In Wake of Chevron’s Demise, Exporter Targets Commerce’s Test to Identify POR Cost Fluctuations

Citing the recent overturning of Chevron, a Belgium citrate exporter on July 12 attacked the Commerce Department’s method of determining whether an administrative review respondent has faced “significant” cost fluctuations during their period of review (Citribel v. U.S., CIT # 24-00010).

Specifically, the exporter, Citribel, took issue with the Commerce Department’s practice of combining a respondent’s quarterly raw material costs with its annual conversion costs in making that determination. It argues that annualized conversion costs are unrepresentative in its case -- it experienced large cost fluctuations due to the COVID-19 pandemic and the Russian invasion of Ukraine (see 2402120041).

Agency decision-making must be “logical and rational,” and Commerce’s refusal to ever use quarterly conversion costs is neither, it said.

Commerce’s rationale “is that conversion costs are normally incurred erratically and may be recorded at different rates throughout a given year,” the exporter said, calling it an “unlawful presumption” that the department “has not explicitly” ruled is rebuttable.

During administrative proceedings, Citribel attempted to rebut it regardless; it asked the department several times to consider both costs on a quarterly basis, but it was denied without any reasonable explanation, it claimed. Commerce instead “simply defended its position with a conclusory statement, asserting that it followed its ‘normal’ approach,” the exporter said.

Commerce’s “cookie cutter” method doesn’t track with the law, it argued.

The Tariff Act of 1930 is ambiguous when defining a “period of review,” only calling it “a period which would ordinarily permit the production of that foreign like product in the ordinary course of business,” Citribel pointed out. It was Commerce, acting within its discretion, that outlined a two-pronged test to decide when best to switch from using annual to using quarterly costs in a value calculation.

When reviewing the department’s decisions, “the Court must exercise its independent judgment in deciding whether the agency has acted within its statutory authority and may not defer to an agency's interpretation of the law simply because a statute is ambiguous,” Citribel said. It cited to Loper Bright Enterprises v. Raimondo, the recent Supreme Court case that overturned Chevron (see 2406280051).

Citribel said that Commerce’s “presumption about conversion costs” was clearly neither rational nor logical. When conversion costs rise rapidly, annualizing them misrepresents the actual costs a respondent incurred during “a period which would ordinarily permit the production of that foreign like product in the ordinary course of business,” it said.

It also called Commerce’s decision to use annualized conversion costs and quarterly raw materials costs to “measure a change in the cost of manufacturing” internally inconsistent.

“Commerce’s failure to account for changes in conversion costs directly contradicts the statutory language.”

The department also “failed to explain the nature of its presumption about conversion costs” or what might be needed to rebut it, nor did it consider case-specific factors when denying Citribiel’s requests, the exporter argued. It said Commerce is required to do both.