Revisit Finding Shrimp Sales 'for Consumption' in India, CIT Tells Commerce

The Court of International Trade in an Aug. 15 decision made public Aug. 20 rejected the Commerce Department's determination that some of exporter Megaa Moda's home market sales weren't made "for consumption" in that market. Judge Thomas Aquilino said Commerce must "diligently examine the circumstances surrounding a transaction," and can't simply use a prior CIT decision to say that the agency can't use the trade patterns of a company's customers to find that the sales aren't "for consumption" in the home market.

However, Aquilino sustained Commerce's decision not to offset Megaa Moda's financial expenses with money the company received from its "interest subvention program" and fixed deposits in Indian bank Federal Bank Limited. The judge said the exporter failed to adequately explain that both types of "income" were "short-term," which would have allowed Commerce to apply its offset practice.

In the 2021-22 review of the antidumping duty order on frozen warmwater shrimp from India, petitioner Ad Hoc Shrimp Trade Action Committee contested Commerce's use of some of Megaa Moda's home market sales to an unnamed customer in determining normal value. The petitioner said the sales weren't "for consumption" in India.

Commerce rejected the petitioner's claim, relying heavily on the trade court's decision in Z.A. Sea Foods v. U.S., in which the court said a customer's "trade patterns" don't provide an adequate basis for establishing that a company's sales to the customer weren't sold for consumption in the home market (see 2212070036). The agency said the record showed the destination of the sales was in India and no specific labeling or packaging indicated that the goods were meant for export.

While Commerce said nothing in the record shows that Megaa Moda's sales weren't for consumption in India, the court said this claim doesn't fully address the petitioner's arguments regarding the test of whether the exporter knew or should have known its goods weren't for consumption in the home market. Aquilino also found it "inaccurate to state that" nothing shows that the sales weren't for consumption in India. The record "provides sufficient circumstantial indication that it would be unreasonable to conclude, without more, that the contested sales" were for consumption in India, the decision said.

Aquilino highlighted the parts of the record he found sufficient to raise a question on the true final destination of the sales, though much of the record was redacted in the judge's decision.

The court also bucked the agency's reliance on ZASF, finding Commerce's interpretation of the decision to be "unduly restrictive." Aquilino said that in ZASF, the court deemed the petitioner's claim "too tenuous" for Commerce "to have pursued," but the "main point for purposes of the matter at bar" is that the court "reiterated" the agency's "knowledge test.”

The judge added that ZASF's "facts regarding 'trade practices' do not readily extrapolate to curtail" Commerce's consideration of "other independent factors" at issue in the present case. Commerce still must conduct a full analysis of the transactions at issue "when questions arise, in order to determine whether the respondent knew or should have known that the sale is for consumption in the exporting country."

Where the court agreed with Commerce was on the question of offsetting Megaa Moda's finances. The agency's standard practice, which has been "repeatedly affirmed,” is to use interest income on short-term interest-bearing assets to offset financial expenses. The question regarding two types of the exporter's income is whether it was short term.

The first type concerned Megaa Moda's interest subvention program, which the company said related to the "refund of interest expenses that have been paid on certain export-financing loans." Aquilino found the exporter's "own explanation of the subvention program" to cut against its "erroneous notion that interest payment refunds are related to any short-term investment of its working capital."

The court said Megaa Moda is trying to "treat borrowed money, in the form of packing loans, the same as if that money were its own, and then Megaa Moda argues that because it has overpaid its interest payments, that the loan has somehow generated money for Megaa Moda.” Aquilino found Commerce to have appropriately followed its practice in denying the offset.

The second type of income concerns fixed deposits with an Indian bank, which Megaa Moda initially described only as "FD with FBL." Aquilino noted that the company failed to even define these terms in its opening brief, claiming that the terms are "obvious" and that the short-term nature of the assets are similarly obvious. The judge said the company's claims are "belated," and held that Megaa Moda failed to meet its burden of showing that its income earned here was short term in nature.

(Ad Hoc Shrimp Trade Action Committee v. U.S., Slip Op. 24-93, CIT Consol. # 23-00202, dated 08/15/24; Judge: Thomas Aquilino; Attorneys: Nathaniel Rickard of Picard Kentz for plaintiff Ad Hoc Shrimp Trade Action Committee; Roger Schagrin of Schagrin Associates for plaintiff-intervenor American Shrimp Processors Association; Kara Westercamp for defendant U.S. government; Robert Gosselink of Trade Pacific for defendant-intervenor Megaa Moda)