque itself was fully cooperative, "evidence on the record demonstrates the GOC failed to provide requested information on the presence and role of CCP, the GOC’s governing party, in each input supplier," the government argued. The U.S. added that Commerce "reasonably applied" AFA since "there was a gap in the record regarding necessary information about the CCP’s presence and control."

In its motion for judgment, Baroque said Commerce failed to provide the Chinese government with adequate notice of its deficiencies. The U.S. called this claim "meritless," since the supplemental questionnaire was issued, in which "Commerce specifically provided the GOC opportunities to address its deficient responses."

The government also addressed Baroque's claims against the data Commerce used to value the benchmark for the countervailable supply of plywood. The U.S. said Commerce "reasonably" ditched the use of UN Comtrade and Stats.NZ data because its regulations tell the agency to "take the average of all 'commercially available world market price[s].'"