CIT Says Commerce Properly Used AFA in Countervailing Ribbon Exporter's Input Purchases

The Court of International Trade on Aug. 13 sustained the Commerce Department's countervailing duties on ribbon exporter Yama Ribbons and Bows pertaining to its reception of synthetic yarn and caustic soda, two ribbon inputs, for less than adequate remuneration. Judge Timothy Stanceu said Commerce adequately used adverse facts available in multiple instances of the subsidy analysis due to the Chinese government's failure to respond to the agency to the best of its ability.

Stanceu also sustained Commerce's decision on remand to reverse its subsidy finding related to Yama's alleged use of China's Export Buyer's Credit Program. The judge previously rejected the subsidy rate for the EBCP, finding that the record can't support duties for the program (see 2308280034). As a result, Yama received a final 31.66% CVD rate in the 2018 review of the CVD order on narrow woven ribbons from China.

In the review, Commerce hit Yama with a 27.74% countervailing rate related to its synthetic yarn inputs and a 0.27% rate for its caustic soda purchases. The agency frequently invoked AFA in setting these rates, initially doing so in finding that Yama's input suppliers are government "authorities."

Commerce asked the Chinese government whether any of the owners, managers or board members of the input suppliers were government officials, to which the Chinese government said there's no central database with which to search for that information. The agency then asked Beijing to trace the ownership of the specific companies back to their ultimate individual or state owners, though the Chinese government again said it doesn't have access to this information.

Finally, in response to a final inquiry, the Chinese government submitted an exhibit with information on the shareholders and partnership structure of the companies. Stanceu said that while this exhibit addressed ownership, it "left unanswered" questions about government influence on the board members or senior management positions. The court held that even without a central database, "Commerce permissibly found that the government failed to act to the best of its ability" and that the agency could "reasonably infer" the Chinese government "was in at least as good a position to obtain the information."

Throughout his discussion of the use of AFA, Stanceu warned that the agency should "avoid" its use "if the necessary information is present elsewhere on the record," though "that was not the case here."

Commerce also invoked AFA in deciding to use the world market price as a benchmark to see if the inputs were provided below cost. Yama challenged the agency's failure to use a "tier-one" benchmark instead, which would have assessed synthetic yarn and caustic soda transactions in China. The agency used AFA after the Chinese government failed to provide information about the suppliers of the two inputs in China, though Yama pointed to evidence on the record showing that only a small percentage of synthetic yarn and caustic soda producers are majority government-owned and that these companies make an even smaller percentage of the total production.

Stanceu found the claim "unavailing," since it was clear to Commerce that "government control could take forms other than majority ownership." The limited evidence here wasn't enough to establish that the government involvement in the input markets didn't distort these markets, the opinion said.

Lastly, Commerce used AFA in finding the provision of the inputs to be de facto specific. The agency asked the Chinese government for a list of industries in China that buy the inputs directly and the industries in which the companies under review are classified. The Chinese government merely said the inputs have a lot of uses including but not limited to the narrow ribbon industry. Stanceu said these responses didn't contradict evidence on the record that the "sole user of synthetic yarn is the textile industry.” As for caustic soda, evidence on the record showed it's used by only six industries -- a number Stanceu found to be sufficient for de facto specificity.

Yama also challenged whether the provision of the two inputs amounted to a "program" under the law. Stanceu said that since Commerce permissibly used AFA and the world price information to show the supply of the goods below cost and the exporter didn't challenge the authenticity of that information, it was "reasonable, therefore, for Commerce to consider this inferred government involvement as constituting 'programs.'"

(Yama Ribbons and Bows Co. v. United States, Slip Op. 24-92, CIT # 21-00402, dated 08/13/24; Judge: Timothy Stanceu; Attorneys: John Kenkel of International Trade Law Counselors for plaintiff Yama Ribbons and Bows; Kara Westercamp for defendant U.S. government)